CARIBBEAN, DOING BUSINESS IN THE



As a term describing a geographic region, "Caribbean" is used in reference to the Caribbean Sea and the various islands and island groups within it. The Commonwealth of the Bahamas and the Turks and Caicos Islands, even though found in the Atlantic Ocean, are nevertheless also thought of as being "Caribbean." Regional analysts, however, be they economic, demographic, political, or business oriented are more likely to use "Caribbean Basin" or "Latin America" when reporting on this region of the world. This makes it difficult to economically delineate the Caribbean. "Caribbean Basin" refers to the islands of the Caribbean Sea, those nearby islands of the Atlantic Ocean, Mexico, Central America, and the South American countries of Colombia and Venezuela. Latin America is that part of the New World that was once part of Spanish America but the term also includes Brazil which was settled by the Portuguese. Some, but not all, of the Caribbean Islands were once part of Spanish America. The curved Caribbean archipelago is approximately 2,200 miles long as measured from Cape San Antonio on the western tip of Cuba through the Lesser Antilles off Venezuela. Total land area of these thousands of islands and keys is approximately 92,000 square miles or about the size of the United Kingdom.

Another geographic term that more accurately describes the islands lying between southeast North America and the north coast of South America is "West Indies." Geographers divide the West Indies into three subregions. Cuba, Hispaniola (an island divided between two countries—Haiti and the Dominican Republic), Jamaica, and Puerto Rico compose the Greater Antilles, which encompass about 89 percent of the Caribbean's land area. The Virgin Islands, the Windward Islands, the Leeward Islands, and all of those islands north of Venezuela including Barbados, Trinidad, and Tobago compose the Lesser Antilles. Included in the Lesser Antilles are the islands of Curacao, Bonaire, Aruba, St. Martin, St. Eustatius, and Saba which collectively make up the Netherlands Antilles. The Bahamas are the third subregion of the West Indies. As of 1995, the population of the West Indies was approximately 36 million, with about 12 million living on the island of Cuba, the largest island in the Caribbean. Encompassing 44,218 square miles Cuba comprises nearly half of the aggregate area of the West Indies.

HISTORICAL BACKGROUND

The cultural and political history of the Caribbean is as complicated as its geographical definition. Following the landing of explorer Christopher Columbus (1451-1506) in the Bahamas in 1492, western Europe came to regard the Caribbean as a region to be plundered and exploited. Native Indians were enslaved by the Spanish and forced to work in gold mines. Pirates from England, France, and the Netherlands stole gold from the Spanish and looted from each other. By the 1600s Spain as well as Denmark, France, England, and the Netherlands had established colonies in the Caribbean. Sugar cane replaced gold as a source of revenue and brought great wealth to the colonizers who soon began importing slaves from Africa to work on the plantations. In fact most of the present day population of the West Indies is descended from these slaves with the rest of the population being of either European or mixed European/African ancestry. By the 1800s, however, various independence movements had weakened the colonial grip on the Caribbean; European interest in the region began to flag especially with the abolition of slavery by the late 1800s.

There has always been lively and sometimes notorious commerce between the United States, in both its colonial and post-colonial period, and the Caribbean islands. This commerce included the infamous "triangle trade" involving finished goods and "rum, molasses, and slaves." With the decline of European influence in the 19th century the United States began adopting a paternalistic view towards the Caribbean and indeed the rest of Latin America. In 1823 President James Monroe declared that the United States would not tolerate any attempt by a European power to control the destiny of a Spanish-American state. Monroe went on to declare all of the New World closed to European colonization thus proclaiming implicit control over this vast region. This paternalism, often resented by Latin America, continues to the present as exemplified by U.S. military interventions in Cuba, Haiti, Grenada, and the Dominican Republic over the decades.

RECENT TRENDS AND DEVELOPMENTS

Although it is difficult to generalize about such a diverse region, generally speaking the Caribbean is economically depressed. Agriculture and tourism are the region's chief economic activities. Approximately 40 percent of the population is involved in tourism, government, and service industries, another 40 percent in agriculture, and the remainder in fishing, light manufacturing, and mining. As in colonial days rum and sugar are major exports as are cement, clothing, electrical parts, and assembled goods. Imports are mostly food, manufactured and finished goods, and raw materials. Unemployment is a chronic Caribbean problem especially amongst those living in the cities along the various island coastlines. Approximately 60 percent of the population lives in these urban areas. There is, however, much optimism among the American business community concerning foreign investment in the Caribbean. J. Antonio Villamil, CEO of a consulting firm, the Washington Economic Group, is representative of much of the American business community with his 1998 prediction that various Western Hemispheric free trade agreements will bring about "a significant increase in trade flows" throughout the Americas, including the Caribbean. Villamil went on to tell Black Enterprise that sluggish economic conditions in Asia and Japan have stimulated American business interest in Latin America resulting in increased trade throughout the region.

Even prior to the Asian economic crisis, investment flows into Latin America, including the Caribbean, had been increasing throughout the 1990s. In fact, 1996 showed an amazing 52 percent increase in foreign direct investment —a record $39 billion. The largest foreign investor in this region is the United States. Between 1990 and 1995 the United States invested $66 billion in Latin America and the Caribbean, accounting for 58 percent of regional foreign direct investments. Canada has also made sizeable investments but mostly in mining and exploration. In 1995, 42 percent of the exploration budget of Canadian mining companies was directed toward Latin America and the Caribbean. Investments from western European nations, especially Germany and Spain, also continue to rise but are directed more toward South America than the Caribbean. In 1995 European foreign direct investments in the region were $6 billion. Japanese investment in Latin America and the Caribbean represented about 13 percent of total foreign direct investment in 1995. Much of this investment money was directed toward financial and insurance activities, with 70 percent aimed at tax havens in the Cayman and Virgin Islands. The United Nations in its 1997 World Investment Report quoted a survey of Fortune 1000 company executives who express confidence in the future of the Latin American and Caribbean economies. The same report also mentioned estimates by the Institute of International Finance that foreign direct investment will continue to increase in the Caribbean.

There are numerous reasons for the continuing growth of foreign direct investment into the Caribbean region. Most of the countries have liberalized the rules and regulations that govern foreign investment. Prior to these changes foreign investors were discriminated against in favor of privileged home industries. There has also been either the elimination of, or a significant lessening of, rules governing profit and capital remittance which affect such things as the percentage of profits that may be sent out of the country. Other industries that were once totally closed to foreign investors, such as public utilities and petroleum, are now open to foreign investment. Many governments have also established investment promotion agencies.

TRADE AGREEMENTS

All of this has led to a great increase in the number of interregional and intraregional trade agreements. These bilateral investment treaties (BITs) totaled 53 in 1997, with 50 being negotiated since 1990. Nine of these BITs involve the United States and seven have been negotiated by Canada. The number of trade arrangements has also burgeoned because new ideas have been incorporated into them such as offering investor protection in such areas as intellectual property rights and the standardization of such concepts as "fair and equitable" treatment. Another BIT commonality that has come to be expected is the inclusion of most-favored nation or "no less favorable" provisions, which grant to foreign investors the same treatment that is accorded to home industries. There has also been a liberalization of guarantees on the free transfer of funds relating to investments. These guarantees cover such things as profits, interest, dividends, and repayment of loans. Other provisions include strict regulations governing the expropriation of investments, dispute settlement, and arbitration. In essence the countries of the region are attracting direct foreign investment by offering greater protection to investors.

In 1996 Stuart Eizenstat, U.S. undersecretary of commerce for international trade, addressed the Salud-America conference in San Diego on future trade with Latin America and the Caribbean. "Simply put," he told the conferees, "Latin America and the Caribbean is a major market for our goods and a primary source of future export expansion." His optimism was undoubtedly related in part to the success of the U.S. Caribbean Basin Economic Recovery Act passed 13 years earlier in 1983. The act included the Caribbean Basin Initiative (CBI) which in 1990 became a permanent part of U.S. foreign trade policy. The CBI was initially meant to provide economic growth and stability to the Caribbean Basin through U.S. private sector investment and duty-free access to U.S. markets. The scope of the initiative has been expanded, however, to include preferential treatment for U.S. exports to the Caribbean Basin and various financial arrangements and incentives through the U.S. Overseas Private Investment Corporation (OPIC). Since CBI implementation, nontraditional exports from CBI nations to the United States increased 147 percent by the early 1990s and included a variety of products ranging from medical instruments to pineapples. U.S. exports to CBI countries have similarly grown by 60 percent to $9.3 billion.

In 1995 OPIC provided nearly $2 billion in loans and loan guarantees for Latin American and Caribbean projects and ventures. OPIC also provides financing and political risk insurance for companies doing business in the Caribbean. For example, in 1995 OPIC issued $90 million to insure partial Citibank funding of major improvements of the Sangster International Airport in Montego Bay, Jamaica.

In order to enhance their foreign trade and competitiveness many countries of the Caribbean have joined the Caribbean Community and Common Market (CARICOM), an economic integration agreement, which was established in 1973. It is a common market for trade and economic cooperation between member countries. CARICOM members include Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts-Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago. The Bahamas, although a member, is not a signatory to the CARICOM trade agreements. CARICOM nations have a total population of 5.5 million. CARICOM's most ambitious effort is a common external tariff which has been adopted by most but not all of its members. CARICOM provides hemispheric solidarity in the face of other large trading blocs—such as the North American Free Trade Agreement (NAFTA) and the European Union —and strives to establish common incentives attractive to foreign investment. The Eastern Caribbean Association of Commerce and Industry, the Caribbean Development Bank, and the Caribbean Council for Europe are all sponsored by CARICOM. The Caribbean Export Development Agency grew out of the CARICOM Export Development Project and assists Caribbean manufacturers and exporters in increasing exports and competitiveness.

All of these activities have contributed to the Caribbean Basin's economic growth, which stood at 3.5 percent in 1996. Per capita gross domestic product (GDP) increased by 1.7 percent, which was higher than the average annual GDP rate of growth in the period 1990-95. Growth for 1998 was predicted to be between 4.5 and 5 percent and growth into the 21st century is expected to be 4 to 6 percent. These figures are very close to a projected world economic growth of 4.4 percent. Inflows of foreign capital to the Caribbean Basin reached a record $63 billion in 1996, with $70 billion projected for 1997. Much of this economic activity is being fueled by rising exports, higher investment levels, falling inflation rates (which is nevertheless unacceptably high in many Caribbean Basin countries), stable currencies, and initiatives to promote private investment. The regional external debt totaled $607 billion in 1996, accompanied by a 3.4 percent rate of increase, which was the lowest for the decade. Despite these optimistic economic figures, unemployment remains high at about 8 percent in urbanized areas—the highest for the decade. There is also an increasing economic gap between professional/technical workers and those in low-productivity sectors. Those Caribbean countries that have been able to integrate their economies with other world regions have fared better economically.

Foreign trade is responsible for much of the Caribbean Basin's economic growth. Regional share of world trade, while only 5 percent has nonetheless grown steadily since 1987; foreign trade's share of GDP from 1987 to 1997 doubled, from 18 percent to 36 percent. In 1996 total trade in Latin America and the Caribbean increased 11 percent to $493 billion. U.S. exports to the Caribbean and Latin America grew by 14 percent in 1996 reaching $109 billion, with imports rising by 19 percent to $125 billion. Some analysts predict that by 2010 U.S. exports to the Caribbean and Latin America will exceed U.S. exports to Japan and the European Union combined. Latin American and Caribbean trade with Europe topped $105 billion in 1996, representing 18 percent of total trade. Regional trade with Asia increased 1.9 percent to $66.3 billion, representing 14 percent of total trade.

CULTURAL RESEARCH

Members of the American business community who hope to tap into this growing economic region should, according to Christopher McGinnis, author of 202 Tips Even the Best Business Travelers May Not Know, engage in what he terms cultural research. Cultural research will "prevent committing embarrassing gaffes," according to McGinnis. "Business travelers need to be aware of behavior that could not only offend, but doom a deal," McGinnis continued. As a measure of Caribbean diversity, the British way of conducting business is prevalent in those former British colonies of the Caribbean, according to Easton Murrille, an airline terminal manager whose Caribbean clients include British West Indies Airlines. Murrille suggests "precision" in dealing with these countries. When conducting business in Caribbean countries attention must be paid to work schedules as they differ markedly from the United States. Doing business over breakfast is quite common, according to Richard Costas, the business editor of Caribbean Week. "The earlier the better," he said. "People leave work early; you can't catch them after 4 P.M." The Barbados-based editor advised that business calls be made about 8:30 A.M. "After 12:30 P.M., it's difficult to reach anyone." The Caribbean used to be casual about time—but no more according to Laura Lyons, a human resources professional working in the British Virgin islands. Roy Hastick, president of the Caribbean-American Chamber of Commerce concurred. "Five o'clock means five o'clock, do not underestimate the professionalism of the Caribbean." Clothing should be comfortable but not casual. For men a shirt and tie will suffice but Costas advised women "to dress very smart in business suits." It is also worth noting that the Caribbean remains on daylight savings time year-round and business meetings should always be reconfirmed as there are still problems with communication services.

The Caribbean is a region of great political and cultural diversity ranging from communist Cuba to Puerto Rico, a commonwealth of the United States. Official languages include Spanish, Dutch, French, and English. Economic opportunity also varies greatly from one country to another, ranging from the relatively prosperous Bahamas to poverty-plagued Haiti. For these reasons it is impossible to generalize about regional business opportunities. Individual consideration must be given to each country. Three excellent sources of information on individual countries are: 1998 Caribbean Basin Profile, Export Caribbean: A Guide to Doing Business in the Caribbean, and the U.S. Department of Commerce's web site on the Internet, which includes the "List of Country Commercial Guides," compiled by the International Trade Administration (ITA), and "Country and Regional Information," compiled by the Trade Information Center (TIC). Both the ITA and the TIC are agencies of the Department of Commerce.

[ Michael Knes ]

FURTHER READING:

Boswell, Thomas D., and Dennis Conway. The Caribbean Islands: Endless Geographic Diversity. New Brunswick, NJ: Rutgers University Press, 1992.

Braveboy-Wagner, Jacqueline Ann, and Dennis J. Gayle, eds. Caribbean Public Policy: Regional, Cultural, and Socioeconomic Issues for the 21st Century. Boulder, CO: Westview Press, 1997.

Brown, Ann. "Business Etiquette with Caribbean Flair." Black Enterprise, May 1995, 116.

Bryan, Anthony T., ed. The Caribbean: New Dynamics in Trade and Political Economy. New Brunswick, NJ: Transaction Publishers, 1995.

Eizenstat, Stuart. "Remarks by Ambassador Stuart Eizenstat." Business America, August 1996, 13.

Lassanyi, Mary E. Caribbean Basin: Business and Marketing Information Resources. Beltsville, MD: National Agricultural Library, 1995.

McGinnis, Christopher J. 202 Tips Even the Best Business Travelers May Not Know. Burr Ridge, IL: Irwin Professional Publishing, 1994.

1998 Caribbean Basin Profile. Grand Cayman, Cayman Islands: Caribbean Publishing, 1998.

Nwanna, Gladson L. Do's and Don'ts Around the World: A Country Guide to Cultural and Social Taboos and Etiquette: The Caribbean. Baltimore: World Travel Institute, 1998.

Rosenberg, Jerry M. Encyclopedia of the North American Free Trade Agreement, the New American Community, and Latin-American Trade. Westport, CT: Greenwood Press, 1995.

Tuller, Lawrence W. Doing Business in Latin America and the Caribbean. New York: American Management Association, 1993.

United Nations Conference on Trade and Development. World Investment Report, 1997. New York: United Nations, 1997.

U.S. Department of Commerce. International Trade Administration. "Country Commercial Guides." Washington: U.S. Department of Commerce, 1999. Available from www.commerce.gov .

——. Export Caribbean: A Guide to Doing Business in the Caribbean. Washington: U.S. Department of Commerce, 1996.

U.S. Department of Commerce, Trade Information Center. 'Country and Regional Market Infornation." Washington: U.S. Department of Commerce, 1999. Available from www.commerce.gov .

U.S. Overseas Private Investment Corporation. "Latin America and the Caribbean." Washington: U.S. Overseas Private Investment Corporation, 1997. Available from www.opic.gov/subdocsAinksAinks-lac.htm .

Villamil, J. Antonio. "Latin American Trade Set for Growth in 1998." Hispanic Business, January/February 1998, 22.



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