Report No. 5638-CRG

Caribbean RegionCurrent Situation, Issues and Prospects

May 6, 1985

Latin America and the Caribbean Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

- This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disdosed without World Bank authorization.

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FOR OMCIAL USE ONLY

PREFACE

This Report has been prepared for the Caribbean Group forCooperation and Economic Development (CGCED). Its prime objective is tocall attention to the progress in economic development, problems and needsof the Caribbean region.

Part I, Overview of the Caribbean Economies, is designed inresponse to the decisions reached in the context of discussions on theWorld Bank's report "CGCED - A Retrospective and Prospective View- (CGCED84-4). As a result, it contains greater emphasis on macro- andmicro-economic policy issues that are hampering development in the region.This section of the report demonstrates that, despite the progress so farand the tentative recovery of most Caribbean economies in 1984/85, thereare serious concerns on a number of key issues, particularly onunemployment, fiscal performance and progressive decline in public sectorinvestment, exchange rates, promotion of exports and the scope andorientation of the sugar industry.

Part II recapitulates and updates information on some of theregional and subregional programs which complement individual countryprograms of the CGCED. Additional donor assistance required for thecontinuation of these programs is identified. Comprehensive reports on theregional and subregional programs are expected to be distributed prior tothe June 1985 CGCED meeting.

Part III analyzes the external capital inflows to the region overthe past two years and determines the gap that still needs to be financedfor the current FY85/86. Two issues here are of major concern. Firstly,the growing scarcity of resources available to the Caribbean region onconcessional terms. Secondly, the need for new donor approaches tofinancing a greater share of local costs.

Finally, to add to their usefulness, the Country Profiles inAttachment 1 have been expanded to highlight country-specific macro- andmicro-policy issues, project priorities, creditworthiness, the Bank's ownprogram and additional capital assistance requirements.

Thu doment ha a restriced disibution and may be used by rdpients only in dte perornc ofthi offii duies Its contents may not oterwie be dicosed without World Bank authonzation

TABLE OF CONTENTS

Page No.

I. OVERVIEW OF THE CARIBBEAN ECONOMIES .............. ......... 1

A. Introduction ............. ....................................... 1B. Selected Economic Policy Issues ....................... 2

II. REGIONAL AND SUBREGIONAL PROGRAMS ......................... 12

A. Structural Adjustment in the CARICOM Countries ........ 12B. Energy ................................................ 14C. The Caribbean Project Development Facility ............ 16D. Tourism ................................................ 16E. Civil Aviation ... * ....... ..... 17F. Subregional Programs in the OECS Countries ............ 18

(a) The Inter-Agency Resident Mission ................ 18(b) Agriculture ...................................... 19

G. Future CGCED Activities ....... ........................ 20

III. EXTERNAL FINANCING .................... .................... 21

ANNEX I: Country Profiles ............................... 24

ANNEX II: Statistical Appendix .................. ......... 63

I. OVERVIEW OF THE CARIBBkAN ECONOMIES

A. Introduction

1. Ir 1984, most Caribbean economies were able to overcome theeffects of the 1981-83 international recession and registered positiverates of growth. Spearheading this growth was a 5Z rise in touristarrivals. The rehabilitation and expansion of tourist facilities andrecovery in the US and Western European economies both contributed to thisfavorable result. With encouraging tourist bookings for the coming seasonand beyond, tourism is indeed being viewed as a growth sector in much ofthe Caribbean. In contrast, the manufacturing sector was one of theweakest performers in 1984, largely because of the difficulties of theCARICOM 1/ (Caribbean Comuinity) regional market following: (a) theadoption of trade restrictions within CARICOM since 1983 by many of the keymember countries because of domestic economic difficulties; and (b) theconsequent non-functioning of the CARICOM Multilateral Clearing Facility(CMCF), which facilitated intra-regional trade. Nevertheless, manyCaribbean nations view manufacturing as one of the potential growth sectorsin the years ahead. Easily trained and relatively inexpensive labor,political stability and access to the markets of the US and of the EuropeanEconomic Community add to the attractiveness of the region, particularlyfor labor-intensive light assembly industries. The Caribbean BasinInitiative (CBI) of the US, which provides a one-way, duty-free trade areafor 12 years, being relatively new, has so far had only limited impact onthe region's trade. The Lom (ACP) Convention was extended for five yearsfrom December 1984, and thus not only provides the Caribbean with acontinuation of traditional markets, but also potential for industrialexpansion.

2. If the prospects seem hopeful for tourism and for exports oflight industries, they rpmain uncertain for traditional exports. Pricesobtained for sugar and bananas were slightly higher in 1984 than in thepreceding year, but bauxite and alumina prices declined. In nearly allcountries, sugar prices, even in protected markets, remain below productioncosts, often by a substantial margin. The EEC quota sugar prices havedeclined by 36% between 1980 and 1984, while the non-quota world price hasfallen by 83% in the same period. The reduction in the 1984/85 US sugarimport quotas has further weakened the market for Caribbean exporters.Increased mechanization and cost reduction programs are being attempted toachieve viability. Banana exports have also declined, except in theislands of the Eastern Caribbean. Shipments to the United Kingdom, whichin 1978 reached 200,000 tons or 60% of the British market, declined to130,000 tons or 30% of the market by 1984. A wide range of problems hasaffected the industry - disease, hurricanes and storms that have struck theregion repeatedly, as well as periodic insufficiency of supply and variablequality. The bauxite/alumina market has shown little recovery and Jamaicanexports only grew in response to a new barter agreement, while regularbauxite and alumina exports were stagnant. With an upturn in demand forcalcined bauxite and modest rehabilitation of the mines, bauxite exportsfrom Guyana in 1984 increased by 16% over 1983.

1/ Not all countries covered by this report are members of CARICOM.

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3. While the economic expansion in OECD countries in 1984 generallyhad favorable effects on the region, the extent of the economic recoveryhas varied widely among the individual economies. Recovery in the islandsof the Eastern Caribbean was more noticeable than in the rest of the regionand was attributable mainly to an increased volume of banana exports andhigher tourist arrivals. Although average Pound Sterling prices paid forbananas increased by 10% in 1984, the EC dollar equivalent declined by 3.1%because of the depreciation of the Pound Sterling. With falling oilearnings, the Trinidad and Tobago economy shrank by 7.4% in 1984 in realterms, following a similar decline in 1983, responding to the continuedimplementation of austerity measures. The Jamaica economy stagnated, hitby a prolonged slide in bauxite earnings and a chronic shortage of foreignexchange, while bad weather cut banana exports by more than 50Z. On theother hand, tourist arrivals and exports of non-traditional products roseto a new record level. In Guyana increased production in bauxite and riceled to an increase in real output of 5.52 in 1984 after three years ofcontinual decline. The Barbados economy also ended its downward slide andregistered growth of 2.4% in real terms in 1984. Improvement in tourismperformance, continued increases in production of electronics componentsand a reversal of the down;iard trend in sugar output were chieflyresponsible for the turnaround. The Suriname economy is estimated to havedeclined by 1% in 1984, continuing the contraction brought about by thesuspension of the Dutch aid program. In the Dominican Republ c the growthrate declined to 1% against the background of declining foreign assets anddepressed prices for sugar. In Haiti, on the other hand, the economypicked-up in 1984, and the growth rate of 2.7% in real terms wasattributable to some improvement in agriculture and expansion in the exportassembly industry.

B. Selected Economic Policy Issues

Employment and Wages

4. Current data on the level of unemplovment in Caribbean countriesare generally not available except those derived from periodic populationcensuses. The indications are, however, that in almost all casesunemployment in 1984 either remained at the level it was in 1983 orworsened even where there was real growth in an economy.

5. In large parts of the Caribbean, the subsistence agriculturesector is small or non-existent. Employment in agriculture has been inestates, traditionally sugar and, more recently, bananas. In mostcountries these two activities remain the largest employers, thus theproblems that have plagued these commodities in recent years have had astrong impact on employment. In Jamaica, Guyana, and Trinidad and Tobagosugar costs have been pushed to uneconomic levels by excess staffingmaintained for social reasons. In the Windward Islands, banana productionhas become as much a social activity as an economic one. In both cases itis clear thdt, regardless of technological and managerial improvements,employment will have, in the coming years, to be reduced.

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6. The mining sector in a few of the countries contributessignificantly to export earnings and government revenue, but providesrelatively fewer jobs. As a high productivity sector, it has been able topay higher wages than the other sectors, which in turn has influenced wagedemands in lower productivity sectors. However, the outlook for the sectoris for fewer jobs and falling real wages. Manufacturing has employmentpotential, but cannot be expected to be a dynamic source of employmentuntil it shifts to an export orientation. Tourism has provided jobs in thepast, but high labor costs have seriously affected 4its internationalcompetitiveness and thus its growth potential.

7. The Government is a significant employer in all countries, aspublic employment is very often expanded not so much to fill a need but toprovide jobs; in most countries the fiscal burden has become overwhelming.It is in the private sector that increased employment opportunities willneed to be created.

8. Despite levels of unemployment generally close to 2UZ, wage andsalary increases have generally been high. Except in Haiti, the DominicanRepublic, Guyana and Jamaica, real wages and salaries have risenconsiderably in recent years. However, with growing unemployment andstagnating government revenues, the employed are facing increasingpressures to accept cuts in real income as part of the adjustment processwhere that step has not already been taken. A critical issue here is howto share the burden of adjustment. Unless labor is convinced that theadjustment burden is equitably distributed, the necessary politicalconsensus for this growing economic problem may not exist.

9. Several factors contribute to the unemployment problem in theCaribbean. One is the inadequate level of private investment, at the sametime that the Governments' own ability to invest has been hampered by a lowlevel of public sector savings. Undoubtedly, another major factor has beenthe level and quality of education and training. In structuring theeducational systems, the countries have not paid enough attention to theskill needs of the economy. Moreover, the related reform of the curriculumhas been slow. As such, there is a high level of unemployment amongprimary school leavers and high school graduates, at the same time thatcertain types of jobs go unfilled.

10. A further factor is the capital-intensity of the technologybrought into these economies, which is not always suited to labor-surpluscountries. Some work has been done on the question of technology transferand adaptation at both the regional and international levels. However,whatever ideas may have emerged in this area have been slow to enter publicpolicy, even though in some cases fiscal incentives have been modified toencourage greater employment.

11. In the past, emigration and access to employment opportunities inNorth America have helped to mitigate the unemployment situation in theCaribbean countries. Given that some of these outlets are being curbed,and given the high birth rates still prevailing in many of these countries,

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the situation could worsen if the rate of job creation is not accelerated.Several Governments already give some kind of support to family planningprograms, but in most cases, the organization of these programs needsimprovement.

Tourism

12. Tourism has always been an important sector for most Caribbeaneconomies. In a few cases it has become the most important activity interms of output, employment and foreign exchange earnings. Although it isoften difficult to determine the sector's real contribution to GNP, in mostcountries it is felt that the industry should be encouraged, particularlyin light of the continued weakness of other traditional activities. Tneregion's tourism is heavily dependent on the US market. Responding to thecontinuing economic recovery in the US, tourist arrivals to the Caribbeanarea were up by 5% in 1984, with many countries registering increases ofmore than 10. According to preliminary data, 1985 should be evcn morefavorable. However, while the number of tourists from the US and Canadagrew, the numbers from Europe declined. One reason is the appreciation ofthe US dollar vis-a-vis European currencies, which has served to increasethe cost of a Caribbean holiday to Europeans. As the length of stay andaverage daily expenditure tend to be lower for US tourists, this means thatthe increases in volume in l984 were greater than the increases inearnings. The exchange rate issue has compounded what some perceive to bea fundamental problem facing Caribbean tourism - rising costs, particularlythe wage bill. In an effort to deal with this issue, hotels in somecountries have lowered their rates, a step that has temporarily provenfinancially viable, but which has led to increased layoffs as hotels trimtheir payrolls.

Sugar

13. Sugar production was once an important export activity in many ofthe islands, but has now ceased or is grown mainly for the local market.However, the cultivation and processing of cane still contributessignificantly to the economic 7ife of Barbados, Trinidad and Tobago,Jamaica, Guyana, Belize, St. Kitts and Nevis, and the Dominican Republic.While in terms of contributions to total foreign exchange earnings thesugar industry is not as critical to the first three countries as to thelast four, a large number of people depend on it for survival. As such,the industry is of great social and political importance in the region,albeit with generally adverse fiscal implications.

14. In recent years sugar has been beset by problems stemming fromboth internal factors and external developments. Sugar prices, which tendto move in cycles, have been depressed since 1980. In addition, the regionhas become a high cost producer and is dependent on special marketingarrangements in the EEC and the USA. The US market is particularlyimportant to the Dominican Republic, and the general reductions of the USquota for all exporters in September 1984 had a particularly adverse impacton that country. Even where prices are guaranteed, the cost of producing aton of sugar in many cases is now higher than the revenue received. Theregion's total sugar export earnings of US$410 million in 1984 were 11%less than in the preceding year.

15. The sugar industry is one of the most studied in the Caribbean.There are numerous reports on the problems affecting sugar, itsorganization and its future. In cases where the industry was nationalized,these studies were carried out not only because of the industry'simportance, but also because of an intent to modernize and restructure itin ways that would increase its contribution to national development. Thatlatter aim has not been accomplished to any great extent. The challengesof reorganization and modernization posed by the industry have never reallybeen met. In some cases the problems have been compounded by poormanagement, insufficient maintenance of plants and equipment, and lack ofresearch related to problems in the field. The impact has been felt interms of falling productivity, low yields per acre and declining quality ofthe cane. The sugar industry will find it difficult to exist in itspresent form. Serious decisions have to be made with respect to its scope,orientation and place in the evolving economic structure.

Bananas

16. Bananas are one of the region's main export crops. In recentyears, however, the performance of the industry in the producing countrieshas varied substantially. In Suriname, intensive replanting led to anincrease in exports of 37% between 1977 and 1982. However, that volumefell by 14% in 1983, largely because of heavy rains. In JamAica, despite afirm market in the UK, the industry has fallen off dramatically, withexports dropping from 205,000 tons in 1966 to 74,900 tons in 1977 and10,800 tons in 1984. However, an intensive restructuring of the industry,now underway, should bring exports back to 75,000 tons by 1987. In theWindward Islands, the industry has made a steady recovery from thedevastation of the hurricanes of 1979 and 1980.

17. Topography, soils, weather, and industry organization make theCommonwealth Caribbean a high cost producer of bananas. It depends on aprotected market in the UK, where domestic consumption has stabilizedaround 300,000 tons a year. In recent years, exports from CARICOM havesatisfied less than 50% of the UK market, as production problems and aninability to meet the quality requirements have made it difficult toincrease this share substantially. However, the existence of a guaranteedmarket and the fact that bananas provide a regular source of income havebeen major incentives to farmers, who have generally responded well to theurgings of the Governments for greater production.

18. The Windward Islands are planning to expand their production;given the constraint of land, a significant proportion of any increase willhave to come from improved yields per acre. In this respect, moreattention will have to be given to improving management and to morescientific methods of cultivation and fruit control. In Belize, theindustry needs serious reorganization if it is to perform moresatisfactorily. An issue of overriding concern is the exchange rate. Asbananas are sold in the Pound Sterling market, while the Caribbeancurrencies are tied to the US dollar, banana producers have felt the fullimpact of the fall of the Pound Sterling against the US dollar. In theshort-term, farmers, particularly in the Windward Islands, have increased

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production to maintain incomes, but over the longer-term, if the farmersare to see increased production as worthwhile, a solution has to be foundto this continuing problem.

The Manufacturing Sector (and CARICOM)

19. In an effort to diversify their economies, particularly withrespect to output, employment and exports, Caribbean countries have inplace a range of policies and instruments that are largely similar. Mosthave set up industrial development corporations, offer fiscal incentives,have established industrial estates and have constructed factory shells.An important part of their policy framework has been protection fromforeign competition, inspired by the infant industry argument. Thus,without much regard for comparative advantage or efficiency, countries haveadopted a range of protective devices to encourage import substitution atthe national level. They also share much the same market - given the priceand quality of many of the goods produced, and the difficulty inpenetrating foreign markets, the regional market has been important to theCARICOM countries. The ability to export to the larger CARICOM countrieshas been, in particular for the smaller islands where the size of thedomestic market is a critical constraint, the main stimulus to recentindustrial development. Particularly important to the growth of regionalindustrial activities in this period was the expansion of the Trinidad andTobago economy in the 1970s, a time when other countries in the Caribbeanwere feeling the contractionary effects of higher oil prices.

20. Recent developments in the Caribbean market have not beenfavorable. Developments in the international oil market, as well asdeclining domestic petroleum production, have hurt Trinidad and Tobago, andits real output has now fallen back to the level of 1979. A need toconserve foreign exchange reserves, a concern about violations of CARICOMrules of origin-, and a desire to protect local industry led to Trinidad

and Tobago instituting in 1983 extensive restrictions on all imports,including those from CARICOM. Balance of payments difficulties in Jamaicaand Guyana led to similar restrictions in those countries, although Jamaicahas more recently removed most controls as part of its ongoing structuraladjustment program. In general, CARICOM's trade relations haveprogressively worsened since 1983. The curtailment of the hitherto almostunlimited access to the Trinidad and Tobago market had an immediate impacton the industrial sector in other CARICOM countries whose real output haseither stagnated or declined, with the effects being felt in both exportearnings and employment.

21. While the removal of the intra-regional trade restrictions andthe resuscitation of the CARICOM Multilateral Clearing Facility wouldundoubtedly enhance intra-Caribbean trade in the short term, itsmanufacturing sector faces fundamental problems in the longer term. First,all CARICOM countries produce more or less the same products. Second, evenwhen taken together, the CARICOM market of about 5 million people islimited. Third, with respect to manufactured goods, some countries havefocused on enclave assembly-type operations, many from the US, that havebeen attracted by low labor costs. These industries, however, have only

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limited domestic benefits for the Caribbean economies. These problemspoint to the critical need to diversify output and markets and to focus onnot only developed countries, but also other developing countries in thehemisphere and elsewhere.

22. The need to export outside the CARICOM area has been recognizedincreasingly in recent years. The potential for exports, however, has tobe seen against some of the basic problems of the area. Measures such asthe granting of fiscal incentives to encourage exports, the creation ofexport development corporations, the development of export creditfacilities and special recognition for export performance can in themselvesdo only so much. The same is true of the markets available through theUS-Caribbean Basin Initiative and the Lomk Convention. None of theseopportunities is significant if the Governments do not separately andjointly address the issues of greater output of goods that have potentialforeign markets, the introduction of new production lines related toforeign demand, the need for market intelligence, improving the quality ofgoods to meet foreign standards, and the need for research, competitivepricing and efficiency. It is important to note that CARICOM has, sinceits inception, had an industrial policy, specifically on the programming ofindustries in the region. This policy has not been successful, in partbecause it was inward looking. It is only with the discipline of externalmarkets that Caribbean industry will become viable for the long run.

23. Because of the unemployment situation, governments have protectedmany industries for too long. Many are still now unable to compete abroador to survive locally without protection. An export-oriented strategy isneeded that limits protection to the early life of an industry, to bephased out gradually as the company is exposed to competition. The issueof productivity does not easily lend itself to quick or ad hoc solutions.Not only is accelerated training needed, but greater attention has to bedirected, inter alia, to the improvement of industrial relations,management in both the public and private sectors, modernization ofequipment, and use of relevant technology.

24. It is clearly difficult to separate the problems facing themanufacturing sector in the region as a whole from the problems facingCARICOM. A major rationale for forming the latter was to increasenon-traditional output and to rationalize the use of the region's limitedresources. The considerable duplication that has already taken place runscounter to those early objectives. The proliferation of final-touchindustries, with their heavy dependence on foreign inputs, has not been inkeeping with the original vision of how the manufacturing sector wouldevolve. On the other hand, the development of resource-based industries,or indust7ies inspiring the acquisition of skills, has been slow. To avoidmistakes that may be difficult to correct, the manufacturing sector has tobe analyzed critically at the regional level in terms of its rationaliza-tion, structure and growth potential in a larger context.

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Bauxite/Alumina

25. As a result of both internal and external factors, the bauxiteindustry in the Caribbean has been on the decline for several years. As awhole, the region's share of world bauxite production dropped from about22% in 1979 to 15% in 1983. In Guyana specifically, the contribution ofthe bauxite sector to real output declined by almost 200% between 1974 and1983, and its share of the market for calcined bauxite fell from about 80%in the late 1960s/early 1970s to just over 50% in recent years. InSuriname, production of bauxite, alumina and aluminum dropped by over 30%between 1979 and 1984, while in Jamaica the contribution of the bauxitesector to real output in 1984 was estimated to be below the 1974 level.Bauxite mining in both the Dominican Republic and Haiti ceased in 1982.

26. The decline in bauxite production in recent years has had seriousrepercussions on foreign exchange earnings and government revenue. In thecontext of a rising import bill heavily influenced by significant increasesin oil prices during the 1970s, most countries producing bauxite faceserious payments problems. Given the fact that Caribbean producers ingeneral have limited energy resources, it may well be that the bauxite,alumina sector has no long run future in the region. Moreover, what willhappen in the international bauxite/aluminum market is not easy topredict. Current projections suggest little improvement in bauxite pricesin real terms over the next 10 years. In the case of Guyana, where theindustry was completely nationalized by the mid-1970s, poor performance hasbeen attributable in part to inadequate maintenance of plant and equipment,marketing problems, poor manLgement and organization. The Governmentstarted paying attention to these areas; this would undoubtedly have afavorable effect on production. Developments in the industrial countriesand in the bauxite market in particular will, however, continue toinfluence strongly the state of the industry in the Caribbean given itspresent structure and organization.

Publ'c Finances

27. The tendency for the current expenditures of the centralGovernment-to grow faster than current revenues has been a prominentfeature of almost all Caribbean economies in recent years. The performanceof government-owned enterprises, however, has been mixed. When theircombined operations are taken into account, the overall public sectorposition becomes worse for some countries, while it improves, even ifslightly, for others. Generally, there is some recognition that in orderfor public finances to improve, government-owned enterprises and statutorybodies must streamline their operations in such a way that they not onlycover the cost of their operations, but also finance at least a part oftheir capital expenditures.

28. With respect to revenues, developments in the external sector arevery important. In the case of Guyana, Suriname and Jamaica, which haverun persistent current account deficits in recent years, the problemsfacing the bauxite industry, a major revenue earner, have contributed tothe fiscal situation. In Suriname's case, the suspension of Dutch aid inDecember 1982 exacerbated the situation. In St. Kitts and Nevis, where the

current account deficit of the central government averaged over 5% of GDPin the last three years, the deteriorating performance of the sugarindustry has been a critical factor. As a result of the o41 boom of the1970s, Trinidad and Tobago had a current account surplus that averaged 16%of GDP (at current factor cost) between 1975 and 1981. In 1982 thischanged to near balance. Since then the current account surplus has risento 3.6% of GDP. Because of the narrow base of these economies, adversedevelopments in any of their major sectors are quickly reflected in therevenue position. Dependence on import taxes, which frequently drop whenimports are curtailed in response to foreign exchange problems, alsoaffects revenue. While CARICOM's external tariffs are uniform across theregion, many Governments have increased stamp taxes as a way to stemimports while improving revenue.

29. While revenues are easily influenced by a wide range of factors,current expenditures, particularly wages and salaries, exhibit steady,seemingly unrestrainable growth. Such payments have been growing as aproportion of current expenditures, not only because of increasingemplovment in the government sector, but perhaps more so because ofsignificant increases in wage settlements in recent years. In the smallerislands, wages and salaries now account for between 45% and 55% of thecentral Government's current expenditures. In Trinidad and Tobago, thefigure was estimated to be about 40% in 1984, as compared to 25% forGuyana.

30. An inability to generate higher levels of public savings hasmeant that in order to finance their development programs, Governments havehad to rely on external grants and increasingly on borrowing from bothinternal and foreign sources. Not only are such sources limited in scope,but, more importantly, the interest payable on past borrowing is coming tooccupy an unmanageable share of public sector revenues. If economic growthis net to be impeded, a greater effort should be made to increase publicsavings, not only by curbing the growth of current expenditures, inparticular wages and salaries, but also by improving revenue collection.In some cases, the tax structure itself needs to be brought more in linewith Government responsibilities. Governments which reduced or abolishedcertain types of taxation in 1980, when sugar prices were high, need tore-examine critically their fiscal systems.

Exchange Rates

31. With the exception of the Dominican Republic, Jamaica and, tosome degree, Guyana, the currencies of all other Caribbean countries arepegged to the US dollar. As to Guyana, since October 6, 1984 the Guyanesedollar has been adjusted on a weekly basis with respect to movements in abasket of currencies of major trading partners, excluding the US dollar.In the case of Jamaica, the Government has instituted a floating exchangerate system, in which the rate is fixed at twice-weekly foreign exchangeauctions. The Dominican Republic has a freely floating rate for alltransactions.

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32. A coustant theme throughout all the sectors of Caribbeaneconomies is the issue of the exchange rate. Most of the countries in theregion have a somewhat unusual set of trading relationships in that thebulk of their imports come from the United States, while the bulk of theirexports go to the United Kingdom. During the 1976-80 period, thisrelationship worked to their favor as the weakening dollar resulted in a35% gain in the rate between, for example, the EC dollar and PoundSterling. Since that time, however, the two major currencies have reversedthis trend and the EC dollar has fallen by over 40% against the PoundSterling. This decline has heightened the concern about thecompetitiveness of Caribbean economies, but has diverted attention from thefact that even against the US dollar Caribbean currencies have becomeincreasingly overvalued. Excessive wage increases as well as inattentionto other costs have begun to affect seriously the competitiveness oftourism. Agricultural exports are rapidly becoming non-economic, while atthe same time real wages in the sector are being eroded. Manufacturing,already facing the weakening of the CARICOM market, is finding the job ofexpanding external markets even more difficult. Caribbean Governments areall aware of the problem, but the high degree of openness and the nature ofdomestic and foreign trading relationships are such as to ensure that anyexchange rate realignment would have immediate and serious implications onreal incomes; on the other hand, the gains from increased exports may takesome time to be reali7ed.

Prospects

33. More country-specific issues are set out in a later section ofthis report (Annex I). Because of their heavy dependence on internationalmarkets, the prospects of the Caribbean economies in the years immediatelyahead will depend heavily on the course of the economic recovery in NorthAmerica and Europe. Nevertheless, the responses of the regional economiesto the challenges confronting them will also influence significantlywhether their recovery of 1984 will be sustained. Assuming that anadequate program of reform is undertaken, the Bank's individual countryassessments suggest that GDP growth rates in excess of the rate ofpopulation increase are indeed feasible in practically all the individualeconomies in the medium- to long-term, so that per capita incomes couldrise. Notwithstanding the handicap of size and vulnerability linked withdependence on a very restricted range of activities, and often,deterioration in the terms of trade, these countries do have the advantageof nearness to North and South America and of having preferential access tothe markets of the US and the EEC. Skillful pursuit of this advantage interms of both trade and aid, complemented with an adequate program ofstructural adjustment, including a sharp decrease of public sectordeficits, and better exploitation of its own natural resources, could wellfacilitate sustained socio-economic progress in the Caribbean region.

Concluding Observations

34. The main issues of development strategy, have been highlightedabove. These include the need for:

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(a) much greater effort to keep people at work; increased employmentwill have to be principally through encouragement of the privatesector and through recognizing the critical role of education andtraining in equipping the youth with the required skills;

(b) increased public savings through curbing the growth of currentexpenditure, in particular of wages and salaries, more efficientoperations of state undertakings, improved revenue collection andin some countries, increased consumption taxes on luxury andsemi-luxury goods. This is imperative if the continual declinein public sector investment is to be arrested and reversed;

(c) export promotion, full exploitation of the tourism potential,more vigorous import substitution policies, especially in foodproduction;

(d) continued attention to be devoted to the diversification ofCaribbean economies, to structural adjustment, and to bringingproduction and consumption into more of a long-run equilibrium;and

(e) urgent attention needs to be paid to the issues of CARICOM tradeand payments and to reestablishing the regional common market asa viable entity.

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II. REGIONAL AND SUB-REGIONAL PROGRAMS

35. This chapter recapitulates and updates the information providedin the 1984 report "Caribbean Group, Current Situation and Prospects", May5, 1984.

A. Structural Adjustment in the CARICOM Countries

36. Early in 1984 the CARICOM Reads of Government commissioned theCaribbean Development Bank to prepare a study on the structural adjustmentpolicies needed in the Caribbean region. This report was discussed at theCARICOM Heads of Government Meeting in The Bahamas in July 1984, and led tothe adoption of the Nassau Understanding. The CARICOM Secretariat wasassigned the responsibility for preparing detailed action programs to beadopted with the view to implement the policy directions outlined in theUnderstanding. There are four main areas in which preparatory work isbeing undertaken: (i) export promotion, both in the form of specificexport promotion activities and proposed revisions in the policy frameworkwhich are necessary to encourage an increase in the levels of extra-regional exports; (ii) revisions in the incentives system, both in the formof fiscal incentives and in the Common External Tariff (C.E.T.) required toencourage increases in production of goods, especially those geared toextra-regional markets; Ciii) agricultural policy reforms to improveregional food self-sufficiency and increase the level of agriculturalexports; and (iv) the regional payments system, including the resuscitationof the CARICOM Multilateral Clearing Facility and the development of aRegional Payments Support fund.

37. At the Ad Hoc Advisory Committee Meeting in Barbados in December1984, it was agreed that the previous CGCED agenda items of ExportPromotion and the Regional Payments Support Fund would be subsumed within anew agenda item 'Structural Adjustment in the CARICOM Countries"- It wasalso agreed at the meeting that the CARICOM Secretariat, in cooperationwith the CDB and The World Bank, would prepare a progress report on thisarea for consideration at the Seventh CGCED Meeting, and that this reportwould describe progress towards defining action programs in the four areasoutlined above, as well as identifying specific studies that would requirefinancial support. A report further updating the following sections isexpected to be made at the June 1985 CGCED meeting.

Export Promotion and Incentives

38. Previous World Bank reports to the Caribbean Group havehighlighted the existence of an anti-export bias within CARICOM. Emphasiswas placed on the need to restructure existing incentives within CARICOM topromote efficient industries able to compete in markets outside theregion. Generally, the recommendations have included: the removal ofnational import quotas; a review at the regional level of tariff exemptionsgranted for imports of raw materials and capital goods; a review of theCARICOM tariffs for final products; and the harmonization of exportincentives.

- 13 -

39. At the December 1984 meeting of the Ad Hoc Committee it wasreported that the following studies already underway would help with thepreparation of an export promotion program for the Caribbean region:(i) exchange rates and their impact on trade in the region (first draftcompleted); (ii) a review of the C.E.T. (study underway); (iii)establishment of an export promotion agency for the OECS member states(study completed and funding of the agency is under consideration by theEDF); (iv) competitive position of CARICOM countries regarding potentialindustrial products for exports (report expected to be ready soon); (v)producers/products in the region with export potential and market analysis;(vi) arrangements to promote activities to potential investors;(vii) establishment of a market information system, and (viii)establishment of a detailed Investors' Guide by each member state (points(v) to (viii) above under preparation). Additional work would need to bedone on export credit guarantee and insurance schemes, fiscal incentives,quality and standards control and provision of technical assistance tolocal exporters. Donors assistance would help to expedite this project.

Regional Payments Support Fund

40. The proposal for establishing a Regional Payments Support Fundwas discussed at a meeting of the CARICOM Ministers of Finance in May1984. Such a fund would provide a pool of funds to ensure the uninter-rupted flow of intra-regional trade. The Government of Jamaica has hadexploratory discussions on this matter with CIDA; other governments areconsidering approaching bilateral donors for possible assistance in theestablishment of such a fund. However, progress in setting up the fund hasbeen slow. The Chairman of the Ad Hoc Committee, during the meeting inBarbados in December 1984, indicated that serious consideration should begiven to dropping this topic for active review by the CGCED until such timethat CARICOM is ready to present for the Group a well-formulated proposalsuitable for donor assistance.

Agricultural Policy Reform

41. The Fifth Meeting of the Conference of CARICOM Heads ofGovernment supported measures designed to liberalize intra-regional tradein agricultural products while protecting regional production from thirdcountry imports. These two measures had been cited in the structuraladjustment study as necessary to effect a reorientation in marketingarrangements for food commodities away from domestic to regional markets.Other measures included:

(a) a re-examination and possible elimination of price controls;

(b) improvement of the marketing infrastructure, including physicalfacilities and trade information systems; and

(c) the recruitment and retention of staff for marketing organiza-tions on the basis of merit and performance in order to increasethe organizations' efficiency.

- 14 -

B. Energy

Ongoing Programs

42. The Project Document for the Caribbean Regional Petroleum Explo-ration Promotion Project was signed by the UNDP and The World Bank in April1983 and became operational in October. The Project, for which t:! Bank isthe executing agency, is designed to assist the eligible governments of theregion over a period of 24 months, to evaluate geological and geophysicaldata, to upgrade their petroleum legislation, to introduce improvedcontractual arrangements for exploration, to train technical and legalpersonnel in the area of contracts for the exploration of petroleum, and toinvestigate known, but undeveloped, hydrocarbon resources. Under theproject the UNDP has agreed to provide US$500,000 to finance a total ofabout 26 man-months of consultant services and appropriate training.Consultants have been retained by the Bank to provide the advisory serviceson exploration; they are carrying out their first assignments. Furtherassignments will be scheduled in the region during the year. The projectalso provides for a -Regional Study of Least Cost Petroleum ProductProcurement.- Its implementation has, however, been deferred pendingclarification of the regional position on refineries at Aruba and Curacao.

43. Following Project presentation to the Caribbean Group meeting ofFebruary 1984, World Bank Energy missions visited Barbados, Guyana, Belizeand The Bahamas to discuss the type of assistance to be provided to thoseagencies involved in the area, including PetroCanada InternationalAssistance Corporation (PCIAC), and the Inter-American Development Bank.Consultant proposals for the exploration advisory services to be providedunder the Project were received in August 1984 and a contract between theBank and Exploration Consultants Limited of the UK (ECL) was finalizedtoward the end of 1984. ECL visited Belize in December 1984, and submittedtheir interim report in February, 1985. Proposed work programs andtimetables are now being worked out for the provision of assistance overthe next 6 months to The Bahamas, British Virgin Islands, Barbados, Grenadaand Antigua and Barbuda. In parallel with the UNDP project, PCIAC is alsocarrying out a technical assistance program on the petroleum sector in theregion, a priority area for the corporation. Its expenditures andcommitments have amounted to about Cdn$17 million in the past three years.

44. In Jamaica, PCIAC carried out an offshore seismic survey,resulting in improved seismic quality and identification of explorationprospects. In Barbados, PCIAC provided oil production supervisory servicesand exploration drilling, leading to a doubling in oil production andidentification of additional gas prospects which are now being evaluated.In Haiti, PCIAC carried out an offshore seismic survey, the results ofwhich are now being integrated into geological studies on the area.Interpretation of PCIAC's seismic survey data in the Tobago Basin is nowbeing finalized and will soon be presented to the concerned countries. For1985, PCIAC's proposed program includes onshore drilling and a gasutilization study in Barbados and a refinery efficiency project in Jamaica,together valued at Cdn$8.3 million.

- 15 -

45. Finally, energy sector assessments are being carried out underthe joint World Bank/UNDP Energy Sector Assessment Program. Those forJamaica, St. Lucia and St. Vincent and the Grenadines were completed in thepast financial year, while in the current and next financial years(FY1985/86), an assessment of the Dominican Republic will be undertaken,and the one recently undertaken in Trinidad and Tobago will be completed.As this program concludes, the main focus will be on assisting governmentsin the region to implement the recommendations nade in the studies.

The Regional Energy Action Plan (REAP)

46. The Regional Energy Action Plan (REAP), which was prepared by theCaribbean Development Bank (CDB) and the CARICOM Secretariat in pursuanceof a decision made at the CARICOM Heads of Government meeting held inJamaica in November 1982, was submitted for consideration at the sixthmeeting of the Caribbean Group. The Plan, which envisages donor financingamounting to approximately US$22.6 million over five years, has four majorcomponents: (a) energy conservation; (b) power sector development; (c) thestrengthening of regional and national institutions; and (d) exploitationof new and renewable sources of energy (including biomass, hydropower,geothermal energy, wind energy and solar energy). The activitiesidentified under (a), which include the establishment of a revolving fundto finance energy investments at concessionary terms, to carry out energyaudits, and to provide technical assistance, are estimated to costapproximately US$8 million. The studies in power loss reduction, long-runmarginal cost tariffs, the valuation and pricing of electricity fromintermittent power sources and the provision of common services to powerutility companies in the Caribbean countries are estimated to cost US$1.2million. The strengthening of national institutions, the training ofprofessional staff in the EAS Secretariat, the provision of specialistsupport to the Caribbean Development Bank and the CARICOM Secretariat,together with the manpower development and training to be carried out underCc), are tentatively estimated at US$2.1 million. Finally, the developmentof bagasse, fuelwood, charcoal and hydropower resources, of geothermalenergy, of wind farm demonstration stations and of a solar water heaterenvisaged under (d) are estimated to cost approximately US$11.2 million.

47. During the Sixth Meeting of the Caribbean Group in February 1984,Canada indicated interest in financing various elements of the Planamounting to over US$3.5 million out of the estimated total program ofUS$22.6 million. The CDB offered about US$7 million. The UK alsoindicated interest in perhaps financing some technical assistance inputsunder the program. The above commitments need to be confirmed. It isestimated that there is still a financing gap of approximately US$12.3million for which donors assistance is needed. A full report on the REAPwill be presented by the CDB at the Seventh CGCED meeting in Washington inJune 1985.

Follow-up Action

48. Energy continues to be a critical factor in the development ofthe Caribbean region. The Caribbean Group, its Ad Hoc Advisory Committeeand the Steering Committee therefore would need not only to continue

- 16 -.

coordinating the activities in this sector but to further strengthen suchcoordination in order to ensure more effective use of resources indevelopment and utilization of energy in the region. In the immediatefuture, efforts will need to be made to secure donor financing for theoutstanding elements of the REAP, and for other activities in support ofthe objectives of the Plan. The CGCED Meeting in June 1985 should providea useful opportunity to review ways for obtaining financing for thisprogram.

C. The Caribbean Project Development Facility

49. The Caribbean Project Development Facility (CPDF) was created inOctober 1981 under the auspices of the UNDP. Operating under the directionof the International Finance Corporation as the Executing Agency, CPDFassists small- and medium-sized businesses that are substantially owned bycitizens of 21 states and territories in the Caribbean area to raise fundsfor new, productive investment projects. Since its inception, CPDF hascompleted or has still under consideration 24 projects in 17 of the 21member countries. The funding mobilized for these projects amounts toUS$6.4 million from local sources and US$17.1 million from foreignsources. Technical assistance is another important area of CPDF activityand has been provided to 29 companies in 10 of the countries. CPDF's sevenfull-time professional staff are active in visiting member countries and inhelping in the development of projects for the private sector.

50. CPDF's operating costs for the two and one-half years from May 1,1985 to October 31, 1987, are projected to be US$4.6 million. Writtencommitments for US$1.0 million have been obtained and discussions areproceeding with potential donors for additional financing. An analysis ofCPDF's activities and financial needs will be presented at the SeventhCGCED meeting in Washington in June 1985.

D. Tourism

51. A proposal by the Caribbean Tourism Research and DevelopmentCentre (CTRC) to finance a US$8 million tourism marketing and promotionprogram in North America was presented at the Sixth Meeting of theCaribbean Group. The program includes provisions for technical assistancein product improvement, human resource development, research, and thecreation of promotional and educational programs. While some donorsexpressed interest in the technical and institutional aspects, commitmentsfor financing the promotional activities have not been firmed up to date.CIDA, IDB and OAS have expressed their willingness to consider a revisedproposal that does not include the promotional component.

52. The assistance of Canada was solicited further at the Canada-CARICOM Heads of Government meeting in Jamaica in February 1985; a decisionon the nature of the assistance to be provided is pending the completion ofa CIDA-financed regional study of past CIDA activity in tourism. Thenature of future USAID assistance in the sector is also under review. Afull report detailing the financing required for this project is expectedto be made available to members of the CGCED at the meeting in Washingtonin June 1985.

- 17 -

E. Civil Aviation

53. At the Fourth Meeting of the Caribbean Group in June 1981, theCanadian delegation pledged a sum equivalent to Cdn$50 million to financehigh priority capital and technical assistance needs identified in anInternational Civil Aviation Organization (ICAO) report on the requirementsfor improved airport operations and maintenance in the region. Subsequent-ly, Canada raised its commitment to Cdn$75 million. The civil workscomponent of the project is progressing on schedule. CIDA has contractedwith Transport Canada to be the executing agent, and that firm is presentlyestablishing itself in Barbados.

54. The ICAO report also highlighted the need for improved trainingin civil aviation and airport maintenance. The report noted that for smallstates, the concentration of training facilities at any one location putstoo heavy a financial burden on the host government. The February 1984meeting of the Caribbean Group endorsed a proposal calling for the creationof training centers at several locations in the region, most probablyBarbados, Antigua and Barbuda, and the Netherlands Antilles. Each centerwould be responsible for one of three discrete activities:

(a) Fire and rescue training and airport management;

(b) Air traffic control and area radar control; and

(c) Aircraft maintenance.

55. In 1983, the UNDP produced a discussion paper on the need for andmethods of coordinating regional aviation training. It suggested theeventual formation of a Caribbean Air Transport Board consisting ofregional personnel who are currently participating in the airportmaintenance program. The paper also proposed the creation of a coordina-ting unit for the regional program, to consist of a program coordinator,project manager, technical coordinator and the necessary back-up staff.

56. Progress in the implementation of these proposals has been slow.As part of the CIDA-financed Caribbean Airports Project, training in someof the areas mentioned above was to take place in Canada begining in March1985. Discussions are ongoing about the possibility of eventually shiftingthe training site to the Caribbean. Meanwhile, CARICOM and the NetherlandsAntilles have put forth a joint proposal to the EEC to finance training forregional airport management personnel in Curacao.

57. Close coordination of all parties involved is required for thesuccessful implementation of these projects. The issue of the creation ofa Caribbean Air Transport Board still needs to be addressed. A progressreport, which would include estimates of financing required, is expected tobe presented during the CGCED meeting in June 1985.

- 18 -

F. Subregional Programs in the OECS Countries

(a) The Inter-Agency Resident Mission

58. Over the last year, the Inter-Agency Resident Mission (IARH) hasbeen guided by a work plan that was submitted to and approved by the Ad HocAdvisory Committee of the CGCED at its meeting in Jamaica in May 1984. Inaccordance with its mandate and its work plan for 1984/85, the IARM has:

(a) co-sponsored with EDI and the OECS a training course and aseminar in national economic management;

(b) continued to support public sector investment programming (PSIP)and setting up of PSIP monitoring systems;

(c) continued to assist member states in setting up public debtmanagement systems;

*d) prepared a 'Compendium of Externally Financed Projects inProgress in the OECS Countries - 1983";

Ce) rendered direct technical assistance, e.g., in connection with atransport sector study in St. Vincent and the Grenadines, and anindustrial sector study in Montserrat;

(f) collaborated with the OAS on a study of beach erosion control inGrenada; and

(g) provided advisory services in statistics, and financial and tradepolicy.

59. As is usual with UNDP projects, in September 1984 the IARM (UNDPProject RLA/82/004) was the subject of a mid-course evaluation. TheEvaluation Report, prepared by a team of consultants, was submitted to theAd Hoc Advisory Committee and considered at its meeting, held in Barbadosin December 1984. The general conclusion of the report was that IARW'sachievements have been positive and encouraging. It was suggested that thefuture work plan of IAKM should increasingly concentrate on institution-building at the national and regional levels and on the strengthening ofregional units, to take over its functions.

60. In accepting the Evaluation Report, the Ad Hoc Advisory Committeerecommended extending the IARM project to the end of 1986. The OECS memberstates also indicated their commitment to become current with theirobligations to the Economic Affairs Secretariat (EAS). It was also decidedthat EAS would have principal responsibiltiy for continuing IARM'sfunctions after 1986. The Committee set up three task forces, eachcounting heavily on IARM support, to do the following:

(a) allocate IARM functions among regional institutions and prepare awork plan for the use of IARM resources during the rest of 1985and in 1986;

- 19 -

(b) undertake a management study of the OECS/EAS to determine themanpower and financial implications of an appropriate workprogram, including the transfer of IARM functions to EAS; and

(c) undertake a study of the critical staffing and training needs inthe central areas of national economic management, and prepare atechnical assistance project document for donors financialsupport of the needs as identified by the three task forces.

61. The work plan of the IARM for 1985/86 emphasizes the training ofcounterparts in the OECS/EAS and in member states, as well as the need tosponsor training in statistics in the region. A more extensive report onthe activities of the IARM is expected to be made during the CGCED meetingin June 1985.

(b) Agriculture

62. The Fifth Caribbean Group Mceting agreed to establish an inter-agency Agricultural Task Force for the Caribbean (ATFC). The initialmandate for borrowers and donors participating in the Task Force was togather and exchange data and to improve their coordination in order toimplement ongoing projects more effectively and to select and designprojects better. The IDB agreed to provide the services of an executivesecretariat for the ATFC.

63. The ATFC found that the lack of coordination among donorsresulted in overlapping and sometimes conflicting activities. Three areasfor action were identified:

(a) the creation and maintenance of a Caribbean Agricultural ProjectInformation Clearing House (CAPICL), with a mandate to collect,edit, tabulate and disseminate project data;

(b) the establishment of a joint country-donor system of consultationon a selective basis with respect to ongoing as well as proposedinvestment and technical cooperation projects; and

(c) a human resources survey relating to the supply of and demand forcritical skills, aimed at identifying training and institutionaldevelopment requirements at country and regional levels.

64. At last year's meeting of the Caribbean Group, the CAPICH'smandate was expanded so as to focus more strongly on items (b) and (c).However, an apparent lack of interest by the members of the Group slowedthe rate of implementation of CAPICki; it was eventually terminated byagreement of the Ad Hoc Advisory Committee that met in Barbados inDecember 1984. Nevertheless, the collection, tabulation and disseminationof agricultural project data for the OECS countries is still going on aspart of a larger compendium of externally financed capital assistanceprojects prepared by the IARM (Compendium of Externally Financed Projectsin Progress in the OECS Countries - 1983).

- 20 -

G. Future CGCED Activities

65. A report indicating the genesis and the accomplishments of theCGCED over the first five years of its existence and making recommendationson how the Group could further improve its operations over the coming yearswas distributed to the members of the Group on March 25, 1985 (CGCED85-4). Its recommendations emerged on the basis of consensus afterextensive consultations with all donors and most of the recipient countriesof the CGCED. The report was approved by the Ad Hoc Advisory Committee atits meeting in Barbados on December 14, 1984 and it was distributed to allmembers of the Group.

66. With the objective to further improve planning of CGCEDactivities as of July 1, 1985 and until the next meeting of the Grouptentatively scheduled for November/December 198b, a special working groupis proposed to be organized during the June 1985 CGCED meeting to discussseveral proposals for new initiatives. A report on this working group'sdeliberations would be made at the Friday, June 21, 1985 proceedings.

- 21 -

III. EXTERNAL FINANCING

67. The Bank's country economic reports have analyzed the externalcapital inflows over the past few years and the requirements of individualcoun,tries in the years immediately ahead. As regards total inflows,external assistance in FY84/85, 1IS$1.45 billion, was little changed fromthe FY83/84 figure of US$1.38 billion. Cumulatively during that two-yearperiod, the three largest aid recipients were Jamaica, accounting for 53%of the total (cumulatively, $667 per head), the Dominican Republic, 25%(cumulatively, $122 per head) and Haiti, 8% (cumulatively, $45 per head).The seven OECS countries together received 5% (cumulatively, $265 perhead). The external capital inflows in this period must be seen againstthe backdrop of the decline in the level of public sector investment inmost countries for two to three years in a row. With the exception ofGuyana and Suriname, external financing has been available for priorityprojects in each country's public sector investment program. The declinein public sector investment is to be ascribed instead to the lack ofdomestic counterpart financing and to the difficulties experienced by thepublic sector in implementing projects due to staff shortages. Often theneed to satisfy conditions of disbursement of loans and otheradministrative requirements have also contributed to the slowdown. Inpublic corporations, weaknesses in management and finance have also actedas a brake on donor financing of projects. The terms of externalassistance were on average significantly more concessional than for LatinAmerican countries.

68. Table 1 below brings together for 13 countries the externalfinancing requirements for the FY85/86 and the year following. The totalFY85/86 requirement is 32% larger in nominal terms over the figure for thepreceding year. However, much of this increase is accounted for by a neardoubling of assistance needs for the Dominican Republic. An importantfeature of Table I is the requirement for considerable balance of paymentssupport for Barbados, Guyana aud Jamaica. With the progress made in aidmobilization, of the total requirement of US$1.91 billion, the gap forwhich financing has yet to be identified is now limited to about US$216.0million although confirmation of already identified inflows will benecessary. The outlook for FY86187 is that aid requirements will notincrease beyond the current year's level.

69. Two important issues arise in connection with the foregoinganalysis. First, in view of the tenuous fiscal and balance of paymentssituations, of increasing concern is the growing scarcity of resourcesavailable to the Caribbean region on concessional terms. Many countries inthe Caribbean are relatively well off and are relatively diversified enoughto be able to manage and service, albeit with some difficulty in recentyears, conventional terms on capital inflows. However, there remains agroup of poor countries, such as Guyana and Haiti which, for differentreasons cannot service debt on conventional terms. There is also a groupof extremely small countries, such as some of the less developed members ofthe OECS, where even with the most strenuous efforts and excellentperformance the economies remain too weak and underdeveloped to be able tohandle conventional terms. For this small group of countries funds on

- 22 -

concessional terms continue to be essential. In the past, donors, bothbilateral and multilateral have been able to channel small but significantamounts of concessional resources to most of the OECS member countries, butrecent scarcities, notably in the availability of funds for IDA, havenecessitated the curtailing of some of these vital flows. These cutbackshave reluctantly been made because funds are not available; they do not inany way imply that such funds are no longer needed. Many bilateral donorshave managed, in spite of increasing constraints, to maintain their flowsof concessional aid to this group of Caribbean nations. Other donors areurged to recognize that such flows are very much justified and are urgentlyneeded. Second, special measures are called for to deal with theprogressive decline in the level of public sector investments. Theregional economies clearly ought to strive for increased public savings.To supplement this, donors for their part will need to actively pursue thepossibility of augmented financing of local costs of development projectsand programs, so that an adequate level of public sector investment couldbe sustained.

Table I, D1M6 FIIWiCU RWEOIRD4RTS FOR H PRJLIC ECTOI lIICSflO(T me"4 AD W1.£ oF PArITS a

(s4 lIll.n)

__ FTI FtIl7

IF) In)Othr Other

DmIl"nt Den nlo lt

Flumncgn of Ut Pi*llc 5lemr laneuwn Prom Ahelcta Fin ncig of the PA1llg s etor lo"eont Prowm Aaletinan

ID) Rylrntc Ehbtrnal Asslstam ID7) lleqyir ta EZIMrnOl A"lt.Wo

(C) Of idilch, oliapY (U (H) (C) Of 'hlch, (.lpll (6) Do

(a) Extorml Olmbgntl klane of Total Of which IU EAtrnwl Ol r_nnl klon of Tetal of ldh

(A) Lecel rimming fg IUm [mlIif (I) Pontne Requltsd Mnt ot (A) LOU l FIm ing from laleling a) rq_ntc Itepited Met ye

PF1I Centrlbullen Ra,aIrts C_lsntn eJ! S ( * Fl Ie nilfled PSI Ceelrlbutlon Reoiarewont . cU e 4nts .!L. ewmtl (Ce * rI 1wllfl

noradeo "I.1 75.4 3.0 3.2 4J 43.5 Sl S 105 I1.l S1J 34.2 Z2.0 S7.t 1233 0.1

eoYv"oo 10.4 116.7 - 13.7 6.6 U.S 64.S n.e. a.a. n e. na.. n. .. a.. n,e.

J_lea USA 0 5.6 61.2 45.0 mo. 2168 710.0 102.0 31.1 167.6 mn., 0.e. .a. 31.2 615.1 S15.1

MIlgmo A obdo 1b.1 5.3 12.9 12.1 OJ * 12., 0.4 14.2 4J SJ S.2 0.7 5. 0.7

lmnice 20.7 2.7 15.0 12.1 5.7 16.0 5.7 16.9 3.2 13.7 3.7 10.0 - 13.7 10.0Ofoad X.J 6.3 71. S0.5 * 12.0 U.5 4.0 M- 3.2 143 7.7 6. 7.0 21.3 1.6

mletrrat 30 O 3 3.2J 0.4 - 36 0.4 J 0J 33 1.3 2.0 - 5. 2.0$1.KiltsA Mnoll 12.7 2.5 10.2 6.0 2.2 10.2 2.2 14.2 0.4 13. S.7 4.1 - ISA 4.1

It. Loh 16.1 2.5 ISA 133 2J3 ISA 23 20.1 2.7 17A4 11.0 GA4 - 17.4 6.4St. Vinonot 4 Cnrodlns y 1n0. e .8. 0.. na. 0.8. n,1. P.0. ne. P.O. n.m. n,a. 0.. R.8. 0.. 0.. 0.8.

Siln 20.0 44 1A.4 S.A 0.4 - 15.4 0.4 22.0 6.2 ISA 13.0 2. - 15.6 2.

Owl0lUn Roe lccl 7TVA4 757.4 6 15SA 615Je

Hitli e -_ _ _ 154.1 164.1 - _ _ _ _ 176.1 176.1 _

Toeal I.1 2.1 C8.4 W583 1A 1724.4 llOSJ 215.7 65.5 55.2 643 . 4A. 1157.0 1683 72.6

U emm's PSIP Is boed only an onmlltd eternal fwda smd, In thIle onc, Ithre Is no extoroal fImIngil pp. PSIP la for aw yar only.

. Th. m rW o"oetu IC In lh. procese c1 Id alfyl Ib Its lnonbent ptveltitl. lh1 PSIP Is beIng forulaLed.

Fr i-wlly o Ie FlIP iv d'lsh ditall are Met yet .eollable.

- 24 -

ANNEX I

COUNTRf PROFILES

- 25 -

ANTIGUA AND BARBUDA

Population: 78,241 (mid-1983 est.) IBRD/IDA Lending: See below.

GNP per Capita: US$1,730 (1983 Atlas Most Recentmethodology) Economic Mission: July 1984

The Economy

1. Real economic growth in Antigua and Barbuda slowed to 1.1% in1983 because of trade difficulties within the CARICOM market and no growthin stay-over visitors. Future growth prospects appear sound, however,given the large increase in tourist arrivals (12.6%) in the 1984 winterseason; overall real growth of 3.3% is estimated for the year.Nevertheless, public sector finances have continued to deteriorate, asthe increase in current expenditures has outpaced the growth in currentrevenues. The deficit on the current account of the public sector reached3.8% of GDP in 1983, as compared to 1.8% in 1982. As a result of theseunfavorable fiscal developments, there has been a build-up of arrears inpayments, particularly for external obligations. Gross external debt rosefrom 48.5% of GDP in 1979 to 61.3% in 1983. These fiscal difficulties havealso affected public sector capital expenditures: these totalled EC$20.2million in 1983, equivalent to 5.7% of GDP and less than half the previousyears' expenditures, which in turn showed a decline over the 1981 level.

Policy Issues

2. The main policy issues are as follows:

(a) the deterioration in public finances, which has caused anaccumulation of payment arrears and a reduction of the capitalinvestment program to a level that is considered insufficient tomaintain and expand the infrastructure necessary to supportgrowth in the productive sectors, particularly tourism;

(b) the immediate need to establish with the government's externalcreditors a schedule that will eliminate past arrears and allowdebt servicing to be regularized in the future;

(c) the need to introduce further tax measures, together withadministrative reorganization of the tax collection system; and

(d) the major challenge of increasing the country's capacity toabsorb manpower to meet the aspirations of younger workers. Thisobjective will require an active smallholder agricultural policy,with appropriate land tenure systems and adequate marketingfacilities, together with continued efforts to encourage furtherinvestment in tourism and manufacturing enclaves. There is animmediate need to review the sugar sector to determine whetherthe sugar project should continue.

- 26 -

Government Policy

3. The Government recognizes that additional revenues are needed,and it is considering the revision of certain taxes and the addition of newones. Further actions include:

(a) a freeze on new hiring within the public service fornon-established, lower skill categories;

(b) measures to improve customs revenue procedures;

(c) the development of an external debt monitoring system; and

Cd) a thorough rev-lcw of the future v'ability of the sugar sector inthe country.

The government also liquidated one large external loan using an associatedoffsetting deposit; this action will reduce interest charges. 1

4. It is unclear at this time whether the proposed fiscal measureswill be sufficient. Furthermore, substantial progress still needs to bemade to overcome the external arrears.

Project Priorities

5. A major infrastructural priority is the continued improvement ofthe water distribution and storage system. USAID has proposed substantialsupport for the expansion and improvement of the water supply. However,further donor support might be necessary. The Government wishes to developa desalinization plant.

6. Gross external public capital requirements are estimated atUS$23.0 million in 1985, of which US$12.9 million has been identified fromthe public sector investment program. Eleven projects require additionalpreparation or pre-feasibility analysis; their estimated total cost isabout US$14 million.

Creditworthiness

7. In order to restore creditworthiness for borrowing onconventional terms, improvements in fiscal performance must be made, andconsiderable progress achieved in eliminating arrears on outstandingexternal obligations. No lending is currently envisaged by IBRD.

Additional Capital Requirements (US$ millions):

FY85/86 FY86/87 FY87/88

Additional external financing required for:

Public sector investment program 0.76 0.76

- 27 -

THE BAHAMAS

Population: 220,000 (mid-1983) IBRD/IDA Lending: See below.

GNP per capita: US$4,060 (1983 Atlas Most Recentmethodology) Xcunomic Hission: April 1985

The Economy

1. The economy of The Bahamas has enjoyed three years of substantialeconomic growth, with about 5% in 1983 and 4% in 1984. The outlook for1985 is positive, based upon continued expansion in tourism andconstruction. The balance of payments current account recorded a surplusof $7.9 million in 1984, as a result of the growth in tourism receipts.This result, together with an increase in short-term capital inflows, hasincreased international reserves to about US$190 million, roughlyequivalent to three months of merchandise imports. Total external debtdeclined by US$30 million in 1984, to US$209.3 million or 13% of GDP.There is a surplus for 1984, on the public sector's current account of $98million, or about bZ of GDP, and loans and advances to public corporationsdeclined as a result of the greatly improved financial performance of theseenterprises.

Policy Issues

2. (a) Wage awards over the past two years have been consistently aboveinflation. If this trend continues, there is a danger tourismgrowth will be impeded due to rising costs and development ofcheaper Caribbean alternatives;

(b) While the performance of most public corporations is sound,attention must be directed toward an improvement of Bahamasairand possibly, The Bahamas Agricultural and IndustrialCorporation;

(c) Amortization payments on Government's external debt will doublein 1985, reflecting the first installmeat of a series of paymentsto amortize a $150 million external loan contracted by theGovernment on behalf of the Hotel Corporation. While this ismanageable, careful future monitoring of the external debtsituation will be necessary;

(d) The Government's agricultural diversification policy has spawneda number of incentive programs which may not optimize the use ofthe country's resources;

(e) An area of future policy concern is the ability of theGovernment's technical capabilities to expand in a mannerconsistent with the growth in the overall economy.

- 28 -

Government Policy

3. The Government's strategy is to continue to promote tourisminvestment. The Hotel Corporation is to concentrate more on thisattraction function and management of existing assets, rather thanexpansion of the public sector's role in directly productive undertakings.The agricultural diversification program is to continue, and furtherefforts are being made to encourage industrial investment. The Bahamas hasa history of prudent fiscal management and this is expected to continue.The Central Bank's monetary policy is restrained.

Project Priorities

4. Project priorities continue to be improvement of the supportinginfrastructure, particularly water distribution and storage and generaltransportation. Vocational training and technical assistance to strengthenpublic sector institutions will remain as significant priorities for thefuture.

Creditworthiness

5. The Government of The Bahamas may be considered creditworthy forborrowing on conventional terms.

IBRD Program

6. Consistent with the 1984 decisions on graduation, the five-yearlending program includes two possible projects currently being discussedwith the Government.

USS millionfRRD Lending

1320-BM 1976 Water and Sewerage 10.01962-BM 1981 Vocational and Technical Education 7.02089-BM 1982 Urban Development 5.8

- 29 -

BARBADOS

Population: 252,000 (1983) IBRD/IDA Lending: See below.

GNP per capita: US$3,930 (1983 Atlas Most Recentmethodology) Economic Mission: February 1985

The Economy

1. With the recovery of the US economy since 1983, the Barbadoseconomy ceased its downward slide and registered growth estimated at 2.4%in 1984. Improvement in the performance of tourism based on the increasedflow of American tourists, continued increases in the production ofelectronics components and a sharp reversal in the downward trend in sugaroutput are chiefly responsible for the turnaround. While tourism still hassome way to go to regain the levels of four years ago, the weakest point ofthe economy at present is the manufacturing sector, which continues to bebadly hurt by the problems affecting access to its main CARICOM markets.These difficulties and the adjustments made by the hotel sector to loweroccupancy rates have caused a steady rise in unemployment, with the rate in1984 at 17%, compared with 11% in 1981. By moderating the increases inwages and import prices, the Government kept inflation low - at 5X - during1984. Fiscal performance was adversely affected by the slow growth inrevenues from income taxes and external trade. With the aim of improvingits fiscal returns, the Government, in a supplementary budget, announcednew measures and revised the capital budget downward. The expansion inexport earnings improved the balance of payments current account. However,with a reduced net inflow on the capital account of the balance ofpayments, the international reserve position continued to be underpressure: it has fallen to the equivalent of two months' imports, one-halfof which is tied up in the suspended Caribbean Multilateral ClearingFacility.

Policy Issues

2. The main policy issues are as follows:

(a) Fiscal policy. It became expansionary in 1984/85 following twoyears of restraint under the Government's stabilization program.The slow revenue growth necessitated the introduction of asupplementary budget. There is a danger that further expansionin the next fiscal year could threaten the exchange reserveposition.

(b) Exchange reserves. As a result of the weak export performance inthree consecutive years and the suspension in 1983 of theCaribbean Multilateral Clearing Facility, Barbados' liquid grossforeign exchange reserves now represent only about one month'simports.

- 30 -

(c) Exchange rate. The rate is pegged to the US$ at 2:1. Thestrengthening of the US$ in the last four years has raised thequestion of whether Barbados should devalue.

(d) Unemployment. As a consequence of the recession and marketingproblems, unemployment has risen to 17%, compared to 11% in 1981.

(e) Sugar. Falling output in three consecutive years resulted insharply rising unit costs of production. Together with the lowsugar prices, this situation created serious financialdifficulties for the industry. Since 1982, the Government hasbacked a scheme to support the realized price of sugar toproducers.

(f) Manufacturing. Assembly of electronic components is now theleading activity. The main issue is to attract new growthactivities geared to third country markets, given increasingrestrictions in the CARICOM markets for Barbados' manufactures.

(g) Tourism. After a couple of very bad years, the 1984/85 winterwas good for the sector, although tourism from Europe has stillnot recovered. The sector is making efficiency improvements andreevaluating its strategy. Critical issues are the need totarget appropriate markets and to upgrade the tourism product.

Each of the major sectors is encountering financial difficulties and needsto address structural problems in management and operation that emergedduring 1981-83.

Government Policy

3. According to the Government's 1983-88 Development Plan, thestrategy is export orientation, with the private sector as leader. Themain foreign exchange earners are to be tourism, manufacturing, agriculturefor exports and services. Energy development and conservation are alsoimportant elements of the strategy.

Project Priorities

4. The Government's investment priorities include the developmentand upgrading of economic and social infrastructure, the furthering ofenergy development and the strengthening of agriculture. Externalfinancing is being sought, among others, for public transportation, coastalconservation, sewerage, housing, oil drilling, irrigation, fisheriesdevelopment and sugar rehabilitation.

Creditworthiness

5. The Government of Barbados has in the past demonstrated itsability to manage the economy well and it intends to continue thisperformance by adopting additional measures to meet the developmentchallenges now facing the major productive sectors. Barbados can continueto be considered creditworthy for IBRD lending.

- 31 -

IBRD Program

6. Consistent with the 1984 decisions on graduation, the lendingprogram includes projects in agriculture, industry, vocational training androads. IBRD's program is expected to include institution-strengthening andrelated technical assistance.

IBRD Lending (USS millions):

Loan Year Borrower Purpose Bank Share1642-BAR 1979 Barbados Education 9.01685-BAR 1979 Barbados Tourism 8.01813-BAR 1980 Barbados Industry 10.01940-BAR 1981 BLPC Power 6.02115-BAR 1982 Barbados Technical Assistance 2.72260-BAR 1983 Barbados Industrial Credit 10.51642/1-BAR 1984 Barbados Education Supplement 3.02432-BAR 1984 Barbados Road Maint. & Rehab. 11.0

TOTAL 60.2

Additional Capital Requirements (US$ millions):

FY85/86 FY86/87 FY87/88

Additional external financing required for:Public sector investment program 4.8 22.0 31.5Balance of Payments assistance 24.5 67.1 67.7

TOTAL 29.3 89.1 99.2_=

- 32 -

BELIZE

Population: 154,100 (mid-1983) IBRD/IDA Lending: See below.

GNP per Capita: $980 (1983 Atlas Most Recentmethodology) Economic Mission: 1984

The Economy

1. The economy of Belize suffered from the effects of theinternational recession in the early 1980s. During the 196Ds and most ofthe 1970s, its real GDP had grown by 4.5% to 5.0X a year. In 1983 growthwas a modest 0.7%. However, it is expected to improve to 2% in 1984 and 4%in 1985. The decline in the prices for sugar and citrus products in theearly 1980s affected external earnings, such that the ratio of the currentaccount deficit to GDP rose to 15.5% in 1982 from 5.4Z in 1980. There wasan improvement in the deficit in 1983 as a result of an increased volume ofsugar exports. Further improvements are expected in 1984, and the ratio ofthe current account deficit to GDP should fall to 7.9%. Furthermore,improvements in the Mexican economy have increased the re-export tradethrough Belize, which will add to government revenues. This factor isimportant, as public finances have deteriorated steadily since 1980, withpublic sector savings becoming negative in 1982. The government hasintroduced a program of restraint on expenditures, and also implementedadditional revenue-raising measures in June 1984. It is expected that thepublic sector dissavings will be reduced from Bz$14.7 in 1983 to Bz$4.2 in1984.

Policy Issues

2. The main policy issues are as follows:

(a) The deterioration in economic performance over the past two yearsbecause of reduced earnings from sugar exports, the virtualelimination of the re-export trade with Mexico as a result of itseconomic difficulties, and lower levels of public investment.The terms of trade for Belize have worsened since 1980.

(b) The steady decline in the financial situation of the nationalgovernment and the public enterprises since 1980. Revenues havebeen affected by lower import duties and re-export fees, and mostof the public enterprises have experienced operating deficits,particularly the Electricity Board and the Banana Control Board.

(c) Distribution and maintenance problems within the Be'izeElectricity Board. The World Bank is presently appraising anenergy project that will address this issue. Two specialistadvisors are to be placed within the enterprise, with supportfrom USAID. Both events are expected to improve the Board'sperformance.

- 33 -

(d) The weakeaing of the public sector's administrative capacity overthe past three years and need for restructuring. There aremanpower shortages at high level positions, while the lower skillcategories have expanded substantially.

(e) The decline in the level of public investment because of a lackof local counterpart funds. Given the infrastructural needs ofthe country, present levels of investment are inadequate.

(f) Problems in the sugar industry. The government has signed aletter of intent to purchase a major share of the industry, butfuture developments require careful monitoring to ensure that nomajor fiscal burden is incurred.

Government Policies

3. The government changed recently, and it is not yet clear what thepolicy prl-rities will be. Based on campaign statements and other sources,the in-' -dcions are that greater emphasis will be placed on private sectorinitiatives and on improving the performance of public enterprises, a goalthat includes eliminating subsidies and possible dissolution of someunits. The previous government had entered into a stand-by arrangementwith the IMF in 1984 to support fiscal adjustment efforts. In June 1984, amajor tax package was approved that was expected to yield further revenueequivalent to 2-1/2Z of GDP in FY1984/85, and 3-1/2Z of GDP on a fullfiscal year basis. Furthermore, the authorities intend to increase taxyields by improving collection procedures. To complement these revenuestrengthening measures, restraint is to be exercised in publicexpenditures.

Project Priorities

4. A major constraint on the development of Belize is the inadequacyof the economic infrastructure. Further substantial investments arerequired in roads, electricity, ports, water, sewerage and housing.However, the capability of the public sector to execute and monitorprojects is constrained by manpower shortages; the need for technicalassistance is high. Estimated external financing requirements forFY1985/86 are US$19.0 million, of which US$4.6 million have yet to beidentified.

Creditworthiness

5. The country should be considered creditworthy for limitedborrowing on conventional terms, provided measures introduced to improvepublic finances are continued and that a part of future external financialassistance continues to be provided on concessional terms.

- 34 -

IBRD Lending

2273-BEL - Road Maintenance and Rehabilitation Project.Approved: May 13, 1983. Amount: US$5.3 million.

Power project under preparation.Public Administration Reform Technical Assistance project under discussion.

Additional Capital RequirementsUS$ million

FY85/86 FY86/87 FYT7/88

Public Sector Investment Program 0.48 2.77 5.18

- 35 -

DOMINICA

Population: 0.077 million (mid-1983) IBRD/IDA Lending: See below

GNP per capita: US$970 (1983 Atlas Most Recentmethodology) Economic Mission: October 1984

The Economy

1. Economic developments in Dominica in recent years have beendominated by the rehabilitation that was reqluired because of the damagecaused by the hurricanes of 1979 and 1980. There was a substantial inflowof external assistance during the period in support of reconstructionefforts and it led to an unusually high GDP growth rate, estimated at 12.5%a year for 1980-81. In 1982-84, the growth rate of GDP returned to normal,averaging 3% a year. Public sector finances have strengthenedsignificantly in recent years, following the successful completion of athree-year (1981-83) Extended Fund Facility program with the IMF. Publicsector finances are, however, expected to be weaker in 1984/85 thananticipated. As a result of favorable developments in the domestic sectorand prudent public sector policies, Dominica's balance of payments positionimproved steadily from 1981. There was, however, some deterioration in1984. Given the prudent economic management of recent past and ability torely on concessional inflows for the greater part of its external capitalrequirements, it is projected that the growth rate of GDP will averageabout 4% in the medium term.

Policy Issues

2. The main policy issues are as follows:

(a) Continuation of the policies adopted under the IMF/EFF program,viz; curtailment of expenditures on wages and salaries, theelimination of subsidies to state enterprises and better revenuecollection.

(b) Increased productivity in the traditional secturs (andconsequently lower unit costs of exports in order to maintaininternational competitiveness).

(c) Continued diversification of the productive base through thepromotion of enclave and assembly-type manufacturing,agro-processing industries and tourism.

(d) Improvements to the physical and supporting infrastructure.

Government Policy

3. The Government's development strategy is consistent with theabove. In particular,

(a) It is pursuing external assistance for investments in thephysical and supporting infrastructure.

- 36 -

(b) Through its Industrial Development Corporation, it is vigorouslypromoting external private investment in agro-based manufacturingindustries.

(c) With technical assistance from the OAS, it is establishing aproject monitoring system. A system of sectoral planning hasalso becn initiated.

Project Priorities

4. The Government's project priorities are in road rehabilitation(additional financing of which is needed following the damage due to theheavy rainfalls in November 1984), the development of the hydro-powerpotential and agricultural expansion.

Creditworthiness

5. Given Dominica's weak balance of payments situation for 1984 andits projected debt service obligations in the medium-term, it can only beconsidered marginally creditworthy for borrowing on non-concessional terms;therefore it should continue to rely on highly concessional capital flowsfor most of its investment program.

Bank Group Strategy

6. The Bank Group's strategy is to:

(a) Continue channelling resources to Dominica (as to other OECScountries), mainly through the CDB, except in those instanceswhere projects are beyond CDB's technical and financialcapability; such direct intervention to take place about every 5years.

(a) Support the government's efforts in infrastructure development,especially in the power sector.

(b) Maintain a policy dialogue on macroeconomic issues and assist thegovernment in mobilizing external financing for its investmentprogram through the Caribbean Group mechanism.

Bank Group Lending

Credit 1221-D(M - Road Maintenance and Rehabilitation Project, SDL 4.4million; approved April 1, 1982.

Additional Capital Requirements (US$ millions):

FY85/86 FY86/87 FY87/88

Additional external financing required for:

Public sector investment program 5.7 10.0 -

- 37 -

DOMINICAN REPUBLIC

Population: Approximately 6.0 million IBRD/IDA Lending: See below

GNP per capita: US$1,330 (1983 Atlas Most Recentmethodology) Economic Mission: April 1985

The Economy

1. Although the growth rate was relatively high-3.9% in realterms-it masked the severe crisis that 1983 ushered into the DominicanRepublic. The Government adopted an expansionary fiscal policy in thethird quarter that produced short-term increases in construction andmanufacturing output as well as gains in income. However, theseexpenditures were financed through the creation of domestic credit. Theultimate effect was a further erosion of the net foreign asset position ofthe Central Bank and overwhelming pressure on the official exchange rate ofUS$1 to DR$1. The Extended Fund Facility program signed with the IMF inJanuary 1983 broke down by year's end, as the country failed to meet theperformance criteria. In addition, the price of sugar coutinued to be low,and only the US quota system mitigated the industry's plight. Growth in1984 was only 1% and the Central Bank accumulated arrears during the yearof about US$500 million. Nonetheless, by the end of the year, theGovernment had put in place a serious stabilization program, and theprospects for resolving the financial crisis appeared decidedly better.The Government undertook a full devaluation by letting the peso fluat,enacted deficit reduction measures and improved the performance of stateenterprises. It also initiated talks with its creditors to restructure thedebt. An IMF standby was approved in early 1985. Although cuts in the USsugar program will hurt prospects in 1985, sound policy can hrCp shift thecomposition of exports toward the dynamic sectors. Tourism, upsubstantially in 1983 and 1984, is the bright spot in the external tradepicture.

Policy Issues

2. The main issues are as follows:

(a) The removal of price distortions and other obstacles impedingfood production.

(b) Increased diversification in agriculture.

(c) Removal of anti-export bias in the trade regime and tax system.

(d) Generation of flexibility in the pricing system to adjust tochanges in cost conditions.

(e) Improvements in the organizational and managerial efficiency ofthe public sector.

- 38 -

Government Policy

3. The Government's development strategy is consistent with theabove policy appre3ches. The 1985 program, announced by the President inJanuary and supported by the IMF by a standby arrangement approved onApril 15, 1985, includes several measures:

(a) unification of the exchange rate;

(b) increases in certain prices;

(c) limits on short-term debt; and

(d) increases in taxes to finance government expenditures.

4. The Government has agreed to increase its net foreign assetposition and to restrain the expansion of net credit to the public sector.It is also pursuing a vigorous dialogue with the Bank on long-term issues,including reforms in the tax system, public sector management, exportpromotion and the agricultural sector.

5. The above concerns will require considerable external inflows insupport of any stabilization program.

Future IBRD Operations

6. Two projects are under immediate consideration (negotiated orsoon to be negotiated): a US$5.8 million loan for a Vocational TrainingProject and a US$35 million loan for a Third Highway Project. After these,further operations, mainly in the transport, infrastructure and powersectors, are being identified.

Bank Lending (since 1979)

7. 1655-DO - Nizao Irrigation (1979) (US$27.0m) Ongoing1699-DO - Second Puerto Plata Tourism (1979) (US$25.Om)E/1760-DO - Sugar Rehabilitation (1980) (US$35.0m)1782-DO - Urgent Import Requirements (1980) (US02i.Om)1783-DO - Emergency Road Projects (1980) (US$25.0m)1784-DO - Second Highways (1980) (US$35.0m)2023-DO - Cocoa and Coffee Development Project(1981)(US$24.Om)2104-DO - Sites and Services (1982) (US$25.4m)

1983

2369-DO - Coal Terminal & Power Engineering (US$3.8 million)

a/ Private Banks' cofinancing of US$10 million.

- 39 -

GRENADA

Population: 91,000 (mid-1983) IBRD/IDA Lending: See below

GNP per capita: US$870 (1983 Atlas Most Recentmethodology) Economic Mission: January 1985

The Economy

1. After a decline in real GDP in 1983 of 2.0%, it is estimated thatthe economy grew marginally in 1984 (at 0.6%) because of a rebound in thelatter half of the year. As a result of measures taken under an IMFprogram, the government had generated surpluses on the current account in1982-83. However, the sharp increase in capital exDenditures, primarilyassociated with the construction of the new internatioaal airport, causedthe overall deficit to widen after 1979. Much of the deficit was coveredby inflows of external grants and concessional loans.

2. The use of non-concessional financing, which had been negligiblebefore 1981, rose to nearly 12% of GDP by 1983. In 1983, the Governmentbegan to experience a liquidity crisis, largely because of delayed externalflows. The situation was exacerbated by the political disruptions andmilitary intervention in October 1983. Fiscal performance deteriorated in1984, with the current surplus on central government operations dropping toEC$0.7 million, compared to EC$6.9 million the previous year. It isestimated that the current account deficit of the balance of paymentsdropped as a share of GDP in 1983 (to 35%) because imports declined giventhe smaller public sector investment progrrau and tourism receipts rose. Onthe capital account, official grants doubjed from the 1983 levels, enablingthe current account deficit to be financed with relatively little recourseto public external borrowings. Outstanding public external debt (excludingthe IMF) at the end of 1984 was estimated at US$42.1 million, about 48% ofGDP. Largely because of recent borrowings of suppliers' credits, the debtservice ratio increased to 9% in 1984.

Policy Issues

3. The main policy issues are as follows:

(a) Reorganization of the public sector, with the objective ofreducing the fiscal deficit and improving its efficiency;

(b) Reform of the public enterprise sector, with a view to divestingsome commercial enterprises;

(c) Promotion of private sector investment through an improvedincentive system;

(d) Reduction of the high level of unemployment, especially amongyouth; and

- 40 -

(e) Comprehensive fiscal reform to improve incentives for productiveactivities.

Government Policy

4. In recent years, the Government has attempted to increase privatesector participation in the economy through:

(a) Revision of the investment code;

(b) Completion of a study on public enterprises with the objective ofdivesting several government-owned units;

(c) Relaxation of the controls on interest rates, prices and foreignexchange transactions.

5. As part of an IMF arrangement initiated in 1983 (but cancelled in1984), the Government:

(a) Improved the effectiveness of revenue collection and raisedtaxes;

(b) Instituted better expenditure controls in the public sector.

6. The new Government, which was elected in December 1984, is in theprocess of formulating its economic strategy. It has, however, confirmedthe objectives of:

(a) Promoting larger private sector involvement in the economy;(b) Reducing the fiscal deficit;gc) Lowering the public debt burden;Cd) Undertaking a comprehensive fiscal reform to improve the

incentives for productive activities;Ce) Reorganizing the public sector to bring it within manageable

proportions.

Project Priorities

7. In order for the Government to meet its goals of economic recoveryand increased private sector investment, it is critical that supportingeconomic infrastructure be upgraded. This includes road rehabilitation,particularly agricultural feeder roads; construction of industrial estates;and expansion of the water supply and telephone systems. In addition,successful implementation of various projects covering the rehabilitationof cocoa and bananas and the upgrading of support services is critical tothe Government's goal of revitalizing agriculture.

Creditworthiness

8. Because the external debt service will constitute a considerableburden on the economy in 1985 and in 1986-87 (but to a lesser extent)Grenada can only be considered marginally creditworthy for borrowing onnon-concessional terms; therefore it should rely on highly concessionalcapital flows for most of its investment prograr..

- 41 -

Bank Group Strategy

9. The Bank plans to:

(a) Continue channelling resources to Grenada (as to other OECScountries) mainly through the CDB, except in those instances whereprojects are beyond CDB's technical and financial capability;

(b) Maintain an active economic policy dialogue with the Governmentand assist it in mobilizing external financing for its investmentprogram through the Caribbean Group mechanism.

Bank Group Lending

10. In March 1985, IDA approved a US$5 million credit for AgriculturalRehabilitation and Crop Diversification.

Additional Capital Requirements (US$ millions):

FY85/86 FY86/87 FY87/88

Additional external financing required for:Public sector investment program 6.6 11.9Balance of Payments assistance 4.0 3.0 3.0

TOTAL 4.0 9.6 14.9

- 42 -

GUYANA

Population: 0.784 million (mid-1984) IBRD/IDA Lending: See below

GNP per capita: US$520 (1983 Atlas Host Kecentmethodology) Economic Mission: Jan./Feb. 1985

The Economy

1. Following three years of rapid decline in GDP, Guyana's economicperformance in 1984 was somewhat better. Compared to the 10% drop in realGDP in 1983, its growth rate at constant factor costs (1977 prices) wasestimated at about 5% in 1984, although the absolute level was still belowthat of 1970. The main factor behind the positive growth was the improvedperformance of the bauxite and rice sectors in 1984. The production ofcalcined bauxite increased by about 60% in 1984 as a result of a recoveryin demand and the implementation of improved management policies, based,inter alia, on the recommendations made under the recent Bank/IDA-financedstudy of the bauxite sector. Rice output, which had declined by about 19%in 1983, increased by 25% in 1984. The production of sugar continued tostagniate, declining by about 4% in 1984 as a result of unseasonal rainfallthroughout the year. As a result of drastic restraints on imports andnon-payment of external interest obligations, the balance of payments'current account deficit continued to improve. However, despite someadvances in production, public sector finances continued to be weak in1984, particularly because of the continued underutilization of capacity inthe main public sector corporations, increases in public sector wagesaveraging around 15% that were also made retroactive to January 1984, andthe compounding of domestic interest payments.

Policy Issues

2. The main policy issues are as follows:

(a) Exchange rate adjustment, aimed at arresting the rapidlydeteriorating foreign exchange situation and reducing theparallel market premia;

(b) Reduction in the size of the public sector deficit, mainlythrough expenditure reductions at the central government leveland improved productivity of public enterprises;

(c) Removal of price distortions;

(d) Rehabilitation of the bauxite sector, including improvedmanagement;

(e) Restructuring of the rice sector to promote competition andefficiency;

(f) Development and conservation of energy reso'irces; and

- 43 -

(g) Export promotion, particularly through the removal of obstaclesto private initiatives.

Government Policy

4. In its 1985 annual budget statement, the government initiated anumber of policies to tackle the above issues:

(a) The off'Lcial value of the Guyana dollar is to be adjusted weeklywith respect to a basket of currencies of the major tradingpartners, excluding the US. The official exchange of the Guyanadollar vis-a-vis the US dollar in February 1985 wasG$4.30/USS1.00, compared to G$3.70/US$1.00 in January 1984.Further action in this area should be pursued.

(b) A number of policy instruments have been proposed to deal withthe public sector deficit:

- Manpower reallocation in an effort to improve productivity;

- Improved revenue collection (the IMF has identified technicalassistance needs in this area);

- Reorganization of the public corporations; and

- Restructuring of the domestic debt.

[c) The Government plans to liberalize prices so that they can becomethe mechanism for determining the desirable allocation ofresources, discouraging consumption, changing consumptionpatterns and raising the efficiency of utilization.

Project Priorities

5. Because of the uncertainty surrounding resource inflows to supportthe PSIP, it is restricted to ongoing projects with identified externalsupport and short-term programs of major domestic importance.Agriculture remains the main thrust of the proposed PSIP followed byhydro-power development. The Government is actively seeking externalsupport for its hydro-power development program and rehabilitation of thebauxite sector.

Creditworthiness

6. Given the size of Guyana's external arrears and its debt servicingproblems, it cannot be considered creditworthy for non-concessionalfinancing.

Bank Group Strategy

7. The Bank Group proposes to:

(a) Support the government's efforts as outlined above throughcontinuous policy dialogue;

- 44 -

(b) Explore suitable arrangements that could constitute the basis fora possible enclave-type rehabilitation project for the bauxitesector; and

(c) Try to mobilize donor support through the CGCED.

Bank Group Lending (since 1978)

6. IBRD

- 1622-GUA - Import ProgramApproved: October 10, 1978; Closed: June 30, 1979 (US$5.0m)

- 1623-GUA - Upper Demerara ForestryApproved: October 10, 1978; Ongoing (Supplemental financing

approved March 7, 1985) (US$10m)- 1906-GUA - Technical Assistance for Power Development

Approved: October 7, 1980; Closed: June 30, 1984 (US$8.0m)- 1948-GUA - Structural Adjustment Loan

Approved: February 3, 1981; Closed: December 31, 1983 (US$14m)- 1949-GUA - Second Technical Assistance

Approved: February 3, 1981; Closed: December 31, 1984 (US$1.5m)

IDA

- 853-GUA - Import ProgramApproved: October 10, 1978; Closed: June 30, 1979 (SDR 5.0m)

- 1098-GUA - Structural Adjustment CreditApproved: February 3, 1981; Closed: December 31, 1983 (SDR 6.3m)

- 1208-GUA - Petroleum Exploration Promotion

Approved: February 16, 1982; Ongoing (SDR 1.7m)

Additional Capital Requirements (US$ millions):

FY85186 FY86/87 FY87/88

Additional external financing required for:

Mainly Balance of Payments assistance 68.6 - -

- 45 -

HAITI

Population: 5.3 million (mid-1983) IBRD/IDA Lending: See below.

GNP per capita: US$320 (1983 Atlas Most Recentmethodology) Economic Mission: January 1985

The Economy

1. Haiti's economy experienced modest, but precarious, growth in thelast two years, led by a slight improvement in agriculture and theexpansion of the export assembly industry and by the US recovery. Real GDPgrew by 2.7Z in FY1984. The economic decline since FY1980 and thecontinued population growth at 1.4Z meant, however, that per capita GDP andconsumption were still 9% and 14% below their FY1980 levels, respectively.By FY1983, a financial and economic stabilization program, adopted inFY1982 with the support of an IMF standby agreement, had successfullyreduced the public sector deficit from 13% to 9X of GDP, and the resourcegap from 19% to 13%. Confidence returned, and a new two-year IMF standbywas negotiated for FY1984-85. Fiscal revenues in FY1984 were belowexpectations, however, and the tight control of public expendituresexercised in FY1983 was relaxed leading to significant extra-budgetaryexpenses. The resulting performance was not as planned: the public sectordeficit remained at 9% of GDP, while the resciurce gap declined onlyslightly to 12%. The authorities were unable to draw on the full amount ofthe standby. The money supply (Ml) increased at 19%, compared to 6% inFY1982. Reserves, which should have grown, in fact declined by US$13million, and net international reserves became deeply negative at minusUS$51 million. Gross official reserves fell to 3.7 weeks of imports, afterrising to 5.6 weeks by the end of FY1982. These economic and financialdevelopments reflect the poor agricultural performance; poor industrialperformance because of the widespread protection that has fosteredinefficiency, except in the competitive assembly industry; and a continuingfiscal crisis because current revenues have stagnated for five years ataround 10% of GDP, while expenditures have continued to rise.

Policy Issues

2. The main policy issues are:

(a) Financial stabilization; and

(b) Promotion of growth through appropriate policies for agricultureand industry.

A detailed analysis of the policy issues and specific policy recommenda-tions are contained in this year's World Bank economic memorandum on Haitiwhich is expected to be issued shortly.

- 46 -

Government Policy

3. The government's development strategy is consistent with thesepolicy approaches:

(a) Rationalization of the management of public finances to achiev-the equilibrium necessary to rebuild Haiti's internationalreserve position and restore confidence. This approach includes:

- Modernization of tax collection and introduction of newtaxes;

- Reduction in public spending.

(b) Increased production and employment through:

- Short-term attention to industrialization for exports;

- Longer term development of an integrated industrial base,using inputs from the agricultural sector;

- Eventual, far-reaching reorganization of agriculture;

- Measures to mobilize domestic savings; and

- Steps to make foreign private investment more attractive.

Project Priorities

4. The priority for public sector investment projects should be tosupport the expansion of private enterprises in agriculture, industry andservices, especially for export. Socially-oriented projects should receiveless analysis than in the past and should be subject to systematic leastcost solutions. The priority in agriculture is irrigation rehabilitationand the provision of essential infrastructure (like rural roads) in highpotential irrigated and rainfed areas. The priority in industry is alsoinfrastructure (power).

Bank Group Strategy

5. The Bank proposes to make the public investment program the focusof its economic work in the next year. Tne critical priorities for whichfinancing has not yet been secured remain to be examined.

Bank Group Lending (since 1980)

5. IDA- 1106-HA - Agriculture Rehabilitation (US$2.5m)Approved: March 17, 1981; Closed: September 30, 1983

- 1121-HA - Port Development (US$8.6m)Approved: March 26, 1981; ongoing

- 1131-HA - Industrial Credit (US$5.7m)Approved: April 26, 1981; ongoing

- 47 -

- 1120-HA - Sixth Highway (US$12.1m)Approved: April 1, 1982; ongoing

- 1257-HA - Forestry (US$3.6m)Approved: June 3, 1982; ongoing

- 1281-HA - Third Power (USS22.9m)Approved: July 6, 1982; ongoing

- 1305-HA - Third Education (US$8.3)Approved: November 30, 1982; ongoing

- 1338-HA - Urban Development (US$7.3m)Approved: March 22, 1983; ongoing

- F 001-0 - Urban Development (US$11.9m)Approved: March 22, 1983; ongoing

- 1410-HA - Second Rural Development (USS17.6m)Approved: August 23, 1983; ongoing

- 1527-HA - Fourth Power (US421.6m)Approved: November 20, 1984; ongoing

- 48 -

JAMAICA

Population: 2.18 million (1984) IBRD/IDA Lending: See below.

GNP per capita: US$1,200 Most RecentEconomic Mission: February 1985.

The Economy

1. Following a poor economic performance in FY1983/84, when thefiscal deficit stood at 16.5% of GDP and reserves declined by US$306million, Jamaica has made major adjustment efforts in the last fiscalyear. The fiscal deficit was reduced to 7.8Z of GDP, and in CY1984 netreserves increased by US$186 million. Despite the severe austeritymeasures implemented to achieve these targets, GDP registered slight growthin 1984 of 0.5% after a rate of 1.8% in 1983. The main sources of thegrowth were agriculture and tourism. The balance of payments' improvementin 1984 reflects an 8% increase in exports, including a 20% increase innon-traditional exports outside CARICOM, and a 6% decline in imports, whichled to a 30% reduction in the current account deficit. Throughout thisperiod, the J$ has been devalued steadily in the foreign exchange auctionsystem, ending the year at about J$5.00=US$1.00, compared to an averageexchange rate of J$2.15=US$1.00 in 1983. Despite the efforts in 1984, theImmediate prospects for Jamaica are very difficult, with bauxite/aluminaexports expected to decline in 1985 by about 40%, a situation that willinevitably require further austerity measures.

Policy Issues

2. The main issues facing the Government are as follows:

(a) The shortage of foreign exchange, especially the expected loss ofUS$160 - 250 million in gross export earnings frombauxite/alumina in 1985. Without additional financing, a majordrop in GDP - of the order of 8% - would occur.

(b) The need to reduce the fiscal deficit, which, because of the lossof levy earnings on bauxite, which may reach as high as J$300million, would rise to about 12% of GDP unless correctivemeasures are taken. Since this loss is permanent, a crediblefiscal program urgently needs to be developed. One consequencewill be further redundancies for public employees.

(c) Public investments, will need to be carefully reviewed to ensurenot only that no unnecessary projects are carried out at thepresent time, but also that a minimum level of necessaryexpenditures is maintained, particularly with respect to thosethat prevent deterioration of the capital stock.

- 49 -

(d) Public enterprises must produce strong current savings as acritical element in any fiscal program that is developed; the SALprogram in this area is vital.

(e) The financial structure of companies must be addressed,particularly the problem of their high debt/equity ratios.Measures to address this issue have been identified and meritearly implementation.

(f) Non-traditional exports will be the main source of futuregrowth. Therefore the SAL measures in this area, such as thecontinued reform of the licensing and tariff systems, are ofcritical importance.

(g) With the loss of bauxite/alumina earnings, programs, such as AGRO21, which are designed to develop agriculture, have become evenmore important than before. The sugar sector must becomeself-financing as soon as possible; banana exports will need torecover rapidly; and efficient import substitution andnon-traditional exports will have a vital role.

Project Priorities

3. In view of its difficult fiscal and balance of paymentssituation, the public investment program for the next few years is verylean, and emphasizes projects which focus on public enterpriserationalization, rehabilitation of existing public utilitiesinfrastructure, and the provision of credit and equity capital to fosterprivate investment in the agricultural and industrial sectors.

Creditworthiness

4. The economic outlook for Jamaica raises serious doubts about itscreditworthiness. Given that large rescheduling will be necessary in thecoming period, Jamaica can only be considered creditworthy for very limitednet increases in commercial lending at the present time.

Bank/IDA Financing: 40 loans (of which 21 are fully disbursed).Total outstanding - US$619.1 million.

Additional Capital Requirements (US$ millions):FY85/86 FY86/87 FY87/88

External financing required for otherdevalopment assistance: 700 615.1 559.6of which identified:new non-project 309new project 80rescheduling 209

subtotal 598

Unidentified financing requirement(Balance of Payments assistance) 102

- 50 -

MONTSERRAT

Population: 11,733 (mid-1983) IBRD/IDA Lending: Nil; not amember of the Bank

GNP per Capita: US$2,360 (1983 Atlas Most Recentmethodology) Economic Mission: Uctober 1984

The Economy

1. In 1983, Montserrat experienced a slowdown in economic activitybecause of a decline in construction and the recession in theindustrialized countries. GDP fell by 0.5%. As a result, unemploymentrose from 5.6% in 1982 to 7% in 1983. The slowdown in economic activity,particularly the drop in imports, reduced the Central Government currentaccount surplus to 0.9% of GDP. A decrease in import demand and slightlyhigher exports of goods and services resulted in a lowering of the externalcurrent account deficit from 30% of GDP in 1982 to 10.5% in 1983. The debtservice ratio as a percent of exports rose marginally from 1.2% in 1981 to2.2% in 1983. The estimates for 1984 indicate no real growth in theeconomy. However, exports will show an improvement over 1983. Theexternal debt for Montserrat remains moderate, at 0.5% of GDP.

Policy Issues

2. (a) The slowdown in economic performance in 1983 and 1984, which hascaused unemployment to rise and has substantially reduced thecentral government's current account surplus to 0.9% of GDP in1984 from a peak of 3.1% in 1981.

(b) A need to forestall further decline in the agricultural sector,which has been aggravated by a recent drought. Growth inthe sector is hindered by severe marketing problems, the lack ofadequate extension services and the absence of an effectivecredit system.

(c) A need to restructure and improve the performance of theDevelopment Finance and Marketing Corporation.

(d) A need to review the public enterprises and divest those notconsidered viable.

(e) Support for further improvements in water resources, increasedvocational and technical training and upgrading of electricitygeneration equipment.

Government Policy

3. In general, economic management in Montserrat is sound. Therecent decline in public savings has caused the government to investigatemeans of curbing the growth in public expenditures. Further, it is

- 51 -

presently undertaking a review of public enterprises. To improveagricultural output, the government has proposed an agriculturalrehabilitation project to expand the production of tree crops, livestockand vegetables. Expansion of the Irrigation system has been made apriority. The government is committed to creating an environment suitablefor private investment by expanding the supporting economic infrastructure.

4. The pace of reform for the public enterprises has been slow. Thepresent fiscal situation demands that immediate attention be directedtoward the enterprises.

Project Priorities

5.. The major focus of the future investment program should be theimprovement of the water system infrastructure and agriculturalrehabilitation. The investment program for 1985 totals US$3.8 mill,on, ofwhich US$0.4 million remains to be funded. New projects under study at avery preliminary stage total US$2.8 million.

Bank Group Lending

6. No lending is envisaged.

Additional Capital Requirements (US$ millions):

a FY85/86 FY86/87 FY87/88

Additional external financing required for:

Public sector investment program 0.4 2.0 2.2

- 52 -

ST. KITTS ANiD NEVIS

Population: 45,469 (end-1983) IBRD/IDA Lending: See below.

GNP per Capita: US$820 (1983 Atlas Most Recentmethodology) Economic Mission: October 1984

The Economy

1. GDP declined by 2.4% in 1983 as a result of a poor sugar crop anda drought that affected the production of other agricultural crops. Thissituation was reversed in 1984 as a result of an 8% increase in sugarproduction and a projected 12% increase in tourist arrivals. The expectedgrowth of GDP for 1984 is 3%. Central Government finances were adverselyaffected by the losses in the government-owned sugar industry. Currentaccount deficits have been recorded for the central Government since 1981,and in 1984, it is expected to represent 5% of GDP. The current account ofthe balance of payments improved substantially in 1984, with the ratio ofthe current account deficit to GDP falling to 9.7%, as compared to 29.0% in1983 and 11.4% in 1982. Improved tourism revenues and sugar earnings,together with the fall in imports, particularly food and consumer durables,accounted for this improvement. The outlook for 1985 is positive becauseof strong bookings for the 1985 winter tourist season and an improvedoutput of 32,000 tons in the sugar sector.

Policy Issues

2. (a) Deterioration of public sector finances; central Government'scurrent account deficit moved from a positive 4.5Z of GDP in 1980to a negative 5.0% in 1984.

(b) Fiscal difficulties which have adve-sely affected the publicsector investment program.

(c) Deterioration in the financial performance of the sugar sector,particularly its field operations.

(d) The need to compensate the former estate landowners and henceallow the Government to obtain clear title to sugar lands.Settlement of this issue will allow the Government to undertake along-term agricultural diversification policy with a coherentland use program.

(e) The need to upgrade the economic infrastructure, particularlytelecommunications, electricity on both islands, and water onNevis.

Government Policy

3. The Government's strategy is to continue promoting tourisminvestment, particularly with respect to the South-East Peninsula section

- 53 -

of St. Kitts. It is also committed to ensuring the long-term viability ofthe sugar industry. The government recognizes the importance of theworsening fiscal performance of the public sector and has sought to curbthe growth of expenditures, and it is presently studying means of enharcingrevenues.

4. The pace with which the fiscal difficulties are remedied needs tobe accelerated. In particular, early decisions must be made on alternativerevenue sources and means of improving the productivity of field operationswithin the sugar sector.

Project Priozities

5. Project priorities continue to be improvements to the supportinginfrastructure, particularly utility services. Of the US$4.3 millionincluded in the new project investment program for 1985, US$0.63 millionhas no identified funding source. The most notable of these includeselectricity rehabilitation and water storage and distribution systems.There are also projects under study totaling USS4.4 million, which includethe South-East Peninsula road, telecommunications updating, and the BayFront Shopping Mall.

Creditworthiness

6. Given St. Kitts and Nevis' weak fiscal situation, it can only beconsidered marginally creditworthy for borrowing on non-concessional terms;therefore it should continue to rely on highly concessional capital flowsfor most of its investment program.

Bank Group Strategy

7. The Bank plans to: (a) continue channeling resources toSt. Kitts and Nevis (as to the other OECS countries) mainly through theCDB, except in those instances where projects are beyond CDB's technicaland financial capability; and (D) fund one operation of US$5.0 million forinfrastructural development.

Additional Capital Requirements (US$ millions):FY85/86 FY86/87 FY87/88

Additional external financing required forpublic sector investment program 2.18 4.10 3.55

- 54 -

ST. LUCIA

Population: 125,000 (1983) IBRD/IDA Lending: See below.

GNP per capita: US$1,060 (1983 Most RecentAtlas methodology) Economic Mission: February 1985.

The Economy

1. In 1984 St. Lucia experienced a real growth rate of almost 5%,the highest since the 0.2Z decline in 1980 that resulted from thedevastation of Hurricane Allen that year. Two main factors wereresponsible for the 1984 performance. One was the continuing recovery ofthe banana sector, despite the adverse effects that the decline of thepound vis-a-vis the US dollar had on earnings. Banana exports increasedfrom 54.5 thousand tons in 1983 to 64.0 thousand tons in 1984. The otherfactor was the performance of the tourism industry. The hotel occupancyrate was in !984 66.8% as compared to 56.2% in 1983. On the other hand,the manufacturing sector continued to stagnate in 1984 as a result of thetrade problems being experienced in CARICON. Despite efforts to improvethe finances of the central government, the current account deficit forFY1984/85 is estimated at about 5% of GDP. Persistent inefficiencies inthe tax collection system and wage and salary increases for public workerscontinued to affect the state of public finances. Still, the financialposition of some government units show signs of improving. Despite theperformance of the tourism and banana sectors the estimated current accountdeficit of the balance of payments in 1984 was around 17% of GDP. Whilethere was no substantial change in the food and fuel bill, imports ofmanufactured consumer goods increased by almost 18%. The tendency tofinance a large part of the development program with foreign borrowing hasresulted in an increase in the external public debt from US$8.0 million atthe end of 1977 to US$31.2 million at the end of 1984. Unemployment 'as ata level of 20% to 25% of the labor force. The prospects for bananaproduction and tourism in 1985 look good. The exchange rate issue,however, will be crucial to the financing performance of the bananaindustry in the entire Windward Islands. Nor, unless the CARICOM tradeproblems are settled, is the position of the manufacturing sector likely tochange in 1985. The potential for increased production in domesticagriculture is good, but problems relating to marketing, credit and landtenure need to be addressed.

Micro/Macro Policy Issues

2. The main pol'cy issues are as follows:

(a) The need to increase the level of domestic savings and toencourage the flow of financial resources to the productivesectors of the economy (too high a proportion is now beingdirected to consumption-oriented activities).

- 55 -

(b) The persistent deficit in the balance of payments' currentaccount. It has to be tackled on both the import and exportsides: consumer imports may have to be curbed and a moreintensive import substitution policy be pursued, particularlywith respect to food; banana exports can be increased, but theexchange rate problem will have to be dealt with; the tourismsector can be further expanded; the potential for exporting ofnon-traditional goods to extra-regional markets needs to beexplored more fully.

(c) The heavy dependence of manufacturing on the CARICOM market.This sector needs to turn its attention to extra-regionalmarkets. In this connection there needs to be a greater focus onissues relating to local value added, quality, price, marketintelligence, etc.

(d) The high rate of unemployment. Increasing attention should bepaid to the relationship between the development strategy and theeducation system, if the issue of unemployable graduates is to beavoided; the rate of population growth will have to be addressed.

(e) The level of productivity. St. Lucia is a relatively low-costcountry, but in certain areas its costs are already higher thanthose of some of its neighbors for comparable activities. Shouldrecent trends in nominal wages and salaries continue to risewhile productivity is falling, St. Lucia may completely lose anadvantage that has made it one of the most industrialized of theOrganization of Eastern Caribbean States (OECS).

-f) Inadequate revenue collection, payment arrears and the grantingof wage and salary increases which the government cannot afford.These problems continue to affect the central government'sfinances.

Government Policy

3. The Government's development thrust centers around threeactivities: agriculture, manufacturing and tourism. Basically, thestrategy is sound, but the supporting policies and measures need to bearticulated more clearly.

Project Priorities

4. Generally the composition of the public sector investment program(PSIP) has been consistent with the overall development strategy,with increasing emphasis on diversification of the productivebase and strengthening of the supporting infrastructure. ThePSIP for FY1984/85-FY1987/88 is projected to reach about EC$50million a year. A large part of the program aims at completingthe projects in progress. With regard to new ones, expenditureshave only been projected for projects that are in a sufficientlyadvanced stage of preparation and for which interested donorshave been identified.

- 56 -

Creditworthiness

5. While in a better situation than the other OECS member states,St. Lucia, given its fiscal situation and debt servicing arrears, cannot beconsidered fully creditworthy for borrowing on non-concessional terms.

Bank Group Strategy

6. The Bank plans to: (a) continue channelling resources mainlythrough the CDB, except in those instances where projects are beyond CDB'stechnical and financial capability; such direct intervention to take placeabout every five years; (b) the recent Economic Mission has reported on thepossibility of an industrial credit project and the Rodney Bay sewerageproject.

Additional Capital Requirements (US$ millions):

FY85/86 FY86/87 FY87/88

Additional external financing required forpublic sector investment program 2.3 6.4 8.6

- 57 -

ST. VINCENT AND THE GRENADINES

Population: 114,000 (mid-1983) IBRD/IDA Lending: See below

GNP per capita: US$860 (1983 Atlas Most Recentmethodology) Economic Mission: May 1984

The Economy

1. The receit economic development of St. Vincent and the Grenadineshas been based largely on agricultural exports, especially bananas,arrowroot and vegetables. As such, growth has been determined by weatherconditions and international demand and has exhibited sharp fluctuations.During 1982-83, the economy showed signs of a slowdown, with GDP growthaveraging about 3% a year, in contrast to the high growth rate in 1981induced by the reconstruction activities in that year following the naturaldisasters of 1979 and 1980. After two successive years of deficits in1981-82, the public sector c.teret account exhibited surpluses in 1983-84.The balance of payments has also improved in recent years. On the basis ofthe moderate economic performance of the last two years and assumptionsrelating to the management of the economy, the growth rate of GDP isexpected to average about 5% a year in the medium term. Continued growthof the economy will also depend on the inflow of external capital, largelyon concessionary terms.

Policy Issues

2. The main policy issues are as follows:

(a) In the agriculture sector, solutions to the marketing andproduction problems of the arrowroot and sugar industries; andestablishment of a land policy that will halt furtherfragmentation and improve the pattern of distribution.

(b) In the context of the public sector, improvement in the financesof non-financial public enterprises; administrative reforms inthe central government to enable it to cope more effectively withits expected roLs; and the introduction of necessary additionalrevenue measures and improved tax administration.

(c) In terms of the overall viability of the economy, policies topromote domestic savings; and development of enclavemanufacturing industries and tourism.

Government Policy

3. The Government's development strategy is consistent with theabove policy issuea. It has recently initiated acLions along the followinglines:

(a) An FAO technical assistance team is currently assisting theGovernment in evaluating the sugar industry;

- 58 -

(b) Administrative reforms in the central government have beeninitiated (the Ministry of Finance and Planning is beingreorganized);

(c) Policies to promote private enternrise are oriented towardimproving domestic savings; and

(d) The Government is pursuing external assistance for an airportexpansion program, as it views the limited air access as aconstraint on tourism and industrial development.

Project Priorities

4. The new Government is in the process of defining its projectpriorities with the assistance of the IARM. The PSIP should be ready forthe CGCED meeting.

Creditworthiness

5. St. Vincent and the Grenadines can only be considered marginallycreditworthy for borrowing on non-concessional terms given its fiscalsituation and relatively weak balance of payments; therefore it shouldcontinue to rely on hignly concessional capital flows for most of itsinvestment program.

Bank Group Strategy

6. The Bank Group plans to:

(a) Continue channelling resources to St. Vincent and the Grenadines(as to other OECS countries) mainly through the CDB, except inthose instances where projects are beyond CDB's technical andfinancial capability; such direct intervention to take placeabout every five years;

(b) Assist the government's efforts in the area of industrialdevelopment; and

(c) Maintain a policy dialogue on macroeconomic issues and assist theGovernment in mobilizing external financing for its investmentprogram through the Caribbean Group mechanism.

Bank Group Lending (since 1978)

7. IDA Credit 1479-STV and Special Fund Credit SF-21-STV (SDR 5.0m)Power Project - approved May 24, 1984.

- 59 -

SURINAME

Population: 373,000 (mid-1983) IBRD/IDA Lending: See below.

GNP per Capita: US$3,520 (1983 Atlas Most Recentmethodology) Economic Mission: June 1984

The Economy

1. Following a period of sluggish growth, Suriname's economydeteriorated when the Netherlands Government suspended its developmentgrants in 1983. The effect of a continued weak performance by the miningsector was compounded by slowdowns elsewhere in the economy, as thegovernment imposed monetary and trade restrictions to help safeguard thebalance of payments. Fiscal policy, however, continued to be expansionary,and even though expenditures for capital works were eventually cut back,the government substantially increased its dependence on central bankfinancing for the budget deficit. The severe fiscal imbalance wasreflected in the balance of payments, and the country suffered a relativelyrapid drain of foreign exchange reserves.

Policy Issues

2. The main policy issues are as follows:

(a) The severe financing problems. Fiscal policy became expansionaryafter independence, financed by considerable amounts ofconcessional aid from the Netherlands, which was suspended at theend of 1982. Capital expenditures have been cut back, but norevenue measures have been taken.

(b) Restrictive trade policy, especially since 1982. Initially theaim was to restrict domestic industry, later it was to protectthe balance of payments in the wake of the suspension of Dutchaid.

(c) Exchange reserves which exceeded four months of imports during1979-82 and which were essentially depleted by the end of 1984.

(d) The drastic decline in the contribution of bauxite mining andprocessing, following two energy crises and weak markets. Thesector still contributes three-quarters of merchandise exports.Growth prospects depend on improved markets and the availabilityof additional -energy for aluminum processing.

(e) In agriculture, the need to increase rice production. Rice isthe second largest export item, accounting for 10% of exportearnings. Recent and continuing Government investment in riceshould permit the sector to grow 4Z annually in the medium term.The Government is also investing in oil palm, but there is only a

- 60 -

slight chance for an adequate return. The Government's policieson marketing, input supply and the role of the private sector ingeneral need attention.

(f) The orientation of manufacturing to the domestic market.Relatively high wage costs and problems of market access limitthe export potential. Recently, government regulations onpricing and employment have reduced the growth prospects of thesector.

Government Policy

3. A new cabinet, with a term of 27 months, replaced the interimcabinet in January 1985. This cabinet is in the process of elaborating adevelopment strategy.

Project Priorities

4. Suriname has made substantial investment in infrastructure forrice growing, especially in construction of the Corantijn canal. It isimportant that the next phases for utilizing the irrigation water arecarried out. These include mainly empoldering and provision of ancillaryfacilities, such as spillways and diversion works. Another investmentpriority is the development of small hydroelectricity facilities whichcould have important import substituting effects.

Creditworthiness

5. Since the suspension of Dutch aid has deprived Suriname of 90% ofits public capital inflows, major efforts are required to raise domesticsavings, and to improve the economic policy environment so as to stimulateproduction and exports and therefore restore creditworthiness.

Bank Group Strategy

6. The Bank intends to maintain a dialogue on policy issueswith the Government of Suriname.

- 61 -

TRINIDAD AND TOBAGO

Population: 1.2 million (1983) IBRD Lending: See below

GNP per capita: US$6,900 (1983 Atlas Most Recentmethodology) Economic Mission: 1982

The Economy

1. The economy of Trinidad and Tobago declined in 1984 for thesecond consecutive year. Although real value added in the petroleum sectorrose marginally after several years of falling output, all nonpetroleumsectors had negative growth except for miscellaneous services. As aresult, the unemployment rate has risen from 9.5Z of the labor force in1982 to 13.0% in 1984. The Government, however, continued to improve itsfiscal performance. The current account surplus rose to 3.6X of GDP in1984, compared to 1.7% in 1983 and near balance in 1982. Capital spending(including net lending) by the central Government dropped by 14% in nominalterms in 1984. The balance of payments also strengthened significantlyprimarily because of a 26% fall in import payments, a result of the tradeand foreign exchange restrictions levied by the government in October1983. The current account deficit narrowed from 13.6% of GDP in 1983 to8.0% of GDP in 1984. Flows on the capital account, primarily directinvestment and central government borrowings, covered only part of thecurrent account deficit, the remainder being financed by a decline ininternational reserves of about US$750 million. Net international reservesat the end of 1984 stood at US$1.4 billion (equivalent to 9 months'imports) compared to US$3.4 billion at the end of 1981.

Policy Issues

2. An economic mission visited the country in 1982, primarily toassist the Government in the preparation of the National Development Plan;the report was published in June 1983. It noted that Trinidad's transitionto a stage of limited dependence on petroleum might be constrained byserious structural problems including:

(a) overprotection of industry;

(b) wage increases in the non-oil sector, which have outstrippedproductivity growth; and

(c) stagnation of agriculture and the decline in the internationalcompetitiveness of the non-oil sector.

3. The major policy issues confronting the government are the needto:

(a) a switch resources from consumption to investments and exports;

- 62 -

(b) improve economic efficiency and broaden the productive base ofthe country;

(c) provide sufficient incentives to the petroleum industry so thatproduction stabilizes at current levels; and

(d) develop an investment strategy to use the abundant natural gasresources.

Bank Group Lending Program

4. IBRD - Ln. 1722 - Third Education: Approved June 7, 1979;Cancelled: May 31, 1984

5. Consistent with the 1984 decision on graduation, the Bank isprovidIing Trinidad and Tobago with up to one man-year of non-reimbursabletech.ir,al assistance. The Bank is currently assisting with an EnergyAseassment.

- 63 -

ANNEX II

STATISTICAL APPENDIX

- 64 -

Table 1.1s CARIBBEAN - GROWTH OF GOP (1)

(Constant prices)

1177 1978 1979 1960 1981 1982 1983 1954

Antigua * Berbuda 7.5 9.1 6.6 7.8 4.0 2.7 1.1 3.3

Bahamas 3.4 8.0 8.0 4.0 -2.5 1.5 5.0 4.0

Barbadco 3.7 4.8 7.9 4.9 -2.6 -4.3 0.0 2.4

Belize n.e. 7.9 -3.9 4.3 1.5 -1.7 -0.4 2.1

Dominica 3.4 12.0 -17.2 16.4 6.2 2.3 2.4 4.S

Grenade 5.5 S.l 2.1 3.0 7.5 4.7 -2.0 0.6

Guyana -3.0 -2.5 -1.2 1.6 -0.3 -10.4 -9.6 S.S

Jamaica -1.9 -0.3 -1.4 -5.4 3.3 0.0 1.5 0.5

NMntserrat -1.4 6.4 11.4 10.3 2.9 4.2 -0.5 0.0

St. Kitts & Hovie 0.0 0.8 7.6 4.1 6.5 2.2 -2.4 3.0

St. Lucia 5.9 13.3 3.1 -0.2 0.2 4.5 2.0 4.9

St. Vincent & 3.5 12.2 4.4 4.3 9.3 2.5 4.1 n.G.

the Grenadines

Surlname 16.2 11.0 -1.6 -3.3 5.6 2.0 2.0 -1.0

Trinidad & Tobago 7.8 7.9 5.3 3.0 3.4 5.9 -5.2 -7.4

Dominican Republic 5.0 2.2 4.7 5.8 3.5 1.7 3.9 1.0

Haiti 0.5 4.9 7.6 7.2 -2.7 -3.7 0.3 2.7

- 65 -

Table 1.2: CARIBBEAN - FUBLIC SECTOR SAVINGS a/

(USS mliilon)

1977 1978 1979 1980 1981 1982 1983 1984

Antigma A Barbuda -2.2 -0.6 0.4 O.S 2.1 -2.3 -5.0 -2.7

Bahamas 23.1 41.0 63.0 91.0 78.0 45.0 50.0 15.0

Barbados 14.9 37.0 39.3 38.1 27.5 39.7 58.9 Sl.8

Belize 2.9 6.7 5.6 7.8 4.2 -6.5 -14.7 -2.1

Domllce -1.6 -1.9 -10.7 -8.5 -4.1 -0.5 3.5

Grenada 2.7 -1.5 0.3 -0.3 -0.7 2.9 1.7 1.7

Guyana -12.2 21.6 21.2 12.5 -104.6 -95.7 -129.3 -171.3

Jamlea -103.2 -S9.7 -101.0 -205.6 -137.6 -166.6 -312.5 -47.6

Nontaorrat -0.3 -0.4 -0.3 0.4 0.8 0.7 0.3 0.3

St. Kltts & Nevsi 2.7 1.4 1.4 2.1 -0.9 -3.5 -2.1 -0.6

St. Lucla 3.3 5.1 3.6 4.9 2.0 -0.9 3.3 1.1

St. Vincent * 0.1 -0.1 -0.7 0.0 0.0 2.3 3.8 B.S.

the Grenadines

Suriname -26.8 13.0 4.9 6.0 -77.7 -43.4 -117.7 n.s.

Trlnidad & Tobago 755.3 653.8 743.3 1,188.3 1,169.2 1.2 140.3 304.3

Domliican Ropubile 335.8 165.0 27.4 97.8 31.6 -33.4 45.9 2S.3

Haitl 29.0 29.4 20.0 3.4 -12.1 10.0 16.7 20.9

As Z of GOP

Antiguoa Barbuda -3.6 -0.1 0.5 O.S 1.8 -1.8 -3.8 -2.3

Bahamas 3.9 6.0 7.7 9.9 5.8 4.2

Barbados 3.0 6.7 S.6 4.7 2.9 4.0 5.6 4.5

Belize 1.4 6.3 4.1 4.4 2.4 -1.9 -4.1 -1.2

Domlmica -4.5 -4.1 -25.7 -14.7 -6.1 -0.7 4.1

Grenada 5.4 -2.3 0.4 -0.3 0.7 2.7 2.2 n.a.

Guyana -2.8 4.4 4.1 2.1 -18.4 -19.8 -26.7 -38.6

Jamaica -6.4 -2.8 -4.2 -7.7 -4.4 -5.0 -7.7 -2.5

Monteerrat -2.5 -3.3 -2.0 1.8 3.1 2.4 0.9 0.9

St. Kitts & Nevis 11.2 5.0 4.7 5.9 -2.1 -8.2 -3.5 1.0

St. Lucia 4.7 6.1 3.5 4.3 1.6 -0.7 2.3 0.7

St. Vincent a 0.3 -0.2 -1.1 0.0 0.0 1.0 1.6

the Grenadines

Surlname -3.6 1.S 0.5 0.6 -6.8 -3.5 -9.1 n.o.

Trinidad & Tobago 24.1 18.1 16.2 18.1 15.8 0.0 1.7 3.6

Dominican Republic 7.4 3.5 0.5 1.5 0.4 -0.4 O.S 0.1

Haiti 3.0 2.9 1.8 0.2 -0.8 0.7 1.0 1.1

aI Data are uniform for a given country but are not completely comparable across countries duo

to dlfferences In scope Csome data are for central government only) and timlng of fiscal

year.

- 66 -

Table 1.3, CARIBBEAN - BALANCE OF PAINENTS Oi CURRENT ACCOUNT

(US$ mlilion)

1977 1975 1979 1330 1981 1952 1983 1984

Antigua a Barbads -9.6 -3.7 -17.4 -26.3 -44.1 -40.9 -7.6 -14.6

8ahoms Is9.S -15.8 -52.2 -33.1 -81.2 -45.1 0.6 7.9

Barbados -34.3 -4.4 -24.0 -37.4 -86.0 -41.3 -50.0 -36.2

alize -s.e -11.1 -9.5 -9.3 -10.4 -25S. -19.0 -13.3

ominile -S.5 -6.6 -14.3 -32.4 -22.4 -9.6 -a.6 -17.S

Orenada S.3 -0.5 -5.2 -13.3 -23.2 -33. -29.0 -20.0

Guyana -79.9 -109.2 -168.9 -133.3 -127.9 -86.1

Jamaica -25.3 -86.5 -142.6 -lS.2 -375.2 -367.9 -4S6.4 -311.7

omntaerrat 1.1 -0.9 -2.6 -6.2 -10.3 -3.1 -3.4 -3.0

St. Kitts & Novie -1.2 1.0 -3.S -9.6 -7.8 -5.7 -17.6 -6.3

St. Lucia -11.4 -2S.S -'31.S -44.5 -54.3 -44.4 -20.4 -21.S

St. Vincent 1 -6.S 0.0 -6.4 -13.2 -6.1 -11.4 -7.2 n.R.

the Orenadines

Suriame 1.1 -46.0 -37.0 -s5.2 -122.S -153.3 -163.3 u.s.

Trinidad 4 Tobago 214.6 35.9 -29.2 34S.0 366.4 -815.0 -1,092.0 -669.0

Domialcan Republic -264.5 -311.9 -331.3 -669.8 -40S.9 -441.9 -421.9 -210.1

Haiti -37.s -44.6 -54.5 -98.4 -1S9.5 -54.3 -100.4 -95.0

As Z of CDP

Antigua & Barbuda -1S.3 -5.4 -20O.1 -2S.3 -37.5 -36.6 -6.8 -12.3

Bahaast 3.3 -2.3 -S.5 -5.S -6.9 -2.9

Barbados -6.9 -2.1 -3.6 -S.5 -9.0 -4.2 -4.7 -3.1

Belize -9.4 -10.4 -6.7 -5.4 -5.7 -15.5 -10.9 -7.9

Dominica -1S.1 -14.6 -31.6 -56.0 -33.4 -13.5 -9.5 *.c.

Grensda 10.7 -0.8 -6.9 -20.S -29.7 -37.7 34.9 -23.0

raynma -22.4 -6.4 -15.2 -1855 -29.7 -27.7 -26.4 -19.4

Jamaica -0.9 -3.3 -S.9 -6.2 -12.7 -12.2 -14.5 -14.0

Montserart 9.7 -6.9 l6.2 -2S.6 -37.9 -30.3 -10.5 -6.2

St. Kitts * Nowls -!.0 3.6 -11.8 -26.5 -17.9 -20.3 -29.0 -9.7

St. Lucia -16.3 -30.7 -30.5 -39.4 -43.0 -33.0 -14.5 -. 14.2

St. Vincent 4 -18.7 0.0 -12.3 -22.5 -8.4 -13.8 -8.0 n.a.

the Grenadines

Suriaame -11.0 -. 3 -4.0 -S.S -10.7 -12.4 -12.7 n.c

Trimidad A Tobago 6.9 1.0 -1.0 5.3 5.2 -10.1 -13.6 -5.0

Dbminican Republic -5.8 -6.6 -6.0 -10.1 -5.4 -5.6 4.8 3.9

Halti -3.S -4.4 -4.9 -6.7 -10.9 -5.7 -6.1 -S.2

- 67 -

Table 1.4: CARIBBEAN - TOUNISM

(USS m1i111o)

1977 1978 1979 1910 1961 1912 1953 1914

Astigus * Barbuda 24.7 21.5 36.7 42.5 46.6 48.0 60.0 66.2

Bahamas 371.2 445.2 SO5.5 577.6 632.2 643.5 755.6 *02.3

Berbades ill.s 136.6 207.8 253.7 264.1 254.5 254.1 275.S

BelIse 3.9 4.5 2.4 2.5 2.6 3.3 4.0 n.s.

Doelilca 3.0 3.6 2.6 2.1 3.2 4.8 5.1 E.g.

Grenada 6.0 14.6 IS.5 20.1 17.3 17.3 14.7 17.3

Omyanm n.e. n.. ".a. n.e. n... -Jamal.. 10S.6 146.6 195.4 240.5 264.3 537.8 391.2 435.2

Montserrat 2.3 3.0 3.7 4.3 S.O 6.0 6.0 6.4

St. Kitts & Mmvis 2.0 5.0 6.8 7.9 9.6 1.4 11.1 13.3

St. Lucia 17.3 27.7 33.4 32.9 21.4 32.5 39.7 43.7

St. Vincent a 5.9 11.1 12.8 16.7 17.6 17.2 18.2 M.S.

the *rsaadinms

Surluaae n.a. n.a. U.S. n.e. a.G. a.e. n.a.

Trialded 6 Tobago 91.2 109.2 119.7 151. ISI.S 137.6 177.6 197.6

Doelalcan Republic 92.3 92.3 123.9 172.5 206.3 266.1 310.0 402.9

Haiti 36.7 42.0 60.6 76.S 74.9 bl.2 72.7 66.0

Sourcess IBRD Economic emorsaida.

Table 1.5I CARIBBEAN - TOURISM a/

("000 of visIters)

1977 1978 1179 1980 16l1 1982 1983 1164

Antlgua £ Barbuda 104.1 126.8 169.S 20S.0 209.1 164.1 165.0 165.I

Bahamas 1,381.4 1,706.9 1,769.4 1,904.6 1,763.3 1,947.4 2,224.1 2325.1

Barbados 372.4 442.9 481.0 526.7 468.4 414.6 430.8 461.7

Belize 55.1 60.6 61.7 63.7 62.3 63.2 6S.6 u.s.

Domlalca 31.0 3S.6 2S.1 24.6 22.9 22.6 2S.S

Grenada 137.0 146.7 170.i l5.0 102.7 85.4 82.7 73.7

Guyana n.a. n.m. u.s. n.a. a.e. n.a.

Jamaica 366.5 532.9 593.7 543.0 S52.0 670.2 782.9 643.4

Montserrat 12.7 IS.4 16.9 20.5 21.4 24.9 13.8 20.0

St. Kitts £ Novi& N.c. 37.1 40.0 35.5 46.3 45.7 57.1 64.0

St. Lucia 149.0 145.7 140.5 140.3 69.6 106.1 112.9 128.0

St. Vincent & 32.3 46.6 56.2 78.0 71.5 67.6 72.7

the Orenadines

Suriname a.a. n.a. n. . n... n.a. u..

Trinidad & Tobago 202.0 208.4 170.6 155.6 n.e. n.-.

Oeminican Republic 442.0 460.0 537.9 566.4 613.6 602.2 n.c. a.a.

Haiti 291.1 301.8 303.0 306.S 261.1 219.9 227.5 215.4

ai Theme data correspond to total arrivala Includiag crulse ship passengers.

Seorcess IBRO Economlc Memoranda.

- 68 -

Table l.oi CARIBBEAN - VOLUME OF BANANA EXPORTS

'000 tons)

t977 1376 1979 limo 13s1 1932 1363 1934

Antlga & Barbud - - , _ _ _ _ _

Bahamas - - - - . _

Oarbedes - _ _ _ _ _ _

Beilze 10.4 9.9 16.0 15.0 10.5 10.0 10.1 a.s.

Dominica 30.4 37.0 16.0 8.1 27.1 27.5 29.3 -

greeade * 14.0 A14.2 14.6 12.9 10.6 10.6 9.6 9.3

Guyana - - - - - - --

Jamaica 74.3 72.7 63.3 33.1 11.1 21.2 23.0 10.6

entserrat - - - - _ _ _

St. Kitta A Nevis - - - - - -

St. Lucla 41.4 47.8 48.2 32.6 42.9 41.7 53.3 69.2

St. Vincent * 26.2 31.0 22.3 18.6 29.8 25.0 27.3 -

the Grnaadine

Sureinam 27.3 29.0 27.3 34.0 36.5 37.5 32.2 N.M.

Trinidad 6 Tobago - - - - - - --

Dom-licen Repubilc - -

Haiti - - = _

C-) Not appilCable.

Sourceas IBRO Economic Memoranda.

Table 1.7: CARIBBEAN - VALUE OF 8AMANA EXPORTS

CUS* million)

1977 1378 1979 1960 1361 1362 1933 1964

Antlgua & Barbeda - - - - _ _ _ _

Bahbaas - - - _ _ _ _ _

Barbedee - _ _ _ _ _

Belize 1.5 1.7 3.4 3.5 2.2 2.1- 2.4 2.5

Doelrce 6.9 S.2 4.4 3.0 9.1 10.0 11.2

Grenada 3.2 3.4 3.7 4.1 3.7 3.4 3.2 3.0

anyone

JamaIca 13.S 17.3 18.2 3.2 4.3 4.7 6.6 2.5

Nnteaerrat - - - - - - - -

St. Kitts a %vi. - - - - - - - -

St. Luela 9.S 12.1 13.S 10.S 14.7 15.6 20.8 25.4

St. Vincent * 5.6 7.3 5.9 6.3 10.1 9.0 9.7

the Grenadines

Suripame 3.4 3.9 4.1 S.9 7.3 *.1 7.7

Trinidad & Tobago - - - - - -

Domlnican Republic - - - - - - - -

Haitl - - - - _ _ _ _

C-) Not applicable.

Sourcess IBRO Economic Nemoranda.

- 69 -

Takla 1.03 CARIBBEAN - VALUE OF BAUXITE EXPORTS a/

(US$ Millien)

1977 1978 1979 1980 19S1 1982 1983 1_84

Antlgu A Berboda - - - - - - - _

lahamae----

Barbades BelIz Ie - - - - _ _

Dolelce - - - - - -

Grenada - - - - - - - _

Cuyea. 99.1 98.2 107.1 144.3 120.1 88.3 77.2 102.5

Jamaica 205.3 234.0 213.5 197.4 172.1 170.0 109.2 177.2

Montsrrat - - - - - - - -

St. Kitts a Nevis - - - - - - - -

St. Lxcis - - - - - - - -

St. Viacent a - - - - - - - -

the GrenedInel

Surilaae 65.6 72.1 56.3 72.0 64.0 20.1 25.1

TrInidad A Tobago - - - - - - - -

DOelnicen Republic 22.0 23.1 20.9 1S.5 IS.7 5.3 0.0 0.0

limItS 17.3 17.2 18.1 19.6 16.6 21.3

w/ Includes calclnd bauxite.

C-) Not applicable.

Sources. 18RO Economic Mamoranda.

Table 1.9s CARIBBEAN - VOLUME OF HAUXITE EXPORTS a/

C 000 tona)

1977 1978 1979 1980 1981 1982 1983 1984

Antigue * Berbuds - - - - - -

Ca mee _

Barbadeo - - - - - - - -

0ll:. - - - - - - - -

Doaminic - - - - _ _ _ _

Grenada - - - -

OGyana hi 1 575.0 1 577.0 1 553.1 1 587.0 1 453.3 1 057.1 1 140.0 1 324.0

Jamaica 6,400.0 6C400.0 6,400.0 6,100.0 5,370.0 4,080.0 3,009.0 4,560.0

Yentcerrat - - - - - - - -

St. Kitts & Mevis - - - _ _ _ _ _

St. Lucia - - - - - -

St. Vincent * - - - - - - - -

the GrenadInes

Suriname 2,172.0 2,241.0 1,737.0 1,767.0 2,069.0 500.0 448.0 n.a.

Trinidad A Tobago - - - - - - - -

Deminican Republic 774.1 756.7 634.7 605.8 457.2 140.6 0.0 0.0

Haiti 701.0 629.5 613.0 579.0 480.0 622.0 - -

*J Includee clened bauxite.

h Leng tone.

C-) Net applicable.

Soureses IBRO Ecenomic Memoranda.

- 70 -

Table 1.10. CARIBBEAN - VALUE OF ALUNINA EXPORTS

(USe 1ilien)

1177 1978 1979 1910 101 1902 1103 194

Antig.s A Barbuda - - - - - - - -

Bahamase

Barbados--------

ecu:I z - - - - - _ _ _

Domlnica - - - - --

Grenade a - - - - -

Guyana 30.S 31.9 21.1 43.7 32.7 12.0 2.3 -

Jamalc 323.2 348.3 360.2 534.7 580.1 343.8 314.6 324.S

Noatearrat - - - - - - _ _

St. Kitts A Neviw - - - - - - - -

St. Luie - - - - - - - -

St. Vincent A - - - - - - - -

the Grenadines

Surlnam. 151.9 175.9 191.1 263.1 266.4 232.0 216.4 -

Trlnidad A Tobago - - - - - - -

Dominican Repubilc - - - - - - - -

Hoitl - - - - - - - -

C-) Hot applicable.

Sourceas IBRD Economlc Memoranda.

Table 1.11: CARIBBEAH - VOLUME OF ALUHIHA EXPORTS

(1000 tons)

1977 1978 1979 1910 1981 1902 1983 1904

Antigue & Barbuda - - - - - - -

Bahamas _ _ _ _ _ _ _ _

Barbados - -

Belize - - - - _ - _ _

Oe-lnlee - - - - - -

Grenada---- ---

nuysna . 263.0 246.0 145.0 226.0 150.0 64.0 29.0 -

Jamaica 2,000.0 2,100.0 2,100.0 2,360.0 2,550.0 t,75S.0 1,907.0 1,720.0

Moatserrat - - - - - - -

St. Kltts S HeNwls - - - - - -

St. Lucia - - - - - - - -

St. Vincent & - - - - - - - -

tha Srenad!nee

Surlname 1,059.0 1,125.0 1,199.0 1,329.0 1,166.0 1,055.0 1,143.0 n.aTrinided & Tobago - - - - - - -

Dominican Republic - - - - - - - -

Haiti - - - - - - - -

5/ Long teos.

C-) Met appilcable.

Sourees: 1ORD Economic Meeorands.

- 71 -

Table 1.12u CARIBBEAN - VALUE OF SUGAR EXPORTS

(US$ million)

1977 1_78 1g79g 190 isai 19O2 1983 19_4

Antigua A Barbuda - - - - - - - -

ashamas---- ---

Barbados 25.2 26.9 32.5 60.7 2S9. 34.4 22.4 30.6

lelIze 23.9 32.9 31.5 47.7 42.6 32.e 34.2 3S.7

Grenada - - - - - - - -

Guyana 72.5 *2.0 90.4 120.6 10C.6 87.7 69.3 5.8

Jamalca 63.4 59.5 56.9 S4.7 46.5 43.3 57.3 45.7

Monteerrat - - - - - - - -

St. Kitts A Nevis 9.4 11.S 11.3 14.4 14.7 11.1 1.0 11.6

St. Lucia - - - - - - - -

St. Vincent & _ _

the Orenadlna

Surlname _ _

Trinidad A Tobago 34.6 22.4 35.2 26.0 27.1 21.3 23.4 25.1

Dominican Republic 215.6 172.0 190.3 290.2 S13.2 265.5 263.6 216.6

Halti 0.0 2.3 0.0 6.4 0.0 0.0 1.7 6.4

l-) Nt appilCable.

Sourcess IBRD Economic Memoranda.

Table 1.13. CARIBBEAN - VOLUME OF SUGAR EXPORTS

o000 long tonal

1977 1978 1379 19S0 1931 1382 1935 1904

Astigma * Barbuda - - - - -

Bahamas

Barbados 39.S 77.5 53.0 113.0 S6.6 68.5 67.3 82.0

Beilze n.a. 111.6 91.6 97.2 90.4 9S.1 109.1 ISO.0

Doelnica - - - - - -

Grenada - - - - --

Guyana 207.7 250.4 264.0 248.1 264.S 250.2 213.2 201.1

Jameleo 209.8 193.0 157.7 131.C 121.3 135.3 136.7 121.8

Montserrat - - _ _ _ _

St. Kitts A Nevis *.a. 36.3 36.8 31.5 25.9 31.5 25.3 25.0

St. Lucia - - - - -

St. Vincent & - - - - - _

the oreaadinea

SurImame - - _ _ _ _

Trinidad A Tobago 141.7 102.9 O5.1 64.0 67.1 41.2 50.8 52.S

Dmialicea Rep. .1 109S.7 904.7 992.4 P32.0 847.5 833.3 917.7

Haiti a* 0.0 5.3 0.0 19.2 0.0 0.0 7.1 13.6

a* Netric tons.

C-) Rot applJcable.

Sources: IBRO Economic Memrornde.