Who is BU to challenge the UWI Cave Hill intelligentsia about the implication of the recent downgrade by Standard & Poor’s.
It is generally accepted the importance of maintaining an investment grade rating to a country like Barbados which is suffering under the weight of heavy debt servicing. With rapidly declining foreign reserves, our boast of never defaulting on our debt, and ability to defend our US peg is now being questioned. Even if the government and the Central Bank continue to preach the need for confidence, it has become obvious their calls have done nothing to bolster the little which exist. Without confidence Barbados will continue to find it difficult to jumpstart the economy.
The news from Standard & Poor’s this week (20/11/2013) that Barbados had its long term rating changed from BB+ to BB-, the short term B rating was unchanged, was not unexpected. Of course our rating outlook remains negative. What was unexpected is to hear a member of the UWI intelligentsia suggesting that a non investment rating should not be a hindrance to attracting investment to Barbados. The explanation is that some investors will perform their due diligence to inform investment decisions. Further explanation was given that Brazil and countries in Africa have not had investment ratings and it has not prevented investment inflows. All of this rhetoric is coming after a failed bond effort by Barbados.
Now where do we begin with this line of argument.
In the examples referred to about African countries, Brazil and other emerging developing countries which are able to attract investment, here is what must be considered. These country have a vast domestic market to support diverse commodity based industries. Many of them have vast and untapped natural resources. Finally, many of them have systems of government which continue to ‘mature’ in the better interest of more effectively managing national resources.
Barbados has enjoyed good credit ratings in days of old because of bullish tourism and international business products. A quantum shift in the way business decisions are being made on the global stage post 2007 has decimated our economies and will continue to worsen if the status quo is protected. What is patently evident even to the ignorant is that there is a new normal. To aspire to how we have operated in the pre-2007 period is a nonsense. The fact that we continue to fail at executing new ways of generating real GDP and effect a trending down in our deficit positions means that a favourable credit rating will remain elusive. Unlike some countries in Africa, South America and other emerging developing countries Barbados has an unfavourable investment climate by comparison. A look around the region shows the separation in the performance of commodity and serviced based economies.
So where do we go from here?
Let us as a country identify a few strategies which can have material impact on how we do business in the next one to three years, and EXECUTE!
This government has pointed to reform in the energy sector with the rollout of a renewable energy sector. If a priority, the person charged with its implementation cannot be of a bureaucratic mind-set.
There is the project to centralize government’s revenue collection. This makes sense and mobilizing loans from the IADB may possibly be linked to this project. Let us get it done! A government with a second term mandate, although marginal, cannot be seen to be sleeping on the job or pandering to political considerations.
There is the proposal to amalgamate statutory and quasi government entities. This hopefully will provide the opportunity for cost savings and promote efficiencies. Let us do it!
Then there is the business of business facilitation. We have talked about it as a country and its importance to being competitive on the new stage but talk it remains. Minister Donville Inniss has not moved the needle on this initiative one notch that we can articulate.
Finally, it is apparent a few of the statutory bodies have grown to be financial albatrosses around the necks of taxpayers. Barbadians know too well those statutory bodies which political parties ‘pad’ to guard party support. Now that money has dried up this strategy of protecting the party faithful has been exposed for what it is, an unsustainable practice. Deal with it!
With the recent announcement from Standard and Poors, there is a loud silence from our lead.
The Lord is my shepherd, I shall not want. He maketh me to lie down in green pastures.
He leadeth me besides clear waters. He restoreth my soul. He leadeth me in paths of righteousness for his namesake.
Though I walk through the valley of the shadow of death, I will fear no evil, for thou art with me. Thy rod and thy staff, they comfort me.
Thou preparest a table before me in the presence of mine enemies. Thou anointest my head with oil. My cup runneth over.
Surely goodness and mercy shall follow me all the days of my life, and I shall dwell in the house of the Lord, forever…