War leaves Caribbean edgy

CARIBBEAN countries, many of them very small vulnerable island-states, are edgy as their latest economic nightmare became stark reality when the United States-led coalition military force declared war on Iraq.

For many countries in the region, a war, particularly a lengthy war can only do further harm to their economies, already pummelled by the fall-out effects of the 9/11 terrorist events in 2001 and which were recently showing incipient signs of recovery. Jamaica’s Prime Minister PJ Patterson has warned that the war, which his administration opposes, will only lead to food shortages, rising prices and a flattened tourism industry. “The heightened sense of alert, tension and uncertainty that accompanies war would erode confidence in the economy and wipe out anticipated gains from investment,” said Patterson whose administration is facing bulging deficits that will close this fiscal year at about eight percent of gross domestic product (GDP).

Jamaica’s Minister of Finance and Planning, Dr Omar Davies, said the reality of war now meant that the Government could no longer commit itself to meeting set financial and economic projections. The Jamaican Government is already facing a sliding currency, precipitating a rise in interest rates, a J$30 billion hole in the budget, an increase in public sector spending (J$6.4 billion), a rise in its energy bill projected to increase by US$200 million and reduced Net International Reserves (NIR) that now stands at just under US$1.3 billion. Chairman of SuperClubs, hotel magnate John Issa, said the effect of the war on the Jamaican economy rests on its duration and its consequential actions.

“One may conclude that it will have a negative impact on tourism but it must be said that once people confirm reservations, they rarely change them and this looks like being the case here in Jamaica. I think people will delay travelling, particularly to the United States and Europe. “Already many Jamaicans have cancelled or delayed their travel arrangements and are monitoring the situation with this in mind. It’s a shame because momentum had picked up for this winter season and already we can see a discernible slowing down in bookings,” said Issa. In St Lucia, Prime Minister Dr Kenny Anthony last weekend made a nationwide address to the population bracing them for the negative fall out of the war. Dr Anthony said just when the tourism based island economy seemed to be climbing out of the stranglehold of another global recession, it is now witnessing  the resurgence of global events over which it has little control and which  threaten to reverse its economic gains.

“Every sector of our economy is likely to experience severe strain. This is a period therefore which will take the strongest resolve and commitment of Government, the fullest support of the private sector and the understanding of every St Lucian,” said Dr Anthony. Last month the National Economic Council (NEC) met with a wide cross section of St Lucia to explore the possible impact of a war in Iraq on the island. The NEC has indicated the possibility of a period of immense economic difficulty for St Lucia. “ The NEC has observed that following on the heels of nearly two years of economic stagnation as a result of the world recession and the September 2001 attacks on the USA, a peaceful resolution to the crisis in Iraq could be a matter of economic life or death for several Caribbean nations,” said the St Lucian leader.

Stating that the war has very serious implications for St Lucians and for the economy, Dr Anthony said the fear and reality of retaliatory attacks against US and British citizens and further deterioration in the global economy as a result of the war, are expected to have a sharp and negative impact on the tourism industry. “Understandably, there will be a greater reluctance to travel,  particularly by US and British citizens, who are Saint Lucia’s main source of tourism revenue. On the other hand, if the war is short, we may well see a dramatic increase in travel, particularly from the United States.” The impact of the war on the price of fuel is another issue of major concern for St Lucia as any increases in energy costs will have consequences for the cost of goods and services in nearly every sector. “The cost of manufacturing activity, electricity, transportation and other services are all expected to come under increased pressure if the war eventually leads to another cycle of rising fuel costs.” Dr Anthony has called on citizens to be more frugal in their use of fuel and energy as the availability of fuel can no longer be taken for granted.

The Caribbean Tourism Organisation (CTO) is also monitoring the impact of the war on the Caribbean. Secretary General Jean Holder said that the CTO has been discussing with its  member countries how best it might guarantee the peace of mind, the security and the investment of customers. “Almost all of our suppliers have now agreed to a very flexible policy of dealing with cancellations and with postponements. The idea is that if a customer should have difficulties for reasons beyond his control, then we want to ensure that he does not lose his investment in coming on a holiday to the Caribbean,” said Holder. On the implications of the war for Caribbean tourism, Holder states: “We are not prophets. We are looking at our prospects realistically.” He said in the first Gulf War in 1991 which was very localised in the Middle East, the Caribbean benefited in large measure because Americans were not travelling across the Atlantic. The Caribbean also benefited from the strength of the economies of Europe at the time.

Holder, however, sees the current war as a continuum of the 9/11 events of 2001. “ ...Therefore, this is a theatre of war, although in large measure it may be seen as being localised in the Middle East, (but) it is in fact global, in so far that there are many terrorist elements that are attendant on our situation. “And therefore the whole perception of safety and uncertainty is quite different from (what) it was in the first Gulf War. And, therefore, I think our situation is somewhat more uncertain than it was then,” said Holder. “It is also buttressed by the fact that the world’s economies are in a very shaky situation on both sides of the Atlantic and this has affected things like the price of fuel.

“All of these things have weakened the position of our air transportation industry on a global basis. And all of these factors are inimical to the situation of travel and tourism. “So while I remain always optimistic at the extent to which tourism bounces back, I think we have to view the developments of a war, which is a continuum of the terrorist activities as very bad for our tourism industry and if the war is over quickly we hope that these negative factors will quickly disappear,” said Holder. Last week visiting Venezuela’s Energy Minister Rafael Ramirez said the return of normal oil production by his country following several months of a major political impasse will have a positive impact on the global market.

“Venezuela has maintained its production of 3-4 million barrels of oil per day and there is certain capacity of other OPEC countries which will permit flexibility in any interruption of supply ... but we cannot guarantee how a war will end,” said Ramirez. Ramirez said while the impact of war on Iraq is unpredictable, a major danger is that it can be translated into instability in the global energy market. “Our commitment as a member of OPEC is to contribute to a permanent stability of the energy market because we understand that to countries of the Caribbean and Latin America — this constitutes a very important factor in the development of their economies,” he said. The Venezuelan minister said it was out of concern for the development of economies in the hemisphere, that his country established the San Jose Agreement and the Caracas Agreement for energy cooperation to guarantee the supply of energy to neighbouring countries.