Economic resilience should be key priority for Caribbean – Clarke
Published:Thursday | May 16, 2024 | 12:07 AMAsha Wilks/Gleaner Writer
Finance Minister Dr Nigel Clarke says economic resilience has got to be the key economic priority for Caribbean countries.
This, he said, is especially true given the open economies and narrow economic bases of small island developing states (SIDS), like Jamaica, which continue to face challenges ranging from economic vulnerability to climate change.
Speaking at the Jamaican launch of the US$135 million Caribbean Community Resilience Fund (CCRF) held last Thursday at the AC Hotel by Marriott, Clarke noted that it was “challenging to make life work for small island states, even if you have high per capita GDP”.
This is because the structural economic realities within the Caribbean indicates that even if there exists a certain amount of wealth, as measured by invested capital, it could all go away with one or two economic shocks.
“If it’s one thing we know, economic shocks are going to be a permanent reality of life in the Caribbean and being open means that it affects us when it may not affect somebody else,” Clarke noted.
Using the American state of Louisiana as an example, he explained that because the United States was “extremely resilient” a hurricane affecting one state would have no measurable impact on the GDP of the overall country.
Therefore, Clarke said it was the region’s duty to take responsibility for its vulnerabilities, as “that’s what societies that are advanced do for themselves”.
Continuing with another example, Clarke stated that in Canada where they are vulnerable to extremely cold weather which can have below freezing temperatures for long periods of time making life difficult, they are one of the countries with the largest amount of underground infrastructure, with millions of square feet of retail office space which allowed individuals to be able to spend an entire week underground.
This, he added, is an example of taking responsibility for one’s vulnerability.
In expressing his satisfaction with the announcement what the CCRF intends on achieving, he shared that it “was like music to the ears of policymakers”.
‘Timely’ and ‘exciting’
He praised how “timely” and “exciting” the fund is, as it “comes at a time where Jamaica and the Caribbean are all facing a potential crisis ... where the solution to a large extent is going to lie in having pools of capital available to invest in our economies in finding solutions”.
The fund, which is supported by the United States Agency for International Development (USAID), promises to revolutionise the region’s approach to tackling climate resilience and economic sustainability.
Sygnus Group, which operates in Jamaica, St Lucia, and Puerto Rico, will manage the fund. The CCRF will target seven key resilience sectors, including energy, transportation, blue economy, housing, finance, information and communications technology (ICT), and agriculture.
Jason Morris, co-founder and executive vice president of Sygnus Capital, clarified that while the CCRF’s primary goal was climate resilience, its other objectives included strengthening the infrastructure of Caribbean nations by giving access to capital for projects and businesses, giving investors in the Caribbean the chance to invest in impact investments, offering technical support for capacity building, providing catalytic capital for the region, and providing flexible, patient, risk-tolerant, concessionary, and impactful capital.
The chief investment officer continued that the investment horizon of the 10-year fund can be increased to two one-year periods.
Divided into two investment periods, the fund will have two portfolios: an equity portfolio which has an investment period of five years, and a debt portfolio which has an investment period of seven years.
The debt portfolio will have two closure dates: the first is on June 30 and the second is some time in February 2025.
Morris, who gave a breakdown of the fund, stated that the Caribbean Development Fund (CDF) as a sponsor and supporting as first loss capital made a commitment of US$15 million. Additionally, over US$1 million was from Sygnus and US$5 million from enhanced capacity building.
For his part, Jason Connor, chief executive officer of Sygnus Capital Puerto Rico, said that he was well aware of the region’s lack of access to capital and that the CCRF’s launch would help to raise the visibility of both the Caribbean and the sectors that the fund is targeting, which were both severely underdeveloped for capital on a large scale.
“Recently I read as part of the development of the fund, the document from USAID states that just in climate related resiliency there’s over US$20 billion worth of opportunities to be deployed, to be unleashed in the Caribbean,” he said. “That doesn’t include the non-climate related opportunities, so we’re talking anywhere from $10 to $15 billion dollars additional of opportunities that year after year go unsolved, unreleased.”
Connor went on to say that while banks are unable to bridge this gap, they nonetheless try their best, and this is true even in countries with larger economies.
He emphasised that the only area that differed substantially from the developed world was the non-banking sector. According to him, this industry really required expansion so that businesses who do not qualify access the capital through the banks and have options.