Caribbean Economic Integration: What is Happening Now; What Needs to be Done

• Author: Trevor M.A. Farrell
• Pages: 177-205

Caribbean Economic Integration 177

INTRODUCTION 1

When CARICOM was born 30 years ago, its architects envisioned that

with the failure of political integration, economic integration along with

functional cooperation would become the centerpiece of the integration

movement. Economic integration was expected to centre around resource

and production integration, in which production operations would draw on

raw materials and intermediate inputs from different territories. The dream

that perhaps best captured this concept was the vision of a metal working

industry based on aluminum production that would be spawned from the

marriage of Jamaican and Guyanese bauxite with Trinidad and Tobago’s

energy resources.

It was recognized by some of the architects that the small domestic

markets of the region even when combined were unlikely to be a sufficiently

large market for regional industry to reap full economies of scale and become

competitive just producing for the regional market. In this context, resource

and production integration was seen as the foundation of an intra-regional

trade, the lattice work of which would then be knitted into an export platform

for selling Caribbean produced goods into international markets.

As it turned out however, intra-regional trade in the first couple of

decades of CARICOM’s existence turned out to be rather disappointing both

in terms of volume and in terms of how narrow the network of trading

relationships turned out to be. One country, Trinidad and Tobago, ended up

dominating intra-regional trade. Many countries in the region engaged in

little trade with others. By the early 1990s, after some 20 years of regional

economic integration, less than 7 per cent of the region’s imports were

sourced from within the region.2

CARIBBEAN ECONOMIC INTEGRATION:CARIBBEAN ECONOMIC INTEGRATION:

CARIBBEAN ECONOMIC INTEGRATION:CARIBBEAN ECONOMIC INTEGRATION:

CARIBBEAN ECONOMIC INTEGRATION:

WHAT IS HAPPENING NOW; WHATWHAT IS HAPPENING NOW; WHAT

WHAT IS HAPPENING NOW; WHATWHAT IS HAPPENING NOW; WHAT

WHAT IS HAPPENING NOW; WHAT

NEEDS TO BE DONENEEDS TO BE DONE

NEEDS TO BE DONENEEDS TO BE DONE

NEEDS TO BE DONE

Trevor M.A. Farrell

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178 PRODUCTION INTEGRATION

THE 1990s

By the mid-1990s however, new developments in the area of economic

integration began to emerge. These took a form that had not been widely

anticipated and had not been planned for. Over the last ten or so years, we

have begun to see much more evidence of economic integration emerging

than in the previous 20 years.

The new developments are focused on four main areas:

(1 ) Intra-regional direct investment, and the concomitant emergence

of regional multinationals

(2) Growth in intra-regional portfolio investment

(3) The growth and development of a regional capital market

(4) Regional firms beginning to make use of the offshore centers that

have appeared in all of the OECS states and in Barbados, adding

to the long time centres such as The Bahamas and the Cayman

Islands.

THE GROWTH AND SPREAD OF INTRA-REGIONAL

DIRECT INVESTMENT

There are some firms such as Goddard’s in Barbados that for decades

now have been involved in operations outside of their home territories.

However, over the course of the last ten years, there has been a mushrooming

of cross-border direct investments in the region. The number of firms

involved has grown significantly, and the number of industries involved

has also shown remarkable growth. Tables 1 and 2 (see pp. 180, 181) set out

the available data. In Table 1, we set out a list of industries in which a

preliminary investigation found CARICOM firms to be involved in cross-

border operations within the region.3 It is clear that a wide range of activities

are involved, from banking to carnivals, from tourism to fast foods. The

largest investments so far seem to have been in the area of financial services

(particularly banking and insurance), followed by tourism.

What are the key features of these direct investment flows? First of all,

much of it has been emanating from Trinidad and Tobago. 4 This is followed to

some extent by Jamaica and then Barbados.

Secondly, some of the firms involved are now operating in a significant

number of territories in the region. Included here are firms such as the

Trinidad and Tobago based C.L. Financial Group, whose insurance subsidiary,

CLICO, operates in 22 countries around the Caribbean and Central America,

and Sagicor of Barbados which operates in 20 countries. In the area of

banking, RBTT of Trinidad and Tobago, the largest indigenously owned bank

in the region, operates in eleven countries in the region; Republic Bank, also

of Trinidad and Tobago, with recent deals to acquire banks in Barbados and