Table Of ContentIn its aim to stimulate policy dialogue and help policymakers overcome the chal-
lenges that hinder Caribbean economies from fulfilling their potential for growth
and development, this book is a timely success. By bringing together up-to-date
research on the challenges of weak macroeconomic fundamentals and long-standing
structural impediments, it provides insights and policy perspectives that can shape
coherent answers to these pressing policy concerns. The book’s careful analyses
point the way toward opportunities for welfare gains from determined but balanced
policy actions targeted at the region’s high energy costs, financial exclusion, high
crime rates, and the persistent loss of skilled workers to richer countries.
Consideration of the vulnerabilities and opportunities that arise from financial
interconnectedness across the Caribbean also informs the book’s reminder to poli-
cymakers of the benefits that remain to be exploited by greater regional cooperation
in a number of areas. With its relevance and range of evidence-based policy recom-
mendations, this volume earns its place on the bookshelves of practitioners and other
students of Caribbean economic development.
—Brian Wynter
Governor, Bank of Jamaica
This book provides a comprehensive assessment of three major Caribbean contem-
porary economic challenges—slow growth, macroeconomic imbalances, and struc-
tural impediments. The chapters are skillfully written by Fund economists, who are
versed in the various aspects of Caribbean economic issues, to relate the challenges
to the vicious cycle. Policy recommendation is an important aspect of the book and
addressed at both the individual country and regional levels. This book is a must-
read for public policymakers and anyone interested in contemporary Caribbean and
small states economic and financial issues.
—Dr. Gobind Ganga
Governor, Bank of Guyana
Economic growth in the Caribbean over the last two decades has been slow, both
relative to growth in the region over the previous 20 years and in comparison to other
small, non-Caribbean countries. Unleashing Growth and Strengthening Resilience in the
Caribbean provides a thorough analysis of the region’s subpar economic performance
and lays out a practical approach for improvement. The authors highlight key policy
changes that merit serious consideration: building greater resilience to increasingly
frequent hurricanes; reducing the cost of energy; greater investment in infrastruc-
ture; more regional cooperation and integration; microeconomic reforms to reduce
the cost of doing business; and countercyclical fiscal policy. But the path to faster
sustainable and inclusive growth is different for each of the 13 countries examined
in this book, and it’s refreshing to see the IMF embark upon a more collaborative,
tailored approach to its recommendations for developing countries. This coun-
try-specific approach is part of a broader—and greatly welcomed—philosophical
change at the Fund, which recognizes that the best kind of economic discipline does
not push extreme measures such as fiscal austerity in a one-size-fits-all manner, but
rather commits to a pragmatic, longer-term growth strategy that is both vigilant and
flexible. This important publication is a must-read for anyone who cares about the
©International Monetary Fund. Not for Redistribution
creation of policies that encourage greater economic prosperity for all segments of
Caribbean society, and anyone interested in the development of deeper understand-
ing between these island nations and the global economic institutions that exist to
help them achieve stability.
—Peter Blair Henry
Dean, NYU Stern School of Business, and author of
Turnaround: Third World Lessons for First World Growth
This book takes a refreshing new look at contemporary problems of Caribbean
economies and makes a substantive contribution to the existing dialogue on both
analysis and policymaking related to the region. It merits serious attention and care-
ful study by policymakers, researchers, and the general public.
The analysis is focused on identifying sources of the region’s long-term weakness in
economic performance relative to other “small” states and regions in the world econ-
omy. It adopts a multi-faceted approach that integrates a range of social, institutional,
and environmental factors (brain drain, violent crime, natural disasters) with issues
of chronic debt accumulation, provision of public infrastructure and social services,
tax incentives, supply of and access to finance, energy costs, and the trade regime,
correctly placing emphasis on the interaction and feedback effects among them. It
skirts around some important issues, such as competitive structure and operation of
business enterprise, and the problem of governance at the national level, but it recog-
nizes weaknesses in regional cooperation among states on economic matters.
Problems in the tourism and financial sectors are given special attention.
What emerges from this diagnosis is a complex picture of factors that have operated
to retard the region’s progress in catching up with living standards in other relevant
nations that have moved ahead. As to what needs to be done about this, there is no
simple linear formula here, or magic bullet, that leads from macroeconomic stabili-
zation to sustained improvements in economic efficiency, broad-based growth of
income, and social inclusion. By implication, “unleashing growth” requires a multi-
pronged, systematic, and sustained effort focused on addressing a wide range of
factors arising at both macro and micro levels of the economy. Broad policy recom-
mendations are offered, while choice of policy priorities and details of a specific
strategy or plan are implicitly left to be determined by action on the ground.
As the product of a group of technical experts in the IMF, this book represents a
significant advance in reporting on the Caribbean region by the IMF. It provides
clues into observed weakness in the expected “pass-through effect” from IMF struc-
tural adjustment programs pursued in the past; and it offers useful insights for
guiding development of the policy framework adopted by the IMF for management
of economic programs operated under its purview in this region.
—Donald J. Harris
Professor Emeritus of Economics, Stanford University
©International Monetary Fund. Not for Redistribution
Unleashing Growth
and Strengthening
Resilience in the
Caribbean
T A
revor lleyne
İ Ö
nci Tker
U r
mA AmAkrishnAn
k s
rishnA rinivAsAn
I N T E R N A T I O N A L M O N E T A R Y F U N D
©International Monetary Fund. Not for Redistribution
© 2017 International Monetary Fund
Cover design: IMF Multimedia Services Division
Cataloging-in-Publication Data
Joint Bank-Fund Library
Names: Alleyne, Trevor Serge Coleridge, editor. | Ötker, İnci, editor. |
Ramakrishnan, Uma, editor. | Srinivasan, Krishna, editor | International
Monetary Fund, publisher.
Title: Unleashing growth and strengthening resilience in the Caribbean / edited
by Trevor Alleyne, İnci Ötker, Uma Ramakrishnan, and Krishna Srinivasan.
Description: [Washington, DC] : International Monetary Fund, 2017.
Identifiers: ISBN 9781484315194 (paper)
Subjects: LCSH: Economic development—Caribbean Area. | Caribbean Area—
Commerce. | Economic indicators—Caribbean Area.
Classification: LCC HC151.U543 2017
Disclaimer: The views expressed in this book are those of the authors and
should not be reported as or attributed to the International Monetary Fund, its
Executive Board, or the governments of any of its members.
ISBN 978-1-48431-519-4 (paper)
978-1-48431-891-1 (ePub)
978-1-48431-924-6 (mobipocket)
978-1-48431-925-3 (PDF)
Please send orders to:
International Monetary Fund, Publication Services
P.O. Box 92780, Washington, DC 20090, U.S.A.
Tel.: (202) 623-7430 Fax: (202) 623-7201
E-mail: [email protected]
Internet: www.imfbookstore.org
©International Monetary Fund. Not for Redistribution
Contents
Foreword ........................................................................................................................................v
Contributors ................................................................................................................................vii
1 Unleashing Strong, Sustainable, and Inclusive Growth in the Caribbean ......1
Daniel Leigh, Krishna Srinivasan, and Alejandro Werner
2 Reinvigorating Growth in the Caribbean ...............................................................19
Marcos Chamon, Joshua Charap, Qiaoe Chen, and Daniel Leigh,
with support from Franz Loyola and Lulu Shui
3 Caribbean Tourism in the Global Marketplace: Trends, Drivers,
and Challenges ................................................................................................................39
Sebastian Acevedo, Nicole LaFramboise, and Joyce Wong
4 Cuba Awakening: Potential Risks and Opportunities ........................................63
Sebastian Acevedo and Joyce Wong
5 Fiscal Challenges in the Caribbean: Coping with Natural Disasters ................79
İnci Ötker with Franz Loyola
6 Tax Incentives: To Use or Not to Use? ....................................................................101
Meredith A. McIntyre
7 Managing Economic Citizenship Program Inflows: Reducing Risk
and Maximizing Benefits ............................................................................................123
Judith Gold and Alla Myrvoda
8 Debt Restructuring in the Caribbean—The Recent Experience ..................149
Joel Chiedu Okwuokei and Bert van Selm
9 Financial Development and Inclusion in the Caribbean ................................173
Joyce Wong
10 Financial Interconnectedness in the Caribbean: Challenges for
Financial Stability ..........................................................................................................195
Elie Canetti, Kimberly Beaton, Qiaoe Chen, Fabio Di Vittorio,
Udi Rosenhand, and Kalin Tintchev
11 Problem Loans in the Caribbean: Determinants, Impact, and
Strategies for Resolution ............................................................................................231
Kimberly Beaton, Thomas Dowling, Dmitriy Kovtun, Franz Loyola,
Alla Myrvoda, Joel Chiedu Okwuokei, İnci Ötker, and Jarkko Turunen
iii
©International Monetary Fund. Not for Redistribution
iv Contents
12 Loss of Correspondent Banking Relationships in the Caribbean:
Trends, Impact, and Policy Options .......................................................................265
Trevor Alleyne, Jacques Bouhga-Hagbe, Thomas Dowling,
Dmitriy Kovtun, Alla Myrvoda, Joel Chiedu Okwuokei, and Jarkko Turunen
13 Energy Diversification: Macro-Related Challenges .............................................289
Meredith A. McIntyre and Ahmed El Ashram
14 Emigration and Remittances in the Caribbean ................................................315
Joyce Wong
15 Violence in the Caribbean: Cost and Impact .........................................................329
Heather Sutton, Laura Jaitman, and Jeetendra Khadan
Index ...........................................................................................................................................347
©International Monetary Fund. Not for Redistribution
Foreword
The Caribbean countries—endowed with some of the greatest beauty on this
planet—sustained several decades of strong growth following their independence
in the 1960s and 1970s. Their success was underpinned by the development of
strong democratic traditions, sound institutions, and an active debate of public
policies reflecting the aspirations of the Caribbean people. More recently, howev-
er, many of the countries in the region have fallen into a trap of low growth and
high debt. In addition to the costs posed by frequent natural disasters, which have
contributed to low growth, the region has also endured deep macroeconomic,
financial, and structural challenges. A large public debt overhang, combined with
high energy costs, violent crime, constrained access to credit, a high cost of doing
business, and brain drain—to name just a few—have undermined regional
growth prospects.
The IMF’s focus on small states, in general, and the Caribbean, in particular,
has been growing over the years, notably through dialogue and collaboration with
key stakeholders. I personally have had the pleasure of engaging through the years
with policymakers from the Caribbean during the Annual Meetings of the IMF
and the World Bank. In addition, the IMF, with strong support from the donor
community, has made significant strides in enhancing technical assistance to
build capacity in the region. In some countries, our engagement through IMF-
supported programs could even be considered game-changing.
It is my distinct pleasure to be part of this effort to disseminate the analytical
work on the Caribbean that has been conducted largely in the IMF’s Western
Hemisphere Department. This book is timely and important in many respects.
With a primary focus on how to raise the region’s growth potential while balanc-
ing it with stability, it provides rich analyses of key macroeconomic, financial, and
structural impediments to growth, and recommends feasible solutions for the
Caribbean. The chapters draw on the vast academic literature, and synthesize a
substantial amount of analytical work on highly topical issues for the region. The
book also broadens the reach of our policy advice to a wider audience across the
region and globe.
This book serves as a fresh platform to further our close engagement and pol-
icy dialogue with the region. I hope that it will spark a healthy debate on the
economic challenges of the region and further research on the path to unleashing
sustained higher growth and job creation.
Christine Lagarde
Managing Director
International Monetary Fund
v
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Contributors
Sebastian Acevedo is an economist in the IMF’s Western Hemisphere
Department and works on the Ecuador desk. At the IMF, he worked for six years
on the Caribbean, covering topics related to natural disasters, economic growth,
productivity, tourism, debt, and exchange rate regimes. He holds a B.A. in eco-
nomics from Universidad EAFIT in Colombia, an M.A. in international trade
and economic cooperation from Kyung Hee University in the Republic of Korea,
an M.A. in economics from Georgetown University, and a Ph.D. in economics
from the George Washington University.
Trevor Alleyne took on his current position as an assistant director/division
chief of the Caribbean I Division at the IMF’s Western Hemisphere Department
in September 2013. He is responsible for the economies of the Organisation of
Eastern Caribbean States. His previous Caribbean experience at the IMF was as
division chief of the Caribbean II Division during 2008–12, serving also as mis-
sion chief for Jamaica, Barbados, The Bahamas, and Suriname. Mr. Alleyne has
been at the IMF since 1992, with assignments mainly in the African and Western
Hemisphere Departments. Most recently, he served as mission chief for Nigeria
and Zambia (2012–13). Prior to joining the IMF, he was a principal analyst at
the US Congressional Budget Office from 1986 to 1992. He is a professional
economist with over 25 years of experience and was educated at the University of
the West Indies (B.Sc.), University of Pennsylvania (M.A.), and University of
Maryland (Ph.D.).
Kimberly Beaton is an economist in the IMF’s Western Hemisphere
Department, currently covering Panama. Previously, she was a senior advisor to
the Executive Director for Canada, Ireland, and the Caribbean. Prior to joining
the IMF, she was an economist at the Bank of Canada. She is a graduate of
Queen’s University in Canada.
Jacques Bouhga-Hagbe is currently a senior economist at the IMF and has
worked on many countries since joining the IMF in 2002. He holds a Ph.D. in
economics from Cornell University, New York, and an engineering degree from
the Ecole Centrale de Paris.
Elie Canetti has worked for 25 years at the IMF, where he is an advisor in the
Western Hemisphere Department. He has also worked on Asia and on financial
stability issues. His Caribbean experience includes heading the Financial Sector
Assessment Program for The Bahamas and serving as mission chief for Trinidad
and Tobago and St. Vincent and the Grenadines. He was adjunct finance profes-
sor at Johns Hopkins School of Advanced International Studies and worked at
PIMCO with Mohamed el Erian. He holds degrees from the University of
California, Berkeley; London School of Economics; and Princeton University.
Marcos Chamon, a national of Brazil, is deputy division chief in the
Caribbean III Division of the IMF’s Western Hemisphere Department and
vii
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