Tourist-Rich Islands Eschew GDP as Metric to Win Access to Aid
(Bloomberg) -- A group of wealthy Caribbean nations is trying to shake up global finance in a way that would cut dependence on China and boost their access to funding.
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Antigua and Barbuda Prime Minister Gaston Browne is leading a campaign for the United Nations to adopt a metric that measures economic fragility, which would potentially open the door to new funding.
Countries like Antigua and Barbuda are often too small to tap global bond markets but too rich to qualify for much international aid, so they have long turned to China to finance critical infrastructure. Barbados, Jamaica and the Bahamas are among the nations backing the change, which is also being supported by Norway’s former Prime Minster Erna Solberg.
“Many of our countries have been precluded from concessional funding because we’re deemed to be too wealthy,” Browne said in a telephone interview. “But when you’re struck by a climate event and you have no income and you have no savings, looking at the per capita income metric in terms of eligibility for funding is vulgar.”
The “Multidimensional Vulnerability Index” backed by Browne already has the support of 39 Small Island Developing States and enough international backing to win approval at the UN General Assembly in September, he said.
The MVI is designed to measure a country’s structural vulnerability to external shocks such as storms, climate change and financial upheaval. The index’s backers argue it should be used alongside existing benchmarks to determine funding needs.
The proposal comes as the Caribbean’s reliance on high-interest loans, coupled with frequent natural disasters, has saddled it with some of the highest debt levels in the hemisphere. The island of Barbuda was devastated by Hurricane Irma in 2017, which destroyed or damaged more than 90% of homes.
Antigua and Barbuda’s gross domestic product of about $19,000 per capita makes it wealthier than nearly all of Spanish-speaking Latin America, as well as some East European nations. The islands’ biggest foreign currency earner is tourism, while many of its neighbors also have large financial services sectors.
Chinese Money
In recent decades, China has stepped into the funding breach, investing more than $13 billion in the Caribbean since 2010, building ports, airports, roads and schools that have won it allies and put Washington on edge.
In the last few months alone, China and Chinese companies have said they will build a 20,000-seat stadium in Barbados, given Dominica — with a population of 72,000 — $10 million to support various government initiatives and offered Antigua grants for social housing.
China is also the third-largest shareholder of the Caribbean Development Bank, which helps member nations finance social and economic programs, and 10 Caribbean nations are part of China’s signature Belt and Road trade initiative.
Browne said China has offered his nation 20-year loans at 2% interest with a 5-year moratorium on the principal — better terms than the International Monetary Fund and World Bank offer.
“Our airport and seaport, those two were funded by the Chinese,” Browne said. “If we did not have that level of friendship and support from China, Antigua and Barbuda would be a significantly different place today and would be worse off for it.”
‘Malign Agenda’
China’s Caribbean expansion has caused hand-wringing on Capitol Hill.
In a statement to Congress in March, US Southern Command General Laura J. Richardson said China “is exploiting a fragile security environment and taking advantage of the region’s need for economic investment to gain influence and advance its malign agenda.”
Browne called those fears overblown and said the Caribbean was simply looking for help wherever it could find it.
“We are eternally grateful,” for China’s loans, he said. “But we will never allow China or any other country to do anything that would hurt US interests.”
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