Tag Archives: Barbados Economic Crisis

Increased taxes and costs are killing tourism. Barbados government actions “simply defies rationale”

Barbados Solid Waste Tax

Adrian Loveridge - tourism expert, hotel owner

Adrian Loveridge – tourism expert, hotel owner

I had hoped to dedicate this week’s column to the new measures put in place announced in the 2015 budget to stimulate spending, especially in the tourism sector.

Unless I missed something while trawling through the 57 pages, not a single ‘incentive’ has been announced that would be likely to encourage increased domestic spending across the sector.

Conversely, many could fairly claim that the additional $200 million in taxation annually will further restrain people’s ability to take a ‘staycation’ or enjoy one of many excellent restaurants.

Government Broke: VAT refunds two years past due.

In fact private sector led initiatives like the re-DISCOVER dining promotion have been forced to scale down any paid promotion, due to the continued inability to reclaim due and payable VAT refunds, now overdue for more than two years. This in itself is ludicrous and short sighted as many of the participating restaurants do not qualify and are unable to apply the reduced rate of 7.5 per cent VAT, but obligated to pay the higher 17.5 per cent rate.

So Government could be easily losing up to $2 million a year in lost taxes. Add the duties and taxes lost in the included wine element and that figure could well be significantly more, let alone the employment this promotion generates.

Until we witness some real actual sustained recovery in tourism, it is very difficult to comprehend why any Government thinks that increasing taxation and operating costs will reduce the time it takes to attain that objective.  Continue reading

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Almost one year since Forbes called Barbados ‘Cyprus West’ – have we changed for the better?

Barbados Finance Minister Sinckler

Has Finance Minister Sinckler done the right thing… or is the situation so far out of hand that no government could be effective now?

Barbados, “the Jewel of the Caribbean,” the tiny easternmost island in the Lesser Antilles with 288,000 year-around inhabitants and lots of very rich foreign visitors and investors, is in the throes of a financial meltdown.

While its entire GDP is now only worth about $4.2 billion, and its population is smaller than that of Duluth Minnesota, this crisis is worth examining closely. For here we have a very precise example of the “finance curse,” where excessive dependence on high debt, an aggressive offshore haven industry, very low tax rates for high-net worth investors, foreign companies, and banks, and high tax rates for everyone else, have essentially brought this little country to its knees.

… from the December 2013 Forbes online article Postcard From Barbados — a.k.a. ‘Cyprus West’

See BFP’s January 2014 article Happy New Year 2014: Forbes announces that Barbados is on its knees, in a financial meltdown.

 

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Canadian banks unhappy with Caribbean investments and loans

Caribbean-bank-money_laundering

“Last year unemployment in Barbados stood at nearly 12%, but it the rate is forecast to rise to 15.6% in 2015, according to the IMF.”

According to the International Monetary Fund, RBC, CIBC and Bank of Nova Scotia are dominant players across the region with about 60% of total banking assets, almost as strong as their position in Canada. But are those players starting to question their enthusiasm in the face of the regions worrying economic malaise?

Canadian Imperial Bank of Commerce warned last week that it will take a $420-million charge to goodwill related to its subsidiary CIBC FirstCaribbean, which it blamed on “persistently challenging economic conditions and our current expectations for conditions going forward.”

With unemployment in the U.S. still stubbornly high, the middle class seems to be taking more modest holidays, with far fewer traveling to the Caribbean. The developed world is starting to recover from the turmoil but the numbers suggest that’s not the case in countries like Barbados and Jamaica.

… much more in the Financial Post: How the Caribbean is not so sunny anymore for Canadian banks

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Barbados Finance Minister says redundant public employees should work for Trinidad & Tobago government

“We’re encouraging people to look for opportunities beyond Barbados and there are Caribbean territories that require that skilled labour. A lot of skilled labour from Barbados come here (to T&T). They go back and forth, and we are encouraging them to look for those opportunities.”

Barbados Finance Minister Christopher Sinckler speaking to T&T bankers

Leroy Parris and good friend Finance Minister Chris Sinckler share champagne

Leroy Parris and good friend Finance Minister Chris Sinckler share champagne – file photo

We’ve seen the cycle repeated for a long, long time. Barbados has way more people than this little rock can accommodate in space, resources and economy – so anytime in our history when there is a pull-back in the economy (as there is now), thousands of Bajans leave for better circumstances.

That happened when the Panama Canal was being carved from the jungle at the cost of 500 dead Bajans per mile, and it happened in the 1950’s and 1960’s when the lure of working in the UK took thousands of our best and brightest people away – most never to return.

Who leaves Barbados during these migrations?       Continue reading

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Barbados Top Gear Festival is over. What now?

“Hopefully the Top Gear Festival will have redressed the low tourist arrivals problem for this month, but with almost half a year of the softer summer months yet to come, what can we do to grow the most receptive markets?”

Recommendations: Smarter partnerships, and a focus upon Great Britain and Continental Europe

Adrian Loveridge - tourism expert, hotel owner

Adrian Loveridge – tourism expert, hotel owner

Back in the nineteen seventies while I was working in Canada as a travel agent we pioneered a number of what were then ‘unique smart partnerships’ with airlines and hotel groupings.

One of the most successful was an arrangement with Wardair on the Winnipeg-Gatwick (London) route, where our agency block booked groups on certain dates to obtain a lower price. The benefit to the traveller, our customer, was that if they flew on these particular specified dates, they would get their first or last night’s airport accommodation at no extra cost.

What prompted these memories was trying recently to find a more affordable way of getting my wife to the UK shortly for family reasons. We ended up booking a flight to Manchester, simply because it is currently far less expensive than flying to a London airport.

Despite then still having to travel over 220 miles to where she is staying, off-peak rail travel is very reasonably priced and virtually door-to-door with a minimum number of station changes.

The longest part of the land journey is between Manchester and Euston and is operated by Virgin Trains. This prompted me to look carefully at the incredible network they operate and a closer study of the ticket prices and overall journey times to other major northern British cities. Huge population centres that include Liverpool are only about an hour away and Edinburgh and Glasgow between three and four hours from Manchester Airport.  Continue reading

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More unemployment coming to Barbados hotel and tourism sector

“Government will eventually have to decide what it wants – Tax the industry out of existence or put in place the reforms discussed over decades that clearly have made a significant difference for a solitary player.

Or, apply the reforms uniformly to alleviate the current national imbalance.”

Hotel layoffs the natural result of Government failure to keep promises

Adrian Loveridge - tourism expert, hotel owner

Adrian Loveridge – tourism expert, hotel owner

It is now a full six months since companies trading under the Sandals Resorts brand were granted unilateral extraordinary concessions never before seen in the long history of our tourism industry. Despite repeated assurances given to the tourism sector, once again implementation is sadly lacking and as we enter the long eight summer months the industry is left floundering to second guess pricing and marketing strategies that will help it survive yet another year.

Criticism is leveled again at some hoteliers for not passively submitting to the prices dictated by tour operators, which ultimately has led to further airlift losses from a market that is especially attractive in terms of average duration of stay. But pray tell me, how can any Government official expect a single accommodation provider to agree fixed contract rates up to eighteen months ahead of arrival date when they have no overall idea on what those rates are based on?

It really has to reflect the height of lunacy when the remarks are uttered by someone who holds the ultimate power together with his cabinet colleagues to return the industry to viability. Until this is done the chance of competing with many other Caribbean destinations at the same level remains only a distant dream.

Surely by now our policymakers understand the basics of how the travel business is structured and the timing required to put programmes in place. Continue reading

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What has gone wrong with the Barbados 7.5% VAT?

Current 17.5% VAT killing tourism

Adrian Loveridge - tourism expert, hotel owner

Adrian Loveridge – tourism expert, hotel owner

When Government announced last year that it was passing a bill to allow the lowering of Value Added Tax (VAT) to 7.5 per cent for qualifying hospitality partners my initial thought that it was a wonderful opportunity to at least partially address the frequently quoted high costs of our tourism product.

The criteria did not appear too ominous. That the entity had to be registered with or a license from the Barbados Tourism Authority, Barbados Hotel and Tourism Association or Small Hotels of Barbados Inc, it was in compliance with all statutory obligations of the Income Tax, NIS and Social Securities Act and was able to demonstrate to the satisfaction of the Comptroller and generates at least 75 per cent of total earnings annually in a foreign currency.

In our 26 year experience the vast majority of guests pay via credit card, I would not have thought this was difficult to verify. These imposed conditions would seem quite reasonable and for most attainable.

Why then have so few seemingly eligible tourism partners registered successfully and applied the lower rate of VAT? After all, 10 per cent of the final cost to the consumer is not an insubstantial reduction. Looking at menus posted on the websites of many of our hotels with in-house restaurants or stand alone establishments 17.5 per cent VAT is still shown, which includes some of the big names and (unless they have yet to be updated) state owned accommodation providers are included in this. Interestingly, this applies even to businesses where their owners or managers sit on the board of the national marketing authority.

So what has gone wrong? Is this once again a case of implementation deficit?

Originally the measure was announced in the 2013 budget submission, so does it really take so long to process registration applications?   Continue reading

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Sandals 9 month closure another blow to Barbados economy and employment

Adrian Loveridge, tourism expert

Adrian Loveridge, tourism expert

So entirely contrary to all the heady rhetoric that the introduction of Sandals brand will drive additional airlift: in fact the exact opposite will happen from their closure on 1st April for major renovations.

At least until the re-opening slated for December 2014.

Quoting their own projected occupancy of an average of 85 per cent with a typical stay of 7 nights and two persons per room, that’s almost 500 lost airline seats per week or a mind boggling 16,000 plus by the end of this year.

Will this further destabilise the remaining carriers that continue to service Barbados and lead to yet more airlines cutting routes or reducing capacity? Tour operators, already unable to match demand with the high cost of doing business here, are considering switching flights to other destinations where they can glean a profit.

Once again citizens are left speculating whether our Government was aware and factored in the almost nine months closure with hundreds of hospitality employees being thrown on the unemployment pile, before granting unilateral extraordinary concessions to the Sandals group.

Perhaps they calculated the NIS and income tax contributions collected from local construction workers hired for refurbishment would more than make up for this. Because clearly, the state is not going to collect other taxes like VAT and import duties from Sandals as they have all been waived.  Most materials used will also be imported, so a substantial percentage of the estimated US$65 million project will simply re-export foreign exchange (FX).

Several other issues also have to be considered: The lost revenue to our Direct Tourism Services with included package components like golf green fees, catamaran, diving etc., let alone secondary spending that 16,000 plus extra visitors would have generated on submarine excursions, taxis, car rental attractions, activities and shopping. The list goes on and on. Continue reading

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Family loses 3 jobs – exposes nepotism, cronyism at National Housing Corporation?

Barbados Jobs

But then I started to think “How can it be that a couple and their adult son are all hired into juicy NHC jobs all within the same time period 5 or 6 years ago?”

Barbados government lay-offs start to hurt

by passin thru

A little human interest piece in The Nation initially invoked my sympathy where three family members in the same household lost their jobs at NHC on the same day.

The house income instantly went from $7,000 a month to nothing. We can feel for these folks. $7,000 a month sounds like a lot of money, but in a house with three adults and two other children, there is not much left over once everyone is fed, clothed, sheltered and transported to work and schools.

“I don’t have a job. I owe the credit union. I owe the bank. I owe for the stuff in here and I have my son to support. What am I going to do?” said the woman, and I do feel sorry for her.

But then I read further and started to think “How can it be that a couple and their adult son are all hired into juicy NHC jobs all within the same time period 5 or 6 years ago?”

It could be luck, I suppose, that they all applied for NHC jobs and each was hired. Could be, I suppose.

But I know my Barbados too well. I know how things work around here.

This layoff of an entire family should be news and discussion for more reason than they are on the breadline.

There is another story here, and I don’t think that the island news media will cover it or ask the right questions.

Something to think about!

Read The Nation article here, but we have to print it all because you just know how that paper changes history!

Family Loses Jobs

ON FRIDAY MORNING, Hallam Gittens, his girlfriend Andria Brathwaite and stepson Kishmar Brathwaite were sitting on a monthly income of about $7 000 amongst them.

That sum was stripped down to zero in a matter of hours, through no fault of their own.  Continue reading

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Barbados government pretends to start billion dollar waste to energy plant with not a dollar to pay for it.

Courtesy of The Nation

Courtesy of The Nation

Environment Minister Lowe’s ground breaking ceremony nothing to do with reality

by passin thru

Let me get this straight: Bajans are supposed to believe that the Sanitation Service Authority is forging ahead with a billion dollar project list including a new office building ($32 million), waste to energy plant ($680 million), a leachate treatment plant ($42 million), landfill gas to energy plant ($10 million), solar power field ($120 million), wind power field ($24 million) and a mechanical workshop ($11 million).

All of this on borrowed money on the heads of our children and Lord knows how many other future generations.

This, at the same time that we don’t have money to replace/repair 84 buses that sit idle stripped for parts. We don’t have money to pave roads that are falling apart for ten years. No money to hire 100 ‘missing’ police officers. No money to fix a hundred water main leaks.

And we’re making 3,000 government workers redundant and taking the social unrest because there is nothing else to be done. Our tourism industry is shrinking when other countries are growing and building new resorts. Our hotels ‘feature’ a million empty beds a year, an average age approaching 30 years and I’d hate to hear the stats on the average age of the furnishing and mattresses.

No money for a sick, falling down hospital, no money to pay the hospital suppliers and employees on time – a big crisis every payday. Other government projects sit half finished, no work going on. Layoffs coming at the UWI too.

We had to withdraw our international bond issue because there aren’t any more fools left to ‘invest’ in a national retirement scheme that has as 80% of its ‘assets’ – the debt to itself. The government is so desperate for revenue that tax people are warning defaulters that they are coming to seize 10 year old vehicles and worker’s tools if they don’t pay up – and the people have nothing except their trucks and their tools.

And we’re supposed to seriously believe that the government is in ‘final negotiations with investors’ who are prepared to ‘loan’ a billion dollars to a country is on the verge of a currency devaluation that will shake its societal foundations to the core?

What a sick cruel joke.

Madness.

Read the lies for yourselves…

New Home for SSA

A WIND, gas and solar energy programme earmarked for Vaucluse, St Thomas, could involve investments of nearly $1 billion. Continue reading

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Ralph Taylor explains the Barbados tourism disaster

I’m about half way through this video of SoCo Hotel owner Ralph Taylor talking to a BLP meeting last Sunday the 12th of January 2014.

Mr. Taylor tells it like it is, but so far his analysis is missing two factors:

1/ There’s no money left after 20 years of BLP and DLP larceny, neglect and stupidity.

2/ Investors aren’t staying away in droves just because of the numbers: they know that Barbados governments have burned many foreign investors through broken promises and non-payment.

Nonetheless, it’s worth listening to Mr. Taylor, who starts in with how bad things have been in Barbados in terms of declining hotel rooms (and thus declining investment) for the last 34 years…

Number of Hotel Rooms 1980 and 2014

Country      1980        2014      Average Growth Hotel Rooms

Jamaica        10,000    30,000    486% for Jamaica, Cuba, St. Lucia

Cuba              7,226       57,000

St. Lucia        1,245       4,900

Barbados       6,680     5,400      -20%

“We are still not getting new hotel development. We must ask ourselves, why are we not getting this new development?

The reality is that investors are looking firstly for adequate returns on capital, and then all other factors are considered.

When there was a big hue and cry over the concessions to Sandals, my contribution to that debate is that I have long advocated that tourism is an export industry, and therefore its input costs must be free of duty.  Continue reading

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Bahamas blasts Barbados in Battle of the Bonds

Barbados_Flag125.jpg

How the world received two different bond offers…

Barbados forced to withdraw bond offer

“Cash-strapped Barbados’ efforts to raise urgently needed money on the international markets have suffered a major setback with its withdrawal of a bond tender offer and buyback for up to US$250 million (BDS$500 million).”

October 4, 2013 Govt move to raise money hits a snag

Bahamas bond offer over-subscribed by factor of 20!

The Bahamas has received “a huge vote of confidence” after the Government’s $300 million foreign currency bond issue was 20 times’ oversubscribed, with investors accepting an interest rate almost one percentage point lower than anticipated.

James Smith, the former minister who is now a key Ministry of Finance adviser, yesterday confirmed to Tribune Business that the $300 million sovereign issue had received “a fairly robust response” from the international capital markets.

“I think they were closing the offering some time yesterday [Monday] afternoon,” Mr Smith said, revealing that it had attracted subscriptions worth $5-$6 billion – more than 20 times’ the amount sought.

January 15, 2014 Gov’ts $300m Bond Issue Oversubcribed ’20 Times’

“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…”

December 7, 2013 – James S. Henry: Barbados debt crisis and the “offshore haven” industry

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Barbados Hotels and Resorts debacle continues with another government loan guarantee. Where did all the public money go?

barbados-gems-hotel-scandal.jpgGEMS scandal keeps going and going and going…

Say ‘goodbye’ to your tax dollars as government guarantees a loan with zero hope of repayment.

Adrian Loveridge, small hotel owner.

Adrian Loveridge, small hotel owner.

Whatever was behind any honest intentions of the Hotels and Resorts Limited (HRL) or the “GEMS” debacle, it is difficult to imagine a worse outcome so far.

Government’s decision to guarantee yet another loan to this failed entity, despite the current austerity situation, frankly defies belief and clearly will not have a happy ending.

This latest loan is for BDS$5.55 million at an interest rate of 7.75 per cent, arrangement fee of $350,000 and monthly repayments of $55,000.

Included is a $300,000 overdraft facility which attracts an administration charge of $5,000 each month.

HRL now operate a single hotel – Blue Horizon with just 67 rooms. Another 50 additional rooms acquired at the time of purchase (1997) remain derelict all these years later. Savannah and Time Out at the Gap are leased and operated by private sector interests.

Where did the money go?

Three other properties originally in the GEMS portfolio were sold and it still remains unclear what price they realised and exactly where those funds went. Continue reading

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Lessons for Barbados from the Roma Cafe, Detroit

“You can never get comfortable with something you’ve done, even though you’ve done it for so many years.”

“The city implemented an ‘awning tax’. They taxed us for having an awning over the city sidewalk.”

“When there are jobs, crime low. When there are no jobs, crime high.”

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Barbados tourist arrivals down 12% despite Crop-Over. July cruise ship arrivals down 37%

We’re in trouble – no doubt about it.

by Passin thru

Statistics might be a science, but the use and presentation of statistics is an art – sometimes a liar’s art when politicians and other government people have a stake in those statistics or results.

The tourism statistics have arrived comparing July and August 2012 and year-to-date against the same periods last year in 2011.

We are in trouble. Big trouble.

Last I heard tourism was the foundation of our economy. Last I heard, we and our great great great grandchildren are on the hook for billions borrowed to prop up the last two governments, but we don’t have much to show for the crushing debt except some photographs of parties and a useless $150 million dollar hole that was supposed to be the Greenland dump. Last I heard the current DLP government is still borrowing like crazy and it’s all going into general revenues or other supporting programmes to keep the wheels turning and the lights on. It’s not like we’re borrowing money to buy assets or to create income: it’s all going into the mist where there are no specific measurable goals and the results of the spending are impossible to quantify or even point to.

But some things can be quantified and so we come to the July and August tourism statistics.

My oh my! What a disaster.

Stats reveal some things I didn’t know before

We are always told in the news media in sort of a general way about how the UK is our main tourism market, and then Canada, then the USA etc.

Wrong.

Have a look at the statistics below. The USA is actually our largest single country source of tourists, or at least it was until things dropped off the edge in 2012. Canada provides less than a third of the long stay arrivals that the USA does.

So why couldn’t we keep that vital Dallas-FortWorth connection? Why can’t we load one airplane a week out of the cold midwestern USA during the winter?

Smile at tourist today where ever you meet them.

Make small talk. Bend down and tell their children you’re so happy their folks came to visit. If it works out, maybe invite them to walk or talk to them for five minutes about some little piece of history they probably don’t know. Give them something positive to remember about Barbados and Bajans that makes this place special from the last island they docked at.

I remember when things got really really tough in the late 1980s and we got behind in the payments for the truck. And if the truck went there was no job and no income. It was as simple as that. Dad announced that he was going to set the alarm clock one hour earlier, start work an hour earlier and work one hour later every day. Over the course of his six day working week that was another 12 hours of work. He said he’d have to work longer and work better too, to make it through those tough times. He had to keep his customers happier than they had ever been before.

Dad did what he had to do and we kept the truck. Barbados needs to do what Dad did in the late 1980s.

The Statistics – Read ’em an weep

july_2011-and-2012_compared

aug_2011-and-2012_compared

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