Letters & Opinion

Between Debt And The Deep Blue Caribbean Sea

By Clement Wulf-Soulage
By Clement Wulf-Soulage

THOUGHTS of a Caribbean dream holiday instantly conjure up clichéd images of swaying palm trees, sparkling turquoise blue seas and white sandy beaches. However, realistic thoughts of the region’s economic landscape produce images of tidal waves of unemployment, anaemic investment environments and mountains of debt.

The debt crisis in the Caribbean – from the Bahamas in the north to Guyana in the south – is what has now been dubbed “the silent crisis”, particularly as the region has become relatively inconspicuous in attracting transformative and sustainable investments (Caribbean share of world FDI has been declining since the late 1990s) amid the constraints of a stagnant financial-services industry, underdeveloped physical and social infrastructure and high debt-servicing obligations. Hence, the question on everyone’s mind is: How will small vulnerable states in the region face the growing challenges of high debt, rising debt service cost and low growth?

Hit by downturns in tourism following the 9-11 terrorist attacks and then the global financial crisis, the Caribbean region has slowly but surely become one of the most indebted in the world, with liabilities often far beyond what is safe for such small, vulnerable and undiversified economies.

But that’s hardly the whole of it. The Caribbean is one of the most disaster-prone regions in the world – costing annually the equivalent of 2 per cent of GDP. The rating agency Moody’s explains that: “The industries in which Caribbean economies specialize are highly cyclical in nature, exposed to external shocks, and dependent on the performance of the external economic environment. Therefore, Caribbean countries remain vulnerable to external shocks and balance of payments difficulties, and their economic performance will continue to exhibit cyclical features.”

A negative balance of payments essentially means that an economy lives beyond its means and consumes more than it actually produces. In the absence of natural resources and organic economic growth, debt-ridden economies in the region need to borrow abroad, often at prohibitive interest rates in order to finance consumption – making them prone to fiscal and economic crises – and in the event of such a crisis, compelling them to undergo painful economic, structural and fiscal readjustments.

Yet despite the position of Moody’s and other international institutions – and irrespective of the fact that investors have long exploited the high returns on Caribbean bonds and speculated that they can repurchase those regional securities in the face of sovereign bond payment difficulties – others believe that the Caribbean region has no one but itself to blame for the anaemic growth and unsustainable levels of debt. In a report on the region entitled “The Silent Debt Crisis”, the U.S. rating agency Moody’s provides some further perspective: “Unlike elsewhere, the build-up of debt in the Caribbean region was not sudden or caused by the global financial crisis. It happened gradually and almost unnoticeably over many years.”

Further, Moody’s estimates that “the debt-to-GDP ratio is over 60 per cent for 12 of the 20 Caribbean countries for which it has data. Six have debt-to-GDP ratios of over 80 per cent, and four have over 100 per cent.”

Going on World Bank statistics, the average level of debt of Caribbean nations in relation to the size of their economies stands around 70 per cent, whereby Jamaica, Antigua and Barbuda and Grenada have already passed the 93 per cent mark. In June 2015, Saint Lucia’s public debt stock stood at $2.8 billion, representing an increase from December 2014. In 2010, its debt-to-GDP ratio was 60.4 percent; however in 2014 it reached 73.5 per cent. The same unsustainable trend can be observed in Saint Vincent and the Grenadines where in 2010, the debt-to-GDP ratio was at 65.4 per cent, but increased to 78.1 per cent in 2014.

The World Economic Forum (WEF) recently examined the issue of financial stability and the lurking risks of rising levels of national debt worldwide, as it believes that the level of gross indebtedness in relation to GDP shows whether a country can pay back its debts without seeking fresh loans. As of January 2016, Jamaica and Barbados, according to the WEF, were among the 17 worst country debtors in the world, along with Greece, Italy and Portugal.

Of further disquiet is the fact that since 2006, Jamaica and Belize alone have carried out two debt-restructuring programmes totalling US$9.5 billion. Likewise, Antigua and Barbuda, St Kitts and Nevis as well as Grenada have had to default and restructure their debts in the last two decades. Moody’s has said that “if history is to serve as a guide, more defaults are likely by the highly indebted countries in the region”.

Barbados, one of the more prosperous and developed islands in the Eastern Caribbean, has had to struggle with a gross debt-to-GDP ratio of over 130 percent (including securities held by the National Insurance Scheme), – a perilously high figure for a small island, despite it having gone through an austerity programme that saw the sacking of one per cent of its public servants and the imposition of fiscal and structural adjustments.

Not to be outdone is Jamaica, whose national debt hovers around 139 per cent of GDP, and which has become a byword for fiscal and economic mismanagement over the past forty years (such is the extent of debt’s hold on the Caribbean psyche). Against the backdrop of increasing crime, corruption and unemployment, the country has struggled to both meet its international financial obligations and secure additional finance on the international capital markets. Curiously, at the end of last year, the Jamaican Share Index rose by 77 per cent, prompting financial analysts to suspect that “specific entities” may have bought large amounts of securities to artificially boost the index.

At any rate, there is little doubt that the debilitating debt crisis has had a pernicious effect on the overall growth potential of the region – retarding its economic development and further inhibiting its ability to respond to adverse external shocks, as well as draining scarce resources from health, education and other important services.

In the financial corridors of the world, the problems of debt-afflicted nations may be expressed in terms of capital flows, debt-service ratios and credit earnings, but the reality of the matter is that debt obligations by regional economies are about the lives of millions of “real” people who increasingly feel that they have been left stranded on the high blue seas by their own governments and exploited by importunate international creditors.

Coming Soon: Conscience of a Progressive (My New Book)

For comments, write to [email protected] – Clement Wulf-Soulage is a Management Economist, Published Author and Former University Lecturer.


  1. These are the signs of the times. These problems are not only related to the Caribbean countries, but globally as a who.
    The super rich corporations have reinstall slavery globally and the world is not up in protest. Support the old saying “Nero fiddles while Rome burns.”That makes us accepting of their total dominance of our lives by keeping silent, governments included.
    Many corporations presently believe in employing part time workers. A way of saving costs, they claim. Many of their workers educated or skilled, are forced into accepting low paying jobs with little or no medical benefits.
    That places a financial burden on families as the workers or their families can’t afford to get sick. If they do, their lives are completely turned upside down in debts due to the medical bills.
    Many seek shelter through programs funded by their government, which switches the responsibilities and obligations of these corporations of funding their employees medical programs to the governments.
    Governments are forced to take on risks to aid their citizens by seeking loans they struggle to repay.
    These financial burdens in addition to bad policies decision making, begin chocking the country economies. These bad loans, if even granted, come with ridiculous interest rates. The options are simple. You either accept or suffer.
    Families and governments continue to struggle globally while rich corporate executives and their investors continue to amass the entire world fortunes.
    Corporations no longer believe in merit raises or profit sharing, a policy that once sparked economies, in addition to being the motivator in workers as they felt confident and pride of knowing they would be rewarded for their dedication and hard work.. Workers were excited and proud of showing up for work, knowing that their hard work and dedication would be rewarded with those types incentives.
    Now we live like zombies, simply going through motions of survival, knowing of no end in sight for improvement.
    You raise any points of requesting management to do a little more for their employees during a general meeting and within a two week period you are laid off.
    Restructuring I think is the new term they use.
    Knowing full well that was not the reason why you were laid off. It is a term of fear and intimidation that is being wildly practiced by today’s corporations. So now we are all held hostage by these corporations, a reminder that “masser days” are still very much alive and functional. Though at a higher and more sophisticated level.
    If the workers are struggling to maintain their families because of financial strains, they cannot afford to spend monies they do not have. The economies become sluggish due to lack of monetary circulation, which is the perfect breeding grounds for financial disasters of these countries.
    Why is it that corporations fail to understand that if they paid their workers well based on performances, that the workers will spend that income to improve their life quality, circulating the currency.
    Basically that very same money is returned to corporations through purchase payments. Creating a healthy cycle where the money is churning , making the economy buoyant and stable.
    Instead the super rich rob their workers of their sweat and labor, making them corporate thieves while hoarding the monies they stole from their workers as trophies, while the entire world suffers.
    Governments need to globally hold these corporations accountable and apply pressure on them by unifying while continue to raise these issues and concerns so as to for these corporations into fulfilling their duties and responsibilities by compensating their workers adequately, especially as cost of living continue to escalate.
    Only when that happens will countries and their citizens be able to relieve themselves of most of their debts and society return to some form of normalcy.

  2. The US will soon be joining the club with their political short sightedness and corporate greed leading the way.
    During the past 10 years there have a cooperate assault of on professional wages in the US that seems to have accelerated during the past 5 years – specifically on Accounting and Computer Information System positions. The cynical tool used for this assault is one of the most corrupt and missed used government programs called H1B1 program. H1B1 is the program by which foreign workers can come to the US and fill in “highly” skilled positions. On a single day, when the H1B1 lots open up, a few Indian companies can gobble as much as two thirds of the H1B1 slots. It is now well established that both the resumes and degrees of many of the recipients are manufactured – embassies never verify applicant’s degrees or resumes. Qualified HIB1 recipients should have a degree in the applied field of study and 5 years of experience. The Indian companies have such a lock on this process that it’s near impossible for recipients of other countries to even have a fighting chance of getting in.
    The sad part is that congresses is very well aware of the problems involving the HIB1 program, but have done nothing about it. Congress is nothing but a corrupt institution only interested in its next fix – camping contributions from its cooperate clients. This corporate assault is also having long term consequences in the said field of studies. Today, many universities are having a hard time filling a computer science class. To further put pressure of on wages, many of the financial corporations are now only opening new positions in computers in the notoriously low wage states of Texas and Florida. Think about it – you position is closed in New York and opened up in Texas or Florida for pennies on the dollar. Here is the game – Texas and Florida are not known for their educational expenditures and great technical Universities, so “highly” skill workers are always in short supply in these states. So how does corporations fill in these positions; you guessed it right – H1B1s. And establishment politicians are scratching their heads over Berne Sanders and Donald Tramp. It’s difficult to hold corporations accountable when the very politicians are dependent on these very corporations for their own survival in the form of campaign contributions. Unfortunately, the one thing that never goes down is the salaries of the corporate leaders – Todays works only work to sustain the life style of their corporate master.

  3. Excellent piece Marcus. Thanks for having a strong backbone and intestinal fortitude in defending truth. I always have a total admiration for individuals who defend fairness. Congratulations.
    Sam, the same can be said of you for your thoughts and honesty , while taking the time, effort and fortitude to openly express them in public.
    Thank you.
    To Mr Soulage. Your timeless efforts in researching your articles prior to their release speaks volumes of your pride and integrity as a journalist.
    Keep up the great world. Very refreshing reading your articles.

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