Caribbean economies were hit hard by the global financial crisis, and most have been slow to recover. “The FDI outlook for the world is cloudy. For the Caribbean, yet to recover from the crisis of 2008 and so heavily dependent on FDI flows and vulnerable to changes in the world economy, this is cause for concern,” said Pamela Coke Hamilton, executive director of the Caribbean Export Development Agency.
The agency, alongside the Caribbean Association of Investment Promotion Agencies (CAIPA), was present at a gathering of Caribbean government ministers and representatives from national-level investment promotion agencies hosted by the Inter-American Development Bank on May 12 in Miami, which was aimed at tackling these issues. It took place a day ahead of the Caribbean Investment Summit 2016, at which officials presented potential investors with investment opportunities in their respective countries.
FDI has an outsized importance to Caribbean economies, but shrinking government budgets have resulted in underinvestment in supporting national investment promotion agencies.
Against this already difficult backdrop, key economic sectors for the region are either recession-sensitive (such as tourism), negatively affected by decreasing commodity prices (such as resources), or are under international scrutiny and facing regulatory volatility (such as financial services). The Panama Papers scandal – a data leak that revealed offshore accounts held by a number of high-profile individuals from around the world – has cast new light on reputational risk associated with offshore tax shelters, a label many Caribbean islands have struggled to shake off.
“The importance of offshore financial centres to the Caribbean cannot be overstated, and we really need to look at that in the context of what is now occurring in the global financial services sector,” said Ms Coke Hamilton.
The region is also underperforming in trade, with low participation in global value chains, according to Mario Umaña, a specialist in competition integration and trade at the Inter-American Development Bank. “We believe there could be a strong positive link with trade and FDI. The region has an opportunity to develop its export base through FDI,” he said.
Solutions to these challenges must be found through regional FDI collaboration, argued McHale Andrew, CAIPA president and CEO of Invest Saint Lucia. “As small vulnerable economies, we have little choice but to work together to ensure that our efforts are impactful,” he said.
An official Regional Promotion Strategy, years in development, was launched last year to promote the Caribbean as a business destination, with a focus on renewable energy, niche tourism and business process outsourcing as target sectors, and the UK and Mexico as target source countries for investment. The plan identifies specific areas of collaboration including targeting diaspora investors, implementing business climate reforms and communicating the Caribbean business brand to the world.