THE HOYOS FILE: How tourism helped us own ‘a piece of the rock’

PATRICK HOYOS,

Added 04 December 2016

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PROME MINISTER Freundel Stuart recently noted that in 1966 Barbados produced around 200 000 tonnes of sugar for export, compared to this year when total exports may not exceed 10 000 tonnes. He said: “In 1966 we were still basically a very large cane farm.”

Stuart’s folksy image is borne out by the facts. In a 1969 university thesis, Barbadian Winston Nicholls noted that: “Between 1946 and 1964, sugar and related products consistently made up over 90 per cent of gross domestic product.”

Luckily, plans for a tourism industry which had been set in motion a decade earlier were starting to bear fruit.

Writing in 1969, Nicholls knew the times were a-changing for he noted that “though it does not show up individually in these figures, the tourist industry, the ‘new’ export industry, has been growing by leaps and bounds”.

As Stuart said last week: “So much has changed. We have modernised our economy, diversified it, and that process of diversification is continuing. We’ve learnt our lessons.”

Well, of course, we diversified. First, into tourism and then its sub-sector, international business.

And along the way we became a much busier consumer society, building a fairly profitable market for the commercial banks operating here. Without the foreign exchange from tourism, it would not have been possible.

Nicholls cited tourist expenditures at $10.4 million in 1958, when almost 30 000 visitors came, growing to $26 million in 1965, when 68 500 arrived. In other words, in seven years, the emerging industry had doubled in size.

These days visitors spend well over a billion dollars a year. According to the Caribbean Tourism Organisation (CTO) Quarterly Exit Survey, long stay visitors spent US$558 million in the first six months of this year.

Tourism arrivals grew quickly from 79 000 in 1966, passing the 300 000 mark in 1978, just 12 years later. We got past the half a million mark 11 years later, in 1998, when 512 000 visitors came.

And after reaching 592 000 visitor arrivals last year, Barbados is expecting to cross the 600 000 mark this year.

But it was also in the 60s that the wider public’s long pent-up demand for consumer finance began to be met – for the first time.

The first commercial bank, the forerunner of what would become Barclays Bank DCO, had been set up in the region in the 1830s for only one reason: the sugar industry would require more financing than it needed under slavery. 

Other banks had arrived at the turn of the century, when after 50 years of repressive policies by Britain, many anti-sugar taxes were removed, allowing the Caribbean sugar industry a new lease on life. But it was the arrival of the Bank of Nova Scotia in the mid-1950s that would in the 60s lead to the start of the consumer revolution here.

In their 1978 research paper Commercial Bank Credit In Barbados, 1946-1977, Muriel Sanders and DeLisle Worrell note the remarkable change in the commercial banking sector between 1956 and 1968.

In those 12 years, GDP rose from $106.2 million to $224.5 million. Today, of course, GDP is somewhere close to $9 billion.

It may be hard to believe that in the 60s, most newly-married couples still lived with their families. 

It was a hire purchase firm called Old’s Discounts which created this newly-emerging market for consumer loans. Prior to that, consumer loans were not pre-packaged, but were done on a personal basis, and depended very much on who you knew.

The Scotia initiative changed access to financing and played a major role in creating today’s large consumer loan sector.

Those young researchers, the team of Worrell and Sanders – the Worrell, of course, being today the Governor of the Central Bank of Barbados – pointed out in their paper that personal loans across the banking sector in rose from $4 million in 1964 to $7 million in 1966, and to $11.8 million in 1968. 

By 1973, mortgage loans to residents stood at $16.4 million, of which $10.2 million was for residential purposes. 

In 1998, mortgage loans to residents reached $38 million, but less than ten years later – at September 2006 – the figure surpassed one billion dollars, and more than doubled again six years later.

At the end of last year, total mortgage loans stood at $2.56 billion, of which $2.43 billion was for residential purposes.

Driven by mortgages, total credit extended across all sectors by the commercial banks rose from $67 million in 1966 to $5.9 billion at the end of last year.

There have been many ups and downs on this road to progress, and many periods where we seemed to be stagnating economically.

But as this is Independence week, I find it inspiring to see how we developed our current major source of foreign exchange, and how we expanded the dream of “owning a piece of the rock” into a reality far removed from those heady days when the citizens of a 104 000-acre cane farm took their destiny in their own hands.

We didn’t do too badly.

Happy Independence!

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