Doing Business in the Caribbean 2016: Central America shows the way

DoingBusiness 2016: Measuring Regulatory Quality and Efficiency is the 13^th in the long-standing series of co-publications by the World Bank and International Financial Corporation (IFC). This annual report on the ease in doing business in 189 nations covers the period from June 2014 to June 2015.

I have been reviewing such reports for the past two years, and have published two articles from each review: first to examine the global ranking of Caribbean states, then to breakdown their performance into the 10 indicators used in the ranking process. This article reviews “Doing Business 2016”.

Last year in “Doing Business in the Caribbean: Who Cares?” and “Greater Caribbean Business in 2015”, I suggested  collaboration within the Association of Caribbean States (ACS) in order to effect well needed reform, especially considering commonalities that existed within its membership.

The Latin America and Caribbean (LAC) region has a number of groupings that could undertake such reform in “Doing Business”. However, the ACS stands out, because it is focused on the Caribbean. The two tables below present data primarily for member-states.

Caribbean Island	Population (Millions)	Income (US $)	2015	2016
Caribbean Islands	29.9	6,455	102	104
Caribbean SIDS	8.9	13,687	96	98
Puerto Rico (US)	3.5	19,210	56	57
Independent Caribbean SIDS	5.4	10,107	100	102
Jamaica	2.7	5,042	71	64
Trinidad	1.3	16,562	85	88
Bahamas, The	0.4	21,010	108	106
Barbados	0.3	15,579	116	119
OECS	0.7	9,080	104	107
St. Lucia	0.2	7,090	77	77
Dominica	0.1	7,070	89	91
Antigua & Barbuda	0.1	13,360	99	104
St. Vincent & the Grenadines	0.1	6,560	106	111
St. Kitts & Nevis	0.1	14,540	122	124
Grenada	0.1	7,850	130	135
Large Caribbean Island States	21.0	3,390	137	137
Dominican Republic	10.5	5,950	93	93
Haiti	10.5	830	182	182

Table 1: Ratings of Caribbean Islands

Previously, I had advocated reform through the Caribbean Forum (CARIFORUM). However, ACP’s 25 member states comprise 15 CARIFORUM member-states. Cuba is another member, and 8 Caribbean Overseas Territories are associate members, though neither are part of “Doing Business 2016”.

ACS therefore has a wider membership of Caribbean islands than CARIFORUM. Also, “ACS provides a framework for the dialogue and activity necessary to further advance economic integration and intra-regional trade and investment, thereby improving competitiveness of the Greater Caribbean region”.

DoingBusiness Regional Profile 2016: Latin America and the Caribbean lists 32 LAC states. With the exception of Puerto Rico, 24 of these are ACS members. Nevertheless, data for Puerto Rico was reviewed and is presented for reference. All the other LAC states are located in South America.

Both tables present general information on the relevant economies, as well as their rankings for 2015 and 2016. Table 1 conveys information on 13 Caribbean Islands, divided into two groups: 11 Small Island Developing States (SIDS) and 2 large island-states: namely the Dominican Republic and Haiti.

The SIDS are sub-divided into three groups. Puerto Rico, being the only island that is not politically independent, is a group unto itself. The 6 smallest islands belong to the Organization of Eastern Caribbean States (OECS) – the next group; and, the last comprises the 4 remaining SIDS.

Table 2 conveys information on 12 ACS Latin American (LatAm) states. Like the Caribbean Islands, these LatAm states are divided into two groups – Central, and South American States. The former comprises 8 states and the latter 4 states.

It should also be noted that this table includes three CARIFORUM member-states: Belize, in the Central American group, as well as Guyana and Suriname in the South American group. With the exception of Puerto Rico, all Caribbean islands in table 1 are CARIFORUM states.

ACS Latin American States	Population (Millions)	Income (US $)	2015	2016
Latin American States	250.8	8,850	104	102
Central American States	169.7	8,480	90	86
Mexico	123.8	9,980	42	38
Costa Rica	4.9	9,750	79	58
Panama	3.9	10,970	66	69
Guatemala	15.9	3,440	81	81
El Salvador	6.4	3,780	115	86
Honduras	8.3	2,190	97	110
Belize	0.3	4,760	118	120
Nicaragua	6.2	1,830	123	125
South American States	81.1	9,640	131	133
Colombia	48.9	7,780	52	54
Guyana	0.8	3,970	132	137
Suriname	0.5	9,640	154	156
Venezuela	30.9	12,820	184	186

Table 2: Ratings of ACS Latin American States

In both tables, 2015 rankings are generally lower than those published in “Doing Business in the Caribbean: Who Cares?”. These rankings were actually revised using a new evaluation process developed for the 2016 rankings: thereby facilitating comparison between the current and past year.

Of all ACS members, only the OECS improved its average 2015 rankings in the revision. This was due to significant improvement in the rankings of Saint Lucia and Dominica, which superseded Antigua and Barbuda as the top performers within OECS: other member states having marginally worse rankings.

OECS average 2015 ranking was revised to 104: equal to that of the LatAm states. But, the average 2015 ratings for independent SIDS as a whole remained superior. The average 2016 rating for ACS LatAm states marginally improved, while that of independent SIDS worsened to become equal, at 102.

For the LatAm ACS, the Central America group benefited from the revised 2015 ranking. Only Honduras improved in rank, but Belize held firm. In the process, Honduras superseded El Salvador in the revised standings. Similarly, Mexico and Panama fared better than their counterparts in this revision.

Mexico was ranked higher than Colombia, previously the top performer within ACS: thus making it top 2015 performer within ACS. Similarly, Panama superseded Costa Rica in the revised ranking. Of the three changes in standing, only Mexico and Colombia maintained their relative positions in the 2016 ranking.

In “Doing Business 2015”, 9 out of the top 12 LAC performers were ACS member-states. In “Doing Business 2016”, this has improved to 10 of the top 12 performers. This improvement is solely due to significant improvement in the rankings of the Central American sub-group.

Currently, the top 12 LAC performers, from highest to lowest rank, are: Mexico, Peru, Colombia, Puerto Rico, Costa Rica, Jamaica, Panama, Saint Lucia, Guatemala, El Salvador, Trinidad and Tobago, and Dominica. Of these, Peru and Puerto Rico are the only states that are not ACS members.

Six Latin American ACS member-states are in the top 12: Colombia being the sole South American member, of its group of 4. Mexico, Costa Rica, Panama, Guatemala and El Salvador comprise the remaining 5, of the 8 member Central American group.

With the exception of Puerto Rico, four Caribbean islands are in the top 12. No large Caribbean-Island state is present. Jamaica, Trinidad and Tobago are 2 of the 4 larger Caribbean SIDS that are top performers: Saint Lucia and Dominica being 2 of the 6 OECS members that are also top performers.

The improvement of the 2016 average rank for the Central America sub-group is specifically attributed to advancements by Mexico, Costa Rica, and El Salvador. The latter two, having been superseded in the revised ranking, managed to retake their previous positions. Guatemala held firm.

For the Caribbean Islands, only Jamaica and The Bahamas improved in the 2016 rankings, with Saint Lucia, Dominican Republic, and Haiti holding firm. Though improved, The Bahamas rating was still below-average. But, that of the Dominican Republic remained above-average.

In the Jamaica Gleaner publication dated October 28, 2015, the article “Jamaica Citedfor Doing Reforms in Doing Business Report” stated that:

“Jamaica... has been cited by the World Bank, alongside Costa Rica and Mexico, as executing the most reforms in the region in the last five years”, and “also found that Jamaica is among the global top 10 improvers ‘as it implemented a regional high of four reforms’ ”.

Regrettably, ACS also comprises 7 of the 8 lowest ranked economies in LAC. In ascending order from the lowest ranked, these are: Venezuela, Haiti, Bolivia, Suriname, Guyana, Grenada, Nicaragua, Saint Kitts and Nevis. Of these, Bolivia is the sole non-ACP member.

Only the larger SIDS are not a part of this group. Haiti is one of the two large Caribbean island states in the group; Grenada, Saint Kitts and Nevis: 2 of the 6 OECS. Venezuela, Suriname, and Guyana are 3 of the 4 South American states; and Nicaragua: the sole Central American state.

The South American sub-group therefore has the largest discrepancy in ranks: Colombia is in the top 12, but the others are in the bottom 8. Two of these are CARIFORUM states; or put differently, 5 of the 7 lowest ranked ACS members are also CARIFORUM members.

The Greater Caribbean not only has the most capable states to effect reform, but it also has the most deserving of states. Again, in “Doing Business in the Caribbean:Who Cares?”, I had proposed using the Asia-Pacific Economic Cooperation (APEC) as a model for ACS to address reform within the sub-region.

On the whole though, the relative standings of most states within the sub-region were unchanged: even in the case of Mexico and Jamaica, whose global ranks improved. However, Costa Rica and El Salvador improved their standings: Panama and Honduras falling below Jamaica and The Bahamas respectively.

Otherwise, five (5) islands fell in the regional standings.  Listed from the highest to lowest ranked, they are: Saint Lucia, Trinidad and Tobago, Dominica, Dominican Republic, and Saint Vincent and the Grenadines. The global rank for Saint Lucia actually held firm, but all the others fell.

It should now be apparent that states have to improve their global ranks just to maintain their relative regional standing. The global ranks of Mexico and Jamaica improved by 4 and 7 places respectively, just to maintain their respective standings of 1^st and 6^th.

Though Mexico was the top performer, it is instructive to note that Costa Rica moved up 21 places globally, from 79 to 58, to take the 5^th spot: thus preventing Jamaica from advancing in the regional standing, even though it had moved up 7 places globally. It was simply not good enough.

To actually improve in standing, substantial improvements have to be made. Costa Rica’s global ranking moved up 21 places to take it from 8^th to 5^th in region. El Salvador moved up 29 places, from 115 to 86, to take it from 17^th to 10^th place regionally.

With the widening of the Panama Canal now complete, a significant increase in trade and investment can be expected in the Greater Caribbean. So, improving competitiveness of local firms is imperative and this through the improved competitiveness of Greater Caribbean states.

The indifference to reform should not be allowed to further deteriorate performance in “Doing Business”. ACS seems to be the regional body most able to facilitate this reform in the shortest order, and time is of the essence to capitalize on expected increase in investment and trade within the Basin.

Central America seems to be championing reform in their individual nations. Can the other LatAm ACS members and the Caribbean islands follow suit? More importantly, can we all collaborate to be able to capitalise on gains expected in the near future? Only time will tell.


Paul Hay is a Jamaican national, founder of PAUL HAY Capital Projects: a consultancy, based in Kingston Jamaica, with a vision of providing strategic planning and implementation services to organizations for non-residential facilities in the Caribbean.

Related articles:

Doing Business in the Caribbean 2018: El Salvador Shines

Doing Business in the Caribbean 2017: Central America Leads By Example

Doing Business in the Caribbean 2015: Who Cares?

Greater Caribbean Business in 2015

Business in the Caribbean 2014: CARIFORUM needs Reform, part 2

Business in the Caribbean 2014: CARIFORUM needs Reform

Singapore: Example to the Caribbean in Doing Business 

Trinidad and Jamaica should Reconsider Strategic Alliance in the Mineral Sector

William Demas – former Head of the Economic and Planning Division of the Government of Trinidad and Tobago – compared the 5-year national plans of Jamaica and Trinidad and Tobago (T&T) in his book The Economics of Development in Small Countries, first published in 1965, and noted that:

“...both plans anticipate a slow-down in the rate of growth of G.D.P. as compared with the 1950’s. In both cases growth rates of G.D.P. of 5 per cent are projected..., in both cases, the slow down in the rate of growth of G.D.P. is the result of the anticipated slowing down in the rate of growth of the mineral export sectors to 3 per cent – bauxite in Jamaica and petroleum in Trinidad.”

The existence of relatively cheap oil imports as prevailed in the 1950s through to the OPEC action in 1973 factored in Jamaica’s economic growth.  But, the international oil market has changed.  Oil prices have hovered around US$100 per barrel since the end of the last decade and prices of US$150 – US$200 per barrel are projected on recovery from the global recession. 

The Jamaican dollar devalued by an average annual rate of 212.6% from 1970-2005.  From 1990-2006, GDP grew 1.1% on average while energy use grew 2.5% per annum.  In 2006, the value of oil imports amounted to 87% of export earnings.

Zia Mian, a retired senior World Bank official and international energy consultant, states in an article titled “Jamaica’s Energy Challenge – part III”, in the Sunday Gleaner dated 30 March 2008, that: “Jamaica’s economy is relatively energy intensive.  Per capita energy consumption is estimated at over 10 barrels of oil equivalent (boe)”. 

Jamaica has one of the highest rates of energy consumption in Latin America and the Caribbean region.  This is mainly due to the heavy usage of energy by its bauxite/alumina sector.  Jamaica operates four alumina refineries. All of these use oil to convert bauxite to alumina, which is then shipped to smelters overseas for further processing to aluminium.

Oil is the most significant cost involved in producting alumina. According to data from the Jamaica Bauxite Institute, Fuel/Energy represented 40% of the operating cost of producing alumina in 2009, when operating costs were US$ 217.40/metric tonne; and 52% in 2012, when operating costs were US$ 345.80/metric tonne.

Carlton Davis, author of Jamaica in the World Aluminium Industry 1938 – 1973, former Cabinet Secretary and chairman of the Jamaica Bauxite Institute, stated in an article entitled: “Energy Cost and our Economic Future – Future of Alumina Sector Hinges on Energy Cost”, in the Mona School of Business Nov/Dec 2011 issue, that:

 “Given the importance of the cost of energy in the production of alumina and the consensus that oil will be more expensive over the long-term than natural gas or coal it is incumbent that oil is replaced by one of these two fuels.  However, it is necessary for the industry to increase the efficiency of whatever fuel is used.  Given what is at stake the Government has a lead role in affecting this transformation.”

According to the Economic and Social Survey Jamaica 2012, export earnings from the bauxite/alumina sector declined by 11.5% in 2012: crude bauxite by 7.5% and alumina by 12.4%.  This decline was partly due to the “global slow down associated with the European debt crisis” but also the result of:

·         Lower alumina prices, where Jamaica could not compete due to its relatively high cost plants; and

·         Increased global competition from newly commissioned, more efficient, alumina plants.

Two of Jamaica’s refineries are slated to be converted to coal-fired electricity generating plants in the near future; and the remainder converted for use of natural gas. According to Carlton Davis, “...data from the alumina sector indicates that using natural gas would require less capital investment than coal”. Conversion of a plant from oil to natural gas would cost US $30 million, while conversion to coal costs US $250 million.

Zia Mian also states in an article entitled “Cross-Caribbean Energy Link-Up”, in the Sunday Gleaner dated 29 September 2013, that: “After T&T informed Jamaica that it had no gas to honour its commitment to supply 1.125 tonnes of LNG per annum to bauxite and power sectors, I developed and suggested an interim gas-supply option. This option was predicated on trilateral cooperation among Jamaica, T&T and Venezuela”.

The objective of this initiative was to purchase natural gas from Venezuela, have it liquefied in Trinidad, and ship it to Jamaica. In September, Trinidad signed a bilateral agreement with Venezuela to resolve their border issues and share natural gas from fields which lie on those borders. This “recent bilateral deal has reopened the opportunity for Jamaica to buy natural gas from Venezuela and liquefy it in T&T”.

In fact, “T&T’s United States LNG market is now minimal and T&T has been selling LNG to Far Eastern markets”, and “the costs of transport to those destinations are generally high”. So, a strategic alliance between Trinidad and Jamaica at this time could prove mutually beneficial.

A World Bank project has been underway in Jamaica for some time now to support the development of a regulatory environment for introduction of natural gas.  The preferred fuel for the recently tendered 360 MW generating plant is natural gas; and, one of the bidders intended to source this fuel from Puerto Rico, which would have meant Jamaica would have been getting Trinidadian LNG via Puerto Rico.

In this regard, I support Zia’s recommendation that Trinidad and Jamaica “must give this opportunity another  try and see if it could reduce the cost”, though I would add not only in electricity generation, but also in alumina production.

In the 1960’s, the only endeavour cheap oil did not allow Jamaica was to have its own aluminium smelters; though there was a proposal in the 1970’s to have Jamaica’s bauxite shipped to smelters built in locations such as Trinidad. The more recent cancellation of Trinidad’s Alutrint smelter complex should not end further collaboration between these two nations in the mineral sector. Both nations, in Jamaican paralance, need to “wheel and come again”.


Related articles:
Could the ‘Singapore Experience’ have started in Trinidad?
Singapore: Lesson to Jamaica

Paul Hay is a Jamaican national, founder of PAUL HAY Capital Projects: a consultancy, based in Kingston Jamaica, with a vision of providing strategic planning and implementation services to organizations for non-residential facilities in the Caribbean.