business journal

BusinessJournal

Volume 1 Number 3December 2010

ISBN 2218-0826

contents December 2010

Editor:Linda Hutchinson-Jafar

Contributors:Dr. Anthony BryanAmbassador P.I. Gomes José Miguel InsulzaHughlette JacksonGarfield KingSirius MannJeremy MartinAlec SanguinettiKelvin A. SergeantCletus Springer Governor Lawrence WilliamsDr. Raymond Wright

Design and layout:Karibgraphics Ltd.

Business Journal is published by:Caribbean PR Agency#268 Harold Fraser Circular, Valsayn, Trinidad and Tobago, W.I.T/F: (868) [email protected] www.bizjournalonline.com

© 2010. No part of this publication may be reproduced without the written permission of the Publisher.

Lawrence Williams, Governor of Bank of Guyana speaks about the banking industry in the Caribbean

and in Guyana pg. 25

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From the Editor

The Caribbean - turning the corner amidst vast challenges

Latin America in the global context

COLUMNSWhat is China doing in Latin America?

Development policy and the MDG scenarios - linking theory and practice?

OP/EDThe OAS - towards development for all

SPECIAL FEATURECaribbean banking

GUEST COMMENTARIESLatin America’s oil power transition

Clean energy - an imperative for the future of the Caribbean

BusinessJournal

Volume 1 Number 3December 2010

ISBN 2218-0826

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Challenges persist for Caribbean tourism

Science with a “pinch”

PERSPECTIVESGarfield King

News Briefs

Books

The lighter side

EXCLUSIVE BJ INTERVIEW

business journal | deCeMber 2010 �

From the Editor’s Desk

We’re fast approaching the end of 2010 and doesn’t it feel like the past year has just flown

by. And what a year it has been! It was more down than up with our economies in the Caribbean and the major revenue-earning sectors such as tourism, agriculture and energy. So now, as we cast our eyes towards 2011, we can only hope that we’re nearing the light at the end of the tunnel of more than two years of economic and social challenges for our countries. In this issue, our special feature looks at how the slowdown in Caribbean economies as a result of the global

economic and financial crisis, impacted on the banking industry. Generally, banks in the Caribbean were spared major direct contagion effect of the financial crisis in the US and Europe but there was indirect hits in the form of non-performing loans and slowdown in credit growth. In this issue, we’re also looking at the economic and investment trends in Caribbean and Latin American nations which are all very encouraging. Also in this issue as well, we are pleased to publish an Op/Ed, special to Business Journal from Secretary General of the Organisation of American States (OAS) José Miguel Insulza which looks at some of the challenges facing western hemispheric countries. There are many other commentators and columnists who bring their in-depth perspective on varying issues. I do hope you enjoy this issue as much as my team and I had in putting it together. And as we come to the end of another year, I’d like to wish each and every reader and your family best wishes for 2011 in your personal and professional life. Thank you all as well for supporting Business Journal over the past six months. Please feel free to write me at [email protected] and share your thoughts on this latest edition or what you would like to see in the March 2011 edition.

Best wishes for 2011!

Linda Hutchinson-JafarEditor

� deCeMber 2010 | business journal

The Caribbean region is gradually recovering from last year’s severe recession, according to the IMF’s Western Hemisphere: Heating up in the South, Cooler in the North.

Securing Growth

After declining by more than 3 percent in 2009, real GDP for the Caribbean as a whole is projected to post only marginal gains in 2010 growing by an average of about 1 percent, after relatively low debt ratios and is benefiting from ongoing reconstruction efforts in Haiti. In Haiti, the reconstruction that followed the devastating earthquake in January 2010 is supporting a fragile recovery. Large external assistance in the years ahead is expected to boost growth, while the impact on inflation is expected to be contained given very large output gaps and the high import component of aid. The prospects would be much different, however, if the pledged assistance failed to materialize on time.

ThE CaribbEan—Turning ThE CornEr amiD VasT ChallEngEs

regional Economic outlook

The tourism sector in the Caribbean is expanding very slowly, in line with the tepid recovery in employment conditions in advanced economies. During the first half of 2010, tourist arrivals in the Caribbean increased by an average of 3½ percent compared with the same period last year. This was led by increased arrivals from the United States and Canada, against continued declines from Europe. The recovery of tourism, however, has been uneven. Smaller islands in the region have experienced a sharper and more prolonged decline in tourist arrivals than some of the larger islands. A closer look at the data suggests that destinations that significantly reduced hotel prices following the crisis experienced milder declines in arrivals. Though many factors are likely at play, downward price rigidities could help explain these intraregional differences. For example, hotels in the Dominican Republic and Jamaica lowered prices more than other countries and did not experience a decline in the number of tourist arrivals. In contrast, hotels in the Bahamas and Barbados were more reluctant to reduce prices and their tourist arrivals fell. Boosting competitiveness and growth over the medium term remains a key policy challenge. For the whole region, improving productivity will require sustained structural reforms, including enhancing the role of the tourism sector. Labour markets will need to be more flexible (especially important given fixed exchange rate systems) to allow the region to better react to external shocks and to increased competition for tourists from inside and outside the region (including Cuba). Risks to the region are on the downside. In addition to the risks of policy slippages, the region is highly exposed to advanced country labour conditions, which could falter. With no space to adopt countercyclical policies, the region would have to adjust to a more negative scenario by focusing any expenditure on protecting the poorest households.

Regional Economic Outlook

Western HemisphereHeating up in the South, Cooler in the North

World Economic and Financia l Surveys

I N T E R N A T I O N A L M O N E T A R Y F U N D

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Reducing High Debt Burdens

In most countries in the region, efforts are under way to consolidate public finances and reduce heavy public debt burdens, but weak growth and low revenues make progress difficult. Despite a contraction in real primary spending, public debt is projected to increase by an average of 15 percentage points of GDP between 2008 and 2010, for the region as a whole. To finance their large fiscal imbalances, governments in the region have turned to local pension funds and banks, as well as International Financial Institutions to finance the large fiscal imbalances. Concessional financing from Venezuela’s PetroCaribe has also played an important role, though doubts persist over the sustainability of this assistance, given. As noted in previous editions of the Regional Economic Outlook: Western Hemisphere, placing and maintaining public debt on a firmly declining path is critical to breaking from the current low-growth, high-debt trap. Achieving the required large improvement in the primary balance will require strong resolve in containing primary spending, particularly public sector wages. This would also help improve competitiveness, given their spill-overs on private compensation. In addition, measures aimed at broadening the tax base (including through the elimination of generous tax incentives) will be necessary to boost revenues over the medium term.

Strengthening the Financial Sector

Credit in the Caribbean region has been slow to recover (much like Central America), due to weak credit demand, though in some cases damaged bank balance sheets have been a factor. In addition, in some countries large government financing needs may be crowding out credit to the private sector. Moreover, some increase in non-performing loans resulting from the downturn, coupled with weak oversight and low provisioning ratios could pose additional risks to the system. Supervisory authorities need to keep close oversight and stand ready to intervene if needed.

Financial systems remain vulnerable to contagion shocks by cross-border financial conglomerates. Contingent liabilities associated with the collapse of the Trinidad and Tobago-based CL Financial Group remain a key fiscal risk, particularly for the ECCU, where insurance claims amount to 17 percent of regional GDP. Legislative proposals to strengthen and harmonize supervision and regulation across regional partners must be adopted immediately to improve oversight and mitigate fiscal risks. Consideration should be given to the establishment of a single regulatory umbrella that brings all nonbank financial institutions under one domain as well as to greater cross-border regional supervisory cooperation.

Editor’s note

Trinidad and Tobago’s Finance Minister Winston Dookeran said the US$1.2 billion pumped into CL Financial up to May 2010 by the previous administration involved more than 10 percent of the country’s GDP and affected 250,000 citizens. As of June 2010, CLICO and British American combined total liabilities were US$4 billion but total assets were estimated at US$3 billion. The number of traditional, long term policyholders affected by this crisis, covering pensions, life and health insurance is 225,000 persons and accounts for US$953 million in liabilities. CLICO also sold short term investments or deposit accounts with 3-5 year durations which earned interest rates significantly above market rates. Some 25,000 of these customers were left holding the short term contracts and the liability to them is US$1.9 billion. CL Financial, founded in 1993 by Trinidad-born entrepreneur Lawrence Duprey, held billions of dollars in assets in a portfolio of more than 60 companies in the Caribbean, Europe, the Middle East and Asia. The portfolio included banking and financial services, insurance, energy, real estate, forestry, insurance, medical services and retail.


The President of the Inter-American Development Bank, Luis Alberto Moreno, spoke on Latin American and Caribbean economic prospects and challenges at the G30 International Banking seminar, on the side of the International Monetary Fund and World Bank Group Annual Meeting in Washington, D.C.

latin america in the global Context

in the current complex global environment, which was presented so lucidly in the previous section, conditions in Latin America are comparatively favorable.

Undoubtedly, the region coped successfully with the world financial crisis; the growth forecast is stronger than for the developed economies; financial, monetary, and fiscal institutions are much sounder than two decades ago; the natural resources in demand around the world are abundant in our region; and social policy mechanisms are more efficient. The majority of countries now have independent Central Banks committed to price stability, with solid international reserve positions in almost all countries, and fiscal institutions with pre-established objectives and rules. It is important to remember that sound macro institutions are both technical and political achievements. After decades of macroeconomic imbalances, broad political and social consensus has been built around price stability and the need for responsible fiscal policies. Without jeopardizing medium-term macro sustainability, and on account of better institutions, during the past decade several countries have already overcome three central problems: vulnerability to sudden stops in external financing, the inability to issue debt in local currency, and pro-cyclical fiscal policy, triggered, in part, by the first two problems. Sound financial systems are additional great strengths of the region, as reflected in regulatory capital requirements, the moderate leverage ratios of bank balances, the modest levels of non-performing assets in bank portfolios, the high provision and reserve rates, and high returns. There is awareness in the region of the importance of remaining vigilant to protect the system, and of the importance of promoting greater competition for further credit deepening. It is important to emphasize, however, that the region is also very heterogeneous. A very good example of this variety is the unequal way that the countries are affected by the current abundance of capital and high commodity prices. In countries like Brazil, Chile, Colombia, and Peru that have flexible exchange rates and sound macroeconomic balances, there is strong upward pressure on currencies,

making it a great challenge to stay competitive. In these countries, the recovery has been clearly V-shaped, and in some there are even signs that the GDP is approaching its potential level. In the Central American and Caribbean countries, the majority of which are net importers of commodities and receive significant external revenue from remittances or tourism, both depressed by the crisis, the recovery has been slower. Although capital flows to the smaller economies have increased in recent months, they have been relatively moderate and more unstable than those of the region’s larger economies. As a matter of fact, one of the risks faced by the region in the short term, which is a topic of this forum, is the


risk related to capital m o v e m e n t s . Strong inflows of capital in countries that are more financially integrated with the rest of the world exacerbate the trade-off between monetary autonomy and exchange rate stability. So far, the countries with flexible exchange rates have safeguarded their monetary autonomy, which has prompted them to accept strong exchange rate appreciation. This strategy is not without risks, since price bubbles can emerge on the stock or real estate markets and can lead financial intermediaries to take excessive risks. Furthermore, instability of exchange rates may jeopardize investment decisions and diversification in tradable goods sectors. Until now, measures to directly limit capital inflows have been the exception, although some countries have imposed taxes to short term capital inflows or established marginal reserve requirements to foreign liabilities in the banking sector. Measures to counteract the loss of competitiveness in tradable goods sectors, such as import duties, export subsidies, and other restrictions on international trade, have also been few and far between. But further currency appreciation will intensify political pressures for greater intervention. Setting aside monetary, financial, and exchange-rate issues for a moment, great strides have also been made on the social front. New political and social institutions have improved the governments’ capacity to support human capital development and to offer social safety nets for low-income families. Although Latin America has traditionally had the widest social inequalities of any region in the world, that range has narrowed in the last decade in most of the countries, thanks to efforts to increase and target social spending for low-income families.

Looking ahead

The medium-term outlook for Latin America is very promising. While acknowledging the diversity of economic and political conditions from country to country, one can say that Latin

America and the Caribbean is the emerging region best prepared to benefit from the decade ahead.

The majority of our economies are opening to the globalized world,

supported by sustainable macroeconomic management

and responsible fiscal, monetary, and social policies. One of the main challenges for

the region is to complement these gains with increases

in productivity that ensure quality jobs and

sustained and sustainable growth.

While acknowledging that the region faces many other

challenges, I would like to take these last few minutes to discuss

two that I consider very important and relevant to this part of the forum.

The first challenge is to raise productivity. As the IDB noted in a recent publication, the income gaps between the developed world and Latin America and the Caribbean have widened in recent decades because of the widening gap in productivity, not because of the lack of investment. When we speak of productivity, we think almost automatically about the industrial sectors and the competitiveness of the tradable goods sectors. But in the region, productivity problems are particularly severe in the services sector. While there have been marked productivity gains in industry, and particularly in agriculture in the past 20 years, the productivity of the services sector has tended to decrease. Since services account for nearly two-thirds of jobs, it would be impossible to raise aggregate productivity without concentrating on this sector. This becomes more acute in the current context of relatively abundant foreign exchange, when the obstacle to growth is not the tradable goods sector, but the services sector. The low productivity of services is closely linked to another major problem: the problem of informal labor and the reduced size of


businesses and productive units in the services sector. Unfortunately, well-intentioned policies tend to reinforce informality and the survival of firms with low productivity. To protect workers, labor regimes in Latin America establish very high taxes and contributions for formal-sector employment, and simplified regimes or total tax exemption for the informal sector. Ironically, some of the taxes and contributions are used to subsidize social services for informal workers, creating a vicious circle of higher taxes on formal employment, increasing informality, and decreasing productivity. In order to be productive and competitive, the region must, among other things, take on the reform of its labor markets and their underlying tax regimes. The other challenge is to ensure that income from natural resources is used more effectively. As I mentioned earlier, institutions are better prepared to manage income from

natural resources in a way that does not cause macroeconomic instability. But there is more to it than that. There are three priority areas where income from natural resources should be invested: (1) to finance investments to close the productive and social infrastructure gaps; (2) to cover current and future deficits in social security systems so that deficits do not become an increasing burden for the formal-sector workforce, and by this means reducing informality; and (3) to save for future generations, particularly when that income would otherwise come from nonrenewable resources. Today there are, then, great challenges and great opportunities in the region. That is why I consider, as do other analysts, that “if the region rises to the challenges, we stand poised to make this the decade of Latin America and the Caribbean.”

The Latin America and Caribbean (LAC) region is exiting the global crisis at a faster pace than anticipated, according

to the International Monetary Fund’s October 2010 World Economic Outlook. Growth in the LAC region is projected to average 5.7 percent in 2010 and 4 percent in 2011.

According to the Outlook, this reflects solid macroeconomic policy fundamentals, sizable policy support, favourable external financing conditions and strong commodity revenues. Robust commodity export revenues have boosted domestic income, which along with easy financing conditions has supported domestic demand. According to the Outlook, for many of these economies, the potential negative effect from subdued demand for imports by the advanced economies will be manageable, given lower reliance on external trade and greater dependence on commodity exports, for which external demand is projected to remain robust.

latin america and Caribbean sustaining growth momentum

However, Mexico, with its deep real and financial links to the U.S. economy, and the commodity-importing Central American and Caribbean regions, with their dependence on tourism and remittance flows from the United States, will be more vulnerable than others to weak U.S. economic conditions. For instance, the share of exports plus imports in total GDP—a very rough measure of openness—averaged less than 50 percent in the LA-5 (Brazil, Chile, Colombia, Mexico, Peru) in the past five years (compared with more than 125 percent for the ASEAN economies). Risks to the outlook emerge from both external and domestic factors, the Outlook says. External risks are tilted to the downside, reflecting mainly a worse-than-anticipated recovery in advanced economies, with its negative spillovers on commodity prices. An additional contagion channel arises from the large presence of foreign banks in Latin


America, although the fact that these banks have relied primarily on subsidiaries funded by local deposits rather than cross-border flows mitigates the risk. On the other side, there are also risks of overheating, particularly if unwinding of earlier stimulus takes longer than currently anticipated. According to the Outlook, growth in most of the Caribbean countries will be subdued amid weak prospects for tourism and remittances and limited room for policy support in light of chronic public debt burdens. LAC economies need to establish policies to achieve strong and sustainable growth like Asia, it says. However, unlike Asia, medium-term policy priorities are not driven by rebalancing more toward domestic demand (given relatively low reliance on external trade, although the tourism-dependent Caribbean countries are notable exceptions) but rather by a need to ensure that strong growth does not give rise to balance sheet vulnerabilities in the private or public sector.

Macroeconomic and prudential policies will need to be designed to ensure that the recovery becomes well entrenched and at the same time to contain the risks of overheating and the build-up of fiscal and financial sector risks. Thus, the priority for the region is to use the window provided by the cyclical upswing to start unwinding stimulus, regain room for policy maneuver, and sustain its relatively recent track record of strong macroeconomic policy management. In many economies the policy mix should favour early withdrawal of the fiscal stimulus, while allowing the withdrawal of monetary stimulus to proceed at a slower pace. Fiscal tightening will help address risks of inflation pressure (Peru, Uruguay) and exchange rate overvaluation (Brazil), reduce the generally high public debt and associated vulnerability, and provide a cushion for future contingencies. Moreover, given policy challenges arising from strong and persistent capital inflows in some economies, fiscal tools are likely better options to deal with overheating pressures than monetary tools.

T&T and uK’s Prime ministers hold

discussionsTrinidad and Tobago’s Prime Minister Kamla Persad Bissessar and British Prime Minister David Cameron discussed a number of issues when they met in London recently. Ms. Persad-Bissessar raised the issues of the Air Passenger Duty (APD) and the role of the Commonwealth to smaller nations emphasising the need to ensure “common wealth” in the Commonwealth especially since some 700 million people live on 1USD per day.

10 deCeMber 2010 | business journal

Foreign investment grew 16.4% in the first semester of

2010

Foreign direct investment (FDI) in Latin America and the Caribbean recovered significantly in 2010 with regard to the drop in 2009 as a result of the global financial crisis. According to new data released by ECLAC, FDI to 11 of the region’s economies grew 16.4% during the first semester of 2010 in comparison to the same period last year. This increase totalled over US$7 billion, rising from US$43.2 billion in 2009 to US$50.3 billion this year. Latin American and Caribbean investment abroad grew strongly, jumping from US$5.5 billion in the first semester of 2009 to US$20.8 billion in the same period this year. Based on these results, ECLAC estimates that FDI will rise moderately in 2010, but will fall short of the record levels seen in 2007 and 2008. The increase in FDI is due in the first place to the economic stability and growth in most countries of the region. In South America, the high prices of prime materials have continued to encourage FDI flows to mining and hydrocarbons. Added to this are the recovery of world trade and the improved outlook for international financial markets. FDI flows to Mexico in 2010 showed signs of a significant recovery, as in Chile and Peru. In Central America, FDI to the two main FDI recipients in the subregion -Costa Rica and Panama- also grew with regard to 2009. During the first semester of 2010, Brazil continued to be the region’s prime FDI recipient, with flows reaching US$17.1 billion. This is largely explained by the strong interest in investing in traditional activities and emerging sectors (oil prospecting and ethanol production), as well as loan payments from Brazilian subsidiaries of multinational corporations to company headquarters.

RBC’S SURESH SOOKOO MOVES UP

Suresh Sookoo, currently chief executive officer of RBTT Financial Group (RBTT), has been appointed chief executive officer, Caribbean Banking, according to an announcement by RBC International Banking, part of Royal Bank of Canada. Mr. Sookoo’s responsibilities now encompass Caribbean-wide oversight of retail, business and corporate banking operations. “Suresh’s deep understanding of our business and his proven success as a leader make him the ideal person for this expanded role,” said Jim Westlake, group head, RBC International Banking. “Suresh will focus on integrating our businesses onto a common platform across the Caribbean, enhancing the end-to-end and client experience by simplifying the way we do business, and improving the productivity in our banking network.” RBC acquired RBTT in 2008 and Mr. Sookoo’s appointment represents the next step in the integration of RBC Caribbean Banking businesses. RBC has one of the most expansive banking networks in the Caribbean with a presence in 20 countries and territories across the region, 129 combined branches and close to 7,000 employees serving more than 1.6 million clients across the region.

business journal | deCeMber 2010 11

The European Commission has approved EUR 28.3 million grant financing for a Regional Private Sector Development Programme to be executed over five years in the Caribbean region.

“This programme will contribute to the gradual integration of the Caribbean Forum of African, Caribbean and Pacific States (CARIFORUM) into the world economy, enhancing regional economic growth and by extension alleviate poverty,” said Valeriano Diaz, Head of the EU Delegation in Barbados and the Eastern Caribbean. The Regional Private Sector Development Programme is integral to assisting the region in responding to the opportunities and challenges offered by the CARIFORUM-EU Economic Partnership Agreement (EPA), as well as other new and existing trade arrangements.

Specifically the Programme will: enhance competitiveness and promote innovation in the regional private sector promote trade and export development among CARIFORUM States; promote stronger trade and investment

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relations among CARIFORUM States, the French Caribbean Outermost Regions and the European Union Overseas Countries and Territories in the Caribbean; promote stronger trade and investment cooperation between CARICOM and the Dominican Republic.

The implementing agency will be Caribbean Export, which is also to directly benefit from institutional strengthening activities under the Programme. CARIFORUM states, regional and national Business Support Organizations, Small and Medium Sized Enterprises and entrepreneurs are both stakeholders and beneficiaries under the Programme and will play a vital role in its successful execution. The countries that are part of the CARIFORUM are: Bahamas, Barbados, Belize, Guyana, Haiti, Jamaica, Trinidad & Tobago, Suriname, and the members of the Organisation of Eastern Caribbean States (Antigua & Barbuda, Dominica, Grenada, Montserrat, Saint Kitts & Nevis, Saint Lucia and Saint Vincent & the Grenadines). The British Virgin Islands and the Turks and Caicos are associated members of CARICOM .

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EU approve EUR 28.3 million for Private Sector Development

IDB $8.2 billion financing window for Trinidad and TobagoThe Inter American Development Bank (IDB) has made a commitment to provide a window of financing for Trinidad and Tobago’s development needs of US$1.3 billion over the next three to five years. This financing will be released in tranches with the first tranche of US$140 million in December 2010 to assist in financing the Public Sector Investment programme. In 2011, additional financing amounting to US$430 million could be accessed for additional projects and the remainder over the period to 2015.

Left to right at the press briefing are Roberto Vellutini, VP Country Operations IADB, Minister of Finance Winston Dookeran and Gerard Johnson, General Manager, Caribbean Country Department, IADB.


Column

What is China doing in latin america?

latin America suddenly finds itself as one of the bright spots for global

economic investment. As a whole, the region successfully weathered the recent global financial crisis. It did this not by repudiating the gospel of the “neoliberal” model, the Washington consensus and other economic orthodoxies but instead by adhering to tenets of fiscal discipline and sound economic management. Ironically, the United States, which failed to apply its own prescriptions, paid the heaviest price. Latin America is now one of the most popular targets of global economic investors, with countries competing for its commodities and friendship. Analysts say the new attention is a good thing. It helped bolster several of the region’s economies during the worst of the global financial crisis. The growth of the BRICS (Brazil, Russia, India and China) which are today four of the largest emerging economies, is another element in the global investment equation. In 2001, when the Chief Economist of the investment firm Goldman Sachs coined the term it was predicted that by the year 2050 in dollar terms the BRICS would eclipse the combined economies of the current richest economies of the world. Now the dynamic has changed to such an extent that this prediction has been moved closer to 2025! The BRICS account for more than a quarter of the world’s land surface and represent more than 40 percent of its population. The share of the BRIC nations in world trade has increased dramatically from 2001 (7 per cent) to 2008 (13 percent). Interestingly, the BRICS used the global economic crisis as an avenue to better their relations with the less fortunate members of the developing world. They have also built good diplomatic and economic relations

among themselves and created a niche for the group in world affairs. However, while the members may find common ground, there is rivalry within the group and it is hardly likely that it will develop easily into an alternative nexus for world order.

China and Latin AmericaThe People’s Republic of China is the leading external BRIC in the race for commodities in Latin America. In the midst of

the global financial crisis its economy grew by 8 percent in 2009. It has already eclipsed the United States as the world’s largest energy consumer. In April 2010 Chinese President Hu Jintao was in Brazil hammering out investment deals, and on this visit, and a previous trip to Brazil in 2004, President Hu sought to secure access to raw materials critical to China’s growth. (Hu was also supposed to visit Venezuela and Chile, but cancelled that leg of his trip after a major earthquake in China.) China became Brazil’s No. 1 trading partner in 2009, taking the spot from the U.S., with trade between the two surging from USD 6.7 billion in 2003 to USD 36.1 billion last year, according to Brazilian government figures. It has also replaced the United States as Brazil’s and Chile’s main trading partner. Just as Europe and the United States once bought Latin America’s commodities, China is now pursuing a similar strategy to fuel its own spectacular development. Its voracious appetite for soybeans, minerals and oil, is another reason that some South American countries were able to get through the financial crisis. While the pace of China’s involvement in Latin America is quite dramatic it is not as yet as extraordinary as the ambition, speed and scale of China’s involvement in Africa. According to Chris Alden, author of China in Africa, two-way trade stood at USD 10 billion in 2000 and by 2009 it reached USD 90 billion,

business journal | deCeMber 2010 1�

making China Africa’s largest single trading partner, surpassing U.S. trade with Africa of USD 86 billion in 2009. This comparison is important because Beijing insists that it is a partner in Africa’s development, delivering investment and gaining a new market for its products and important access to resources. But Western business interests say China is on a resource grab paying low wages, skirting standards on safety, the environment and human rights, and using its assistance and diplomacy in questionable ways. While the truth lies somewhere between, the reality is that Chinese aid is quick and direct, and its businesspeople are “risk happy” searching for long term potential rewards in developing countries.

China and VenezuelaAs China expands and deepens its relationship with Latin America, Venezuela has emerged as one of its key interests in the region. According to Evan Ellis, a professor who has written widely on the relationship, China recognizes Venezuela as one of its four “Strategic Partners” in Latin America. With the help of a high-level bilateral working group and frequent trips by senior officials, including six trips by Venezuelan president Hugo Chávez to China, the relationship has produced over 300 bilateral in investment commitments. China-Venezuela bilateral trade exceeded USD 10 billion in 2009, and is likely to expand even more rapidly. China’s interest in resources is focused on Venezuelan oil, although it has also demonstrated an interest in iron and other

metals and minerals. While the oil in the Orinoco region is expensive to extract and requires specialized refineries to process, the sheer quantities involved make it of interest to China, as that nation seeks to satisfy ever expanding demands for oil imports. Chinese petroleum companies are extracting oil while Chinese commercial companies are simultaneously embarking on major new projects to sell their consumer goods in the country. China edged out Colombia in 2009 to become Venezuela’s second-largest trade partner (other than the U.S. oil market.) Not so subtly, Venezuela is using China to try to replace its U.S. market. One analyst, Roger Noriega, estimates that U.S. purchases of Venezuelan crude oil have slipped from 1.74 million barrels per day (bpd) in 1998 to 1.42 million bpd in 2002 to a possible 950,000 bpd in 2010. Starting from a tiny role in Venezuela’s oil market when Hugo Chávez came to power, China is today participating in the export, transportation, refining and distribution of Venezuela’s heavy Orinoco crude oil through, upstream operations, massive capital investments, strategic planning and long-term purchase agreements. While the specific initiatives by China toward Venezuela, as well as its style of engagement are distinct from its relationship with other individual Latin American countries, the underlying motivations involved in China’s engagement with Venezuela are a specific expression of China’s broader global interests. But as Ellis and other analysts warn, China’s support of Venezuela, with financial aid and generous investment, creates an unsustainable cycle of indebtedness and dependency on China. In the future, there is scope for crisis since Chinese interests in Venezuelan commodities and markets may not fully coincide with the foreign policy objectives of the Chávez regime. In the meantime, the Chinese are distancing themselves from the anti-U.S. crusade of the Chávez regime in order to avoid being inadvertently involved in a crisis of the regime. Beijing has deep investments and companies on the ground. For both Venezuela and China, the rapid deepening and expansion of the relationship is characterized by significant incentives and risks...but the Chinese are great risk takers!

Chinese Premier Wen Jiabao (R front) meets with Sergei Mironov (L front), chairman of the Russian

Federation Council, in Beijing, capital of China, Oct. 19, 2010. (Xinhua Photo)

1� deCeMber 2010 | business journal

Development Policy and the mDgs scenarios -linking Theory and Practice?

Column

The UN High Level Plenary Meeting of the General Assembly from 20-22

September 2010 reviewed progress of the international community in achieving the eight Millennium Development Goals (MDGs) that were adopted in 2000 and are to be achieved by 2015. The three days of “speech-making” by Heads of State and Government, a variety of side-events including the corporate private sector, foundations, international organizations and civil society culminated in a closing session of the General Assembly adopting an “outcome document”. Formal commitments by Member States were made and quite noteworthy was a pledge of an additional 1 Billion Euros by the European Commission. This seemed the most concrete expression of matching pledges to practice. Indeed at the launching of the Global Strategy for Women’s and Children’s Health on 22 September 2010, an estimated US$40 billion has been orally “committed” over the next five years. But one must be careful in not becoming overwhelmed by such a large sum. For the simple reason that it is not clearly stated whether that enormous amount includes contributions committed or disbursed and/or being programmed and implemented by governments, civil society or foundations locally, nationally, regionally or globally. Too often recycling of “old” funding is used at a media opportunity to excite the public as if “additional” funding has been secured beyond the already “committed”, “programmed”, being “disbursed”, “contracted”, “planned” or “in the pipeline” sources. Categories in the “aid business” abound.

Moreover, attention needs to be given firstly to the fact that the “outcome document”, the Summit Report, was adopted at the UN General Assembly by consensus. This means in practice that all Member States have accepted a moral obligation to be committed to implementation of the “action agenda” for achievement of the MDGs by 2010

Beyond pronouncements –where are policy principles?

These linguistic gymnastics are one side of the equation in understanding progress toward accomplishing the MDGs. More reflection seems warranted on the “MDG Scenarios”. This seems necessary to unravel the development “model” or conceptual basis on which poverty and the approaches for its eradication are premised. One of the more prominent attempts in this direction has been Jeffrey Sachs’ The End of Poverty (2005), portrayed sometimes as a “manifesto” of the “poverty terminators” with the subtitle- “How we can make it happen in our lifetime” and the Foreword of pop star Bono. Detailed reviews and much debate have questioned the neo-liberal free trade assumptions advocated by Sachs and like-minded associates. The flaws and fallacies of such advocates have been adequately exposed, for example, in the work of Cambridge economist Ha-Joon Chang1. His regard for historical and geopolitical circumstances in treating with development economics will serve to provide a few suggestions that need to be in our conceptual toolbox if effective links are to be made between “theory” and practice. Without this conceptual clarity the MDGs remain mainly prescriptions of unfulfilled “millennium dreams”. 1 Bad Samaritans – Rich Nations, Poor Policies and the Threat to the Developing World, Random Hoouse, 2007.


By way of encouraging greater awareness of the contents of this obligation and the expected areas governments may prioritise in the MDG “action agenda”, a brief analysis and comments are offered in the following remarks. Another useful purpose would be to expand public awareness of the issues cited in the Summit Report. Additionally, some observations will be offered on the theoretical groundings that might usefully enable realization of the first of the MDGs viz. the reduction of extreme hunger and poverty (MDG1). This is fundamental to the transformation of the productive and productivity relations within developing societies in which the livelihoods of the great majority are dependent on agriculture and the rural economy and for whom, the right to food security and food sovereignty are consistently denied. Beyond these societies to the global arena attention must be also directed in analysing how the structures of power in “global/regional” arrangements influence options of developing countries in choosing their paths to sustainable development. Let us briefly examine the main topics and proposals of the “Outcome Document” especially for MDG # 1.

The UN 2010 Summit Highlights

The final Report and Action Plan of the Summit, in 81 paragraphs and endless sub-paragraphs proclaimed how firmly “united” the assembled Heads of State and Government are committed to achieving the MDGs by 2015. This “outcome document” acknowledged that “successes, uneven progress, challenges and opportunities” provided a mixed and uneven picture of the progress to date but great “trust” was placed on how “with increased political commitment”, the lessons learned could be “replicated and scaled up”. One need not be too ironical in probing the great “unity” displayed in the UN, where the speech of one President leads to the “walk-out” of an offended delegation. More significantly, one can rightly ask, what lessons were learned from the deepening economic recession of the dominant “free trade” Western economies with excessively high levels of unemployment and billions of dollars in budget deficits, now introducing “austerity measures” that remove social welfare benefits, cut health services and place educational opportunities only for those who can afford to pay? To make “trust” and “political commitment” the basis on which to end the extreme hunger and poverty (MDG 1) of the near-one billion persons in developing countries is not merely a confusion of “good intentions” but a disregard of lengthy historical evidence that demonstrates how inequality, the control of resources and use of power - political, military and commercial- enable a few countries or classes within societies to obtain power and wealth at the expense of the great majority in society. 2

Thirty five (35) paragraphs of the document with recipes from the UN MDG Gap Task Force, prepared well in advance of the Summit, demonstrate that this was not an “outcome” of debate by Heads of State and Government but an endorsement of views assembled by the elaborate UN technocracy whose skill in culling voluminous reports of “poverty” became conveniently expressed as yet another “Action Agenda”.

2 Useful insights on this are in Erik S. Reinert, How Rich Countries Got Rich..and Why Poor Countries Stay Poor, Constable, London, 2007 ; and of course the extensive literature of the Transnational Institute by Susan George, Another World is Possible If..,Verson, London, 2004 and by Francois Houtart are quite illuminating.


One understands why disillusionment with the UN system and its modes of operation will persist when stage-managed events of this nature, and on such a grand scale, waste resources, and encourage self-serving bureaucracies rather than explain the critical factors essential in the fight against global poverty. A fascinating case of this was portrayed in the study, Up the Down Escalator: Development and the International Economy, by Michael Manley, a former Prime Minister of Jamaica. However from an examination of proposals on MDG 1 it is realized that underlying structural and systemic issues on hunger and poverty are not addressed but prescriptive measures proposed. This means that a blind eye is given to the macro-level factors at the global level, associated with the financial, fuel and food crisis of 2006-8 that pushed more

Child mortality (MDG 4) has been reduced, but not quickly enough to reach the target. Maternal mortality (MDG 5) remains high in much of the developing world. (UN Photo: Guinea)

than 1 billion persons into acute hunger on a daily basis. Nor has the full scale of hunger and malnutrition in terms of households without incomes by which to acquire food even where it may be available. Food and nutrition insecurity has to be seen both in terms of unavailability, as food scarcity as well as accessibility, being beyond the reach of several millions who are too poor and simply without money to buy food that may be available. Combined with these two dimensions are the production systems in which almost 2 billion rural small farmers are entrapped attempting to eke out their household subsistence on overworked, nutrition-deficient, rain-fed, rudimentary and “back-breaking” techniques. These are the basic factors for “addressing the root causes of extreme poverty and hunger” recognized as necessary in the document but not addressed in the prescriptions.

Many Prescriptions...little Diagnosis?

With even millions of more funds, if an adequate diagnosis is not made of root causes and logically connected measures adopted for them to be overcome, “the record 1.02 billion people – or 15 percent of a world population of 6.8 billion- who cannot afford their most basic food needs” will continue. A glimpse at the global spread of hunger and an informed analysis of structural factors that provides sound solutions have been presented by Fatimah Zwanikken. 3 At the core of those proposals is the need for “conducive policies and regulatory and institutional frameworks, as well as enhanced market access” and effective measures for ensuring access to “productivity-increasing farming technology.” These are essential factors for the Caribbean to bear in mind with so many as Net Food Importing Countries among the 53 million persons in the Latin America & Caribbean region unable to afford basic food needs. Recent efforts to craft a CARICOM Regional Food and Nutrition Security Policy may help in creating renewed impetus to overcome the “key constraints’ of the “Jagdeo Initiative” but it still lacks up to date empirical data and analysis, for example, on which countries and farmers

3 See the very lucid and concise argument on « Boosting agricultural productivity in the South :Time for Action » in OPEC Fund for International Development (OFID) Quarterly July 2010.


produce what commodities, who control the food import lobbies and food distribution trade, what scale of products are targeted to reduce chronic non-communicable disease and boost affordable and nutritionally valuable staple foods. All of these need to be situated in the policy framework of incentives and complementary production systems for large, medium and small scale enterprises with the accompanying science & technology innovation.

Addressing MDG 1 by the Caribbean will undoubtedly require sharing experiences and technical personnel as well as joint ventures that include the Dominican Republic and Cuba- as we have no time for the “same-old, same-old” rhetoric as the time for that has long passed.

Dr. P.I Gomes is Guyana’s Ambassador to Brussels


The OAS: Towards Development for All

On April 15, 2009, I had the honour of inaugurating the Hemispheric Private Sector Forum and the Youth Forum of the Americas, which took place in the framework of the 5th Summit of the Americas, held in Port of Spain, Trinidad and Tobago. Later that year, on November 24, I had the pleasure of returning to Port of Spain to address the Opening Ceremony of the Commonwealth Business Forum, which was held just before the 21st Commonwealth Heads of Government Meeting and which had as its theme, “Partnering for a more Equitable and Sustainable Future: the Commonwealth and the Americas”. My message on both occasions made the point, among others, that the increased interdependence of our economies, at the sub-regional, hemispheric and international levels, has pointed to the need for broader and deeper cooperation among nations globally and regionally. Thus, even as the G-20 meeting, which was fortuitously just held before the 5th Summit of the Americas, emphasized the importance of dialogue and concerted action among the world’s most important economies to confront the global economic crisis, the 5th Summit agreed to promote major goals in the areas of human prosperity, energy security and environmental sustainability in the Americas, as well as reinforcing the need for hemispheric cooperation to tackle the crisis and, in general, working towards development and prosperity for all. In this context – and although the main players in summit meetings are states – it was clearly understood that the private sector, as the main engine of job creation and growth, has an essential role to play in pursuing the goals set by our leaders. In addition, through the Youth Forum of the Americas – deliberately held in concert and parallel with the Hemispheric Private Sector Forum in order to further cooperative ties between two key sectors – there was strong recognition of the need to incorporate young people into building public-

private partnerships aimed at advancing the development agenda and strengthening democratic governance in our hemisphere. The OAS is convinced that youth plays a very important role in reinforcing democracy in the countries of the inter-American system; hence, our commitment to fostering a democratic culture among new generations. To this end and in keeping with the guidelines of the Inter-American

Democratic Charter and the Declaration adopted by the 38th Regular Session of the OAS General Assembly, in Medellín, Colombia, in 2008, we have established a Focal Point for Youth in the OAS General Secretariat to support dialogue, technical assistance and strategic partnerships with youth. When I addressed the Commonwealth Business Forum, I focused on the important links between the Americas and the Commonwealth and on ways in which we could improve our collaboration in trade, investment, development and democratic governance, all in the interest of the sustainable development of our countries and our regions. In pointing out that the 12 Commonwealth Caribbean independent states, as well as Canada, had contributed in a decisive and positive way to altering the culture of the OAS, I stressed that these countries had brought their entrenched traditions of parliamentary democracy, strong rule of law and respect for civil and human rights to the OAS and had thereby reinforced its pillars of democracy, human rights, integral development and multidimensional security. I have no doubt that this convergence of cultures and systems will continue to bear fruit within the OAS and the inter-American System. In the Americas, we are now experiencing a process of democratic consolidation in contrast to the many decades of undemocratic rule in Latin America, which were marked by military coups and brutal dictatorships. Recent events, however, indicate that democracy is still a

op/Ed


work in progress and that there is no room for complacency. I therefore believe it critical that we further consolidate the democratic gains that we have made by improving the quality of governance in many of our countries, at the same time as we work towards improving the economic conditions in which our peoples live. All this requires adopting public policies and good governance practices, such as fighting corruption, improving public security, promoting transparency and accountability in government, providing social safety-nets for the vulnerable, reducing poverty and inequality, respecting and promoting human rights and, in general, improving the delivery of public services to citizens. This is easier said than done. Indeed, poverty and inequality continue to be unacceptably high in the Americas and the current global economic downturn threatens to wipe out the gains made in previous years. In this regard, the Economic Commission for Latin America and the Caribbean (ECLAC) has estimated that an additional 9 million people sank into poverty in 2009, representing almost one quarter of the people who had managed to emerge from poverty between 2002 and 2008. While the countries of Latin America and the Caribbean have on the whole made great strides in improving the management and diversity of their economies, the sustained economic growth in our region enjoyed in the years prior to the global financial crisis has been seriously challenged. Fortunately, even though the economic recession hit the Americas hard, ECLAC reported in July that the region was able to consolidate

its economic recovery in the second half of 2009 and will grow 5.2% this year, with a 3.7% rise in per capita GDP and an expected drop in unemployment from 8.2% in 2009 to 7.8% in 2010. It has to be pointed out, however, that the higher than expected overall growth rate can be attributed more to the resilience of the larger economies of South America, with strong domestic markets, and that the more vulnerable, highly indebted small economies of the Caribbean will record low or negative growth. ECLAC believes that where the economic picture is brighter, this is a result of three factors: private consumption, which reacted positively to the gradual improvement of employment and greater lending; higher investment; and, to a lesser extent, an increase in exports. The lesson from Latin America to the Caribbean seems to be that public policies that reduce public debt, encourage investment and stimulate exports are needed to build macroeconomic soundness. At the same time, there is a need for public policies geared at protecting the most vulnerable in society. And by extension, there is a need for multilateral policies and action that protect the smaller countries of the hemisphere, in the Caribbean and Central America, for whom the economic uncertainty is more pronounced. The economic crisis has laid bare some of the alarming realities facing our smaller states. For example, those countries that have highly indebted economies, but have graduated from access to concessionary finance from the international financial institutions (IFIs), are now caught in a vicious circle of borrowing to service their debt, which in turn negatively affects their credit rating. As we all know, a reduced credit rating further limits their ability to access much needed financing in times of economic contraction. I believe that the IFIs and other development institutions should revisit their policies regarding micro and small states, who through great effort have improved their human and economic development indicators, but whose small size, geographic location and open economies leave them exposed to the ravages of natural and economic upheavals. We, at the OAS, have an obligation to do all that we can to help bolster the resilience of these small states to external shocks.

Latin American and Caribbean leaders assembled at the V Summit of the Americas in

Port of Spain, Trinidad in 2009


In this regard, greater solidarity among the countries of the Americas is critical. We must explore genuine South-South cooperation, which the OAS can and does facilitate, in areas of mutual interest including, trade, investment, energy, environmental conservation and development. We must build political alliances that take into consideration the challenges faced by our smaller members and we must advance the need for more favourable treatment for them in all relevant multilateral forums, including the G-20. Moreover, as the Caribbean is being challenged on several other fronts, such as the loss through emigration of skilled personnel, HIV/AIDS and the increase in organized crime and violence, which result in significant economic and social costs, the international development community must revisit outdated assistance policies to provide more cooperation to the region to safeguard its invaluable human resources. The foundation of any resilience building effort must undoubtedly be human resource development. The countries of the Caribbean have always been proud of what they justly define as their main wealth: their people and their creative and intellectual talents. It is this basic resource that has allowed the countries of the Caribbean to develop the public institutions and civil society organizations that are the foundations of their development and stable democracies. The OAS is committed to continuing to cooperate to build capacity and to provide a more secure and prosperous environment for these talents to flourish.

One essential tool for creating this prosperous environment is the provision of quality education to citizens. Education is not only the main pillar for the integration of individuals to society, but also provides the tools, skills and knowledge that build them as citizens and help them to effectively exercise their rights and obligations. Moreover, education contributes to the development of personal autonomy and citizenship competencies that give access to equal opportunities and prepare citizens for their participation in public life. The OAS has been facilitating the achievement of this goal, by coordinating efforts and working together with the Ministries of Education of member States. Against this background, the private sector in the Americas has become a vital partner in our efforts to advance democracy and development. Through a series of public-private partnerships, the business sector has contributed greatly to providing training and technology to marginalized groups, including the youth, women, indigenous people and Afro-Latinos. The OAS has been very active in this area. Through the efforts of several of our affiliates, such as the Trust for the Americas, the Young Americas Business Trust and the Pan-American Development Foundation, we have successfully mobilized private sector support to build capacity for development. We must find ways to encourage them to do more, even as we reach out to the private sector in the Caribbean to become more involved. At the 5th Summit of the Americas, the Heads of State and Government outlined an agenda for the Americas, which calls for action in several areas, including: taking steps to speed up economic recovery; providing social protection networks for vulnerable groups; cooperating on energy; improving public security; and strengthening democratic governance. The members of the OAS are all striving to advance these mandates in our various Ministerial and Inter-American forums by exchanging information and sharing best practices through hemispheric networks and programmes. Progress is being made; much more work remains to be done.

His Excellency José Miguel Insulza is Secretary General of the Organization of American States

Protocolary Session of the Permanent Council to welcome Prime Minister of Trinidad and Tobago

Kamla Persad-Bissessar


special Feature

More than two years after the devastating global financial and economic crisis, Caribbean countries tightly inter-woven and inter-connected with major world economies are still wobbling and stumbling from an indirect hit. The indirect body blow to the Caribbean assumed malignant forms in declines in economic activity, rising joblessness, fall in export demand, drop in services sector such as tourism, decline in remittances, sharp fall in foreign direct investment, drying up of international financial credit, a worsening of fiscal balance and rising public debt. The crisis devastated dozens of financial institutions in countries around the world including some household names. Many more banks had to be put on life-support and propped up by financial crutches from their governments. Nancy Hughes Anthony, President and CEO of the Canadian Bankers Association remarked recently that since the beginning of the financial crisis, the United States alone has had over 200 bank failures. Some 738 banks and other lending institutions in the U.S. have received direct government capital injections totalling almost US$244 billion. The government of the United Kingdom has put more than US$122 billion into its banks. The Netherlands, almost US$52 billion; France US$25 billion; Ireland US$28 billion while Germany earlier this year set aside US$105 billion for capital injections. By and large the Caribbean banking industry has been spared direct hit and has managed to remain resilient against the onslaught of the greatest financial and economic crisis since the Great Depression of the 1930s.

David Dulal-Whiteway, Managing Director of Republic Bank Limited said the Trinidad and Tobago banking system and most others in the Caribbean did not have any exposure to the U.S sub-prime market simply because there was no investment in it. “Fortunately for us in the banking system here, I tell people boring seems to means exciting. We were criticised for not being aggressive enough and not bringing new things to the market because the banking system here focused on the basics of banking. We know how to raise deposits, we know about good service and we know how to give loans. “Funny enough, those international banks who went into all the derivatives and all these fancy products (which we were accused of not doing enough of) they were the ones who got into problems and they are the ones who are now being told you need to go back to the basic. Get

out of all these high risk instruments, so we are fortunate that we never moved away from that model,” Mr. Dulal-Whiteway told Business Journal. Winston Moore, Lecturer in the Department of Economics University of the West Indies, Cave Hill Campus in Barbados said based on data the spill over effects of the financial crisis in the US and Western Europe did not result in a credit crisis within the Caribbean banking system. “Financial crises are usually characterized by declines in asset prices (e.g. land, stocks, etc) failures of both large financial and non-financial entities, a fall in prices and shortages in foreign exchange markets.


“In most Caribbean countries, the stress placed on the regional banking system has not resulted in any runs on commercial banks or large failures. The failures that have occurred, the collapse of the Standford International Bank and CL Financial, have largely been contained, “he said. Trinidad and Tobago’s based Economist Indera Sagewan-Alli believes the Caribbean financial sector was spared major direct contagion effect, due in large part to its very conservative lending policies and because credit expansion is based on deposit mobilization rather than on inter-bank or overseas borrowing. “In effect, banks were not exposed to the sub-prime mortgages or to the exotic derivative instruments that pre-dominated the US Financial system and which consequently led it its collapse. “The regional financial system was not entirely spared though as the resultant global recession led to the collapse of the Stanford Bank in Antigua and the CL Financial conglomerate headquartered in Trinidad and Tobago with financial subsidiaries throughout the Caribbean. “The fall of the latter has truly tested the resilience of the system with the systemic risk it posed to the entire regional financial sector circumvented by the intervention of the Government of Trinidad and Tobago,” according to Ms. Sagewan-Alli. Given the slowdown in economic activity experienced in most Caribbean countries, Mr. Moore, President of the Barbados Economics Society pointed out that the quantum of non-performing loans (NPLs) on commercial banks’ portfolios has been rising. In Jamaica, for example, the August 2010 Article IV report for the island issued by the IMF noted that the NPLs of the financial sector had grown by 57.6 percent in 2008 and 60.6 percent in 2009. Similarly, said Mr. Moore, the November 9th Statement by an IMF Mission to Trinidad and

Tobago noted that the banking system remains robust, with strong capital and profitability despite increases in non-performing loans which need to be monitored carefully. “Given the rise in expected risk, most banks within the region seemed to have tightened their lending standards thereby resulting in a slowdown in credit growth. The most recent figures suggest that bank credit to the private section has fallen by 0.6 percent in Jamaica, while credit growth in Barbados and the Eastern Caribbean Currency Union grew by

only 1 percent. Most financial institutions within the region are likely to maintain relatively prudent lending standards until the end of the recession is in sight,” the UWI lecturer added. Mr. Dulal-Whiteway, who has worked in the banking industry over the past 20 years admitted to some delinquency on loans mainly from islands that are highly dependent on the tourism sector which has seen drastic cuts in hotel rates to attract visitors. “Even though arrivals are still up, the spend is down and therefore with tourism down, that was an impact basically. We have operations

in Barbados so the spend in Barbados is down and while the unemployment number may still be showing OK, the fact is a lot of people are not getting five days work and that had an impact on people’s ability to pay,” he said. In Trinidad and Tobago, where Republic Bank is headquartered, Mr. Dulal-Whiteway said non-performing loans have been negligible. “If I look at the delinquency numbers in Trinidad, it is even better than in the boom days. So we’re in a bit of a different situation here. What has affected us here more is the high liquidity situation, the lack of demand for loans and that lack of demand for loans, our spreads, the margins have fallen off and therefore our subprime is down compared to previous years,” he said. “What has created the big liquidity is that 1. Every time government does business in budgeting, it pumps money into the system,


special Featureyou have that happening, you have payments being made to CLICO policyholders/ investors and that’s going into the banking system and then you just had a fall off in demand for loans, so you get loans being repaid and that is then added to the liquidity situation, “he said. While the Trinidad and Tobago financial sector continues to be the best performing sector in the economy, Ms. Sagewan-Alli said maintaining this situation is threatened by the global recession which affected exports and prices of major energy export products and more directly by the economic crisis in regional markets, which is the largest market for non-energy exports. Demand for investment funds particularly from the domestic manufacturing sector also continues to decline despite successive reduction of the repo rate by the Central bank. “In effect, banks are flush with liquidity but short on demand. In more recent times, we are seeing an increase in the numbers of mortgage defaults. This is cause for worry. To reiterate the conservative nature of the banking sector, notwithstanding excessive liquidity, further to the global crisis, banks have intensified the qualifying requirements for loans, preferring not to lend rather than increase their exposure. How long the sector can continue to perform profitably under these circumstances is another area of concern,” said Ms. Sagewan-Alli. On the question of whether the financial systems in the Caribbean are better prepared and more resilient to the crisis because of reforms in the financial regulations and supervision, Mr. Moore said he did not think that financial regulations or supervision was any better in the Caribbean. “The fact of the matter is that regulators in any country can only do so much. Many of the new financial products designed in the US were designed to get around regulatory and accounting constraints that limit risk-taking. If much of what the financial institution is shifted off its balance sheet, even a very competent regulator will find it difficult to do their job. “

What has helped the Caribbean, he said, is that banking in the region is still very traditional: take deposits, make loans, making the job of the regulator relatively easy and also makes the banking business in the Caribbean less risky. From a regulatory position, Ms. Sagewan-Alli believes the commercial banking sector in Trinidad and Tobago is well regulated. “It is in areas such as insurance, credit unions and where there is conglomerate

involvement (as in CL Financial) that we need stronger updated legislation and regulation to match the rapidly changing and evolving nature of financial institutions. “Already we failed to act even though there was knowledge of a pending crisis, we cannot repeat this error. It is already two years since the CLICO rupture and yet we have not seen the required legislation brought to the parliament of the set of regulation with power of enforcement put in place,” she said. Mr. Moore said the collapse of CL Financial has highlighted three major deficiencies in regional regulations: (1) lack of cross-border collaborations; (2) inadequate monitoring of non-bank financial institutions, and; (3) political interference in the regulatory process. “Many of the financial institutions with the Caribbean operate in more than one island. This therefore implies that regulatory and supervisory practices would need to take on a regional flavor, less the regulator gets left behind. “In addition to inadequate cross-border regulations, the supervision of non-bank financial institutions within the Caribbean is woeful. Significant effort resources needs to provided to the regulatory bodies in charge of monitoring non-bank financial institutions such as mutual funds, trusts, insurance companies and the like. “Nevertheless, none of these new initiatives are likely to be successful without the political will to support these initiatives as well as stay out of the way of regulators when they are doing their job,” he said.


Lawrence Williams, Governor of Bank of Guyana speaks to Business Journal about the

banking industry in the Caribbean and in Guyana

Business Journal: What has been the impact of the global financial and credit crisis on Caribbean banks? Have there been any episodes of distress in the Caribbean financial systems so far?

Governor Williams: The financial crisis led to world-wide recession with the developed economies in the main, being particularly hard hit. As you are aware, it all began with the housing market crash and the phenomenal rise in foreclosures of residential homes which threatened to lead to systemic crisis in the international financial markets. Some Governments intervened to prevent a collapse of the financial system by injecting huge amounts of capital to ensure systematically important institutions survive as well as introducing specific measures to ring-fence and or support weak financial institutions. In the case of Guyana, the financial crisis has had minimal impact on the banks in view of the limited exposure to risky and complex financial instruments. It was the case of the lack of sophistication working in the favour of the banking sector. Foreign assets amounted to approximately 18% of total assets. Most of the foreign assets were held in U.S Treasuries and Agencies, CARICOM Government Papers and Supranationals. The exposure to “toxic assets” was minimal and the banks were pro-active in minimizing any possible fallout there from. Some loss was suffered by non-banks in respect of their investments in the Stanford Investment Bank while investment in CL Financials and its subsidiaries were impaired. These institutions continue to operate without the need for special support from the Central Bank or central government. Our banking system is strong and has shown remarkable resilience to the crisis. There has been portfolio switching to safer assets, very close monitoring of foreign assets and liabilities and the related risk exposures.

The slowdown witnessed in some Caribbean jurisdictions has not been mirrored in Guyana. Private sector credit showed continued growth whilst non-performing loans have contracted. Non-performing loans at the end of 2006 were 12% of total loans compared with 6% at the end of September, 2010. Like Guyana, the financial systems in the Caribbean have not been significantly exposed to the financial crisis. In some jurisdictions, institutions have suffered losses as a result of investment in “toxic assets”, and or in institutions that had major exposure to such financial products. However, the close monitoring by the regulators and the years of investment in upgrading prudential controls and in inculcating the requisite skills in supervisory staff averted any major fallout. This was reflected in the measures taken at the national level and regionally to contain the negative impact of the crisis.

Business Journal: What would you attribute to banks in the Caribbean remaining solvent and in most cases, profitable?

Governor Williams: Banks in the Caribbean have remained solvent primarily by avoiding excessive exposure to risky investments. The approach in most instances is to focus


on “bankable projects” with excess liquidity being channeled to safe investments such as domestic Government Securities and foreign sovereign debt instruments. Further, the spread on intermediating funds as well as fees on the various transactions and services ensure that most of the banks return healthy profits.

Business Journal: Is there scope for improvement in dealing with systemic risk and what are the lessons drawn from the current global financial crisis?

Governor Williams: The financial systems in Guyana and in the Caribbean are certainly better prepared to deal with financial crisis. Apart from the reforms in regulations there has been targeted training and exposure of supervisory personnel. Throughout the region, there has been a review of the strategy for ensuring financial system stability. Critical analysis have been made of the best supervisory model for various jurisdictions taking into account the peculiarities of the financial sector.

It is essential that all sectors of the financial system, whether systematically important or not, be effectively supervised and that sectoral supervisors are able to share information that would be of value in the compilation of financial stability Reports. Additionally, there has been greater collaboration between regional financial authorities to ensure that the region benefits from the enhanced measures domestically and that as far as practical there is a harmonized regional approach to crisis management. Colleges of Regulators have been established and convened on important supervisory issues across the financial landscape. I believe the following lessons may be drawn from the global financial crisis. The need for:

Greater sharing of information between regulators domestically and cross border;Careful and detailed review and analysis of new financial products/instruments before launching;Contingency plans should be in place domestically and regionally to deal with any financial crisis.

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In the June 2010 issue of Business Journal, we reported that Central Banks in the Caribbean Community (CARICOM) have initiated the development of a crisis management plan designed as a regional response to crisis situations of banking enterprises operating in more than one jurisdiction in the region. Brian Wynter, Governor of the Bank of Jamaica said the plan is intended to address crises that involve illiquidity situations or the ensuing insolvency of at least one member of a banking group. “It is also proposed that the plan will address principles underlying preparedness during normal times, systemic risk assessments, crisis identification, how and when to invoke procedures and the adoption of region-wide communication strategies,” he said at a conference hosted by the Jamaica Deposit Insurance Corporation/Caribbean Regional Technical Assistance Centre. Business Journal also reported on Trinidad and Tobago’s Central Bank Governor Ewart Williams who called on the Caribbean to strengthen its monitoring financial system to avoid potential crises of companies which could have widespread implications. Referring to last year’s bail-out of Caribbean conglomerate CL Financial (CLF) by the Trinidad and Tobago government, Mr. Williams described the monitoring system in the Caribbean as rudimentary and fragmented. He identified several glaring vulnerabilities of CLF including a mis-match between assets and liabilities with mostly short term liabilities paying above market interest rates matched by long term assets, excessive leveraging of balance sheet assets, a preponderance of inter-group transactions, the total absence of a risk management framework and inadequate capital. These vulnerabilities were compounded by a weak legislative and regulatory infrastructure in which CLF was not subject to formal regulation, poor internal governance and insufficient regional regulatory collaboration.


Monetary Policy ReportOctober 2010

Central Bank of Trinidad and Tobago

Since the last MPR, (April 2010) in an effort to reduce market interest rates and stimulate loan demand, the Central Bank lowered the repo rate by 100 basis points, from 5 per cent to 4 per cent. In response, commercial banks have lowered their prime lending rates from 9.5 to 8.9 per cent. The Central Bank policy action has, however, not yielded the expected results as bank credit outstanding has continued its steady decline started 11 months ago. As at August, bank credit outstanding was 2.8 per cent lower than a year earlier. Both consumer and business credit show sharp declines but mortgage loans outstanding as at August 2010 were 7.1 per cent higher than 12 months earlier. The non-response of credit demand to sharp declines in the policy rate can be attributed to several factors viz:

uncertainties about the economy and about employment prospects have led many borrowers to avoid new indebtedness; the interest rate reduction has been passed on to mortgage rates to a larger extent than to other bank loans; and the increase in non-performing loans have led some banks to tighten underwriting standards.

Against the background of a marked increase in bank deposits and declining credit expansion, there has been an unprecedented rise in excess liquidity in the banking system which has driven treasury bill rates to record low levels. This development combined with the narrowing of the spread between domestic and foreign interest rates has led to an increase in demand for foreign exchange to finance asset purchases abroad.

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Three years after the global financial crisis, ripples are still being felt throughout the world. In the Caribbean, the crisis has affected economic growth and in many countries, the fiscal deficit and the public debt is now a cause for concern. Preliminary data from UNECLAC show that the fiscal deficit for the entire Caribbean region is currently 4% of GDP, but varies from as high as 9% of GDP in Jamaica to 2.3% of GDP in Suriname. Moreover, in some countries like Antigua and Barbuda, Barbados, Jamaica and St Kitts and Nevis, the central government debt is expected to rise to over 100% of GDP. In the case of Jamaica for example, the debt/GDP ratio could be as high as 114%. As governments introduce fiscal consolidation measures in an attempt to deal with these fiscal and debt constraints, it is anticipated that inequality and poverty levels could rise, reversing some of the gains made towards the millennium development goals in the last decade. The banking and financial sector in the region has not been immune to the crisis, but has generally escaped unscathed. We can list a few areas in which the crisis has had some impacts on the financial sector. These include inter alia;

The CL Financial/CLICO debacleThe Stanford DebacleDecline in loan portfolios Regulatory oversight and legislative controls.

In the case of the first two, there has been tremendous distress not only on the institutions, but also on its customers. Had it

••••

THE BANKING INDUSTRY IN THE CARIBBEAN:

THREE YEARS AFTER THE CRISIS

not been for the intervention of government, the contagion effect on the financial sector would have been more severe. The banking sector in the Caribbean has always adopted a conservative approach when it came to investing in high risk instruments like derivatives. This conservative approach meant that the region has had little direct exposure to sub-prime mortgages and derivative instruments. Mortgage backed securities were not dumped onto the markets

in the Caribbean by the USA investment banks since there has always been limited integration of the regional banking system with the global financial markets. Furthermore, there has been limited borrowing from overseas banks. Overall then, the exposure of regional banks to financial crisis was minimal. Although a few financial institutions had some exposure to Lehman Brothers, Merrill Lynch and AIG, this exposure was small in relation to their total assets. The banking system in the region remains well capitalized with a relatively low level of non-performing loans. Recent data from Trinidad and Tobago for example indicate that short-term borrowing from foreign banks constituted less than 4% of the total deposit base of the banking system. Notwithstanding the fact that the financial system in the region was not seriously imploded by the crisis, the region has been affected since two of its major conglomerates, CL Financial/CLICO which has headquarters in Trinidad and Tobago and Stanford in Antigua and Barbuda has undergone tremendous stress as a result of the crisis. In both cases, the crisis led to serious problems resulting in government intervention. However, closer analysis revealed that both

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companies were operating in an environment of weak internal controls which affected all subsidiaries in the conglomerate when the problems erupted. CL Financial limited is an investment holding company operating in insurance, banking, finance, real estate, manufacturing, distribution, agriculture, energy, petrochemicals and health. The company was established in 1993 as a holding company for Colonial Life Insurance Company (Trinidad) Limited. Or CLICO. This CLICO has investments in over 65 companies and 32 countries. It was the largest private sector conglomerate in Trinidad and Tobago and one of the largest private sector company in the Caribbean. CLICO focused on short-term deposit like products paying interest rates which were way above the financial market. Its risks also included real estate, equities, energy sector investments and several other high risk enterprises. The problem with CLICO was that there was excessive risk concentration through inter-group investments. In the case of Stanford, the organization offered investors instruments with high returns but products which were very risky. The products operated along the lines of a Ponzi scheme. The CLICO collapse and the Stanford closure has involved regulators throughout the region and thousand of investors could lose millions of dollars, not to mention the impact it has had on confidence in the financial system. Another outcome of the financial crisis which continues to affect the financial sector is the amount of money which remains in circulation and cannot find bankable propositions. Private sector credit in most sectors, except mortgage has been on the decline. This has occurred in spite of reductions in interest rates throughout the region. Furthermore continued central bank actions in terms of liquidity management have not seen the expected results. In Trinidad and Tobago, the Central Bank has consistently reduced the repo rate and it currently stands at 4%. Deposit rates have also come down, in most cases now below 1%, so banks now have a problem in terms of finding an outlet for the excess liquidity. However, although banks have had difficulty in

finding suitable outlets for their excess liquidity, and although economic growth remains small, or negative in a number of countries, non-performing loans has not risen above 3% on average throughout the region. Finally, although the banking sector in the Caribbean was always tightly regulated, a number of the laws grew outdated. For example, in Trinidad and Tobago, the insurance legislation was outdated. The Insurance Act dated back to 1980. Additionally, the banking sector suffered form weak supervision, minimum capital requirements in some cases and lacked liquidity requirements and restrictions on related party transactions. These weaknesses posed challenges to regulators when the financial crisis erupted and in some cases, still pose challenges since the relevant laws are yet to be established. The crisis in the region has impacted the banking sector. In the main, it has led to a series of reforms in regulation and supervision which can only make the banking sector more resilient in the future. But finding outlets for their loan portfolio remains a challenge because of weak credit demand. This situation cannot be sustained much longer.

Kelvin A. Sergeant is an Economic Affairs Officer, Economic Development Unit,

ECLAC sub-regional Headquarters for Latin America and the Caribbean,

Trinidad and Tobago

�0 deCeMber 2010 | business journal

Three years after the turmoil in global financial markets, the Jamaican banking system

is reporting sustained growth and profitability. This is in sharp contrast to the picture just over a decade ago following the mid-1990s domestic-driven crisis, which saw major fall-outs among indigenous financial groups, with direct cost of intervention and rehabilitation estimated at the equivalent of 27% of GDP or a third of the domestic debt stock (2001/2002). The present buoyancy is largely attributable to the post 1990s response and lessons. The Jamaican financial system was spared direct adverse impact from the 2007/08 global financial crisis (triggered by a major credit crunch in the US financial system), as the sector had minimal exposure to the US securities market. For the banking/deposit-taking sector (commercial and merchant banks and building societies), a near 100% of the investment component of assets was in domestic Government of Jamaica (GOJ) debt instruments. The only area of vulnerability appeared in small pockets of the securities industry, which was addressed promptly through liquidity support from the central bank (to satisfy margin calls) and sharpened regulatory watch. Though shielded from the international liquidity crisis, the system must brace for possible economic stresses as the lag effect of the global economic slowdown and recession is felt in the fragile local economy. It is believed however that the financial system is now structurally sound and adequately prepared to sustain future shocks. A brief look at the state of the financial sector (with emphasis on the banking industry) leading up to the respective crises, 1990s and 2007/8 is instructive.

JamaiCan banKing inDusTrYrEmains sTrong aFTEr ThE global FinanCial Crisis

is This strength sustainable?

The main triggers to the 1990s meltdown were: Persistent weakness in the macroeconomic fundamentals (high inflation and interest rates, exchange rate instability, sluggish growth and high public debt levels); financial liberalization without the requisite regulatory and supervisory framework and/or enforcement regime. The result was regulatory arbitrage and the entry of several new players, leading eventually to

excess capacity in the financial services sector. In order to survive in a highly competitive environment, coupled with weak demand, many industry players engaged in imprudent banking practices and excessive risk taking, without the requisite capital cover. The policy response to the inevitable failures in the system was short-term intervention and rehabilitation, and major reform of the financial sector for the long term. These included an initial 100% depositor guarantee, later replaced by the establishment of a formal limited coverage deposit insurance scheme; promulgation of additional legislation and significant overhaul of the regulatory and supervisory framework. Key to the reforms was the setting up of an additional independent regulatory agency, the Financial Services Commission (FSC), for the securities and insurance industries and private pension funds (the non-bank financial sub-sector). Two critical elements of the wider and more invasive supervisory powers were, consolidated supervision and transfer of managed funds from the books of the banks to their non-bank affiliates, allowing for more direct reach to conglomerates, isolation of risks and greater transparency. By the onset of the 2007/8 global crisis, the Jamaican financial sector had experienced a near 360 degree turn. A more robust and

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business journal | deCeMber 2010 �1

credible regulatory and supervisory framework was now in place for the banking sector. The industry was issued with enhanced and broadened standards of best practice that dictate proper governance, operational, liquidity and risk management; and was being held to more stringent asset quality and capital adequacy requirements. Under supervisory directives, the industry had undergone significant restructuring and rationalization, with the number of banking institutions down to less than one half that of the immediate post crisis period (15 entities in 2007 from 35 in 1998). The entities were now stronger, better capitalized and with demonstrated board and management commitment to sound governance and risk management practices. Regulation of the non-bank sector was moving apace. Collaboration was forged between FSC and the supervisory authority for banks, the Bank of Jamaica (BOJ) to ensure consistency and efficiency; and the supervised entities were reporting generally satisfactory performance. While the sector rebounded from the 1990s fall-out, loan growth was slow, and lagged behind investments, which was the dominant component of total asset until 2008. Investments comprised substantially the very high-yielding GOJ securities which drove the high profit levels; but the weakness in core business (loans) would be of some concern from a macroeconomic perspective. Three years after the global crisis the banking sector continues to record strong performance. A review of the banks’ 2009/10 annual and quarterly reports and BOJ quarterly prudential indicators on the system as at June 30, 2010, confirm key quality and soundness measures all above prudential maxima/minima. Capital adequacy ratio of 19.8% for the system was near two times the prudential minimum of 10%, and comfortably above the 8% international benchmark; while the 5.9% Non Performing Loan (NPL) ratio was still well within the benchmark maximum of 10%. The outlook for the sector is a positive one, but there are some emerging trends which will dampen the buoyancy. The rapid profit grow in recent years has been largely fuelled by the high interest rate environment, driven by fiscal and monetary policy measures

to support the fiscal imbalances, protect price levels and the domestic currency. Concurrently movement in the loan portfolio has been reflecting the sluggishness in the productive sector, with a shrinking and more risky pool of bankable projects. In February of this year the Government enlisted the cooperation of private sector stakeholders to execute a debt swap programme (JDX). High coupon domestic debt totaling some $700 billion (or 65% of GDP) was successfully exchanged for lower-rate (on average about a 6 percentage point reduction) debt instruments, with lengthened maturities. This will have an immediate and future negative impact on net interest income of the banks. With respect to loans, growth has been weak, and in recent years outpaced by the growth in non- performing loans, which more than doubled over the past three years (NPL: total loans, 5.9% at June 30 2010 compared to 2.5% at end June 2007). Cognizant of this trend the banks have been engaged (many proactively) in revenue/cost realignment exercises to protect profitability and continued soundness of the institutions. The measures include: rates and fees tradeoff; further business and product innovation; cost cutting; intensive remedial loan management and tightened underwriting criteria for new loans.

Concluding commentsMicro and macro responses to the 1990s domestic financial crisis have served to prepare the banking system well for future shocks. The sector’s resilience to the recent global crisis is a credit to management as much as it is to the comprehensive and credible regulatory and supervisory regime now in place, (though the latter was oft criticized by industry interests as being ‘over-regulation’, and inimical to profitability and growth in shareholder value). Banking sector growth is critical to economic growth and development, but if real sector growth is not in tandem, this is indicative of fundamental weaknesses. Productive sector growth will be an imperative to sustain the present strong banking system, and to achieve macroeconomic stability.

Hughlette Jackson is a financial services professional of over 20 years. She is currently partner in a Compensation Scheme consulting group, DP Partners. Contact: [email protected]


latin america’s oil power transition

by Jeremy Martin

guest Commentary

There is an important shift occurring across Latin America today. It

is a transition that points to a reordering of the region’s oil producers and their corresponding geopolitical influence. What is this shift that is affecting the overall energy profile of the region and what are the important changes in the geopolitics and petro power across the region and why have we seen such an evolution? Historically there have been two tiers of oil producers in Latin America. The first tier has been Venezuela and Mexico and the second tier everyone else including Brazil and Colombia. Venezuela and oil are practically synonymous. Oil has gushed from Venezuela since early in the 20th century and the nation was a founding member of the OPEC oil cartel. Oil in Mexico is similarly part of the nation’s DNA, especially since the nationalization of foreign firms before WWII and the creation of the state oil firm Pemex – which remains the state monopoly and only game in town. But, the big stories of the new decade are the moves by Brazil and Colombia. Brazil has leaped from “also ran” to the top tier of oil powers in Latin America. Colombia, after years of internal strife and security issues has recently attracted huge amounts of investment and greatly recovered its oil production. Indeed, not only is Brazil moving up the list, they could ascend to the top of the heap very soon. Brazil has doubled their oil output since 2000 and some estimates point to exports from Brazil of roughly one million barrels per day by 2020. Colombia has similarly marked a move up the list of top producers and could soon hit production of one million barrels per day.

Brazil and Colombia’s steady move up the list of dominant regional oil players also comes in many ways thanks to Mexico and Venezuela’s downward spiral. Nowhere is this clearer than if we look at each country’s national oil company: Brazil’s Petrobras and Colombia’s Ecopetrol are ever-growing international investor darlings

while Mexico’s Pemex and Venezuela’s PDVSA are mired in downward output, severe inefficiencies across the board and lack of strategic investment. There are four key issues that have directly affected if not driven this regional realignment: Brazil’s offshore developments and the Pre-Salt fields; Colombia’s revamped regulatory and fiscal model; reassertion of state control in Venezuela; and paralysis and inadequate reform in Mexico. Each has played a key part and begs further analysis. Take Brazil. Over the last 50 years, Brazil has evolved from an oil importer to a self-sufficient nation with the near-term potential to be a significant net oil exporter. The primary catalyst for Brazil’s rise was its strategic decision regarding offshore oil and gas exploration and production coupled with revamping national laws in the 1990’s that eliminated national oil company Petrobras’ monopoly and partially privatized the company. But it has been Brazil’s lack of onshore and easy-to-get-to oil reserves that surprisingly have proven most fortunate. With no choice but to explore for oil and gas offshore, Brazil turned its Atlantic Coast into one of the world’s largest oil and gas research and development laboratories. Years of efforts paid off as Petrobras set a string of records for offshore and deep-sea drilling. And since late 2007 an almost never ending series of discoveries in what is called the Pre-Salt area off their coast.

business journal | deCeMber 2010 ��

Brazil and Petrobras are clearly here to stay as a dominant energy player, as underscored the world-record US$67 billion stock offering in September underscored. In Colombia, violence and the long-running war between FARC rebels and the government, along with an inefficient and unattractive model for hydrocarbon investment, had severely impacted the nation’s oil outlook. Indeed, production peaked in 1999 and the country was on a path toward importing status. These facts faced the Alvaro Uribe government when it took office in 2002. The administration’s effort to confront the violence and insecurity gripping the nation are well-known and do not demand repeating here. But what does require underscoring is the critical role the security gains played for the nation’s desire and effort to revamp its energy sector and to attract the requisite international investment needed for such a re-launch. Upon assuming office, the Uribe government embarked upon an effort to slow, if not reverse, the country’s declining oil production, which had been falling since its peak of 830,000 barrels per day in 1999. Through legislation enacted in 2003, the Uribe government re-wrote the country’s fiscal, economic and regulatory terms for upstream oil and gas investment. Key revisions included establishment of a lower, sliding-scale royalty rate on oil projects and longer exploration licenses. Some of the most important changes focused on the national oil company Ecopetrol

including forcing it to compete with private operators and a popular and successful partial privatization of the state-owned company. The new framework also set up an oil regulator and promotion agency, ANH, that has conducted several successful bidding rounds including one earlier this year that counted 255 blocks covering 130,000 acres. The results have been nothing less than astounding from both an investment and oil production standpoint. Investment in the country’s oil sector has gone from under US$500 million in 2003 to almost US$3 billion last year. Equally important, oil production has recovered to 760,000 barrels per day, almost back to the levels of its late 1990’s peak period. And the trends and estimates point to daily production of one million barrels per day in the near term. On the other side of the evolution has been Venezuela and Mexico. Venezuela’s crude-oil output has slid more than 700,000 barrels a day over the past decade. The production decline in Venezuela, which holds enough reserves to put the country into the same league as Saudi Arabia, has been primarily self-inflicted. Under Hugo Chávez, Venezuela has diverted billions of dollars of profits from PDVSA to a variety of domestic and international programs. The diversions have greatly hit the oil industry in Venezuela and PDVSA’s ability to invest: PDVSA’s budget was about 20% of Petrobras’ in 2009. When it comes to Mexico, the tale is equally woeful of late. Indeed, the upward trends for

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Brazilian and Colombian oil production coincide with a clear downward trend for production in Mexico. It has become so dire that projections indicate that Mexico could become a net importer of oil by as soon as 2020. It has been said that in Mexico oil is not merely a chemical compound but rather a fundamental element of sovereignty. Simply put, in Mexico, oil is part of the national DNA. This fundamental political truism continues to affect development of the nation’s huge oil resource potential by restricting private -- particularly foreign – investment. It is also useful when discussing the current state of oil affairs in Mexico to return to the late 1970’s and a critical marker in Mexico’s oil history: the discovery of the Cantarell field. Cantarell proved to be the world’s third largest oil field. The discovery in shallow waters off the coast changed everything. As the Cantarell field proved itself prolific, Pemex became one of the world’s largest oil exporters. Production at Cantarell boomed until 2004 when its output peaked at 2.1 million barrels per day. Cantarell, and Mexico’s oil production has, however, trended down since this peak over six years ago.

The ability of Mexico to produce for export ever increasing volumes of oil is being thrown into jeopardy due to a variety of factors: geologic exhaustion, technical inefficiencies, and strategic ineptness. But perhaps most importantly the polemic nature of oil in Mexico has brought with it years of political gridlock and only modest, incremental efforts to redress the overarching issues facing Pemex and the nation. The long-held domination of petro power in Latin America by Venezuela and Mexico has not completely disappeared but they clearly are no longer the only game in town. Their geology and potential will assure them a place in the top tier for now. Yet Brazil and Colombia have also parlayed their recent efforts into a position of huge relevance for the region’s energy matrix. The exact ramifications of this reordering are not yet fully known, but the sheer nature of the change is important and will continue to impact the entire region.

Jeremy Martin is the Director of the Energy Program at the Institute of the Americas at the University of California, San Diego in La Jolla, California.

LNG opportunities for Trinidad and Tobago in Latin America

Trinidad and Tobago which has been facing a decline in its exports of Liquefied Natural Gas (LNG) to its largest market in the United States has an opportunity to go after new markets in Latin America and the Caribbean. Oscar Prieto, Chief Executive Officer of Atlantic LNG told an energy conference in Port of Spain recently that new markets that plan to use natural gas for power generation to diversity its electricity fuel mixes include Argentina, Brazil, Colombia, the Dominican Republic, Puerto Rico and Jamaica. “Trinidad and Tobago is in a position to supply these markets,” Prieto said at the IBC Energy Caribbean conference. Trinidad and Tobago, the world’s seventh largest LNG producer already supplies LNG to the Dominican Republic and Puerto Rico. Exports of LNG to the US market has declined due to the development of shale gas and an increase in the supply of LNG from sources worldwide. In 2009, the share of US LNG imports from Trinidad and Tobago dropped to 52 percent in 2009 from 78 percent in 2008. In 2010 to date, the US LNG imports has declined to 45 percent.

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robert Riley, Chairman and Chief Executive Officer of BP Trinidad and Tobago (bpTT) has been appointed Head of Safety &

Operational Risk Competency and Capability Development of BP’s new Safety and Operational Risk function headed by Mark Bly, BP Executive Vice President of Safety and Operational Risk. Mr. Riley’s elevation to this new position takes effect on January 1, 2011. In this role Mr. Riley will report to Mark Bly and will lead BP’s worldwide efforts to develop industry leading quality and rigour into BP’s operations, particularly as it relates to safety and operational risk. Norman Christie will succeed Mr. Riley as Regional President, Trinidad, which is the new title for the heads of BP’s exploration and production business units. Jamaican born Christie, currently bpTT’s Chief Financial Officer, has been a member of the bpTT leadership team since 2005. Over the past five years in the Trinidad business Mr. Christie has been instrumental in leading bpTT’s safety and performance and has contributed significantly to the consistent delivery of business results. Mr. Christie’s appointment takes effect on January 1, 2011. Mr. Riley who held the position of BP Trinidad and Tobago Chairman and Chief Executive Officer since October 2001 said he is very pleased to be part of the new organisation and pleased to be able to bring the lessons from bpTT’s own safety and operational integrity performance to the wider BP Group. “I also have the utmost confidence that I am leaving the Trinidad organisation in Mfr. Christie’s capable hands. Norm has been instrumental in bpTT’s success over the past five years and has helped the Trinidad business become a consistently strong performer in the BP world,” said Mr. Riley. Under Mr. Riley’s leadership the Trinidad and Tobago business has grown from 200 million barrels of oil equivalent daily (mboed) to approximately 450 mboed.

Changing of the Guards at BP Trinidad and Tobago

About Norman Christie

Norman Christie is Chief Financial Officer. Prior to assuming the role of CFO he held the position of Vice President and Performance Unit Leader, Markets for BP Trinidad & Tobago. He is responsible for the management of existing domestic and export gas sales, and business development activities. For the three years prior, he served in two BP E&P Segment leadership positions. First, as the Commercial Director for the BP Algeria business unit, and then as the E&P Vice President of Planning. Norman joined Amoco in 1986 and, following a series of financial roles in Amoco’s headquarters in Chicago, he served in commercial leadership roles for 3 years in Egypt. The end of Mr. Christie’s tenure in Egypt coincided with the merger of BP and Amoco in 1999. He then returned to Chicago as a Senior Financial Manager for 18 months before moving to BP’s headquarters in London as an Executive Assistant to Tony Hayward, Group Vice President for Finance at the Time. Mr. Christie’s formal educational training has been in finance, strategy, accounting and general management. He is a Certified Public Accountant (Illinois) and holds an MBA from the University of Chicago. He is married with three children.


The investment decisions that we make now, in 2010, will affect the profile of the

sector for at least the next twenty to thirty years. We understand the risks and challenges that we face, but because of our past experiences, we also have the conviction that together, we have what it takes – both on the Government side and on the industry side – to seize the opportunities that are available to us today and make the right decisions to move the country forward. It will be no surprise to know that one of these opportunities rests in the BG operated Block 5c. In the medium-term, Block 5c discoveries will be developed to supply gas to the Trinidad and Tobago market well into the next decade. Block 5c, located 94 kilometers off the east coast, currently has two discoveries – Bounty and Endeavour, with further exploration potential for the block. The appraisal of the Bounty field is planned for 2012 with first gas targeted before the end of this decade. While several development options are being considered, the base case development scenario for Block 5c will require the installation of a Dolphin B Platform with the Bounty and Endeavour wells as subsea tie-backs to the Dolphin platform some 11 kilometres away. The Loran Manatee field represents another growth opportunity. Manatee, which sits on the Trinidad side of the field, is a major discovery for the country and I again take this opportunity to congratulate the Honourable Minister of Energy on the bilateral agreement signed with the Government of Venezuela last month. Manatee is another of BG’s medium to long term supply opportunities and it is targeted to come on stream at the beginning of the next

decade to meet the major demand at that time. The entire field is estimated to contain circa 8 trillion cubic feet of gas. 73% of the gas is located in Venezuela where the field is known as Loran and the remaining 27% is located in Trinidad where the field is called Manatee. Here, this field is shared 50/50 between BG and CVX with CVX acting as operator.

The entry of PDVSA, Venezuela’s national Oil Company into Block 2, the Loran field, is an indication of the interest from Venezuela in the block. Manatee contains a relatively low risk, ready to be developed, dry gas, low pressure reservoir. From a conceptual perspective the development of the Manatee field will require a three platform complex located on or near the Venezuela-Trinidad & Tobago border. A pipeline from the Venezuela complex to the new Dolphin B Platform will have to be built and then exported to market. Compression is also likely to be a key feature of this development. Success with the development of Bounty, Endeavour and Manatee fields will allow BG Trinidad &Tobago and its partners to remain at or above a 1 bcf per day supplier to the Trinidad market beyond the middle of the next decade. Yet another opportunity rests in the two 2010 bid rounds, especially the deep water. These offer companies like BG, the opportunity to acquire acreage to find the reserves required to meet the longer term demand. As part of a Group-wide subsurface initiative to evaluate the remaining potential, BG Trinidad &Tobago undertook an extremely thorough regional geological and geophysical review of prospectivity. As a result, we believe that large Yet-to-Find gas and liquid volumes are available within the Trinidad basin for those with the will and the courage to go and find them.

President of British Gas Trinidad and Tobago (BGTT) Derek Hudson outlined the company’s medium-long term plans at a recent event in Port of Spain:

bgTT sees exciting times ahead


BG submitted a Bid for the Shallow and Average water bid round on September 8th 2010. A deeper water bid round, now open, is scheduled to be closed in January 2011 and we are currently evaluating our position on this. The way forward for us is increasingly clear and attractive:

success of Block 5c is expected to secure 1bcf per day production beyond this decade.

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5c is a key resource base to underpin this growth and we plan to appraise by 2012;successful development of Manatee is also expected to extend this, with significant further potential to continue BG’s LNG supply from Atlantic LNG beyond the existing contracts;exploration success is expected to contribute towards BG’s long-term objective of 1 bcf per day even further into the future.

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OAS Secretary General meets with Director of the Latin America Department of the Russian Ministry of Foreign Affairs

The Secretary General of the Organization of American States (OAS), José Miguel Insulza recently met with the Director of the Latin America Department of the Ministry of Foreign Affairs of the Russian Federation, Yuri P. Korchaguin, at OAS headquarters in Washington, DC. The meeting focused on areas of current interest in the Americas, among them: relations between Latin America, the Caribbean and the United States; Haiti rebuilding efforts; the Honduras situation; OAS support for the peace process in Colombia; and the role of Permanent Observer countries in the Organization. “Latin America has become a special area for our country, and it is part of our foreign policy. Today there is a new era of relations with the entire hemisphere, but especially with this part of the region,” said the representative of the Russian government in his meeting with the OAS leader.


T&T’s Energy Chamber Chief talks about the challenges He spoke at the Chamber’s annual general meeting

Charles Percy, re-elected President of the Energy Chamber of Trinidad and Tobago talks about the state of the energy sector in the twin-island state. Business Journal presents an abridged version of his statement.

The last couple of years have not been easy ones for the local energy sector. While our major commodity prices are now

trending upwards, from the precipitous falls in the final months of 2008, we have nevertheless witnessed the very significant slowdown in activity in the local upstream energy sector. While also the predictions are for very modest growth of the economy in 2010, the sector which accounts for the majority of our membership – namely the energy services sector – has continued to show very serious declines. The official figures from the Central Statistical Office (CSO) indicate a staggering 60% contraction in the energy services sector in 2009, and a further 25% decline year to date. During this period, when many of our members faced very serious constraints on their businesses, the Chamber embarked on an active period of trade missions to explore external business opportunities, as well as increased its lobbying efforts geared to improve local business enablers. Our activities in this regard have actually helped to significantly grow our membership during this extremely difficult period. Nevertheless, it is important to recognize that the marginally positive GDP growth figures for 2010 have been buoyed largely by the recent growth in the petrochemical sector. This is partially as a result of improved prices but

perhaps more significantly because of the new MHTL-AUM complex which has now come fully on stream. This once again underscores the absolutely central role that the energy sector plays in the economy of Trinidad & Tobago.

Encouraging investment

Ensuring and encouraging continued investment in our energy sector is crucial to the continued health of our economy and is therefore one of the strategic objectives of our “Energy Chamber”. We need to ensure that the Trinidad & Tobago energy sector is able to continue to attract both foreign investment as well as domestic capital. The Energy Chamber has long advocated for the amendment of the legislation governing the ability of local pension funds to invest in the energy sector, and also fully endorses the policy of making public offerings for some of the current state-enterprises. We welcome the recent announcement in the budget that these opportunities will soon be made available. It should however be specifically noted, that while we speak of encouraging investment into the energy sector, we are also very mindful of effects of carbon on our environment. We are therefore equally aggressive for investment opportunities in areas of alternative and renewable energy as well as for energy efficiency initiatives, and see these as key components in the transformation of our economy. Again we welcome the proposals in the national budget focused in these areas. Over the past five years the major issue in the upstream sector in Trinidad & Tobago, has been the efforts to reform the fiscal regime for both new exploration areas, as well as for work in the traditional oil and gas acreages. This has been a long and difficult process, but we seem at last to be moving in the right direction.


guest Commentary

Clean energy: an imperative for the future of the Caribbean

apart from Trinidad and Tobago and Suriname, Caribbean countries

are not rich in fossil fuels – oil, natural gas and coal. Furthermore, the use of fossil fuels is a primary contributor to manmade climate change, the present and impending effects of which are well known. There is a general consensus that three approaches can be used to stem the rate of climate change stimulated by fossil fuel use. They are led by renewable energy and nuclear power both of which are relatively clean in respect to pollution. The third mitigatory component is that of Carbon Capture and Storage (CCS). The task of decision and policy makers is not only to forecast the future, but to enhance it. That is the mission that faced in the energy sector of most Caribbean countries. Take Jamaica for example; this is an energy deficient country in respect of conventional fossil fuels, yet it has to face a future in which energy supplies are secure and provided at the least cost. Many analysts predict that the production of oil will peak in the period between 2015 and 2020. As a depleting resource, oil will continually become more expensive. By 2015, oil will be trading at a platform above US$100/ barrel; thus the age of cheap oil is over. We therefore have to look towards energy alternatives.

Renewables in the Energy Mix Jamaica currently consumes about 60,000 barrels of oil per day to meet its needs. Jamaica’s energy mix remains dependent on the use of imported petroleum fuels which account for 91% of the energy mix, while renewable resources account for 9%. Most of the renewable sources

come from wind, hydro, fuelwood, bagasse, solar and ethanol. Transport is the largest consumer of petroleum in Jamaica’s economy, accounting for 37% of total petroleum consumption in 2008 and the demand for automotive fuels (gasoline and diesel oil) is growing at a rate of 4.3% per annum. The bauxite and alumina industry accounts for 34%, while electricity generation accounts for 23%.

The weaknesses in Jamaica’s, as well as other Caribbean energy systems, include:

High dependence on imported petroleum.Lack of domestic fossil fuel sources. High energy import bill.High cost of electricity.Aging electricity generation plants. Lack of detailed and up-to-date data for determining renewable energy projects. Slow development of renewable energy resources. Low levels of public action on energy efficiency and conservation.

Indigenous resources which are primarily renewables are led by; biomass, small scale hydro, wind and solar energy. In addition, the potential for the conversion of waste to energy, ocean thermal technologies and bio-fuels are being explored throughout the region. Jamaica, with an electricity price of approximately US $0.30 cents/ KWh, is not competitive with many of its Caribbean neighbours such as Trinidad and Tobago where electricity prices are less than US$0.05 cents/KWh. This six-fold difference in electricity costs between the two countries impacts

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manufacturing negatively in respect to Jamaica. This imbalance is demonstrated by the trade statistics between the two countries. Emphasis must be placed on the efficient use of energy. In the electricity sector, the most productive first effort should be in efficient light bulbs, whether LED or fluorescent. Changing to such efficient bulbs can result in savings of 40-50% on electricity use. Energy efficiency has to become ingrained in Caribbean culture, as indeed it has in Japan. This will result in a paradigm shift in the way we view energy as a commodity. In the transport sector, the incentives to save fuel should be based on a taxation policy. Fuel efficient vehicles, whether gasoline, diesel or hybrids should receive tax benefits. Building efficiency codes should be promulgated. Wherever hot water is required, it is always more cost effective to use a solar heat source.

is still cost effective for domestic householders to use photovoltaics for generating electricity in most Caribbean countries. The market for solar PV will expand rapidly when net-metering policies are introduced. Net metering will allow a household for instance, to generate electricity using PV and to sell the excess to the utility company.

Jamaica has renewable energy resources in wind, solar, hydropower and biomass, amongst others. In respect of wind, the 20.7 MW wind farm at Wigton, Manchester, is now being expanded by a further 18 MW to be commissioned in the first quarter of 2011. Also, a 3 MW wind farm using four 750KW turbines became operational near Munroe in St. Elizabeth in October 2010. Regarding wind power potential, there are between 70 and 80 MW of wind energy that can be generated at Greenfield sites primarily on the south coast. Solar energy, through photovoltaics (PV), is presently used in various parts of the Caribbean, for security lighting. The cost of solar generated electricity is of the order of US$0.15-0.18/ KWh. Whereas this is too high a cost for normal grid connected electricity, it

There are two approaches to this arrangement. The first is net-metering sensu stricto which would allow the purchase from the utility as well as the sale of excess energy to the utility through the same meter at the same price. The likely policy decision will be to introduce net-billing, where there are two different meters; one for purchase and one for sale. The sale price of course would now be less than the purchase price. It would involve the market concept of retailing and wholesaling. Waste to energy programmes can provide significant electricity from land fill sites. Such waste to energy projects should be developed wherever economically viable. Biofuels will continue to be a part of Jamaica’s energy mix. Perhaps domestic feedstock of ethanol can be produced from one or more of the sugar factories recently privatized. Biodiesel is also a possibility with an expected 5% blend with conventional diesel. The biodiesel can be provided from waste vegetable oil, castor beans, jatrophra, palm oil or even chicken offals. Natural gas is regarded as a transition fuel towards a cleaner energy future. Caribbean countries, as elsewhere, will regard natural gas as a preferred choice provided it can be transported economically to their shores. This


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can be done either by pipeline, as Liquefied Natural Gas (LNG), and Compressed Natural Gas (CNG). There is a policy initiative and plan in Jamaica towards decreasing the amount of oil that is imported and replacing oil with natural gas as LNG for the provision of baseload electricity to the utility company and alumina plants.

A Nuclear Option

Nuclear energy shows promise to provide a cleaner energy source globally that will help to alleviate climate change. Nuclear waste can now be recycled and/or safely disposed of. Hence, nuclear waste disposal is no longer considered a universal problem. Conventional nuclear plants are economical at about 600 MW and above. This is a significant size in the context of Jamaica’s energy needs (and the rest of the Caribbean by extension). A nuclear option will take up to 10 years to develop and commission. Small pebble bed nuclear reactors (PBNR) may become economically viable in the range of 150-300 MW by around 2025. The Pebble Bed Reactor

can be expanded by incremental modules. This technology is a new type of high temperature helium gas-cooled nuclear reactor.

Energy Entrepreneurship

Private investment is important to the growth of Caribbean economies. Private investment has new opportunities to be involved in the Caribbean energy sector. The Caribbean energy market is strong, in keeping with that of the global market and is increasingly attractive to private capital. This is a positive indicator for private investment in Caribbean energy. This augurs well for the renewable energy industry. Thus an appeal can be made for the private sector to consider the development of renewable energy sources as part of their investment portfolio. The renewable energy industry is now growing, looking to markets more than to governments. Regulators in the energy sector have become important in making clear rules and identifying market abuses. Once there is a narrowing of the gap between government goals and private sector expectations, and clarity about government objectives, commitment, and the decision-making process; private investment, both domestic and foreign, will follow.

The Caribbean energy market is pregnant with investment opportunities. It beckons those who are prepared to invest in an area that has significant profit potential. The avenues for energy entrepreneurship are now open. Investors should now join the economic traffic towards a cleaner energy future.

Dr. Raymond M. Wright is Special Projects Manager of the

Petroleum Corporation of Jamaica


Jamaica has developed its first long-term energy policy to facilitate the establishment of a comprehensive

programme of efficiency, improvement and energy diversification to provide high quality, affordable, environmentally friendly energy and to reduce the country’s dependence on high cost imported oil. Energy and Mining Minister, James Robertson said Jamaica’s future is inextricably linked to finding cost-effective, environmentally sustainable energy solutions. Therefore, the formulation, and more importantly, the implementation of the National Energy Policy 2009-2030 is critical in helping Jamaica to achieve overall sustained national development. The Jamaican economy is heavily dependent on imported fuel. As a net importer of fuel the country is susceptible to the volatilities of the world oil market – both in terms of supply and the price of oil. In 2008, Jamaica’s oil import bill was US$2.8 billion. In 2009, the oil import bill dropped to US$1.3 billion which was largely due to the downturn in the bauxite and

alumina sector, which saw the closure of three of the four alumina plants. For calendar year 2008 the Bauxite and Alumina Sector accounted for 9 million barrels of oil or 31 per cent of total petroleum imports, while for calendar year 2009 it only accounted for 3 million barrels of oil or 14 per cent of total petroleum imports. Higher oil prices also have a significant impact on Jamaica’s balance of payments and the current account deficit. During the period under review the current account deficit is projected to drop to an accumulated total of US$3.7 billion. The National Energy Policy promotes the development of renewable energy sources – specifically solar, wind, mini-hydro, biofuels/biomass including bagasse – and a reduced carbon footprint. The policy also promotes energy sufficiency and security of energy supplies through facilitating negotiations to ensure stable and adequate energy supplies at least cost, for example, the San Jose Accord, Petro Caribe, Nigerian agreements and Ecuadorian crude oil purchases.

Jamaica looks to break high oil import Dependency

2008 2015* 2020* 2030*

Petroleum Natural Gas Petcoke/Coal Renewables Other


Challenges persist for Caribbean Tourism

The tourism recovery everyone in the Caribbean had hoped for in 2010 has

continued to elude us – and in all likelihood, this will continue to be the case for the better part of 2011. The challenges that lay ahead of us will be just as difficult, if not more so, and they will require drastically new approaches from the public and private sectors. I believe the greatest challenge will be giving recognition to the fact that tourism is our single largest export as a region and uniting behind it with partnerships that accomplish more than just lip service. Many industry experts have pointed to gradual improvements as the basis for predictions that fail to grasp the seriousness of our situation. Yes, RevPAR and ADR have seen growth for the first time since the end of 2008, but these figures are based on comparisons to 2009 which was one of the worst years for tourism in recorded history. If looked at in terms of pre-recessionary levels we’re still far away from where we should be. Furthermore, we cannot simply compare ourselves to the position we were in at the onset of the downturn. Many tourism businesses have been operating in the red for close to two years. To say they are in better shape now because revenue streams have slightly increased in recent months doesn’t take into account the fact that many of us are deeper into the red than we have ever been. In order to experience a true return to profitability we need tourism spending to come back in full force – and this is at least a year off, possibly more. We also need to recognize the wider impact of tourism on Caribbean economies.

Tourism is a major generator of jobs throughout the region. We need to break the habit of thinking narrowly and embrace this. Our governments need to grasp that tourism doesn’t just employ hotel staff, it provides jobs for taxi drivers and restaurants as well as the farmers and fishermen that fill those restaurants with food. According to research by the World Travel & Tourism Council (WTTC), tourism directly and indirectly

employs more than 1.9 million people in the Caribbean, which is one in every nine jobs. Some Caribbean nations are even more dependent on tourism, such as Jamaica where the ratio increases to one in four jobs, or Curacao, where it’s one in five. This needs to be taken into account by governments throughout the Caribbean which have, with only few exceptions, failed to provide tourism with the full support it deserves and the lifeline it so desperately needs. Yet instead of recognizing tourism’s potential as a tool for economic growth, they’ve continued to look at our industry as a piggy bank from which they can replenish their coffers. Hotels in the Caribbean are taxed excessively. And instead of reducing hotel taxes throughout this difficult economy, many Caribbean governments have increased the burden of our struggling tourism businesses. High import duties, from food items to spirits and construction materials, are choking us at a time when the air is already thin enough. And when you also consider the airline taxes and fees being heaped on by our governments as well as many of our source markets and the airlines themselves, this has drastic repercussions on tourism.

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Our governments need to increase the competitiveness of our tourism industry by reducing the tax burden. They need to provide tax incentives for businesses that update their infrastructure, especially those who adopt clean energy practices as this will increase the longevity and sustainability of our tourism industry in the long term. Governments also need to encourage hotels and restaurants to tap local agriculture. Tourism can be a lifeline for our entire economies, but this cannot happen until its significance is truly grasped.

It is absolutely crucial that our public and private sectors forge real partnerships and work together with one common purpose: the betterment of our socioeconomic situation through tourism, the single greatest vehicle we have as a region. Only then will we be in a position to surmount the even greater challenges that lie further down the road – climate change and environmental degradation.

Alec Sanguinetti is the Director General and CEO of the Caribbean Hotel & Tourism Association

Jamaica Shines at World Travel Awards Finals in London

Jamaica copped several prestigious awards at the grand finals of the 2010 World Travel Awards held at London’s Grosvenor House hotel on November 7, among them being the World’s Leading Cruise Destination, and Montego Bay being voted the World’s Leading Beach Destination. Hailed as “The Oscars of the Travel Industry” by the Wall Street Journal, the World Travel Awards also recognised Sandals

Resorts as the World’s Leading All Inclusive Company, Beaches Negril as the World’s Leading Family All Inclusive, the Round Hill Hotel and Villas as the World’s Leading Villa and Island Routes as the World’s Leading Caribbean Attractions Company.


Walsh spoke at a Caribbean Tourism Organisation Leadership Strategy Conference in mid-October in Barbados.

rightly, you have great concerns about the UK Government’s increases in Air Passenger Duty, which reach a new peak

at the start of next month. APD on long haul routes has tripled or, to some destinations, even quadrupled in four years. The latest rises range between 50 and 112 per cent, compared with APD levels last summer. Because of the unfair distance banding on which the tax is based, Caribbean destinations suffer disproportionately. A family of four flying economy-class to Hawaii from London, involving a distance of more than 7,200 miles, would incur an APD charge of £240. Yet the same family travelling to Nassau in the Bahamas, which is not much more than half as far, pays £300 and double that if they sit in premium economy.

The tax from the UK to the Caribbean is so disproportionate that the APD revenue taken on a typical flight is nearly ten times the actual carbon cost of that flight. I don’t need to tell this audience that such swingeing levies are having an effect. Since last November, when APD to the Caribbean went up from £120 for a family of four to £200, arrivals from Britain have fallen by 12 per cent (and by as much as 25 per cent on some islands). Some of this sudden drop could be attributed to economic recession, but it seems clear that APD has played a major part, because the majority of Caribbean countries have seen larger decreases from the UK than from anywhere in Europe. And even if families find the extra money to pay the tax, they will have less to spend when they arrive here. So they may stay for shorter periods, eat out fewer times in restaurants, take fewer excursions and spend less on local goods and services. So this tax not only massively overstates the carbon impact of flights to the Caribbean, but threatens the very fabric of the tourism sector

BRITISH AIRWAYS CEO TALKS ABOUT THE IMPACT OF APD

Trinidad and Tobago Carnival is a major tourism event

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– on which so much of the islands’ economies depend. It threatens jobs and opportunities – and the ability of the islands’ governments to maintain funding levels for the education, health and welfare programmes they expect to provide for their citizens. Many other island economies in the developing world find themselves penalised in the same way. And it is not just about APD. The UK Government this year expects revenue from its aviation tax to total £2.3 billion. In five years time, it expects receipts to be 65 per cent higher at £3.8 billion. I do not think passenger volumes will grow 65 per cent in five years, so further increases in tax rates must be on the horizon. There remains the possibility that the Government will switch from APD to a per-plane tax, which in many ways would have even more damaging effects – both economically and environmentally. This juggernaut of aviation levies does not stop there. In less than 15 months, all EU airlines are due to become subject to the EU emissions trading scheme. This will impose a heavy additional cost on all airlines. Estimates put the total cost at more than £1 billion a year and likely to rise by £100 million a year after that.

And the UN’s climate change committee recently suggested that the global airline industry should pay an annual tax of $20 billion as its contribution to the $100 billion a year fund proposed at the Copenhagen summit to assist carbon reduction around the world. Enough is enough. This blinkered policy will have three deeply damaging consequences. First, it will price millions of people out of flying – especially long haul flying to regions such as this. Second, the tourism sectors of these islands and many other island economies in the developing world will be dealt a heavy blow. I am not sure how much the policy-makers have considered the impact on developing nations in terms of jobs and their ability to provide social infrastructure, let alone their ability to invest for themselves in green technologies. Third, some airlines will go out of business. Aviation is a low-margin industry at the best of times. If surpluses are swallowed up in taxes, airlines will not only be unable to invest in cleaner, emissions-reducing aircraft, they will ultimately go bankrupt – and the social and economic benefits they bring will disappear with them.

(l. - r.) Ricky Skerritt, Minister of Tourism and International Transport for St. Kitts and Nevis, Willie Walsh, Chief Executive Officer of British Airways and Hugh Riley, Chief Executive Officer of Caribbean Tourism Organization.

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nearly 47 years ago, two scientists, Francis Crick and James Watson from

Cambridge University in the United Kingdom accomplished a feat now considered by many as arguably, the most critical and contentious, in the history of science. They unraveled the structure of DNA, the compound which encodes the genetic information of all plants and animals. This astounding discovery has given a new lease on life to a revolutionary branch of science called biotechnology, which is fundamentally changing life as we have known it. Among the areas in which Biotechnology is making its presence felt is food production. Here, we briefly explore some of the pros and cons associated with Biotechnology and assess some of the implications for us in the Caribbean Genetic experiments in agriculture had been taking place for some time before Crick and Watson’s epic discovery. For centuries, farmers around the world selectively bred livestock and crop plants in order to produce strains with improved characteristics. But their efforts focused largely on the use of traditional and conventional breeding techniques and methods using the natural variation within plant species. But now, molecular biology techniques are now being extensively used to introduce entirely new characteristics in plants and animals, including genes found in unrelated plants, animals and micro-organisms. This shift in approach has really set the cat among the pigeons (no pun intended). Presently, in the USA alone, more than 50 million acres of genetically modified (GM) crops are sown. Europe too is getting in on the act with the production of various forms of pest-resistant maize. As has been the case with other scientific inventions, a huge army of support and opposition is lining up on both sides of the GM divide.

Supporters - including mostly scientists and multinational corporations - see GM crops as a clean and sustainable solution to the growing problem of food security. They argue that GM technology offers the ability to design crop plants to produce increased yields in difficult conditions, with far less reliance on chemicals. Robert Hirsch, Director of Technology of GM pioneer Monsanto, insists that GM is bringing numerous economic and environmental benefits:

producing more food on the same area of land, thereby reducing pressure to expand to sensitive areas such as forests and mangroves which support bio-diversity and other vital eco-system services;reducing post-harvest loss of food (usually caused by disease pests and decay) and improving the quality of fresh and processed foods;curbing the use of resource and energy-intensive inputs such as fuel, fertilizers or pesticides;encouraging the reduction of environmentally-damaging agricultural practices and adopting more sustainable practices such as conservation tillage, precision agriculture and integrated crop management;stimulating a new type of economic growth that brings more benefits with less output and harm.

But critics are taking these claims with a pinch of salt. They are not confident genetic engineers will be able to deliver on their promises. They feel the genetic structure of plants and animals is too complicated and that this complexity is likely to lead to unpredictable results. Indeed, this fear was borne out by the results of the first field trial, in 1996 of a new strain of cotton which produced multiple side effects and deformities.

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Besides having doubts about the capacity of genetic engineers to achieve reliable results, many critics fear that scientists will be so focused on the specific crops being developed, that they are likely to ignore the wider environmental context in which the crops will be grown. For example, there are concerns about the possible long-term effects of crops with built-in, pesticide properties. It is feared that in the same way that bacteria develops immunity to antibiotics, insects will eventually become resistant to crops with built-in pesticide properties. These fears are not unfounded. From studies carried out in the USA it is known that insects are developing a resistance to GM foods at much faster rate than scientists can handle. Further, critics dismiss industry claims that Biotechnology will reduce reliance on chemicals and sustain biodiversity. Non-Governmental Organizations (NGOs) like Greenpeace believe that the very opposite is likely to happen … that while the introduction of herbicide-resistant varieties will alter the pattern of herbicide use, there will be little change in the overall amounts used. It is being predicted that Biotechnology will replace the richness of local plant varieties that have natural, pest-resistance characteristics, with “monocultures” of single varieties that will leave the crops vulnerable to attack by pests. Because the health of the environment determines human health, GM opponents also fear that transplanted genes in plants may cause allergic reactions in people eating the food, as well as introduce antibiotic-resistant genes that could be picked up by harmful bacteria and thus reduce the range of drugs used to treat disease. Many engineers are alive to this threat

and have stopped using antibiotic-resistance marker genes, during genetic modification. Finally, critics are alarmed that genetic engineering is being developed and promoted mainly by private corporations. They fear that recent mega-mergers in the “life industry” sector will give a few giant corporations control over a large proportion of the germplasm, agricultural processes and distribution systems needed to feed the world. In the opinion of these critics, food is too basic a right - for the poor as well as the rich - and therefore it should not be in the hands of companies whose prime motive is profit rather than the good of humanity. I have long held the view that the problem of food insecurity is not caused by an absolute world shortage of food but by global economics which cause the available food supply to be unevenly distributed.

What does all this mean for us in the Caribbean?

A great deal, would be a sharp and simple answer. We do not have the capacity to become significant actors on the supply side of GM food. Our farms are miniscule compared to farms in North America and our farmers cannot afford the premium prices for GM seed and the accompanying inputs of fertilizers and pesticides. Further, legal and economic obstacles make it extremely difficult for us to get in at the designer end of things. A considerable investment in research and testing is needed to develop genetically-modified crop varieties. To recoup this investment and to profit from it, researchers would normally want the right to


the sole use of the new discovery -via a patent - for a certain period before the knowledge enters the public domain. An appropriate legal and institutional infrastructure will have to be established. This would include the enactment of legislation based on the 1994 International Agreement on Trade Related International Property Rights (TRIPS). But even if no GM crops are actually grown in the Caribbean, the technology could still have significant adverse effects on our society and economy, especially if it enables developed countries to grow for themselves crops they import from us. Also, to the extent that other countries are using GM technology to become more competitive, the Caribbean’s food producers are likely to experience severe difficulties retaining or expanding their share of export markets. Still, it would be folly for the Caribbean to dismiss biotechnology out-of-hand. Given the difficulties being experienced by our farmers in irrigating their farms, not to mention the perennial threats from the “Pink Mealy Bug”, “Leaf Spot”, and other diseases, it may become necessary to introduce smart varieties of crops that can resist drought, disease and pests. If or rather when this becomes necessary, the region will have to ensure that there are few negative social and environmental impacts involved. Computer sciences, satellite imagery and communication technology are among the other frontier technologies that can improve agricultural productivity and resource management. The other option open to Caribbean farmers is to go the organic route. As already noted, consumer fears over the human and environmental health impacts of GM crops are creating a growing market for organic products. However it must be emphasized that a shift to organic farming in the Caribbean is not a straightforward matter. It will require:

a total transformation in the mindset of all concerned; the refocusing of incentives away from growth production per se, to reward effective soil and water conservation and other sustainable agricultural farming practices; appropriate legislative and policy reforms and;

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a reorientation of our agriculture marketing efforts.

Moreover, a shift to organic farming will require solid support from the region’s premiere educational and research institutions such as the University of the West Indies and the Caribbean Agricultural Research Institute (CARDI). To begin with, research will have to become less centralized and more sensitive to farmers conditions and priorities. More adaptive, in-situ research should be done using research stations for referrals and using farmers to evaluate the results. The private sector can assist in bringing appropriate technologies to the farmer, though support for research and extension services, especially in areas where climate, soils and terrain pose special problems for our farmers. It seems like challenges abound at every turn for small island developing states like ours. In attempting to overcome these challenges, the Caribbean would need to draw on and or develop the necessary capacity. Clearly science is a sine qua non in any response strategy.

Cletus Springer is Director, Department of Sustainable Development, Organization of American States.

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Conference on the Economy 2010The annual Conference on the Economy (COTE 2010) was hosted by the Department of Economics, Faculty of Social Sciences, The University of the West Indies (UWI), St. Augustine Campus, Trinidad and Tobago in October. The theme of this year’s conference was “Economic Policy Formation and Program Implementation in the Context of the Caribbean Reality”. The conference paid tribute to Dr. Roy Thomas, a former Lecturer and Head of Department of Economics.

Photo: Professor Clement Sankat (l), Principal of The UWI St. Augustine Campus greets Professor Compton Bourne, President of the Caribbean Development Bank (CDB). Professor Bourne is also a former Principal of the St. Augustine Campus of The University of the West Indies.

The Ministry of Energy and Energy Industries in Trinidad and Tobago in collaboration with the National Energy Corporation and the Methanol Holdings Trinidad Limited (MHTL) hosted a conference in mid-November on Downstream Development: Maximising Melamine.

Left to right - Leroy Mayers, Permanent Secretary in the Ministry of Energy and Energy Affairs, Minister Carolyn Seepersad-Bachan, Rampersad Motilal, Managing Director and CEO of Methanol Holdings Trinidad Ltd and Andrew Jupiter President of the National Energy Corporation.


Excerpts of a speech by Barbadian Opposition Parliamentarian, Ms. Mia Armor Mottley, to the Barbados Chamber of Commerce.

The luxury of having access to preferential markets, protective tariffs, quotas, subsidies and industrialization by

invitation lives now mostly in the history books and academic texts. They are relics of another time and space that served us moderately well for the first thirty to forty years after Independence. Within five years from now though, by 2015, we will no longer have one of the key instruments that has supported economic growth and that has supported our enterprises. Think if you will that almost every large-scale enterprise in tourism, manufacturing and agriculture has been the beneficiary of generous incentives from the government of Barbados in their setup and operations. That option of substantial fiscal incentives will be removed from our economic arsenal. The Government and people of Barbados will have to find new models to fuel our future development. A significant part of this government’s problem today, the reason its fiscal position is so precarious and unsustainable, is that it has continued to cling to old models of development that assumes government’s only levers of action are tax and spend. The truth is that while we have made great strides in our physical and social development we have fallen behind the curve in the areas of government and governance and enterprise. Strategic use of taxation and expenditure will continue to be part of the arsenal of government, but there are far more powers available to a government to unleash growth in the economy. The power of a Government to legislate so as to influence behaviour, to regulate rather than to own, to facilitate and coordinate activities that would not otherwise happen,

Dare to dream. Determined to do.

to empower our people through a myriad of ways are increasingly more effective and serve as beneficial tools in managing a modern economy. There is no doubt that the modernization and expansion of our economy is lagging behind where it should be. Let us face the facts. Last year the Barbados economy declined for the second straight year. The decline was of the magnitude of 4.8%. The Government tells us that this was a consequence of the international recession and that it had few options to do better - and from the look of it, even fewer aspirations. Again let us examine the facts. There are 213 countries in the world. Did we move along with the pack? No. Not 50, not 100, not 150 but 188 countries performed better than we did last year. We were 189th in the world in terms of economic performance. 110 countries actually expanded their economies last year. There is much smart government policy can do to change our position in the pack. Surrendering our fate to the shifting winds of the global economy will only relegate us to the back of the race. It is therefore incumbent upon us to make critical decisions about the economic model we chose for the next two to three decades to take us to the next stage of our development. If we want to improve our quality of life and if we want to remain a domicile of choice, Barbados must be able to retain its top talent. Barbados must be a place where poor people can change their circumstances.


Barbados should be a magnet for investment. Barbados must be a destination of choice for the world’s travellers. Economies, even small ones like ours are complex and Governments in trouble use statistics to obfuscate. But as you would know, some things do not lie. Things are not going well when unemployment doubles and when foreign direct investment drops from $1.5b (US$750 million) in 2007 to $90 million (US$45 million) in 2009. But perhaps the truest measure of the performance of economic policy is the amount individual people and companies are investing in the future. If there is little confidence in the future, investment falters, and this has a knock on effect of lowering our ability to produce in the future. And so what alarms me as much as anything else is that overall investment in the Barbados economy has collapsed. Gross capital formation – investment in buildings, machinery and stock has dropped by almost 30% between 2007-2009 - from $1.57b (US$785 m) to $1.16b (US$580 m), a decline of over $400 million (US$200 m). This is the biggest dollar decline in our history and in percentage terms is only rivaled by the last DLP recession. We are already aware that the global recession, along with the Government’s significant increases in taxes and fees has led to a depletion of over $200m (US$100m) in savings over the last two years. Equally, there has been a serious depletion of our Net International Reserves.

Modern government We can do better than this. We need a modern government with new levers of influence that makes use of the technology that people now use in their everyday lives. We need a new approach. An approach that recognizes that being disabled friendly and creating green spaces is not only the right thing to do but it improves our quality of living and our environment, while also setting us apart from the competition and driving, economic activity. An approach where our Government is a facilitator and not a hindrance. An approach that will see any Government which I lead as seeing as its core mandate the settling of the 10 or 12 perennial problems that have bedeviled our society for the last 20 to 30 years and

which seem as though they are now part of our DNA! Littering, service quality and courtesy, unreasonable and costly delays in accessing government permissions and decisions to mention a few! There is a quid pro quo for business benefiting from an enabling environment. There must also be benefits to the vulnerable and less fortunate among us.Business will not thrive in a socially unstable environment and therefore it is important for governments to have the cash to care and to be compassionate – to facilitate that most important national objective of social justice. The South Africans best exemplify it in their concept of “Ubuntu” – “I Am Because We Are”. Our failure to implement is a legitimate concern on which there has been much commentary. It has even been referred to as IDD - Implementation Deficit Disorder. The sooner we realize that part of the problem is structural the better. We will not change attitudes by continually ridiculing and bashing our civil servants. We must recognize that they are the victims of outdated laws and systems, which have ingrained into the psyche of rational thinking people the notion that they are not empowered to decide; merely to implement what is there. Even if what is there now requires you to fill out 25 forms manually, go to seven departments and wait ten months. That is a recipe for inertia and low self-esteem. To change attitudes and behaviour we must first change the nineteenth regulations and procedures and motivate our public servants to see themselves as equal stakeholders in our national economic projects. Less territorial dominance and more collaborative and consensual decision-making are also required. I have dared to dream. And I am determined to do. I have however been in public life too long not to recognize that that dream and that determination to do must be something to which the majority of us aspire and are prepared to work towards.

Editor’s note: Shortly after delivering this speech, Ms. Mottley lost the position of Opposition Leader and Head of the Barbados Labour Party to former Prime Minister, Owen Arthur.


Your speech can be an asset or a liability

Perspectives

There is more to the voice than utterances, or the use of the sounds

provided by the twenty-six letters of the English alphabet. Let’s not forget the need to pay attention, not just to what is said, but also to how it is said. The tone in which those words are spoken contributes significantly to their impact. The way in which something is said - accent, tone, inflection - affects the level of understanding on the part of the listener. Through your speech and voice you reveal part of your personality. You may also reveal your mood and your impression of the person with whom you are speaking. In business, communication through speech and the voice is important. It can sometimes be the deciding factor in whether a transaction will be aborted; enhanced, or whether it will remain in abeyance. In a world of fast paced communication technology, the basic skills required for effective face-to-face communication are sometimes forgotten. This can lead to misrepresentation and misunderstanding. Many individuals possess immense talent and skill, but can betray this capacity when called upon to use their voice as an effective communication tool. Some are blessed with a pleasant voice, others not so much. Some can say unpleasant things in a pleasant way and get away with it, while others say things that are meant to be pleasant, but do not sound pleasing. In whatever category your voice fits, as a business person, you have to speak with clients and prospects. When it’s by appointment you have the time to prepare what you will say and how you should say it. On other occasions the dialogue is impromptu and you could be caught off guard. You can avoid being caught napping by always speaking with enthusiasm. Let the

other person feel that you are pleased to converse with him or her. But be careful not to overdo it otherwise you could come across as insincere. Let the person to whom you are speaking be the more important one in the conversation. If they need advice on a purchase, add to what they suggest rather than rule out what has been said. For example, if they have selected a particular item or service and after discussion you realise they should really be looking at something different, instead of dismissing what they have

chosen you could say something like, “That’s a possibility. You might also want to consider this….” Then offer the reasons why. Be a good listener. Let the other person lead. Remember that even in your silence you are communicating with the customer. When you do speak, smile before you open your mouth. The expression on your face determines the expression in your voice. Try it. Ask someone to listen to you. Put a deep frown on your face; keep it there while you say “Today is the most wonderful day of my life. I have never felt so happy.” Did the tone of your voice match your words? Did you sound convincing? Unlikely. Okay, try it this way. Smile a big, broad smile while saying “I feel really depressed right now. This is the worst day I have had in months.” Was your listener convinced? If you want to sound pleasant, interested and friendly, wear a pleasant, interested and friendly expression before you open your mouth to speak. Your words will be coloured by the shape and expression of your face. This is very apparent in telephone conversations. In fact, it can be much easier to perform. As soon as the phone rings or as you dial the number, put onto you face the expression/emotion you want to convey.


The expression on your face influences the expression or emotion in your voice. It’s really very basic and we do it all the time, without thinking. Doing it consciously, with purpose, gives you another effective instrument in your communication toolkit. Speak at a moderate pace. Fast talking sounds insincere, confusing and might give the impression that you’re a trickster. Contrary to popular belief, the softer voice is much more convincing than the barking one. Avoid shouting, or speaking in a tone louder than you yourself would hope to hear from the other person. When you speak loudly, you are talking at the person not to or with them. Since your voice is part of your personality and the image you are creating, periodic assessment is required. If your business shifts

focus, you may need to make a few minor adjustments to closer align your image with that of your re-vamped business model. Through it all, the main ingredient is sincerity. You need to be sincerely interested in making your verbal communication an asset to your business, just as you are sincerely interested in maintaining your customers and their patronage.

Garfield King is an independent radio producer, presenter and writer with 30 years broadcast experience. As a trainer, he conducts workshops on public speaking, presentation skills and communication dynamics.

Jacques Diouf, Director General, Food and Agriculture Organization of the United Nations, on World Food Day, October 16, 2010 outlined a number of measures that needed to be taken to make a rapid decrease in the number of hungry people.

“We have to resolutely reverse the long-term negative trend of the share of agriculture in official development assistance which dropped from 19 percent in 1980 to three percent in 2006 and is now at around six percent,” he said. “Government of low-income food-deficit countries also should increase the share of agriculture in their national budgets from the present average level of five percent to at least ten percent.”

Among the measures required to spread greater food security was a stabilization of global food markets, the FAO Director-General said. “There is a need for greater coherence and coordination in policy choices for greater assurance of unimpeded access to global supplies and improved confidence and transparency in market functioning. Effective tools and mechanisms to deal with food price volatility are urgently required.”

16 October 2010 World Food Day

SIGN THE PETITION TO END HUNGER Food and Agriculture Organization of the United Nationswww.fao.org


over 300 companies from nearly 30 countries say they

are committed to reducing their emissions in the energy, information and communication technologies (ICT) and buildings and construction sectors.They gave the undertaking at the Business for Environment Climate Summit recently held under the patronage of the Mexican Minister of Environment Juan Rafael Elvira Quesada. The two-day meeting in October concluded with a statement from business leaders agreeing that averting a major climate crisis with serious economic, political, health, environment and security impacts will require the creation of global policy and strong national legal frameworks. National policy instruments that governments should put in place, according to companies, include financial mechanisms to offset initial costs and reallocate total costs along the life cycle of buildings; phasing out fossil fuel subsidies; soft loans on climate solutions; smart grids; feed-in tariffs; and buy-downs in energy that send the right signals to the marketplace. A number of companies made commitments to climate action: Several ICT companies agreed to reduce 7.6 gigatons of CO2 emissions by 2020. Building sector representatives committed to reduce emissions 40 percent by 2020 in new buildings and improve energy efficiency by up to 40 percent in existing buildings. Several energy companies at the meeting agreed that 100 percent renewable energy by 2050 is achievable and is something they continue to work towards as a sector. Business leaders called upon governments to move forward international negotiations to ensure an ambitious outcome at the Cancun Climate talks (16th Conference

Global business leaders commit to a low carbon future

of the Parties), organized by the United Nations Framework Convention on Climate Change later this year (29 Nov - 10 Dec 2010). Business stressed the need for a global level playing field that would both enable these commitments and mainstream green entrepreneurship among and across industry sectors. Companies acknowledged that entrepreneurial action to address climate change can play a critical role in

stimulating a smart global economic recovery, creating new jobs and building more sustainable and resilient low-carbon societies. “It is possibly the first business summit ever to recognize the role of companies as solution providers. We all now recognize the huge problems that climate change is posing for our societies. We should now step up, lead and be part of the tidal wave of companies that bring the solutions our societies need,” said Barbara Kux, Chief of Sustainability, Siemens. Companies also recognized their role in changing conduct and values for a more equitable future. “We recognize the role that big corporations have in changing supply chains so that small and medium enterprises can fully participate in the green economy,” said José Luis Prado, President, Gamesa. “We recognize the possibility we have in changing behaviors, starting from our companies. We can walk the talk and enlist the hundreds and thousands of employees that work for our companies as solution providers,” said Magnus Kuschel, Managing Director, Commute Greener, Volvo Group. The event pinpointed that the global green race has begun and acknowledged the role of civil society in making those solutions more visible and tangible. UN Under-Secretary General and UNEP Executive Director, Achim Steiner, said, “Many businesses including those at the B4E Summit


are signaling leadership and seizing the opportunities of the climate change challenge. Why? Because many see rising risks to profits from the impacts of rising greenhouse gases but also an opportunity to become far more resource efficient and innovative enterprises. “Governments at the UN climate convention meeting in Cancun and beyond have a responsibility to support these aims and actions by signaling their determination to set the kinds of national and global policy frameworks able to accelerate and sustain these transformations,” he added.

In his keynote speech Al Gore, former US Vice-President and Nobel Prize said “We need the good companies to put pressure on all governments to lead by example and step-up their domestic and global commitments.” Mexican Minister of Environment Juan Rafael Elvira Quesada said: “The private sector has much to offer in the global fight on climate change. We do not want that the conclusions and recommendations of this event remain in a drawer. We want to take them to Cancun, to enrich the negotiations.”

grenada and australia to deepen diplomatic relationsAustralia has agreed to set up a Consular Mission in Grenada. This was among issues discussed between Grenada’s Prime Minister Tillman Thomas and Australia’s Foreign Affairs Minister Kevin Rudd during a recent meeting held in New York. Mr. Rudd stated that Australia will look out for the interest of Grenada and other CARICOM countries, especially through the High-Level UN Secretary General panels on climate change and sustainable economic and social development. Australia has committed approximately US$100 million to Small Island Developing States (SIDS) at the United Nations Climate Change Conference in Copenhagen, Denmark in 2009, with 25 percent already delivered.


nEWs briEFssEC’s Chairman WElComEs nEW

sECuriTiEs bill

Chairman of Trinidad and Tobago’s Security and Exchange Commission (SEC), Deborah Thomas-Felix welcomes the new Securities Bill 2010 which enhances the work and oversight of the SEC in a number of areas and promotes conditions for the orderly growth and development of the capital markets.“The market now stands at

$214.6 billion (US$34 billion) as at March 2010 and therefore, the work of the Commission is critical for treating with the challenges of systemic risk, to facilitate fair and transparent markets and provide protection for investors,” said Ms. Thomas-Felix “If nothing, the last two years have taught us that we are one global village inter-connected and subject to the same systemic risks, despite the size and location of our respective markets.” The Chairman said the SEC is fully cognizant of this and of the current challenges in the domestic market as it strives to improve the legal framework in the Securities Industry to have more comprehensive inspection, investigatory and surveillance powers.

CDF suPPorT For sainT VinCEnT anD ThE grEnaDinEs’ argYlE

inTErnaTional airPorT

CDF Support for Saint Vincent and the Grenadines’ Argyle International Airport

The Board of Directors of the CARICOM Development Fund (CDF) has approved a Country Assistance Programme (CAP) to the Government of Saint Vincent and the Grenadines for just over US $4.2 million to be used by the

Argyle International Airport Development Company. The CAP makes provisions for a grant of US$1,640,000 and a concessional loan of US$2,570,000. In announcing the Board’s decision, the Chief Executive Officer, Ambassador Lorne McDonnough noted that the funds approved will allow for

the acquisition of equipment to facilitate the runway paving works which will commence in the first quarter of 2011. The CDF, he said, will also provide US$1,000,000 for the supply and installation of runway lights and emergency generators. The new Argyle Airport will provide Saint Vincent & the Grenadines with direct regional and international jet air access to CARICOM, North America and Europe. This development, Mr. McDonnough said will reduce a disparity which places the people of Saint Vincent and the Grenadines at a disadvantage within CARICOM and could constrain their economic development and their ability to participate effectively in the CARICOM Single Market and Economy (CSME).

CariCom anD russia sign mou

The Caribbean Community (CARICOM) and the Russian Federation have signed a Memorandum of Understanding (MOU) to establish a Mechanism for Political Dialogue and

Cooperation between them. A statement from CARICOM said the MOU is also a result of their mutual desire to strengthen traditional friendly relations as well as to develop fruitful co-operation in spheres of common interest. The MOU was signed by CARICOM Deputy Secretary-General, Lolita Applewhaite and Vice


Minister of Foreign Affairs for Latin America and the Caribbean on behalf of the Russian Federation, Sergei Ryabkov. The Memorandum makes provisions for enhancing dialogue and cooperation between them within multilateral organizations on issues of mutual interest. It also seeks to promote cooperation and exchanges in the economic, trade, financial, investment, technological, scientific and technical spheres as well as exchanges and training in the fields of culture, education, health care, sports, youth development and tourism.

sTabiliTY in barbaDos buT ouTlooK rEmains unCErTain

The Barbadian economy remained stable through the third quarter, even though the global outlook remained very uncertain. The foreign exchange reserves available to the Central Bank to supplement inflows from tourism and other exports of goods and services, stood at $1.4 billion at the end of September – $42 million below the level at December 2009. This level of reserves is sufficient to finance imports at current levels for as long as 20 weeks, in the absence of any other foreign exchange inflows, according to a Central Bank economic review over the past nine months. International financial markets gave a vote of confidence in the Barbadian economy with the very heavy oversubscription of the US$200 million bond which was floated in New York in late July. As a result of the strong demand, Barbados was able to secure an interest rate of 7% on this 12-year issue, in a very nervous market. The proceeds of the loan were partly used to retire the US$100 million short-term loan that had been contracted in June, so that a maturing obligation could be met without dipping into the Central Bank’s reserve of foreign exchange. The remainder of the loan proceeds helped to fill the gap between foreign receipts and payments during the low season for tourism. Tourism output, which had been declining since mid-2008, rose by 3% for the January-September period compared with the same period a year earlier. This expansion was driven by arrivals from the U.S. and Canadian markets, which compensated for the fall-off in visitors from the country’s largest source market – the UK.

largE TurnouT For China-laC businEss Forum

A thousand government officials and business executives from Latin America and the Caribbean, China, Japan and Korea participated in the opening session of the China-LAC Business Forum with high-ranking Chinese authorities and Inter-American Development Bank (IDB) executives. Participants were welcomed by the Governor of the Sichuan Province, Jiang Jufeng; the President of the China Council for the Promotion of International Trade (CCPIT), Wan Jifei; the Governor of the People’s Bank of China, Zhou Xiaochuan; and IDB President Luis Alberto Moreno. “China has become an IDB member country in January 2009 and both China and Latin America and the Caribbean are eager to increase trade and investments,” said Mr. Moreno. “Through this forum, the IDB seeks to expand and strengthen the commercial ties between Asia, and especially China, with Latin America and the Caribbean, by promoting investment and facilitating the identification of business opportunities.” “China is now the biggest trading country with Latin America and the Caribbean after the United States and we believe there are important business opportunities for entrepreneurs on both sides of the Pacific rim,” the IDB President added. “ W i t h so many rich economies experiencing little growth, more South-South cooperation in both the public and private sector is becoming increasingly essential.” This China-LAC summit is part of the series of Asia-LAC Forums that the Inter-American Development Bank (IDB) has organized in recent years. A Forum took place in 2007, in Korea and again in 2008, in Japan.


income inequality can increase the probability of being emotionally depressed, particularly among people living in urban

areas, according to a new study by the Inter-American Development Bank (IDB). The probability of being depressed goes up when inequality, as measured by the GINI Index, increases, according to the study, which analyzed data from 93 countries from the 2007 Gallup Public Opinion Poll. People living in urban areas are more likely to be depressed than those living in rural areas, probably because inequality is more visible in urban areas. The study also found that the level of income, as measured by a country’s gross domestic product per capita, does not affect the probability of depression. The IDB Working Paper “A Cross-Country Analysis of the Risk Factors for Depression at the Micro and Macro Level,” written by Natalia Melgar and Máximo Rossi, economists at Universidad de la República in Uruguay, is the first to offer a broad cross-country analysis of the impact of environmental factors such as economic performance on depression. The paper is part of the ongoing IDB research project on quality of life in Latin America and the Caribbean. Depression is one of the world’s most widespread mental illnesses. Mental disorders can cost as much as 4 percent of the gross domestic product, according to the World Health Organization. The study of the factors that facilitate depression is important to improve quality of life and happiness, and useful for policymakers as they identify at-risk groups and design public health policies.

Income inequality increases the probability of being emotionally depressed, iDb study says

The paper measures the likelihood of citizens of a given country to be depressed than people in the United States. The researchers used the United States as a benchmark because of the wide availability of data and research. Citizens in Ethiopia, South Korea and Bolivia have the highest probability of being depressed than people living in the United States while citizens in Mauritania, Albania and Denmark are the least likely. Thirty-two countries showed no significant differences in probability against the United States.


Latin America and the Caribbean (LAC) cushioned the social impact of the 2008 global crisis thanks to its ability to inter-connect firmly with emerging markets in Asia which in turn boosted growth to 5-6 percent for 2010 -and at least 4 percent for 2011 - while keeping in place the region’s social protection networks. According to “Globalized, Resilient, Dynamic: The New Face of Latin America and the Caribbean” a report authored by the World Bank’s Chief Economist for LAC, Augusto de la Torre, the region showed a remarkable capacity to withstand the crisis’ impact which –the report argues- did not last very long in comparison with other regions, including developed countries, “due to the region’s sound macroeconomic, fiscal and financial policies.” Between 2002 and 2008, LAC managed to lift 60 million Latin Americans out of poverty, even as preliminary estimates showed the crisis adding 10 million people to the ranks of its poor. But according to new World Bank data, in 2009 the number of people living in moderate poverty ($4 per day) grew by 2.1 million with respect to 2008, totalling 168.3 million, while the number of Latin Americans living in extreme poverty ($2.5 per day) grew by 2.5 million, and now it reaches 85.9 million. In 2010 LAC was able to reverse the temporary increase in poverty levels. New estimates indicate that 7 million people will leave poverty behind and 6 million more will be pulled out of extreme poverty allowing the region to return to pre-crisis levels as a result of governments’ capacity and speed to react and apply measures to mitigate the crisis’ social impact. The labor market was also resilient. A year ago, forecasts indicated that 3.5 million people would lose their jobs, but recently released data for 2009 shows that the number of the region’s unemployed increased only by 2 million. The rise of unemployment in LAC was

Through Dynamic Growth, Latin America and the Caribbean Absorbed the Crisis’ Social Impact

less than in other regions such as Europe and Central Asia (ECA), and was slightly above the number posted by the “Asian tigers”. LAC’s resilience to the crisis – including its capacity to withstand the initial external shock, to achieve a speedy and solid recovery, and to apply countercyclical policies in good and bad times – is a reflection of the progress countries have made in the last few decades

towards strengthening the macro-financial system’s immunity, noted Mr. De la Torre in his presentation as part of the World Bank’s annual meetings. He explained that the region’s newfound resilience draws on the quick recovery experienced by countries fully integrated into financial markets -such as Argentina, Brazil, Chile, Colombia, Mexico and Peru (LAC-6), plus Uruguay-- despite being exposed to the crisis’ financial shock.“This is a silent revolution where Latin America has been able to create a financial management style that does not amplify the shock but, instead, mitigates it,” said Mr. De la Torre. LAC’s growing links with emerging economies in Asia and China (especially South American countries, Costa Rica and Panama) have also contributed to making the region stronger, Mr. De la Torre noted. Such economies, mainly China’s, have become the region’s growth engine both as a direct result of growing demand for agriculture and mineral products, but also indirectly, as consequence of China’s growing leverage on international commodity markets for products that abound in LAC. Mr De la Torre explained that in the new millennium LAC has been moving toward a safer form of international financial integration where the region has become a net creditor to the rest of the world with regards to debt contracts, while significantly increasing its position as a net debtor of equity contracts, especially through foreign capital inflows which, at 12 percent, already exceed 2007’s historical record.


Highlights of the October 2010 Investment Trends and

Policy Monitors

as governments are gradually winding down stimulus packages and in some cases reducing public investment in

the face of mounting deficits and debt levels, private investment in the form of foreign direct investment (FDI) does not appear ready to step up to the plate, according to James X. Zhan, Director, Investment and Enterprise Division, UNCTAD Global FDI flows actually declined again in the second quarter of 2010, after four quarters of low-level recovery in the wake of the financial crisis. FDI inflows in the second quarter were down by 25% compared to the previous quarter and by 17% compared to the same quarter of last year, and UNCTAD’s FDI Global Quarterly Index fell from 113 to 85. Early estimates for 2010 based on FDI flows for the first and second quarters, combined with data on greenfield investments and merger and acquisitions (M&A) -related flows for the third quarter, now present a picture of stagnant FDI activity for the year, highlights of the October 2010 Investment Trends and Policy Monitors indicate. According to the UNCTAD Director, this would imply that 2010 flows will still be 25 percent less than the average pre-crisis levels, and 40 percent less than those of the peak year of 2007 (fig. 1). Even though FDI may increase modestly towards the end of this year, a new FDI boom clearly remains a distant prospect.The low second-quarter results were due to a marked decline in intra-company loans – one of the three components of FDI flows – as parent firms called back loans from their affiliates, especially those in the US and UK. Reinvested earnings, usually a stable component of FDI, also tumbled by 52% as firms repatriated a larger share of the earnings of their foreign affiliates.

unCTaD global investment Trends monitor

These developments, aggravated by new risk factors such as potential currency wars and mounting trade protectionism, indicate that a full recovery of FDI may require renewed global efforts to improve the functioning of world financial markets and to promote stronger economic growth. FDI flows are especially sensitive to the risk of competitive depreciations of currencies – a potential currency war – as they affect asset prices, the competitiveness of (affiliate) exports, the value of profit transfers and the cost of production. As such, said Mr. Zhan, depreciations are a double-edged sword for FDI, affecting different types of FDI in different ways, with positive effects for the purchase of assets and for export-oriented investments, but negative effects for services investments and for market-seeking FDI. In the face of a significant uncertainty, transnational corporations (TNCs) will tend to delay investment commitments. As governments recognize the need for private investment to reassume its leading role, the overall trend towards investment liberalization, facilitation, and promotion continues. At least 41 countries recently adopted policy measures affecting foreign investment, 28 of which were in the direction of greater liberalization or facilitation. Countries in Asia were particularly active. At the same, the crisis has led many countries to strengthen the role of the state in the economy, and clearly stronger regulation of the financial sector is a broad trend in the wake of the financial crisis. Investment protectionism remains a serious potential threat to the recovery of foreign direct investment (FDI), particularly protectionism that is “hidden” in the implementation of existing laws and regulations. At the international level the investment regime continues to be shaped by bilateral agreements – 46 of the 50 new agreements


that were signed since April 2010 are bilateral taxation, investment, or free trade agreements. Especially notable is the continued trend towards signing double taxation treaties.

* The Global Investment Trends and Investment Policy Monitors series can be found on the web-site of the UNCTAD Division on Investment and Enterprise, at http://www.unctad.org/diae

IMF invites economists and researchers to discuss Caribbean’s economic challenges

The recent global financial and economic crisis has brought to the forefront the significant challenges faced by Caribbean countries. Growth has slowed significantly in most economies in the region At the same time, the fiscal stance has eased and public debt levels, which were already high, continue to increase rapidly, reflecting the slowdown in growth and, in some cases, the authorities’ efforts to use countercyclical fiscal policy to mitigate the impact of the crisis. The University of the West Indies, the Central Bank of Barbados, and the International Monetary Fund (IMF) are organizing a joint conference in Bridgetown, Barbados on January 27-28, 2011 to discuss issues related to Caribbean regional economic growth, debt, and their associated policy challenges. “We want to bring together academics, researchers, and policymakers to share

their knowledge and experience on the most important economic and financial issues on the Caribbean,” said Alfred Schipke, chief of the Caribbean 1 division of the IMF, which oversees six countries in the region. “The aim is to help the Caribbean countries seize the opportunities and meet the challenges of high and sustained growth as the global economy recovers from the Great Recession.” “The IMF has been expanding its work and involvement with the Caribbean countries,” said Dr. Andrew Downes, director of the Sir Arthur Lewis Institute of Social and Economic Studies of the University of the West Indies in Barbados, and a member of the IMF’s Regional Advisory Group for the Western Hemisphere. “This conference will be an excellent opportunity to broaden the discussion and for the academic community to influence the formulation of IMF programs,” he added.


books

They account for half of global growth and will surpass economic size of developed nations by 2015

While the rich world puts its house in order, developing countries are becoming a new engine of global growth and a pulling force for advanced economies, says a new book by World Bank economists. According to The Day After Tomorrow: A Handbook on the Future of Economic Policy in the Developing World, almost half of global growth is currently coming from developing countries. As a group, it is projected that their economic size will surpass that of their developed peers in 2015. “Developing countries have come to the global economy’s rescue,” said Otaviano Canuto, World Bank Vice President for Poverty Reduction and Economic Management (PREM), and co-editor of the book. “They are the new locomotives of growth which will move global growth forward while high-income countries remain stagnant.” According to the publication, growth in developing countries is estimated to reach 6.1 percent in 2010, 5.9 percent in 2011, and 6.1 percent in 2012, while corresponding figures are 2.3 percent, 2.4 percent, and 2.6 percent for high-income countries. These diverging growth prospects continue in the medium term. Five factors account for it: faster technological learning, larger middle- classes, more South-South commercial integration, high commodity prices, and healthier balance sheets that will allow borrowing for infrastructure investment. “The economic horizon of the developing world is promising,” said Marcelo Giugale, World Bank’s Director for Poverty Reduction and Economic Management in the Latin America and Caribbean Region, and co-editor of the study. “The rebalancing of global growth toward a multiplicity of engines will give the developing countries new relevance. It will also change their policy agendas: on average, economic management will be stronger, governments

Developing Countries Come to the global Economy’s rescue

will be better, and the beginning of the end of poverty will be within reach,” he added. The study notes that developing countries should take advantage of their relatively healthier fiscal positions to foster inclusive growth. This means better targeting of social programmes, more emphasis on giving people the same opportunities, and business environments that facilitate the creation of formal jobs. Other upcoming, developing-country trends identified in the book include the recovery of remittances, an increase in South-South trade, rising investment by sovereign wealth funds, more conservative debt management, and progress by many governments in gaining public trust. According to The Day After Tomorrow, regions like East Asia, Latin America, South Asia and, soon Africa, have the potential to turn into “newly developed.”


books

UNCTAD’s third Investment Policy Monitor (IPM) reports that from April through the beginning of October 2010, at least 41 countries introduced new national investment policy measures, with 27 economies enacting investment-specific policy measures, and 16 economies enacting measures related to foreign investment. At the international level, 79 economies concluded 50 new international investment agreements (IIAs), including 39 double taxation treaties (DTTs), 1 bilateral investment treaties (BIT) and 10 other IIAs. It also finds that during the period under review, there was an ongoing trend towards more investment liberalization and – even more so – towards facilitation and promotion of investment. At the same, numerous countries adopted policies to strengthen the role of the State in the economy, in particular in the financial sector and extractive industries. The overall trend towards attracting more foreign investment can enhance the global economic recovery in the aftermath of the financial crisis, the Monitor says, particularly at this critical juncture when public investment has run out of steam in many countries and when private investment is yet to reassume its lead role in the global economy. Likewise, the development towards strengthening the role of the state, in particular in the financial sector, can contribute to more responsible investment in the future. However, finding the right balance between more regulation, on the one hand, and investment promotion, on the other hand, remains a challenge. The Monitor provides the international investment community with quarterly country-specific, up-to-date information about the latest developments in foreign investment policies at the national and international levels.

1

IntroductionThis Monitor is the third of a new series launched by the UNCTAD secretariat in order to provide policymak-ers and the international community with up-to-date information about the latest developments and salient features in foreign invest-ment policies at the nation-al and international level. It covers measures taken in the period between April and the beginning of Octo-ber 2010.

The policy measures men-tioned in the Monitor are identified through a sys-temic review of govern-ment and business intelli-gence sources. Measures are verified, to the full-est extent possible, by referencing government sources.

Highlights of main developments and policy implications• The review period (April to beginning of October 2010) witnessed

an ongoing trend towards more investment liberalization, facilitation and promotion. At least 41 countries or economies adopted policy measures affecting foreign investment, with countries in Asia being particularly active.

• At the same, numerous countries adopted policies to strengthen the role of the state in the economy. Measures taken include, inter alia, some instances of expropriation/nationalization in Latin America and a stronger regulation of the financial sector. Investment protectionism remains a serious potential threat to the foreign direct investment (FDI) recovery, particularly protectionism that is “hidden” in the implementation of existing laws.

• At the international level, countries continued to conclude new investment agreements – 50 new such agreements were signed between 79 economies. Notable is the continued trend towards signing double taxation treaties.

• The overall trend towards attracting more foreign investment can enhance the economic recovery in the aftermath of the financial crisis, particularly at this critical juncture when public investment has run out of steam in many countries and when private investment is yet to reassume its lead role in the global economy. Likewise, the development towards strengthening the role of the State, in particular in the financial sector, can contribute to more responsible investment in the future. However, finding the right balance between more regulation, on the one hand, and investment promotion, on the other hand, remains a challenge.

No. 3, 7 October 2010

INVESTMENTPOLICY MONITOR

A PERIODIC REPORT bY ThE UNCTAD SECRETARIAT

Note: This report can be freely cited provided appropriate acknowledgement is given to UNCTAD and UNCTAD’s website is mentioned (www.unctad.org/diae).

unCTaD issuesThird Investment Policy Monitor


Truth acts like a cork in water

The lighter side...

if you challenge someone because you doubt their honesty and they begin

their defence with, “The truth is.......” does it indicate;

They were lying previously and only now have decided to be honest; They are about to reveal the mysteries of the universe;They just want to ensure that you understand the situation, orIt is time to make a pot of tea and sit comfortably because it’s story-time?

What are we to make of this widely used word truth? If taken at face value it would seem the world is full of very honest people. How many times a day do you hear phrases such as: “Honest to God”; “That’s the honest truth”; “I swear to you”; “To be honest with you...”; “To be perfectly frank…”. I always feel a little uneasy when someone seems to be bending over backwards in an attempt to convince me of the authenticity of their story. Although truth sometimes needs a witness, it can speak for itself. Lying and dishonesty seem to be accepted in our dealings with others. We may tell “little” lies to the boss when we want a day off; we pretend we are not at home so as to avoid talking to certain people and we claim to understand situations so as not to appear out of touch. Why are we so afraid of the truth? Could it have something to do with the saying, “Truth

1.

2.

3.

4.

reveals”? Whatever is done under cover of night is revealed in the light of day and the day will surely arrive. Is this the reason we hide from truth, or to be more precise, we hide truth? Elaborate schemes are devised to hide, mask or distort truth. The past is often a victim. History books have been written, rewritten, edited, abridged and warped at various times, by various people, to suit their particular agendas.

If a piece of false information is repeated often enough it ascends from the pit of rumor, along the corridors of possibility and into the chamber of “fact” where it sits quite comfortably, recognised by only a few. An inexperienced, poorly trained media plays a significant role in the sanctification of falsehood. It is rarely by deliberate intent. However, echoing the rumors of what may be a possible possibility, the noise of the misinformation drowns out the sound of truth leaving a cacophony of deafening ignorance. Most of us feel it is vital to tell half-truths when we are dealing with others. From the standpoint of security, in the business world or on the national level, that would seem to make sense. But how many half truths equal a whole lie? Notice how when relating our experiences we make sure that we give ourselves the leading role. The narrator becomes the hero. In our personal relationships we lie in order to save face or enhance our image, but sooner or later


the truth surfaces and we end up shame faced with our image badly damaged. Truth acts like a cork in water, as fiercely as you try to push it under it will pop up again with force. Is there anything wrong with being wrong once in a while? We know that cover ups have a way of being uncovered. If you make a mistake why not own up, let it pass and move on? That would surely be preferable to pretending that nothing happened and it was all just a figment of collective imagination. “A wise man learns from his mistakes and acquires more wisdom. The fool denies his errors and becomes more foolish.” A successful businessman claimed, “Business is built on the art of strategic and careful lying.” Is it? Or is business is built on integrity and relationship? Nobel Prize-winning poet Boris Pasternak said “As for men in power, they are so anxious to establish the myth of infallibility that they do their utmost to ignore truth.”

Does that apply solely to people in power? There are those who claim that our focus on lying is like a sickness. Honesty is dangerously out of style. Dishonesty, lying and cheating exist everywhere, but does that make it correct, does such behaviour become ethical because it is popular practice? Surely a wrong deed remains an indiscretion irrespective of the number of culprits who delight in impropriety. Attempts at honesty require courage, but life actually becomes easier as one works toward an honest life. If you tell the truth there is no need to remember which lie you told, and to whom, in your efforts to maintain credibility.

December 2010 ISSN 2070-4593

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