THE UPCOMING election in the United States offers the opportunity for Americans to choose the direction of the country. Whatever the result, the Caribbean is very much at the crossroads as it relates to areas where successes with the current administration can be transitioned and presented to incoming leadership.
Energy and financial services stand out as two of the areas where much work is still to be done, although crime, the threat of terrorism and the Zika virus threaten to overshadow all programmatic areas in the near-term.
For the Caribbean, any hope that a new President will come into office and bring with them not only an interest, but also a robust understanding of the region has to be guarded against. The reality is that an unsettled global environment, with regions significantly less-stable than Caribbean, may serve to relegate the Caribbean to the lower-tier of countries that need attention.
Fortunately there is still time, with an eight to ten month window for the Caribbean to help chart a course of successful engagement in areas that can be shared with and embraced by new U.S. leadership.
In the financial services space, the Caribbean joins other emerging markets in the struggle to survive the exit of U.S. banks and the correspondent banking services that they provide.
While ceasing relationships with small banks that serve small markets is not a new issue, it seems to have only recently garnered the attention of policy-makers and private sector stakeholders in the Caribbean.
While the reasons behind the Caribbean losing its correspondent banking services range from the costs of compliance and fines to a lack of profits, the Caribbean has struggled to engage in a systematic way to address the economic impact of the issue to its competitiveness and peoples. In a defensive posture, the region has also struggled with how to position itself to prospective new service providers.
The above stated, efforts by some Central Banks to introduce rules and regulations that increase regulatory oversight and increased capitalization of financial institutions are positive steps. There is some concern, however, that these and other efforts to strengthen the banking system may be too late to stop the exit by the major banks currently providing linkages to the global economy.
But contrary to claims that the current administration may be unwilling to help the region address compliance issues, there is evidence that there is interest by certain agencies to help. For the Caribbean, a strategy that eschews one-off efforts has to be replaced with a comprehensive engagement plan. There is also a need by those affected within the private sector community to be bigger activists in defense of their industry.
A well executed private-public sector effort would not only give a clear idea of the impact on the financial services sector, but it would also allow for the development of a suite of solutions to address the nuanced needs of the various institutions and countries within the Caribbean. It is clear that there is no one-sized solution.
U.S.-Caribbean solutions must focus on compliance, and technical support, with US agencies such as the Treasury and the Federal Reserve challenged to provide to the Caribbean, many of the solutions proffered to the wider world.
In addition to the Administration, a serious effort to engage Capitol Hill is needed, as well as one that addresses the perception that the Caribbean is an unregulated haven for illicit activities.
Ultimately it is incumbent that the region engage constructively, seeking out the solutions that exist within the system, all the while positioning itself to new providers of correspondent banking services.
On energy, the Caribbean has had some significant successes, taking advantage of external support from a wide range of donors to advance legislation and develop programs that seek to create a regional space for new investment in energy.
While the well-intentioned focus by many, including the U.S., has been on the promulgation of renewable energy solutions, the position of the Caribbean in sustainable energy program is positive. The notion that the Caribbean’s energy needs must be met from solar and wind too often overlook the need for consistent base load power, which is critical to ensuring that industries such as tourism and manufacturing remain competitive.
Specific to U.S.-Caribbean relations in energy, the region has taken a long and circuitous route as it relates to fully realizing the benefits of a closer relationship with its neighbor to the North. While limited human resource capacity within national and regional agencies is often blamed, some argue that U.S.-Caribbean energy engagement was politicized by the fact that many countries have close alliances with Venezuela.
Today, even with lower oil prices, there is still time for the Caribbean to take advantage of the one last Energy Summit that will be led by U.S. Vice President Joseph Biden. This would tap the limited U.S. government funding already committed to the strengthening of new and existing regional energy programming structures. Indeed, the Caribbean’s ability to meet its own baseline renewable energy targets by 2017 can benefit from as much additional funding and technical support as is available.
While the focus within the security arena has long been on the trafficking of illicit drugs through the region to the U.S., recent statements by U.S. security officials on ISIS in the Caribbean should be a prompt for increased cooperation between the region and the United States. Any weakness of a Caribbean security apparatus that may not yet be fully integrated has to be addressed.
For economies dependent on shipping and airline traffic for trade and tourism, there is a need to revisit port security plans, increase scrutiny of travel documents and to launch and strengthen social programs to meet the needs of an at-risk youth population in countries with high unemployment rates.
Increased crime in countries previously seen as safe exposes the fraying of the social fabric of a region long considered friendly and safe. Here, all efforts have to be made by both parties to strengthen the current Caribbean Basin Security Initiative and like programs.
Perception and reality
Ultimately for the Caribbean, the goodbye to the current administration may not result in a clean slate, vis-à-vis relations with new U.S. leadership. A real risk may be that the region may see an incoming administration whose leadership is negatively influenced by actions, or lack thereof, between the U.S. and the region over the last 10 years.
Worse may be the narrative of those who serve the current administration, who could paint a picture of a region difficult to engage, or as one only willing to engage when the President himself is across the table; the latter highlighting a misunderstanding by the Caribbean as to how the U.S. government works.
The narrative that the Caribbean, a once-solid ally, has sought relationships with countries unfriendly to the U.S. to chart its path forward would not be positive. Neither would be the criticism of economic citizenship programs; perceptions of weak governance mechanisms, and a lack of fiscal restraint.
Engagement over the next eight to ten months to advance programs such as the ones outlined above could result in near-term solutions for many of the issues affecting the region, and serve as a foundation for engagement with the new President and their administration.