The recent downgrade of Barbados by the American ratings agency Standard and Poor’s (S&P) will likely take a bite out of the island’s international business, according to a senior official of the sector.
President of the Barbados International Business Association (BIBA) Marlon Waldron today told the media launch of International Business Week at Invest Barbados, Trident Insurance Financial Centre, Hastings, Christ Church that some companies that were considering Barbados would probably have second thoughts about setting up shop here.
“If we have companies that are publicly traded come to Barbados, those companies will probably think twice because based on their risk tolerance, they will have to report that grading on their financial statements. And if the company decides a CCC rating is not in their best interest, they will not come. On the other hand, if it is a private company, the rating may not have any effect on them,” Waldron said.
The international ratings agency last week hit Barbados with another downgrade, from ‘CCC+’ to ‘CCC’, taking it deeper into the non-investment grade level often referred to as “junk” status.
Successive sovereign downgrades of Barbados forced financial services giant Sagicor Financial Corporation to move its headquarters to Bermuda last year after more than a century in Barbados, going back to when it was called The Mutual.
According to S&P, the ‘CCC’ rating meant that debts were vulnerable to nonpayment.
“In the event of adverse business, financial, or economic conditions, the owing party is not likely to have the capacity to meet its financial commitment on the obligation,” the ratings agency warned.
It further noted that Barbados’ policy challenges included “high general government debt, deficits, and debt servicing requirements, limited appetite for private-sector financing, and a low level of international reserves raising the risk to sustainability of the peg to the United States dollar”.
Despite this, the BIBA president said the local international business sector was still doing relatively well in the current environment.
“We are still seeing the normal amount of companies being incorporated as we saw in previous years. We had a fall-off in 2008 with the global recession, but things improved after that, and generally we are flat in terms of going and coming,” the BIBA official noted.
Waldron said the sector generates about $1 billion in revenue, or ten per cent of the island’s annual gross domestic product, and was responsible for generating 60 per cent of Government’s corporation tax income.
The BIBA president said International Business Week, which starts with a church service at St Matthias Anglican Church on Sunday, October 15, was aimed at debunking certain myths associated with the sector.
“We will show Barbadians that the sector is not catering to expatriates only. Our schools’ symposium scheduled for the Lloyd Erskine Sandiford Centre (LESC) on October 17 will familiarize our secondary school students with some of the work opportunities available in the sector, and our Careers Showcase at UWI on October 18 will do the same for tertiary level students.”
The week of activities also includes a two-day International Business Conference at the LESC on the theme Prospering in the Technological Era: Innovate, Integrate, Motivate on October 19 and 20. On the weekend, BIBA will be giving back to the community through its Charity Fun Walk/Run on Saturday, October 21, which will raise funds to purchase equipment for the Eunice Gibson Polyclinic. On October 28, BIBA members will conduct a clean-up project on Long Beach, Christ Church.