Future Possibilities for Capital and Financial Markets within the CARICOM Single Market and Economy

• Author: Sandra Shirley
• Pages: 150-165

150 THE CARICOM SINGLE MARKET AND ECONOMY

Created out of the Caribbean Free Trade Association, the vision of a

Community of Caribbean States as a single, seamless economic space was

intended to realize the hopes and aspirations of all Caribbean peoples and

reflect their ideals.

This chapter will review some of the future possibilities for capital and

financial markets within the CARICOM Single Market and Economy (CSME)

based on the conviction that as a region the vision and ideals for which the

CSME was created are still advantageous.

METHODOLOGY

Firstly, we will comment briefly of the objectives of the CSME and the

common regional guidelines required by the Revised Treaty of Chaguaramas

in respect of Capital and Financial Markets. Secondly, we will define the

nature of financial and capital markets. Thirdly, we will review some of the

likely benefits and trade-offs to be achieved by the CSME. Fourthly, we will

review the progress made, that is, where we are now and, finally, based on

our own experience, we will suggest some possibilities for capital and

financial markets and action steps to accelerate the process towards a unified

CSME by December 2005.

THE OBJECTIVES OF THE CSME

With membership open to all sovereign Caribbean states, the main

stated objectives of the CSME continue to be accelerated, coordinated and

sustained economic development and policy convergence. This is intended

to take place through the integration of markets, products and services.

Common regional standards are required which establish, or harmonize,

laws and national standards.

The region’s approach provides for inputs from technical experts such

as the Council of Finance and Planning (COFAP) and the Council for Trade

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ECONOMYECONOMY

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Future Possibilities for Capital and Financial Markets 151

and Economic Development (COTED), among others. Chapter Three of the

Revised Treaty of Chaguaramas, confers responsibility on COFAP to provide

advice on matters relating to monetary cooperation, the free movement of

capital and the integration of capital markets.

The Revised Treaty of Chaguaramas provides, among other things, for

COFAP to address the following:

• Removal of restrictions on banking, insurance and financial

services

• Introduction of no new restrictions on the movement of capital

for investment or payment for goods and services and other

transfers

• Establishment of a schedule for the removal of existing restrictions

on the movement of capital and other financial assets. Article 40

3. lists these items to include:

a . equity and portfolio investments

b. short-term bank and credit transactions

c. payment of interest on loans and amortization

d. dividends and other income on investments after taxes

e. repatriation of proceeds from the sale of assets; and

f. other transfers and payments relating to investment

flows

• Authorization of the movement of capital without discrimination

• Coordination of foreign exchange policies and sharing intelligence

on unusual capital movements to and from third states

• Member states with severe balance-of-payments difficulties may

implement restrictions but only those which are necessary to

ameliorate such difficulties. These should be phased out

progressively within 18 months. This could include an emergency

support fund.

• Collaboration with COTED to establish rules to facilitate the

development of a regional capital market. Such facilitation

includes:-

a . market intelligence capabilities

b. harmonized legislation–Company Act and Securities Act;

c. removal of exchange controls and free convertibility of

currencies within the Community

d . convergence of macro-economic performance and policies

through harmonization of interest rates, exchange rates,

taxation, balance of payments and economic growth targets

e. efficient transportation and communication links