Dear Editor,
The economies of the Eastern Caribbean islands have seen many changes in fortunes over the last four decades. Typically the economies of the small island states are constrained by a dependence on the single tourism pillar with minimum diversification and very few diversification possibilities that can make a real difference. Common to them all are public sectors that are broadened to the maximum degree mainly driven by the political interest to provide employment and a lack of domestic savings that lead to long-term investments.
Every now and again the inevitable financial deficits become so serious that the politics of the country is forced to focus on expansion of the economy and/or renegotiation of loans or find some other deficit solution. In some cases there is real economic stimulation and reform and in others the country resorts to solutions like the sale of passports to break out of their deficits which in the long run may create greater problems. We have seen economies like Grenada and St. Kitts make serious efforts to stimulate the economy and broaden it. We have seen others sidestep the basic economic issues.
One territory that has not found itself in sufficiently dire straits to restructure and break out of the financial doldrums is Trinidad and Tobago and is clearly sidestepping the problems. Why is that? It is because oil and energy income continues to provide the potential to break the country out of its financial predicament and the calculation is that taking political risks in restructuring their economy is not advisable as long as the hope is there that the energy prices can turn around.
So how does this all compare to St. Maarten? What is the relevance? In short, what oil is to Trinidad and Tobago, Dutch financial support is to St. Maarten. Whilst there is still the prospect of depending on this solution to the deficits then it is best to take no political risk. Unfortunately oil and Dutch money will come to an end at some point.
Robbie Ferron
