Editor’s note: The following is a lightly edited version of an article taken from the World Economic Forum’s website. In it, Barbara Ann Bernard, founder and chief investment officer of Wincrest Capital Ltd, explores how the coronavirus (COVID-19)has impacted the region’s main money-maker, tourism. However, she suggests that the private sector can play a role in mitigating a possible fallout. What can they do? Bernards encourages repurposing.
We are all in the same COVID-19 storm, but not all countries are in the same boat. Here in the Bahamas, 70 per cent of our gross domestic product (GDP) is generated from tourism. Tourist-based economies like ours throughout the Caribbean region have limited social safety nets. This means our people, economy and future are far more likely to be wrecked by COVID-19 than nations with more diversified economies. Today, airports and hotels here are shuttered, unemployment throughout the region is soaring, and nobody knows when these tourism sector jobs may come back.
The Caribbean countries of Barbados, Belize and The Bahamas are among the most exposed in the world to the sudden pause in global tourism. “This pandemic shock is unlike any shock that these sovereigns have seen in their history,” said Julia Smith, an analyst at S&P Global Ratings. S&P expects that tourism in the Caribbean will probably decline by between 60 per cent and 70 per cent from April to December compared with last year. In fact, due to COVID-19, the ratings agency downgraded The Bahamas and Belize this month further to junk status, while lowering the credit outlooks in Aruba, Barbados, the Dominican Republic and Jamaica to negative.
To put the magnitude of the problem into perspective, these countries are accustomed to welcoming three to six cruise ships a day. That is between 12,000 and 20,000 new tourists hitting their shores every day. They have no cruise ships now and haven’t had any since February. Right now, 95 per cent of the 80,000 hotel rooms in the Cancun Hotel Zone are vacant. Without the Cancun-to-Cozumel tourist sector income, countries as large as Mexico are suffering.
Tourism money is very important for one reason: It pumps cash (dollars) into the economy. Without tourists to pay (with cash) for para-sailing, scuba diving, deep-sea fishing, taxis, groceries, etc, tourism-dependent countries risk running out of US dollars, which they need for the importation of food, fuel and for servicing debt obligations. No tourism, no cash.
These economies need to be diversified, but this can’t be done overnight — meanwhile, every night, I fear these countries are on the cusp of civil unrest. Tourism-dependent economies are collapsing.
Tourist-dependent economies need to create thousands of jobs for furloughed tourism-sector workers. They need them quickly. Unlike the EU, UK or US, governments in the Caribbean cannot afford to offer wage subsidy furlough schemes. With unemployment levels soaring past post-war peaks in the US, analysts are looking at the Great Depression for guidance. Some commentators say that battling COVID-19 is akin to fighting a war. But this is far from a wartime economy where production runs full tilt and everyone is needed to work.
What can be done? Here is a plan that would allow the private sector to work with the government in winning the unemployment war without any additional investment. Real jobs are based on real needs. In order to open our economies, even domestically, we will need the equivalent of a small army of workers to carry out health tasks — testing, temperature checks, and contact tracing — as well as the additional sterilization that will be necessary in businesses and public spaces.
If the private sector in Caribbean countries were asked to share the government’s burden of creating employment, thousands of jobs could be created overnight in a mutually beneficial way. Leaders of Caribbean nations might consider mandating that the condition upon which high traffic businesses such as grocery stores, home improvement stores, retail banks, malls, large office buildings, ferry companies, gyms, etc. may reopen is the employment of repurposed tourism sector COVID-19 cleaners and temperature-checkers at a fixed hourly rate during opening hours.
If that were the condition that enabled the private sector to get back in business, it would be the CEOs that were queuing outside the hotel union workers’ building to hire COVID-19 cleaners and temperature checkers. Governments could make it clear that this is a temporary measure that will be in place until COVID-19 is under control and hotels are reopened.