est. 2007

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Barbados Economic Recovery and the Falling Pound

Benidorm in Spain was a small fishing village, then the big boy’s moved in the Spanish Govt rubbed their hands €€€€€€€€/ now look at it. Barbados a wonderful little golden island in the sun and the big boys are wanting to move in, Gov’t is the $$$$$/ €€€€€€or ££££££so important that you become the concrete Benidorm of the Caribbean, LET US HOPE NOT! – Gavin Dawson

There are significant trends unfolding in the global financial markets that will impact Barbados. The perilous condition of the local economy – vulnerable to exogenous shocks –  demands that the government and citizenry demonstrate an alertness to ensure there constructive dialogue. We allow the politicians and talking heads vested in the ‘system’ to lead a narrative that is decoupled from national imperatives.   It explains why we are in the deep hole we find ourselves.

The commitment of successive governments the Barbados dollar pegged to the US dollar  has attracted criticism and support. The decision by the Federal Reserve Chairman to reduced interest rates by 25 basis points will spur the debate.

Of greater concern is the trending of the GBP/USD currency rate.  The currency rate has experienced a 2-year low of 1.21603 as at closed of trading. The political uncertainty in the UK over BREXIT and the flavour of politics practised by new prime minister Boris Johnson could see the pound free fall to a parity with the US dollar. This is what leading market analyst Morgan Stanley and others have speculated.

Screenshot 2019-07-31 at 19.56.25
XE.com

If the forecast is proved correct the immediate concern for Barbados given how the tourism sector is positioned- it contributes the most to GDP both direct and indirect – should be a matter of concern. In simple terms the average UK tourist travelling to Barbados will see a reduced spending power in such a scenario. The statistics read that the UK tourist spends more and vacations longer than those coming from other countries. There is also the investment factor. The wealthy Brits have always targeted Barbados as a preferred country to invest in a second home especially on the West coast of the island.

Relevant links:

Why is the conversation important some will ask?

If we listen to Prime Minister Mia Mottley and members of her government, Barbados economic recovery and growth plan is being placed mainly on tourism.  Barbadians are being conditioned to expect a hotel corridor to be built along the Bay Street area. With the slide of the pound to USD and UK being our most important tourist and investment market should we have a plan B? The blogmaster recalls when the global economy went south in 2007/8 so too did Cinnamon 88 and the Four Seasons project to cite this example to expose the fickleness of a tourism investment pipeline of 1 billion dollars?

One gets the impression we have hitched our hope of recovery to an economic model whose shelf life has expired.

Thanks to John A for prompting this blog.

206 responses to “Barbados Economic Recovery and the Falling Pound”

  1. lawson Avatar
    lawson

    mottley was a model?????

  2. Pachamama Avatar
    Pachamama

    David

    Be careful!

    Here you may find yourself under the ire of Sir William Skinner.

    Because he can never be convinced that anything about Barbados can be best understood through the lens of the geopolitical, the geostrategic – Brexit, federal reserve political actions, etc.

    Whereas this writer has tirelessly proffered the exact reverse. That is, that nothing about Barbados and the Caribbean, for that matter, can be properly understood but through those lenses.

    Of course, this does not mean acceptance of what we see.

    The Fed chairman, by his training and guidance, wanted to increase interest rates to slightly remove the punch bowl of near-zero interest rates from the banks – free money.

    But with an election due in about 15 months Trump demanded that the free money flows should continue in an effort to delay the recession which we have long forecasted to hit before the end of first quarter 2020.

    Not that Trump, or any other president has any control over the Fed, but Trump never knew that. LOL.

    At the end of the day only the people who own financial assets will continue to benefit. The real economy will continue to die, and so will empire!

  3. David Avatar
    David

    @Pa ha

    There was a time the US and UK essayed a geopolicy that suggested they were commented to propping up lesser economies. Globalization was constructed to sustain the hegemony of empire was it not? The policy appears to have shifted parochial.

  4. Pachamama Avatar
    Pachamama

    David

    Yes and no!

    Financial globalization was always about the consolidation of wealth into the hands of elites – in Barbados, elsewhere.

    The austerity current imposed on Barbados is but another manifestation of what globalization was about – the end stage of capitalism!

  5. Hal Austin Avatar
    Hal Austin

    There was a time the US and UK essayed a geopolicy that suggested they were commented to propping up lesser economies. Globalization was constructed to sustain the hegemony of empire was it not? The policy appears to have shifted parochial.(Quote)

    What is this in plain, simple, understandable English?

  6. Pachamama Avatar
    Pachamama

    What’s so plain about ‘English’.

    Why not Swahili, one of the Bantu languages, etc.

    What the *uck it is about this RH English language which puts a pea under the bonnet of the ignorant.

    David was speaking to Pachamama and Pacha understood perfectly well what he said and meant.

  7. Georgie Porgie Avatar
    Georgie Porgie

    I DID NOT UNDERSTAND IT EITHER WITH ALL “MY PAPER TROPHIES”
    THE SENTENCE IS JUST A WORD SALAD, AND IS FAR FROM CLEAR
    IT IS ACTUALLY VERY POOR ENGLISH, AND ONLY THE REALLY IGNORANT CAN NOT SEE THAT

  8. Georgie Porgie Avatar
    Georgie Porgie

    RE The austerity current imposed on Barbados is but another manifestation of what globalization was about – the end stage of capitalism!

    ANOTHER INCOHERENT WORD SALAD THAT IS A NON SEQUITUR
    IT IMPLIES THAT THERE IS NO CAPITALISM EXHIBITED IN GLOBALISATION
    THIS IS FALSE

  9. David Avatar
    David

    @Pacha

    Are we saying the same thing? Globalization is about ensuring goods and services are available to feed the addiction of consumption behaviour in countries that cannot support the cost of doing so.

  10. Georgie Porgie Avatar
    Georgie Porgie

    FOR THOSE OF US WHOSE “MOTHER TONGUE” IS ENGLISH, AND WHO NORMALLY COMMUNICATE THEREBY, WE KNOW THAT TO TO BE EFFECTIVE IN OUR COMMUNICATION WE SHOULD STRIVE FOR A REASONABLE DEGREE OF CLARITY.

  11. Georgie Porgie Avatar
    Georgie Porgie

    glob·al·i·za·tion

    the process by which businesses or other organizations develop international influence or start operating on an international scale.

  12. GreenMonkey Avatar
    GreenMonkey

    Pacha wrote: “The austerity current imposed on Barbados is but another manifestation of what globalization was about – the end stage of capitalism!”

    From a US perspective, the economist and former Wall Street Journal editor Paul Craig Roberts seems to be thinking along the same lines as Pacha about approaching an “end stage of capitalism”:

    America’s Collapse: #2 in a series

    An Economy Based on Plunder

    Paul Craig Roberts

    The world currency role made the US the financial hegemon. This power together with the IMF and World Bank enabled the US to plunder foreign resources the way vanishing American resources had been plundered.

    We can conclude that plunder of natural resources and the ability to externalize much of the cost have been major contributors right through the present day to the success of American capitalism. Michael Hudson has described the plunder process in his many books and articles (for example: unz(DOT)com/mhudson/u-s-economic-warfare-and-likely-foreign-defenses/ ), as has John Perkins in Confessions of an Economic Hit Man.

    Essentially, capitalism is a plunder mechanism that generates short-run profits by externalizing long-run costs. It exhausts natural resources, including air, land, and water, for temporary profits while imposing most of its costs, such as pollution, on the environment. An example is the destruction of the Amazon rain forest by loggers. The world loses a massive carbon sink that stabilizes the global climate, and loggers gain short-run profits that are a tiny percentage of the long-run costs.

    This destructive process is amplified by the inherently short-run time perspective of capitalist activity which seldom extends beyond the next quarter.

    SNIP

    Generally speaking, economists assume away external costs. Their mantra is that progress fixes everything. But their measures of progress are deceptive. Ecological economists, such as Herman Daly, have raised the issue whether, considering the neglect of external costs and the inaccurate way in which GDP is measured, announced increases in GDP exceed in value the cost of producing them. It is entirely possible that GDP growth is simply an artifact of not counting all of the costs of production.

    https://www.paulcraigroberts.org/2019/08/01/americas-collapse-2-in-a-series/?utm_source=newsletter&utm_medium=email&utm_campaign=america_s_collapse_2_in_a_series&utm_term=2019-08-01

  13. Georgie Porgie Avatar
    Georgie Porgie

    feed the addiction of consumption behaviour in countries that cannot support the cost of doing so IS STUPIDITY.

    PRIOR TO “GLOBALIZATION” BARBADOS DID VERY WELL WITHOUT IMPORTING MANY GOODS WHICH IT COULD NOT AFFORD TO PRODUCE

    EXAMPLE OF THE STUPIDITY OF feed the addiction of consumption behaviour in countries that cannot support the cost of doing so IS THE DEPARTURE FROM BREAST FEEDING BY MOTHERS IN SOME POOR COUNTRIES, AND INSTEAD SEEK TO USE DILUTED IMPORTED INFANT FORMULAE, BECAUSE THEY COULD ILL AFFORD TO REALLY PURCHASE THEM. IN ADDITION THEIR LACK OF PROPERLY PREPARING THEM LED TO POOR NATURAL IMMUNISATION AND EVEN INFECTION.

  14. David Avatar
    David

    @Green Monkey

    We have discussed these matters several times over the years. We prospered pre globalization when there was flight and free flow of capital from North to South. The offshore sectors these days are being attacked and labeled because the rich countries of the north prefer to trap the capital at home.

  15. Georgie Porgie Avatar
    Georgie Porgie

    EXPLAIN WITHOUT GOOGLING STUFF YOU DONT UNDERSTAND HOW From a US perspective, the economist and former Wall Street Journal editor Paul Craig Roberts seems to be thinking along the same lines as Pacha about approaching an “end stage of capitalism”:

    IN ALL ECONOMIC ENDEAVOR CAPITALISTS ARE IN THE FORE FRONT!
    ALL COMMERCE AND ECONOMIC ACTIVITY REQUIRES CAPITAL.
    THE MORE COMMERCE AND ECONOMIC ACTIVITY —THE MORE CAPITAL IS NEEDED.

    IF MY BUSYNESS ENDEAVOUR IS LOCAL AND LIMITED, I NEED LESS CAPITAL THAN IF I WANT TO SPREAD MY HORIZONS AND ENGAGE IN COMMERCE AND ECONOMIC ACTIVITY INTERNATIONALLY AND ON A LARGER SCALE

  16. Hal Austin Avatar
    Hal Austin

    @Greenmonkey

    Capitalism is not entering an ‘end stage’. It continues to evolve and mutate like a virus. Post globalisation, which led to the 2008 crisis, we have had the emergence of digital capitalism, characterised by its transnational, unregulated, low tax-paying nature, answerable to no one or no nation.
    Contemporary US capitalism has had no problem with linking an idea of free market with a biological idea of survival; so Trump supporters celebrate capitalism, but they also celebrate the KKK, white supremacy and white nationalism. It is not only about profit-making, it is also about keeping the peace, or as I prefer to call it, social control: warrior policing, surveillance, directed education.
    Their commodity is data and we are already seeing how powerful this is. Look at the so-called trade war between the US and China, in reality a war between the technologies of China and Silicon Valley. Huawei is a greater threat to the long-term future of US dominated capitalism than a nuclear bomb. The American century is coming to an end.
    Remember the End of History notion, which celebrated the historic victory of liberal capitalism after the collapse of the Soviet Empire? Whatever happened to that idea?

  17. William Skinner Avatar
    William Skinner

    @ Pacha

    Your attempts to school me in imperialism are laughable to say the very least.
    I have never posited that geopolitical activities do not or cannot affect Barbados and the region.
    I have steadfastly maintained that without a single Caribbean approach to our challenges, we would scarcely overcome them.
    What baffles you is my refusal to engage in long drawn out intellectual debate about the current faces of imperialism. The actors change but never the actions.
    Has it ever dawned on you that I have been where you now are from about age twelve or so?
    I spend my time trying to promote what I think is in the interest of the Caribbean and a unified Caribbean state.
    Do not mistake my deliberate silence on matters which you choose to pontificate as ignorance.
    By the way, it isn’t that I can “ never be convinced” that geopolitical influences affects our development. Far from: It is that I have known this fact for so long that I am trying to find our own solutions to either lessening or eliminating them from the deleterious effects on our socio economic development.

  18. Hal Austin Avatar
    Hal Austin

    @ William

    I will like to join the conversation, but my contributions are going to moderation. Note, the vulgar language and libellous stuff do not appear to go to moderation

  19. David Avatar
    David

    Thanks Hants, feel free to share this comment on this day 1 August 2019.

    Starting today any commenter that accuses the blogmaster of a ‘wrong’ they will be asked to prove it. The blogmaster will clarify or apologize if required. Failing which the commenter will be inserted to the moderation queue.

  20. Hal Austin Avatar
    Hal Austin

    What happens to the blogmaster when he accuses someone of dong a ‘wrong’? Is there a little Hitler is the Bajan psyche?

  21. Hal Austin Avatar
    Hal Austin

    Is moderation the new Siberia? Who was it calling for freedom of speech?

  22. David Avatar
    David

    You have made your point more than once move on.

  23. Hal Austin Avatar
    Hal Austin

    Move on to where? Are you gong to ban me or is it a capital offence? Get a brain,

  24. 555dubstreet Avatar
    555dubstreet

    who no like it bite it
    https://youtu.be/U5q2pBNjnAA

  25. peterlawrencethompson Avatar
    peterlawrencethompson

    @Georgie Porgie
    “PRIOR TO “GLOBALIZATION” BARBADOS DID VERY WELL WITHOUT IMPORTING MANY GOODS WHICH IT COULD NOT AFFORD TO PRODUCE”

    This is a complete lie. It is all the more painful to read it on Emancipation Day when even Georgie Porgie’s mind should drift closer to contemplating the true history of his Bajan ancestors. Barbados as a whole NEVER “DID VERY WELL” at any time after 1625. Anyone who claims that this is so is a racist liar.

  26. John A Avatar
    John A

    The issue here is how would sterling if it fell to a rate of 1 to 1 against the US dollar affect our tourist traffic and the much talked about hotel corridor. Would the pound in the area of 1 or 1.05 to 1 speak well for an upturn in our real estate market, seeing that the UK visitor is our major buyer of property?

    Also from an investment stand point would hotels be under serious pressure for occupancy if sterling reached this level, as the British visitor could then turn to Spain or destinations closer that were cheaper?

    My concern is that we have hung our hopes of growth and investment based solely on tourism, with our biggest market being the UK . We talk about grand ventures like the hotel corridor, when in reality we can’t even get a decent annual occupancy with our current room stock. We have never stopped to think about what England’s exit from Brexit would mean for our industry long-term, but instead we continue to fool ourselves of growth in our tourism arrivals, giving no thought to what developments in our source markets could do to this dream.

    What I have outlined above is the single biggest threat our tourism driven economy could face. I would like to hear the views of others including our leaders on this matter as a result.

    This threat is what I would like us to focus on here, as this and the happenings in the USA have the potential to affect over 70 percent of our home markets for the lifeblood of our island.

  27. peterlawrencethompson Avatar
    peterlawrencethompson

    @Hal Austin
    “It is not only about profit-making, it is also about keeping the peace…”
    ++++++++++++++++
    You are correct, of course, about the ability of capitalism to “… to evolve and mutate like a virus.” However you are dead wrong about it having anything to do with keeping the peace. the mechanisms that you cite “… social control: warrior policing, surveillance, directed education…” are all ways of deploying violence or the threat of violence with an objective of subjugation, not peace. Furthermore, these are only the velvet glove around the iron fist of the core violence that constitutes capitalism: ecological devastation, impoverishment by design, and genocide.

  28. William Skinner Avatar
    William Skinner

    @ Hal

    Perhaps it’s time for a tribunal to determine why your comments are bring moderated!

  29. Hal Austin Avatar
    Hal Austin

    @PLT

    It is what the advocates of warrior policing will, and do, call keeping the peace. I do not agree. It is legitimised violence.

  30. Hal Austin Avatar
    Hal Austin

    @Willam

    It is the war of ideas, which is often more vicious than physical wars.

  31. peterlawrencethompson Avatar
    peterlawrencethompson

    @John A
    I look forward with glee to a further 20% decline in the relative value of the pound sterling. It will be hilarious to have it worth less than the Euro post Brexit.
    I am also looking forward to the absence of British buyers from our real estate market… the inflation that they caused in past decades had no lasting long term benefits but served only to enrich a narrow cadre of local real estate speculators.
    For Barbados, tourism in 2019 is in the same position as sugar 60 years ago. In 1969 the acreage planted in sugar was still close to it’s historical peak, but the economic returns had already started to slip. In a single generation the returns would be plummeting, three generations on it is completely irrelevant as an industry.
    Wringing our hands, gnashing our teeth, and complaining that the world is changing is not a highly recommended survival strategy. We need instead to adapt to a changing world that includes many more dire threats to our tourism industry than the stupidity of the British electorate: rising sea levels, neocolonialism of both the American and Chinese empires, two feet of sargassum on our beaches for most of the year, etc.
    We need to reinvent Barbados, not try to hang on to a vanishing way of life.

  32. David Avatar
    David

    @John A

    You have the answers, a precipitous fall in the GBP to the USD will negatively impact Barbados economy for reasons cited. Especially as stated in the blog we are trying to rebuild the economy. The question for you is what are the options. Have we shown ourselves incapable of charting new pathways.

  33. Hal Austin Avatar
    Hal Austin

    @ PLT

    Or that an economic view, or just political nationalism? According to the textbooks, a devalued pound will strengthen the economy by making exports cheaper and imports more expensive. We have been here before. n 1992, when Britain left the European exchange rate mechanism, it fell by 20 per cent.
    Before this, the trade deficit was £10.4bn, but the economy was in surplus by 1994 and remained so until 1998. Between 1996 and 1997, the pound had appreciated by 27 per cent.
    After 2008, sterling fell by about 25 per cent, but the trade deficit rose from £41bn to £24bn in 2011, then rose again to £35. I do not want to continue giving figures, just want to ask where you got your opinion from?

  34. The Annoying Mouse Avatar
    The Annoying Mouse

    (Quote):
    “Move on to where? Are you gong to ban me or is it a capital offence? Get a brain,..”
    (Unquote).
    +++++++++++++++++++++++++++++++++++++++++++++++++++++

    Is this the same Mr. Asstin (thanks to Dr. GP for coining your uniquely appropriate handle) who used to call for the banning- and even probable incarceration in the nut house- of those BU contributors who blog under the name “Anonymous”?

    Yet you proceed with meticulous gusto to engage in phallic debate with those who massage you egoistic backside.

    Should we be so rude as to mention the nom de plumes of the Ms Many Pussies aka “ac” the Mariposa or the too many ‘Johns’ of BU with whom you entertain in mutual oral mastur**bation?

    Sounds like Mr. Retribution or Lady Karma at work here, my dear Hal!

    For the sake of your own sanity you need to reduce the level of your frivolous and futile engagement with the BU keyboard warriors especially the chief of the ‘anonymice’ Blogmaster David.

    You ought to leave your centrally-heated north London flat and go get some fresh air on the Willesden common for the sake of your bored wife and family.

  35. John A Avatar
    John A

    @PLY

    @ David

    If you listen carefully to what Boris is saying he actually plans to hold the sterling as close to the Euro as possible in the medium term. The man is controversial but no fool. He
    knows he will face some pain leaving Brexit but with a weak sterling holding around 1 to 1.05 his exports will be competitive. We are the least of his concerns. We must therefore prepare for the fallout.

  36. Vincent Codrington Avatar
    Vincent Codrington

    Barbados from the year 1625 was part of the Global Economy. The term was not yet coined, but there was geographical movements of goods,labour,technology and capital. For nearly four centuries we have learned to navigate the turbulence of the Global Economic system. Unless we panic we will negotiate the present and future as well.

    Ideas and ideologies are just words;they do not alter the realities. Sensible actions based on sound models will see us through.

  37. David Avatar
    David

    @Vincent

    The reality is that outcomes may change. Take Haiti for example.

  38. Vincent Codrington Avatar
    Vincent Codrington

    @ David BU at 11 :42 AM

    Change is a DATUM. We are not Haiti. For 4 centuries we have lived with changes. It is how we respond to those changes that make the difference. Keep away from the panic button. You will make a poor POTUS. Lol !!!

  39. John A Avatar
    John A

    @ Vincent.

    We need to realise and accept Change is coming. The problem is our leaders have not focused on this change and have taken forgotten that going forward Life will be the same as in the past.

    To talk about building hotels as our salvation and not focusing on the new environment we will be in is a clear case therefore of blatant stupidity.

  40. Ping Pong Avatar
    Ping Pong

    https://twitter.com/independent/status/1134480402561753088?lang=en

  41. Wily Coyote Avatar
    Wily Coyote

    It’s time to throw the Barbados dollar in the garbage, adopt another currency, yen, pound, Euro, US etc or float the Barbados dollar. Wait for 5 years for Barbados economy to stabilize then develope a economic plan based on concrete prèsent day information. Hopefully the FAILED STATE OF BARBADOS after 5 years will know where they stand in respect to the world economies and thier GDP.

    It’s time for all this horse shit political posturing, estimating, day dreaming etc TO STOP.

  42. Vincent Codrington Avatar
    Vincent Codrington

    @ John A at 12 :01 PM

    @ David BU

    My heuristics reveal that notes are taken of the useful and insightful points that you have made on these issues. You must also bear in mind that one can carry the horse to the trough but you cannot make him drink.
    In any case do you really expect investors to ignore the elements in the equations that you mentioned? Where there is no demand ;there will be no supply. Hotel chains are not into real estate :,they are into management fees/ . profits.

  43. Vincent Codrington Avatar
    Vincent Codrington

    @ John A

    Some persons may be unaware that we are in a real estate bubble that may be due for a bursting soon…..if it has not already started. May I ask whose funds are invested in them?

  44. Hants Avatar
    Hants

    @ Vincent,

    Should I sell now or is it too late to escape the ” bursting of the bubble ” ?

  45. Vincent Codrington Avatar
    Vincent Codrington

    @ Hants

    Surely your piece of real estate is your retirement home. Why will I encourage a loyal son to contribute to a fall in real estate prices in Barbados?

  46. Wily Coyote Avatar
    Wily Coyote

    @Vincent, Hants

    TOO LATE balloon bubble has been slowly deflating since 2008, been accelerating over the last few years, it’s just a matter of time until complete collapse, BREXIT ISSUES maybe the cliff. Willy has already written off his Barbados investments as LOST, personal residence and a couple of investment properties.

  47. Ping Pong Avatar
    Ping Pong

    PM Mottley is fighting to save Barbados but she is fighting a losing battle. Anyone under 35 years of age should try to get out to greener pastures (maybe Guyana?): the others they should prepare for increasing misery and ultimately death. We talk and talk and talk but no one is proposing and doing anything that remotely gives hope to the majority of Bajans.

  48. Hal Austin Avatar
    Hal Austin

    @ PLT

    I look forward with glee to a further 20% decline in the relative value of the pound sterling. It will be hilarious to have it worth less than the Euro post Brexit.(Quote)

    Is this an economic view or political? If economic, plse explain your elation.

  49. peterlawrencethompson Avatar
    peterlawrencethompson

    @Hal Austin
    My glee over falling sterling is pure schadenfreude, not economic analysis 😉
    I recently was in the company of an obnoxious British businessman who bragged about how much more the pound was worth than the euro.

  50. Hal Austin Avatar
    Hal Austin

    @ PLT

    Can’t see why a British businessman should boast about the value of the pound v the euro. What impact will a devalued pound have on the Barbados economy?

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