THE ISSUE: All signs pointing in same direction
Researched and written by Shawn Cumberbatch
As a small open economy heavily-dependent on external investment and foreign exchange inflows generally, investor confidence is a key requirement for Barbados’ success. The island’s biggest money earners tourism and international business and financial services both rely on this ingredient to flourish.
But as the Central Bank of Barbados reports another period of economic decline, much of it attributable to continued difficulties in these critical areas, can we safely conclude that the country is largely a victim of failed investor confidence?
The financial institution’s governor Dr. DeLisle Worrell touched on the issue last week in a review of the economy for the nine month period ending last month.
After pointing out that the foreign exchange reserves fell by $447 million between December last year and the first three quarters of this year, the economist said “the main contributing factor to the foreign exchange weakness has been the decline in private foreign investment, from $473 million at September 2012 to $147 million at September this year.”
And while he stopped short of using the C word, that word being confidence, Worrell predicted a turnaround next year “on the basis of market intelligence”.
In recent times others have not been shy about saying Barbados has an investor confidence problem.
Minister of Finance and Economic Affairs Chris Sinckler acknowledged this was the case in August while delivering his fourth Financial Statement and Budgetary Proposals in the House of Assembly.
“Waning investor confidence, increased levels of uncertainty in international credit markets and reduced tourism activity resulted in the postponement of several real estate development projects,” he said then in reference to the fiscal difficulties the island faced.
At that time Leader of the Opposition Mia Mottley agreed and last Tuesday in her failed no-confidence motion against Sinckler restated the point, saying local and foreign investors had no confidence in the local economy.
“Perhaps that is the greatest failing of all, that he can stand as Minister of Finance in this Honourable Chamber and admit in the Budget that there had been a decline of $300 million in this country’s foreign reserves in three months, and that it was as a result of a loss of confidence by domestic and foreign investors alike. [This] was an indicator that we were dealing with a Minister of Finance who did not understand his role and responsibility to this country to maintain the stability and confidence necessary to take this economy and the people of Barbados out of purgatory as we face these difficult times,” Mottley said.
Others outside of Barbados have also blamed depressed confidence for Barbados’ challenges, namely the Economic Commission for Latin America and the Caribbean.
In its Economic Survey of Latin America and the Caribbean 2013 that agency noted that “in terms of overall demand, weak investor confidence reflected in low credit uptake continued from 2012 into 2013”.
And earlier this month in a report published by the Jamaica Gleaner newspaper, managing director of institutional market sales Oppenheimer & Company, Gregory Fisher, said the market’s preference for Jamaica debt over Barbados’ was one of confidence and government’s outreach to the international investment community.
Oppenheimer & Company is an investment bank and full-service investment firm, and Fisher said he thought “the Jamaican government is more seasoned and they know how to deal with international investors”, asserting “the Barbados Government has not mastered that as yet”.
For some it is the proverbial chicken and egg situation. In other words, is government to blame and has it not done enough to get domestic and foreign investors interested enough to spend their funds in Barbados?
Or is it simply that the international economic difficulties between 2008 and now have been so depressed that authorities here have been operating with tied hands?
The answer to these questions might vary depending on who you ask, but everyone agrees that a resurgence in investor confidence is badly needed.
Sinckler made this much clear on September 23, in a Barbados Government Information Service interview ahead of his departure for an investor roadshow to London and the United States.
He was confident the exercise “will assist in preserving Barbados’ credit worthiness, while maintaining the confidence of prospective investors that this country is an economically stable and secure place to invest”.
The talk about investor confidence is bound to continue as long as Barbados is in recession or otherwise has economic and fiscal challenges.
A significant bit of good news for the island in this regard came two Fridays ago with the announcement that Sandals Resorts International would be involved in two hotel projects on the island, having reached an agreement to purchase the former Casuarina Beach Resort in
Christ Church, and also signing on the dotted line with government to operate the closed Almond Beach Village property in St Peter.
It is events such as these, more than talk from any government or private sector officials, that are likely to stimulate interest from other investors, analysts believe. They believe that once a respected and internationally-recognized brand like Sandals shows this type of initiative others will likely follow.
Sandals chairman Gordon “Butch” Stewart set the tone for this when he spoke at the announcement of the deals in the presence of Sinckler and Minister of Tourism Richard Sealy.
“I strongly believe that we have acquired one of the most beautiful properties in the entire island and we cannot wait to bring the fully luxury included experience here. We have been voted the world’s best time and time again and have more luxury inclusions than any other resort on the planet and we promise to give the people of Barbados a resort to be proud of,” the Jamaican entrepreneur said.