With no propensity for generosity, who will help the Caribbean?Tuesday, April 20, 2021
According to the World Bank and the International Monetary Fund (IMF), the economy of Latin America and the Caribbean contracted by seven per cent in 2020, the sharpest in the world, far exceeding the global slowdown of 3.3 per cent.
Economic growth for 2021 is projected at 4.6 per cent, but this is optimistic because of the persistence of the novel coronavirus pandemic. The situation of the Caribbean is made worse by the lingering effects of hurricanes in recent years, the uncertainties of the upcoming hurricane season, and the ongoing eruption of La Soufriere volcano in St Vincent and the Grenadines.
In these drastic circumstances, the Caribbean has urgent and substantial needs for development aid and debt relief, preferably in the form of grants and debt cancellation. Unfortunately, countries are not much in the mood for generosity, one example being the hoarding of COVID-19 vaccines.
Several compelling things have seemingly conspired to work against the Caribbean.
First, the IMF, the World Bank and the Inter-American Development Bank do not cancel debt, they postpone payments and they lend some additional money. Caribbean countries which are ranked as middle-income developing countries are unlikely to be seen as priorities. To be fair, the need is greater in the poorer developing countries.
Second, the political situation in the United States is not conducive to a large increase in foreign aid as is evident in the difficulties in getting Congressional approval for its own domestic relief package. There is little to motivate the Joe Biden Administration because the Caribbean, except for Haiti, has no particular strategic value, nor does it pose a security threat to the US in terms of migrants.
Third, the European Union (EU), an important source of aid, may be winding down its commitment to the region and looking to trade to stimulate economic development, rather than aid.
The EU recently signed a new partnership agreement with the Organization of African, Caribbean and Pacific States, formerly the ACP countries. It replaces the Cotonou Agreement and constitutes the template which is the foundation of political and economic cooperation for the next 20 years. It relies on trade and investment, not financial aid.
Fourth, the United Kingdom has already announced a substantial cut in its overseas aid budget.
Fifth, the People's Republic of China is the largest source of bilateral aid in recent years through the Belt and Road Initiative, but Chinese grants are in the form of buildings and infrastructure, not cash. Aid is provided to fund construction projects but the Caribbean's borrowing capacity is very, very limited at this time. Chinese foreign direct investment is not attracted to tourism.
The dire situation of the Caribbean brings to mind the words of the 1960s song Who Can I Turn To: “Who can I turn to when nobody needs me? My heart wants to know, and so I must go where destiny leads me.”
What is the destiny of the Caribbean?
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