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BUSINESS GUARDIAN www.guardian.co.tt JULY 2014 • WEEK ONE
It is abundantly clear that Jamaica and the
entire Caribbean region simply exude capability
I realize that the Caribbean has gone through
a tough time over the past few years. You know
this here in Jamaica. You have lived it.
But this generation holds the keys to the future.
When your immense talents are put in the service
of your countries, success is surely guaranteed.
Indeed, I can feel a powerful wave of change.
I believe that the region has set sail on a voyage
toward greater prosperity. And Jamaica is raising
its sails with confidence.
It is this change that I want to talk about
today---change in two dimensions:
First, the change that has come to the
Second, how the Caribbean can keep chang-
ing to ensure a successful voyage.
Third, I will conclude with how the IMF
has changed to adapt to the needs of its mem-
1. A changing Caribbean
Let me start with how this region is chang-
ing---trading lethargy for lift-off.
The need for change is clear. The Caribbean
has had a tendency to get stuck in the doldrums
of stagnation---low growth, high debt, low com-
petitiveness, high unemployment.
This has been especially true for the countries
depending largely on tourism, like Jamaica. In
these countries, growth has averaged less than
2 per cent a year since the mid-1990s---and less
than 1 percent in Jamaica.
I recognize that this picture does not apply
to all countries in the region. Natural resource-
based countries like Trinidad and Tobago, Suri-
name, and Guyana have been able to achieve
higher growth, thanks to stronger commodity
But in the other countries, stagnation can be
traced to a number of factors. Productivity and
competitiveness have suffered from overvalued
exchange rates and high energy costs. Confidence
has been hurt by high debt and macroeconomic
volatility. Everyone has had to cope with the
high frequency of natural disasters.
Given this legacy, the Caribbean was vulnerable
going into the global financial crisis, and was
hit with its full force. Six years on, output has
still not returned to pre-crisis levels, and public
debt is still at record highs---almost 100 per cent
of GDP in tourism-dependent countries, and
140 per cent of GDP here in Jamaica.
As always, the poor and the vulnerable were
hit hardest by crisis. Across the region, about
a third of young people are out of work. In
Jamaica, the poverty rate doubled to 17½ per
With the doors of opportunity barred for so
many, the result is disengagement and disen-
chantment. Exclusion creates an inflammatory
cocktail of crime and insecurity, and a steady
deterioration in the quality of life.
Clearly, then, the crisis was a major wake up
call. Caribbean leaders understand the need for
change---not just to free themselves from the
grip of crisis, but to adapt to the challenge of
the global new normal.
Think about it. The global economy is more
interconnected than ever before. The engines of
growth are shifting away from traditional markets
in North America and Europe to the far-flung
shores of Asia. The cozy comfort of trade pref-
erences is long gone. The specter of climate
change hovers over the small island states.
As Derek Walcott put it, "the future happens,
no matter how much we scream".
Change begins with restoring economic sta-
bility---this establishes a platform for rising and
Leaders have begun to deliver on that front---
in a few cases, with bold and far-reaching
reforms. This includes Jamaica, which has made
some hard choices to get growth higher and
We know that hard choices are made easier
when implemented in a spirit of solidarity and
shared sacrifice. This is confirmed by Jamaica s
While Jamaica implemented difficult measures,
it tried to spread the burden across society---a
wage freeze on civil servants, a debt exchange
for financial investors, increases in taxes and
tariffs for water and transportation, and higher
import prices as the exchange rate was allowed
And while the government was cutting spend-
ing, it was doing its best to protect the most
vulnerable---raising cash transfers for poor house-
holds by 67 per cent for the elderly and 15 per
cent for others last year, with another 15 per
cent increase planned for this October.
Jamaica has also come up with a great inno-
vation in ownership. The government s reform
program is being monitored by an outside group---
the Economic Programme Oversight Commit-
tee---drawn from all stands of society---public
sector, private sector, civil society, and trade
unions. I met with them earlier today, and came
away extremely impressed.
This is a surely a role model that should be
emulated elsewhere. With everybody inside the
tent, all voices are heard, and everyone has a
stake in success.
So where do we stand? Jamaica is not out
of the squalls just yet, but we can already see
signs of calm seas ahead. The public purse looks
much healthier. Growth is back---the economy
grew by 1.6 per cent year-over-year in the first
quarter of 2014. And both inflation and the
external current account deficit have come down.
We can see similar signs in some other coun-
tries that are navigating their way through dif-
ficult reforms. For example, public debt has
fallen by 15 per cent of GDP in Antigua, and by
one third in St. Kitts and Nevis. In some coun-
tries, growth is on the rebound---St. Kitts and
Nevis, for example, grew by almost 4 per cent
last year, after years of decline.
And yet we are really only at the beginning
of the journey. The voyage ahead is a long one.
Achieving lasting success will take time---for
Jamaica and for the Caribbean as a whole.
2. Completing the Caribbean voyage
This takes me to my second area---continuing
with change to complete the voyage. By this I
mean building on stability to lay the structural
foundations of sustained and inclusive growth.
This region certainly has a proven ability to
adapt and change. Remember, the Caribbean
shifted from an economy based on agriculture
to one based on tourism---a leap that has eluded
The Caribbean is also home to highly-edu-
cated, highly-driven people. I can see it here
today. The region welcomes the contribution
and leadership of women with open arms---evi-
denced of course by Jamaica s inspiring prime
minister, Portia Simpson-Miller, and by Kamla
Persad-Bissessar from Trinidad and Tobago.
The Caribbean also has a legacy of good insti-
tutions---with a thriving tradition of democracy
and political accountability.
This all bodes well for the future---especially
if the region can get to grips with the twin chal-
lenges of competitiveness and climate change.
Competiveness is vital in a region of small
open economies that rely on tourism. Competing
in world markets means keeping a lid on pro-
duction costs. In Jamaica, letting the exchange
rate depreciate, although painful, has helped
restore a good deal of lost competitiveness, and
will support investment and job creation.
A big issue is high energy costs. Electricity
costs three times as much in Jamaica as in the
United States. It costs even more in Barbados.
So conserving and renewing energy, alongside
efforts to bring more competition and dynamism
to the energy sector, will be important. I know
that Jamaica is working hard on this.
The region also needs to invest more smartly
in education and training, to link the skills people
have to the skills the economy needs. This is
especially important to lift the prospects of the
It is also critical to improve the business cli-
mate, which is less hospitable in the Caribbean
than in other dynamic small economies. This
includes reeling in much of the red tape and
making labor markets more effective in creating
In tandem, the public sector must play an
enabling role---through greater predictability,
transparency, and impartiality. For instance, fiscal
incentives could be made simpler and less murky.
Again, Jamaica is making good progress here.
In all of this, the Caribbean would also gain
from greater cooperation. A difficult task is
always made easier when more people lend a
hand---and a lot easier when they work togeth-
er.For example, a regional approach to trans-
portation infrastructure and the marketing of
tourism might work better than each country
pressing its own advantage. There would be
more revenue for all if countries resisted the
temptation to compete with each other on taxes
to attract business. By definition, a race to the
bottom leaves everybody at the bottom.
Ultimately, if the region can get to grips with
these challenges, I believe that its voyage will
be successful---especially if it takes place on
board three "ships".
What ships do I mean? I certainly don t mean
cruise ships, or pirate ships, or the three ships
of Christopher Columbus!
Rather, the "ships" I have in mind are own-
ership, stewardship, and partnership. Ownership
of the reform programme---so that all citizens
have a stake in success. Stewardship of the econ-
omy---nurturing its resources and investing in
its people. Partnership with each other and with
the international community---including the
3. A changing IMF
The IMF was founded on the core principle
that by helping your neighbor, you are ultimately
helping yourself; that the route to national pros-
perity runs through global prosperity.
Our mission is global economic and financial
stability, and we try to achieve it in three ways---
policy advice, lending, and capacity building.
The second way we help is through our lend-
ing. Not surprisingly, we have been working in
overdrive since the crisis broke out six years
ago---making 159 new lending commitments
and disbursing almost US$200 billion to help
ease the pain of adjustment in countries all
across the world.
This was a global crisis calling for a global
response, and I believe that the IMF s safety net
played an essential role in avoiding a catastrophic
economic meltdown. In other words---we did
what we were founded to do.
We did it by partnering with countries and
supporting their efforts to get out of crisis. These
countries include Antigua and Barbuda, St. Kitts
and Nevis, Jamaica---and now Grenada too. We
also helped countries get back on their feet after
the devastation of natural disasters---including
in Haiti, Dominica, St. Lucia, and St. Vincent
and the Grenadines.
The third way we help is through capacity
building---technical assistance and training. This
is about helping countries design, build, and
strengthen the institutions that make up the
core building blocks of economic success. Since
the crisis broke, we have provided training to
all of our members, and technical assistance to
90 per cent of them.
Now, I realize that the Fund has not exactly
won many popularity contests in this region.
For too long, the IMF was viewed in harsh
terms---hindering rather than helping.
Much of this criticism is, I believe, unfair---
after all, many of the countries that seek our
help are already in dire economic straits. But
some of it is valid. We may not always have
gotten it right in the past, but we are committed
to listen and to learn, to adapt and to change,
to be humble and open-minded.
That is what we have been doing. As some
have said, this is no longer your father s IMF---
maybe because the current Managing Director
is a mother!
Today, we are putting the highest priority on
growth and jobs. We are getting more involved
in less traditional areas that matter for growth
and stability---such as taming excessive income
inequality, grappling with climate change, and
enticing more women into the labour force. We
are putting more emphasis on protecting social
safety nets and sharing the burden of adjustment
fairly---and we fully support what Jamaica and
others are doing here.
As Prime Minister Mitchell from Grenada put
it recently, "I always knew the IMF had a head,
now it appears it also has a heart". My view is
that the head needs the heart and the heart
needs the head---as with so much else in life,
they work best as a partnership!
Let me conclude on that note. I believe that
the old paradigms are dead. Both the Caribbean
and the IMF are very different today from what
they were thirty years ago, twenty years ago---
or even ten years ago.
You have changed and we have changed. We
might have started far apart, but---through the
constant motion of change---we are walking
toward one another.
On that note, it seems fitting to invoke Derek
Walcott once again, who talked longingly about
the "days when every street corner rounds itself
into a sunlit surprise". May those days come and
never depart. And may this beautiful country
and this remarkable region be blessed.
The Caribbean and the IMF
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