Characteristics of Caribbean Economies
The Caribbean region comprises of about fifteen (15) relatively small territories. These territories have certain unique characteristics. The following are some of the main characteristics of Caribbean economies which make them unique as compared to other countries.
Smallness – there seems to be varying definitions of a small economy. The commonwealth uses 1.3 million as its definition of a small economy. The Commonwealth of Nations, or the Commonwealth (formerly the British Commonwealth), is an intergovernmental organization of 53 member states that were mostly territories of the former British Empire. Using the Commonwealth’s use of 1.5 million as the threshold for a small country, 45 developing countries are considered to be small. Besides Haiti, Jamaica, the Dominican Republic and Cuba, all Caribbean countries fall into this category of being small. It has been shown that smallness in size of economies creates unique economic management problems.
Lack of Natural Resource – most of the Caribbean countries lack natural resources which they can tap into to be competitive. Consequently, these countries are less developed than most of the other countries of the world. Most countries that are endowed with natural resources are more successful and advanced such as the countries that have oil deposits: Mexico, Venezuela, countries of the Middle East, Canada, Russia and lately the USA. Therefore, countries that are well endowed or rich in natural resources are usually the most advanced countries in the world.
Open Economies – the countries of the Caribbean are open economies since they rely heavily on international trade with other countries of the world. As a result, they are vulnerable to external shocks. This can be a setback for such economies. These small countries are not as competitive as larger countries and so many of them often need protection for their local industries. The openness of these economies has become an even bigger problem since the establishment of the World Trade Organization (WTO) that fosters and encourages free trade where it has become almost illegal for countries to implement trade protectionism measures in order to be competitive. The result of the WTO has also been that these Caribbean countries lost some of the benefits of preferential trade agreement which they would have had with some countries such as through the Caribbean Basin Initiative and the Lomé convention.
Economic structure – economic structure is also another very important characteristic that can determine the state of development of a country. In terms of the countries of the Caribbean, they depend substantially on primary sector production such as basic agriculture including food production These are fairly unstable due to hurricanes and flooding which often negatively affect the production of these countries as well as their foreign exchange earnings. Caribbean countries are not famous for their manufacturing sector but depend to a lesser extent on their tertiary sector in the form of tourism. Unfortunately, tourism is also affected by hurricanes and is seasonal in nature. Therefore, based on the economic structure of Caribbean countries, they are at a disadvantageous position relative to other countries outside of the region.
Economic Problems Associated with Caribbean Economies
Due to the characteristics of Caribbean countries, there are associated problems which these countries encounter which can affect their development. Some of these are as follows:
External Shocks – Caribbean countries are also prone to external shocks in that their economies are linked to those of other countries. When incomes from these countries rise, the demand for products and services from Caribbean countries will tend to also rise and vice versa. A very good example of this was in the case of the global crisis that started in the USA in 2007 and spread throughout the globe. In the less developed or emerging economies such as Caribbean countries, the impact of the global crisis was mainly indirect through a fall in trade and tourism. This is so because Caribbean countries do not have complex and developed capital markets and stock markets.
Brain Drain – the term brain drain refers to the situation where highly skilled people from Caribbean countries migrate to the income-rich developed countries seeking better opportunities. This trend will tend to keep Caribbean countries at a low level of economic development. . The brain drain will not be felt in unskilled occupations as much as in highly skilled areas of medicine, law, science, etc. When highly skilled Caribbean nationals migrate to developed countries, this leaves a void or shortage of these critical services in the Caribbean.
Limited Range of Products – Caribbean countries produce a limited range of products and services. The effect of this is that these economies rely on a limited or narrow source of income. This will definitely have a negative impact on the economic development of these countries. Most Caribbean territories do not tend to venture or graduate to the secondary or even the tertiary level of production except that of tourism.
Reliance on Preferential Trade Arrangements – Caribbean countries have greatly relied on preferential trade agreement through trading blocs for their economic growth and development. Markets in some develop countries for products of the Caribbean were assured. However, the emergence of the World Trade Organization (WTO) would have prevented this to some extent. The WTO supports the removal of all forms of trade barriers.