opinion

Market upheavals threaten Caribbean financial stability

by Clarence E. Pilgrim

Caribbean countries should take precautions and brace for the potential effects which could ripple across the Caribbean Sea, from US financial markets’ upheavals. Three titans of Wall Street succumbed to what some believe were inevitable market forces, brought on primarily by management choices.

The US investment bank of Lehman Brother, filed for bankruptcy protection when it was unable to find financing within the "barren valleys" of the credit markets. It is remarkable that just a year ago it had a market capitalization of more than US$33 billion! The British bank, Barclays, was able to go "laughing all the way to the bank" when it purchased Lehman's lucrative North American investment banking and trading operations for only $250 million.

Also singing happy songs are the executives of Bank of America who are buying the once impressive and now failing Merrill Lynch, in a $50 billion deal that would create one of the largest banking institutions in the United States.

The third financial institution to take a terrible dive is the American International Group Inc. (AIG).  The US government's $85 billion rescue mission is an attempt to keep life in a financial empire which ranked among the world’s largest insurers. Even though the government will enjoy a 79.9 per cent stake and the right to remove management, it still provokes the question of whether this was a worthwhile investment of taxpayer's money, or whether the predatory companies on Wall Street should have been allowed to digest it like what has happened to other companies over the years.

These recent developments will quite likely have some degree of impact on the region, but it is yet to be determined just how these events unfolding in the United States will impact on the stock markets in the Caribbean Community. There may well be repercussions for public and private sector endeavors. A whole spectrum of services, from credit cards to institutional loans, could be affected.

It is important to remember that the dynamics of revolving economic spheres continue to influence the market viability and longevity of goods and services within the Caribbean Community (CARICOM); we are left to ponder on such factors which will impact directly on the standard of living within.

Now we are presented with a clear case of economic change, from isolation and dislocation to a single Caribbean entity which is strong and vibrant enough to chart a new direction and withstand a certain measure of negative economic forces.

However central to “change,” management lays behind the “change” problem. Simply stated, how do we get to a future state to be realized, from the present state which must be left behind? The answer is by using a clearly defined and structured, organized process to transform from one to the other.

To effectively guarantee the strength of a Caribbean Single Market and Economy (CSME) means that strong consideration must be given to the absorptive capacity of individual economic entities within CARICOM (the Caribbean Community). There is the need for the "will" of the leadership within CARICOM to prepare the essential ingredients necessary for the creation of a unified Caribbean society.

Careful planning and preparation is indeed the key to success. Understanding the nature of existing concerns will help to define what exists, determine ways to eliminate the differences and apply goals which are time relevant and results-oriented, particularly in the present global dispensation where the tides of industry and commerce, touch the shores of the entire global village.

The “fine print” for regional integration must be adjusted to these new realities.

At this time, it is important for the Caribbean region to remain mindful of the economic challenges which exist, and develop a working strategy in the event that circumstances like what is presently unfolding in the United States occur. Preparation must be the word which continues to guide our business choices and ultimately our advancement into CSME.

 

The author is an educator and senior civil servant in Antigua & Barbuda