What COVID-19 Teaches About Caribbean Vulnerability and Resilience

Jan Yves Remy, Chelcee Brathwaite and Alicia Nicholls

The Coronavirus Disease 2019 (COVID-19) is making the global economy sick.  Like the pathological disease itself which has been declared a pandemic, COVID-19 has invaded the global economic bloodstream, placing its vital organs in distress, with no immediate cure. Production chains are being disrupted, international travel is shrinking, oil prices are falling, food security concerns are heightening, foreign direct investment is contracting, currencies are plunging, stock markets are crashing. Whether large or small, no country is immune from this contagion.

Caribbean states are no strangers to cataclysmic events which halt entire economies, production cycles and all sense of normalcy. With increasing frequency, the region has had to cope with vulnerability to extreme natural disasters.  The Bahamas and Dominica are still reeling from the effects of Dorian and Irma, and with the added weight of COVID-19, it is hard to imagine what portends if another hurricane were to strike again.    

Perhaps for the first time in modern history, the whole world is feeling truly vulnerable to vagaries not entirely of our own making. However, while larger countries can rely on their more plentiful financial and human resources to rebound from COVID-19, vulnerability for Caribbean States is a chronic condition. In this SRC Trading Thoughts we explore how the region’s characteristic resilience must guide us in overcoming our vulnerabilities in these unprecedented times.

FEELING THE WEIGHT OF VULNERABILITY

For years now, the Caribbean has pleaded with the international community for recognition that social, economic and environmental factors put Small Island Developing States (SIDS) at peculiar risk. In the World Trade Organization, Caribbean negotiators countries were the first to argue for a separate sub-category of ‘Small Vulnerable Economies’, which would require our trading partners to take special account of our needs when crafting trade deals.  These special needs include our limited export diversification and capacity, small percentage of world trade, susceptibility to shocks, limited access to finance, etc.  Although our requests have not to date gained much traction, that could change.  The WTO community will itself have to take advantage of exceptional provisions in trade agreements – like health and national security exceptions, and subsidies rules – to accommodate emergency measures being taken to deal with COVID-19.  Might they now be more sympathetic to our additional needs?  As we at the SRC have argued before, our vulnerabilities are permanent and will not disappear when COVID-19 does.

The region’s extreme vulnerabilities, as exposed by the virus, can be measured along three main dimensions:  the social, economic and environmental.

AT THE SOCIAL LEVEL, the Caribbean’s ageing population and high rate of non-communicable diseases (NCDs) threatens the resilience of communities. According to the United Nations Department of Economic and Social Affairs (UN DESA) for every 100 persons aged 20-64 in the Caribbean, there are 18 persons aged 65+, an estimate likely to reach 33 by 2050. Health wise, the Caribbean has the highest NCD mortality rate in the Americas according to the Healthy Caribbean Coalition.

With the region’s older and susceptible populations at risk, the economic spillover of COVID-19 will be acute: the toll on the working population and public budget strain from increasing health care expenditure will compromise existing social systems. Socially, these vulnerable groups risk dislocation and isolation as a result of the measures being implemented globally for their protection like “social distancing”, which will likely alter social interactions for all in the future.

AT THE ECONOMIC LEVEL, the region’s economies were not in the ‘pink of health’, even pre-COVID 19. The Caribbean Development Bank alludes to the already low regional GDP growth rates, high rates of unemployment, and underdevelopment of many regional economies. 

With the virus, our economic misery will be compounded. With the region’s US$5.36 billion food import bill, our acute dependence on imports is exposed. Should COVID-19 lead to global market panics and price hikes, the region’s food security will face significant challenges. In manufactured goods and inputs alone, UNCTAD predicts a US$50 billion decrease in exports (for February alone) across the global value chains due to production declines in China.  This will affect Europe and the US, which together with China, account for over 60% of our regional imports. With export restrictions on medical supplies in places like The European Union (EU) – which accounts for 26% of our medical supply imports – the region will also be forced to look elsewhere.

The lack of a diversified export base is another economic vulnerability. Commodity-based economies like Trinidad and Tobago and Suriname are heavily dependent on oil exports for foreign exchange. With sharp declines in transport and economic activity, global oil demand is expected to fall by as much as 730,000 barrels a day. Concurrently, global energy prices are expected to collapse with Trinidad and Tobago being forced to adjust oil prices from $60/barrel to $40/barrel within their budget, with obvious implications for reduced earnings.

Our services-based economies which depend on travel and tourism for revenue and employment, will also suffer. The World Travel and Tourism Council (WTTC) predicts a 25% reduction in international travel with 50 million jobs globally at risk.  Major airlines and cruise ships are suspending travel operations and the region is already feeling effects. The Organisation of Eastern Caribbean States (OECS) anticipates a 20% decline in the tourism industry under a best-case scenario where COVID-19 is contained by June 2020.

And what about foreign and regional service providers who make their living by travelling abroad?  Closure of borders spells trouble for a vital source of their earnings.  At a macro-level, cancelled shows and festivals which generate employment and income for local and regional artistes, promoters, bands, and other businesses are in real jeopardy. St. Lucia has already cancelled its iconic Jazz festival and others are postponing popular carnival events.

And what about our environmental vulnerabilities. The emphasis on hand-washing and proper hygiene highlights the region’s water scarcity, resulting from climatic extremes. The Caribbean Drought and Precipitation Monitoring Network (CDPMN) has warned the region, particularly the Eastern Caribbean, of extended drought periods with increasing intensity. The economic and social implications of a lack of access to clean water have to be considered, and will only be worsened with other natural disasters, like droughts, hurricanes and storms that are increasingly affecting us.

DEMONSTRATING CARIBBEAN RESILIENCE

Just as a body can improve its immune system to build resistance to diseases so too must the Caribbean demonstrate our resilience, as we have done in the past. 

Once the immediacy of the situation passes, our recovery process must begin with our economic response.  Building economic resilience starts with fiscal responsibility and keeping debt to GDP ratios at healthy levels.  It also demands greater economic diversity. An economy which relies so heavily on one sector for economic growth, employment and foreign exchange – whether it is the tourism industry or the oil and gas industry – is particularly vulnerable to any shocks affecting that sector. Our economies must not only diversify, but must fully embrace new growth industries, such as renewable energy, and prioritise food security. As external markets close their doors to our products, what lessons are we learning about the importance of sourcing and providing locally first?  How much of our manufacturing needs can we supply from local sources? COVID-19 is demonstrating that the region’s manufacturers are capable of redirecting production to compensate for short supply of cleaning products as demonstrated by rum manufacturers’ shift to the production of rubbing alcohol to fill demand.

We must also embrace the new economy.  COVID-19 is forcing the use of online technologies and platforms as more of our work and daily transactions move online, from meetings, to payments and banking, to teaching.  Consequently, it is pushing us all to embrace the digital age. If ever there was a time to consider our digital strategies – most CARICOM states lack one – that time is now. How are we buttressing our online payment systems, data protection and cybersecurity infrastructure and legislation?  Are we teaching our citizens and educating our young people how to navigate the internet and online systems; and schooling our entrepreneurs on how to utilize ecommerce opportunities to increase their exports?

As we close our borders to travel, what are we learning about how we can be more cost and time efficient in providing services online to foreign markets?  As our creative festivals depend to a large extent on persons traveling into our countries, can we think of how to create online products that package our local creative talent in a form that we can sell overseas?

Our focus must also be on overcoming the social vulnerabilities. Since our main resource in the region is human, building the resilience of our populations entails reducing poverty, improving the health of our populations, lowering the NCD burden, and improving the education system.

On the environmental front, the region must deal with its water scarcity problem. Surrounded by oceans, we must improve our ability to desalinate and utilize this ‘endless’ water source. Improving our water management practices – updating infrastructure for the delivery, storage and treatment of water for instance – should also be priorities for our governments and communities.

Finally, as a regional community, our leaders are coming to the realization that a threat like COVID-19 with its severe economic, social and environmental impacts, requires a collective, regional response. We are seeing unprecedented levels of coordination among our heads of government, as well as with external donors and organizations.  Modes of communication are also changing – leaders have been meeting virtually which will hopefully reinforce that there are more efficient ways of communicating to advance our regional agenda.  We stand in hope that this will also lead to more transparency in the way decisions are communicated to the ordinary citizen.

JUST WHAT THE DOCTOR PRESCRIBED?

COVID-19 will probably change the world forever, but, in time, the global economy will recover.  Larger resource-endowed States will undoubtedly overcome their vulnerability to the disease and return to normal faster than we will.  As endemically vulnerable states, the Caribbean will never be completely immune to shocks.  But having gone through this shared moment of vulnerability with the rest of the world, we must press our case that the Caribbean has peculiar circumstances that deserve attention.  It also presents a teaching moment for the global community that we  have remarkable resilience in overcoming the odds.

Dr. Jan Yves Remy, Alicia Nicholls and Chelcee Brathwaite of the Shridath Ramphal Centre for International Trade Law, Policy & Services (SRC) are regular contributors to the SRC Trading Thoughts. We welcome guest contributors to our column.  To learn more about the SRC, visit our website at www.shridathramphalcentre.com.