Economist and Investigative Journalist James S. Henry: Barbados debt crisis and the “offshore haven” industry

“The ultimate piece of bad news for ordinary Bajans, as they call themselves, is that their Social Security fund has essentially invested about 80 percent of its assets in Barbadian public debt, which is now almost worthless. And so, you know, we’re looking at a major social catastrophe in paradise here…”

So just last month, Barbados tried to raise $500 million of public debt in the U.S. market, and they had to withdraw the debt offer. And now they’re really looking at very serious IMF-type conditionality in order to get out of this situation. So, you know, the ordinary middle-class in Barbados is going to experience higher taxes in the form of excise and VAT taxes.

And meanwhile you have this very wealthy elite. I’m sitting in a hotel where the average room is $350 a night. Two doors down from this hotel is a room that–there’s a hotel the charges $4,000 a night up to $12,000 a night with a two-week minimum. You know, they have this just very split-level kind of society where the very wealthy people from all over the planet come to Barbados and enjoy the beaches and the beautiful natural environment, but you have regular Barbadians having to actually pay most of the cost of government through VAT taxes.

The ultimate piece of bad news for ordinary Bajans, as they call themselves, is that their Social Security fund has essentially invested about 80 percent of its assets in Barbadian public debt, which is now almost worthless. And so, you know, we’re looking at a major social catastrophe in paradise here, and, I think, an important thing for us to take a look at in the United States, not because Barbados is a major trading partner in the U.S., but because it is a foreshadowing of what can happen if we are going to be utterly unwilling to raise taxes on big companies and the wealthy in order to help tackle our debt crisis.

… from The Real News transcript of the above video.

James S. Henry is a leading economist, attorney and investigative journalist who has written extensively about global issues. James served as Chief Economist at the international consultancy firm McKinsey & Co and as an investigative journalist his work has appeared in numerous publications like Forbes, The Nation, and the The New York Times. He was the lead researcher of the recently released report titled ‘The Price of Offshore Revisited.’

13 Comments

Filed under Barbados, Barbados Tourism, Economy, Offshore Investments

13 responses to “Economist and Investigative Journalist James S. Henry: Barbados debt crisis and the “offshore haven” industry

  1. Party Aminal

    I don’t understand why the Government has to go into the N I S Funds when VAT and Duties must pull in ten to twenty times over that of N I S Funds, What Happens to all this Money ?? I would like to see a report of what VAT and Duties account for in revenues, and now there is talk about raising taxes. Who is accountable for these funds and where do they go?
    It is time we the people know, it is time we the people demand answers,it is we the people to demand a change, a change to some one who knows how to run things,(like a Government) time for Politicians to go.

  2. Anonymous

    The video sums up the Bajan problem exactly. Our leaders have gambled everything on something that worked for a time and allowed them to steal vast amounts, but the formula doesn’t work any more.

    Dr. Duguid, Owen Arthur and the rest have offshore bank accounts: USA, Swiss, Marshalls. You name it!

    In truth this island will become dangerous in a few years. As dangerous as Jamaica.

  3. PLANTATION DEEDS FROM 1926 TO 2013 , MASSIVE FRAUD ,LAND TAX BILLS AND NO DEEDS OF BARBADOS, BLPand DLP=Massive Fruad

    Well maybe four seasons saw the land fraud and wanted their money back ,with out exposing the Massive Fraud they demanded their money back with out going to court,. DLP needed money fast and took NIS funds to cover up, ????

  4. Wily Coyote

    @Party Animal

    50+% of Barbados income is from the offshore banking industry, about 40% is from tourism. All of VAT revenue goes to pay the Civil Servants which make up nearly 30% of Barbados workforce, contrary to the video which states it’s only 10%. True 10% are direct government employees, however there is another 20% that is being paid by agencies, boards, authorities etc. that are not directly on the government payroll however are 100% funded by the government. The government using NIS funds as general revenue for operations is SAD, this is going to result in severe hardship for the non elite bajans, reduced pensions, no unemployment insurance etc. in the near future. VAT revenues are presently falling about $1.6MBDS dollars a day short. $1,600,000.00BDS per day DEFICIT largely to pay the civil servants. Barbados is in a severe FINANCIAL CRISIS from which it will be lucky to recover.

    IMF is likely to require an immediate devaluation of the currency, reduce civil service expenditure by at least 20% and other draconian measures in order to secure a bail out loan. It’s unfortunate that the majority of Barbados debt is held by Bajans as it were off shore debt could be renegotiated such as Jamaica, Greece, Cyprus etc has done. Barbados has prided itself over the years as being self financed, this has now come to bit them in the ass. Offshore financing comes with offshore monetary controls which instills financial discipline which is lacking in Barbados.

  5. Party Aminal

    Thanks Wily…..Bajans really don’t understand what devaluing the dollar will mean for us, when this happens it will be a SAD day for us, the poor will be poorer and the thieves will be Richter..
    We only have to look at Trinidad, Jamaica and Guyana and the rest of those Countries that have devalued.
    Does this Government really understand what they are doing or is this their agenda….Where is MIA ? has she already skipped the Country

  6. Jerry Mervriel Nurse

    Do Barbadians recall how Prime Minister Sir Erskine Lloyd Sandiford MP prevented Barbados Dollar Devaluation by implementing the 8% Civil Service Pay Cut? had that not been done Barbados would have joined the other Caribbean Islands? At the DLP Luncheon some years ago I told Sir Lloyd Sandiford his mistake was not letting the country know exactly what was going on, and secondly implementing the 8% Cut and increased his and other Ministers Salaries. He did an excellent job saving Barbados Dollar

  7. Party Aminal

    Unfortunately saving us from devaluation was the only good thing Sandy did, he had the country in the same mess it is in now, This must be a D L P thing ?

  8. Instead of having 24 lawyers in Parliament who everything about law but yet ,cannot pass integrity, transparency and accountability legislation, not to mention a “Freedom of Information Act”, perhaps we would be better off with 24 economists who know little about law but everything about economics !

  9. I hear that train a comin', rollin' round the bend.

    1937 was nothing compared with what will happen after devaluation this time.

  10. The main “instigator” of the “riot” in 1937 was supposedly Clement Payne, and occurred primarily because he was “a foreigner”, a bad influence, and was ordered deported.
    We are a complacent and docile people. We know not the meaning of “casus belli” or “causa belli” because we are a society of mendicants and we are always prepared to accept whatever crumbs are thrown our way, “with gratitude and grumbling”.
    Also,note that other Caribbean societies supposedly more prone to demonstration and riot than Barbados (e.g Guyana,Trinidad & Tobago,and Jamaica), have accepted multiple devaluations of their currencies without rioting.
    Many bajans are already saying “Not me bosie! You alright ! I doan want to get shoot or get my head crack open”.

  11. Civil Servant

    The merchants were complaining about the amount of monies government owed them in VAT refunds, but was it ever mentioned how much revenue was outstanding because of non payment to the government through imports and non imports. Remember the instances of collec

  12. Civil Servant

    Remember the instances whereby monies were taken from workers wages and saleries but never paid to the respective revenue agencies, NIS, PAYE etc.

  13. Pingback: Bahamas blasts Barbados in Battle of the Bonds | Barbados Free Press