“The tax haven Barbados is dying just now. The escape clauses in the offshore contracts are activated e.g. in the case of a downgrade to C, financial breakdown or revolution. No foreign investor will come to Barbados now to do any fresh offshore business, since a tax haven must offer financial security. There are multiple other island around with better rating, better policies, better prospect and a more motivated population.” – Tron
In response to the recent umpteenth credit rating downgrade by Moody’s that quickly followed S&P Global Prime Minister Freundel Stuart was quick to break his accustomed silence to issue the following comment:-
“We seem now to be working ourselves back into a frame of mind where once again we want to sit exams for people outside of Barbados and wait on them to grade us and if they tell us we have passed we are supposed to feel good that we have passed, and when they tell us we have failed we are supposed to hold our heads in shame and think that we are failures”
One understands with a general election on the horizon the prime minister wearing his other as leader of the Democratic Labour Party (DLP) had to spin the bad news of the recent downgrades to some benefit. Bear in mind this is the leader of a country where our foreign reserves have dipped to ten weeks of imports cover and the government is forced to sell national assets to shore up the international reserves. This is a prime minister who heads a country where the foreign commercial banks have demonstrated little appetite for government securities. The point to be made is that the structure of our economy is dependent on the assessment of external players to perform. Does the prime minister not understand that the commercial banks in Barbados will implement credit and risk polices based on the ratings of the credit agencies? Does he not understand that the plummeting credit rating will make borrowing of foreign currency expensive IF we are even able to procure it? Why would he slam that door given our current economic state. Did the prime minister not observe how holders of Barbados bonds in the international market have reacted based on the Bloomberg report?
More important for BU and should be for the prime minster. What message is he sending at a time when the country should be in a serious mode of planning and productivity to ensure we work together to make Barbados great again? Why should a country whose economy is in such a perilous state where a Governor of a Central Bank whose second contract was renewed in 2014 resign days before the downgrades? How does prime minster Stuart feel so emboldened to disrespect foreign financial players who access the reports of the rating agencies as a routine pre condition for lending or investing in a country? Are we to assume the government is confident all of our foreign currency borrowing will be satisfied by concessionary lending from the Chinas of this world?
BU took note how quickly minister of Commerce Donville Inniss added that the recent downgrades would be upsetting to foreign investors. Is the prime minister an economic illiterate not to have realised that we are a country very dependent on foreign direct investment whose principals would want to be assured that there is manageable risk if they decide to do business in Barbados? The bottomline Mr. Prime Minister is that investors will avoid doing business with any country that have been assigned junk status by the big 3 credit rating agencies read Moody’s, S&P and Fitch.
We look forward to the outcome of the deliberations by the two committees of the social partnership who should be submitting recommendations soon to the prime minister. We now live in very uncertain times.