The storm thrashing the debt ridden economies of America and Europe seems to have made landfall in the Caribbean. The Financial Times reports:
The decline in tourism – and the closure of its struggling sugar industry in 2005 – contributed to tipping St Kitts and Nevis over the fiscal cliff this year. With debts equivalent to about twice its annual economic output, the tiny island federation was forced to restructure, slashing its debt-to-gross domestic product to about 95 per cent.
And its not just St Kitts and Nevis:
St Kitts and Nevis is not the only Caribbean nation to be affected. Many face their biggest challenge in generations as they struggle with mountains of debt in economies battered by tropical storms and the tourism slump.
During the pre-2008 boom years, many Caribbean nations invested heavily in their tourism sector as a response to their dwindling agricultural exports. Tourist dollars quickly became the region’s economic lifeline, spurring frenetic hotel and condo development. This worked when times were good, but after 2008 the tourists stopped coming, and the economic lifeline was cut.The meltdown is wreaking havoc on national finances. In a worrying parallel with southern Europe, a massive proportion of the islanders are employed either directly or indirectly by their governments, which are considering major cutbacks in light of rapidly declining cash reservers. Just as we are seeing in Europe, the mix of high public-sector employment, budget cutbacks, and a faltering economy is toxic indeed—indeed, perhaps more toxic for Caribbean nations, which have no wealthy neighbors willing to bail them out.The current storm is nothing compared to the Big One the Caribbean island countries truly fear. Someday, Cuba and the US will normalize relations, and US tourists will flock to an island that’s been off limits for decades. There are plenty of resort owners and tourism officials around the Caribbean who hope Fidel and Raul stay in power for another fifty years.Americans should pay attention to the neighborhood troubles. Drug smuggling and other forms of organized crime flourish when people are jobless and governments are short of money; terrorists have shown an interest in penetrating societies that some see as a kind of weak underbelly for the United States.On the positive side, the time has never been better for a Caribbean getaway. Hotel and airfare prices are sure to drop with the fall in demand, so for all of you leisure seekers out there, why not take a trip to the West Indies? While you’re there, you won’t just be soaking up the sun while sipping on a mai tai, you’ll also be helping a struggling economy get back on its feet.It’s hard work being a Good Samaritan, but we are confident that Americans have what it takes.