Monday, November 16, 2009

Caribbean drifts from Europe

Caribbean drifts from U.K., France
Financial crisis gives autonomy push momentum

Peter Goodspeed, National Post

The Caribbean was once a jewel in the empires of France and Britain, a source of riches from sugar to slavery.

While both empires have long since gone, the last vestiges of colonialism remain in far-flung corners of the Caribbean, such as Martinique, Guadeloupe, the Cayman Islands and the Turks & Caicos.

But the global financial crisis has transformed these island paradises, hurting local economies, damaging tourism and destabilizing off-shore tax-havens. Now it is driving calls for constitutional change, political reform and more autonomy from the mother countries.

From the French overseas territories of Guadeloupe and Martinique, which were rocked by two months of riots over rising food prices this year, to the British-held Caymans, which last week adopted a new constitution appointing their first prime minister, change is stalking the Caribbean.

Two days before the Commonwealth's heads of government meet in Trinidad & Tobago on Nov. 27, the 32 islands that make up St. Vincent & the Grenadines will vote on a draft constitution that eliminates the monarchy and replaces the Queen with a president elected by the National Assembly.

On Jan. 10, Martinique and French Guiana, situated on the northern coast of South America, will hold referendums on whether to seek more autonomy or a change of status within the French Republic.

Last week, Nicolas Sarkozy, the French President, introduced a package of 137 new measures to expand autonomy in France's 11 remaining overseas territories.

The move is intended to assuage discontent that boiled to the surface this year when protests, strikes and riots swept Guadeloupe and Martinique. Locals were upset by soaring prices for imported food and fuel in territories where salaries are generally lower and unemployment considerably higher than in mainland France.

Now, Mr. Sarkozy is seeking to adjust France's relationship with its overseas territories by giving them representation in his Cabinet, more control over their own affairs, the right to take part in international negotiations and the ability to join regional organizations.
The reforms do nothing to alter the territories' overall relationship with France, but they are signs of growing turmoil amid the tattered remnants of empire.

Britain, like France, is struggling with its imperial past. Residents of the Turks & Caicos in the eastern Caribbean are indignant after the British Foreign Office dissolved their parliament in August and restored direct rule from Britain. London said local leaders were guilty of "political amorality and immaturity and general administrative incompetence."

In the aftermath of the worldwide financial collapse, the Turks & Caicos government ran short of cash. It was soon discovered former premier Michael Missick had misspent millions on everything from a bulletproof car to four-wheel-drive Land Rovers for his Cabinet ministers, a jet and lavish parties.
Gordon Wetherall, the islands' Governor, calculated the tiny country of 30,000 people had US$70-million in unpaid bills and another US$60-million in outstanding loans.

Officials in London feared they might have to bail out other overseas territories. At least five British territories in the region -Anguilla, Bermuda, the British Virgin Islands, the Caymans and the Turks & Caicos -- have built their economies around the financial service sector, establishing themselves as tax havens for the rich and headquarters for hedge funds.

Bermuda is the world's third-largest centre for reinsurance and has no income tax, no profits tax and no capital gains taxes. The government's main income comes from import duties and licence fees.

The Cayman Islands are the world's leading centre for hedge funds and a major wholesale banking centre, doing much of the U.S.'s overnight banking.
A recent World Bank report estimates financial services account for almost 45% of the Caribbean's gross domestic product.

Not surprisingly, the worldwide financial crisis hit some island economies hard. Tourism went into a nosedive; revenues from the financial sector withered; unemployment rose; remittances from family members overseas fell; and foreign direct investment dried up.

When the Cayman Islands suddenly found itself running short of cash, it asked the Foreign Office to approve a US$485-million bank loan to bail out the tiny territory's nearly bankrupt government.
But London balked, insisting it wanted to see a financial plan first and suggesting the islands should raise taxes to improve their finances.

That sort of move is anathema to Caribbean tax havens.

Last week, McKeeva Bush, the Caymans' new Premier, travelled to London to lobby against attempts to tinker with the islands' finance system. He also complained Britain was trying to micromanage their economy.

"The current Labour government has chosen to sour relations in order to use Caymans' tax situation as a distraction from their own," he told opposition Conservative MPs.

"It was unanimously agreed that the current U.K. government does not appreciate or understand the value of the Cayman Islands or the other overseas territories and that a 'more grown-up' attitude was required," Cayman Finance, the body representing the islands' finance industry, said after the meetings.
Still, fears are growing that political and economic upheavals might push some Caribbean countries into becoming failed states that could be dragged into the regional drug trade.

The Caribbean financial centres have also come under attack from the Group of 20 leading economic countries who want off-shore tax havens to begin closing some of the loopholes that cost them millions each year in lost revenue.
But any tightening of global financial markets could reverberate through the Caribbean for years to come.

"It's a fact that when global crisis occur, small vulnerable economies tend to pay a disproportionately high price," Denzil Douglas, the Prime Minister of Saint Kitts & Nevis, told the United Nations General Assembly this fall.

"Few if any foresaw the winds that would be contrary, the storms fierce and the course ahead so challenging," said Rufus George Bousquet, the External Affairs Minister for St. Lucia.

The developing countries of the Caribbean are still struggling to find the safety of calmer waters, he added.
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