Caribbean Currents #006: Déjà Vu

Bermuda eyes far-flung siblings, EU blacklist strikes again

Shem Best

and

Darien Lalgee

Nov 08, 2023

November 8th, 2023 edition of Caribbean Currents 🌴🌊📊

In this issue

CARICOM Grows?
Tax Haven Hell
Old Lines, New Problems
Not-So-Revolutionary Bonds
A Drop of Culture
Podcast of the Week
Quick News

CARICOM Grows?

Pale imitation of a federation might gain new member

Bermuda is physically closer to Nova Scotia, Canada than it is to Nassau in the Bahamas, its closest Caribbean neighbor. While geography is not a major deterrent to Caribbean classification (see: Guyana), Bermuda is an extreme, being fully isolated in the North Atlantic. As such, it has come as a bit of a surprise to learn that it is considering a bid to fully join the Caribbean Community (CARICOM).

Bermuda is one of five associate members of CARICOM which are all British Overseas Territories. Associate members have no defined role. Observer members participate in one of the organization's many (and useless) technical committees. At a glance, you’d actually be hard-pressed to see any substantial benefit for this island to join CARICOM. You see, the role of CARICOM is to project a unified voice on the world stage and facilitate integration among its members through trade, travel, and policies. As a British Territory, Bermuda is already spoken for by a little-known world power called the United Kingdom. This comes with a few perks such as paths to full British Citizenship and the protection of the Crown. Sadly it does not seem to come with protection from EU blacklisting, but that’s a discussion for another time.

“I think that it is important that as other jurisdictions are examining the relationship with CARICOM, I think that it is perfectly good for Bermuda to go ahead and to do the same and so from that aspect, there are a number of institutions that we can participate in as an associate member, but there are also other institutions and discussions that we are unable to participate in as an associate member.” - David Burt, Premier of Bermuda

Perhaps Mr. Burt wishes to participate in the many technical committees of CARICOM. Full membership may not be as beneficial as reported. At present, the 15 full members enjoy the following:

- Movement of people: CARICOM passport holders can traverse the 15 member states freely, provided they can afford it in the first place and a reasonable air or sea link even exists. Praying citizens should invoke their faith in the event of sudden travel restrictions due to political tensions.

- Economic partnership and integration: If he’s craving Jamaican bulla bread from all the way in Hamilton, this one may interest Mr. Burt. He could completely opt out, however, like the Bahamas which isn’t a part of the CARICOM Customs Union.

- Unified voice: This one’s a bit of a mixed bag. CARICOM does occasionally pause its own internal squabbles to issue statements on matters of which no one asked its opinion. It’s just formality, so it can go back to fighting over failed airlines and murderous energy bills. Maybe Mr Burt believes he can bring some calm to this cacophonous ensemble.

Ascension to full member status will require a lengthy consultation process and a letter request to the UK. It remains to be seen what internal roadblocks the premier will face, but we’ll be keeping an eye on this one for a future “I told you so”.

Tax Haven Hell

OECD spins the wheel, picks this quarter’s victims

Antigua and Barbuda, Belize, and Seychelles are the latest targets of the OECD’s seemingly arbitrary non-compliance designation. The list also catches Panamá and Russia in the mix, the latter of which was only added sometime after its invasion of Ukraine.

We’ve covered the unfair blacklisting of small developing states by the OECD and FATF before on an episode of Caribbean Currents which you can view here:

The OECD and FATF are nothing more than vassal organizations with the implicit task of protecting the financial interests of the greater EU, so it should come as no surprise that Brussels would hand down devastating rulings such as this with no rhyme, reason, or review. Even though they purport to act in the interest of compliance and financial integrity, they’ve been caught on several occasions doing the exact opposite. The OECD reportedly lobbied Australia to take the teeth out of tax reporting legislation, that would have implicated several high-profile individuals with ties to the EU.

It’s anyone’s guess as to which territories are thrown onto the list, with several Caribbean states having been on and off of it several times. The implications of these designations are far-reaching and real, often denting the reputation of the “offending” state and jeopardizing business development in the country.

Old Lines, New Problems

Guyana bristles at Venezuela referendum

The row between Guyana and Venezuela intensified this week when Georgetown brought the matter to the courts of the United Nations. Guyana’s urgent request comes as a result of Venezuela’s proposed referendum slated for December 3rd, on the matter of the “disputed” Esequibo Region.

Guyana has gone on the offensive, describing Venezuela’s actions as part of a “sinister plan for seizing Guyanese territory” and to undermine the 1899 agreement. Venezuela intends to conduct a referendum next month, on which will be the question of citizenship for residents of the Esequibo and formal annexation.

Even though there have been some reports of the Bolivarian Republic amassing troops on its eastern flank with Guyana, an invasion seems unlikely. Venezuela’s renewed interest in carving a chunk from its neighbor is likely fueled by the recent discoveries of oil and gas reserves along the coast of this region. While Venezuela has the world’s largest proven reserves, Guyana has the largest untapped reserves per capita.

“International Law deems that the agreed or established boundaries as sacrosanct and permanent. It is regrettable that the Bolivarian Republic of Venezuela has continued for decades on a path that is in direct confrontation with this fundamental principle which has been steadfastly upheld by the International Court of Justice.”
- Hugh Todd, Minister of Foreign Affairs for Guyana

This latest round of saber-rattling is unlikely to escalate beyond posturing, primarily due to a near-global recognition of the Esequibo as Guyana territory as per the 1899 award and the US presence in the region. Both CARICOM and the Commonwealth of Nations have declared their formal support for Georgetown.

Guyana however, seems keen to head off what it perceives as a strong propaganda push from Venezuela, which has denounced Guyana’s attempts to have the referendum canceled as “tragic, if not laughable”. Given the economic state of the country, it would be a foolhardy move for Caracas to execute any such land grab let alone handle the logistics of retaining such a large swath of land, relegating this round of altercations to another war of the words.

Not-so Revolutionary Bonds

Jamaica’s much-ado about nothing

The Jamaican government made a “historic” move by issuing its first-ever Jamaican Dollar (JMD) linked international bond, totaling JMD 46.6 billion (USD 300 million). This issuance, which was oversubscribed by 1.4 times, introduces international investors to the potential Jamaican Dollar exchange rate risk.

Here’s how it works: Investors use US Dollars to invest in the offering. The initial investment is converted into Jamaican Dollars based on the prevailing exchange rate, determining the value of their investment in JMD. Importantly, while the bond is denominated in JMD interest, principal payments to bondholders are made in USD, with the amount calculated using the average JMD exchange rate over the ten business days preceding each payment date.

Considering the exchange rate dynamics this year, the JMD has been steadily depreciating against the USD since April. If this trend persists, investors may receive fewer USD when it’s time for repayments, underscoring the exchange rate risk associated with this bond.

From an investor’s perspective, this bond might not be the most attractive option, offering the lowest coupon and yield for a local currency added with an exchange rate risk. However, it does indicate some increased foreign investor confidence in the Jamaican government, as investors are willing to take on some currency exchange risk.

This bond issuance is not as ground-breaking as the government would want you to believe. It underscores a continued reliance on foreign exchange to bolster investor confidence. This is not a problem to be alleviated, but simply the world as it is.

A Drop of Culture

Food Review: Cane, Washington D.C
On this edition, we join our director, Rasheed Griffith on a culinary jaunt to the US capital where he had lunch at a renowned Caribbean restaurant.

Cane has a 4-star or higher score on most review platforms and has been even featured in the NYTimes as “one of 50 places they were excited to eat at in America”. This is as far as the accolades go, however.

"My server couldn’t understand my pronunciation of the word ‘sorrel’. I said it several times, several different ways before I just gave up and pointed to the item on the menu. I thought I was going insane.”

For science, we made Rasheed say the word ‘sorrel’ in a call just to confirm he wasn’t.
Language breakdown aside, how was the food?

“My server also couldn’t fathom my request for tamarind chutney and even informed me that it is correctly called tamarind sauce (it is not). Upon registering my disbelief at my guillotined roti, he also told me that the modification made the meal easier to eat and that this was the correct way to eat it. For anyone who’s had real roti, you can understand why this is absurdly impractical.”

He rated the roti a 2 out of 5.

“I also ordered an unremarkable plate of jerk wings, those get another 2 out of 5”.

In typical DC style, the final bill was a first-world $54. That sorrel (/ˈsôrəl/), was $8 alone.

“It tasted like syrup. I didn’t get the impression that this was freshly made.”

We asked what was his total verdict on his Caribbean dining experience at Cane.

“Well, I won’t be going back.”

CPSI Podcast of the Week

US Financial Sanctions and Dollar Dominance with Daniel McDowell
Is US Dollar dominance going away? No. Let's get that out of the way immediately. Rasheed Griffith and Daniel McDowell sit down for a much more serious and interesting conversation, grounded in the reality of economic and political history.