Barbados’ low level of international reserves is making the island less attractive to foreign investors while creating difficulty for local companies seeking to invest abroad.
This was the consensus Tuesday when the Barbados International Business Association (BIBA) staged its discussion forum at the Grande Salle, Tom Adams Financial Centre, Church Village, The City on the subject Thriving in Crisis.
There was general agreement among the panel of business executives Tom Hall and Khalil Goodman and economist Jeremy Stephen, that foreign investors were unlikely to bring money into the Barbados economy with so much uncertainty about their return on investment. At the same time, local companies were hamstrung by difficulty purchasing foreign currency in a timely fashion.
Trade specialist and moderator Lisa Cummins, put it bluntly: “We have seen a limited number of Barbadian firms expanding beyond our borders and looking to invest in other domiciles, [while] we see inward flows of investment being constrained.”
Williams Industries’ chief executive officer, Tom Hall highlighted the problems local companies faced accessing foreign exchange.
“If we wish to invest with another entity in the Caribbean, we struggle. Williams Industries struggles to get access to hard currency to expand our business,” Hall related.
The CEO, a former UBS Investment Bank worker in London, said loosening the restrictions on outward investment would benefit Barbados because “in the medium to long run you’re going to get monies coming back. That’s how you grow your economy by getting the money coming back in dividends”.
On the other side of the issue, he explained that Barbados’ foreign currency predicament was making foreign investors jittery.
“If your currency becomes very illiquid like ours now you’re going to struggle to attract the same level of investment,” Hall said.
He added that though Williams Industries group of 22 companies was still attracting foreign investment “that capital is reluctant to come into Barbados at the moment”.
Williams Industries founder and executive chairman, Ralph Bizzy Williams contributed to the debate, stressing that limited convertibility of the Barbados dollar “is one of the fundamental problems that we’re facing”.
“If an investor comes to Barbados, he wants to know that if he invests his money here that he will be guaranteed that he can take his profits [out], if he makes a profit. It’s a risk right now.
“As far as I know it has never happened but when you hear these numbers sensible investors [become] gun shy.
“They really got to have a lot of faith and a lot of love for Barbados,” the Williams Industries leader explained.
Responding to the question on convertibility of the Barbados dollar to United States currency, economist Jeremy Stephen said currently the local dollar was less convertible than the Organization of Eastern Caribbean States (OECS) dollar.
He said based on a combination of the Barbados Central Bank’s holdings of foreign currency as at June this year, and that of commercial banks there was an average US$1 for every BDS $5 in circulation on the island. However, Stephen said there was enough US currency in the Eastern Caribbean Central Bank to convert every OECS dollar available in the sub-region.
“The only problem is that the economy here is a little different to the economy in the OECS,” Stephen noted. He explained that among the positive differences was the much higher level of OECS exports.
Stephen, a Caribbean Development Bank consultant, explained: “Tourism is a greater . . . deterrent of current account surpluses than any other business you’ve got, hands down.
“It is a double-edged sword. It was meant to protect us, but now it’s stifling us.”
Stephen told those attending the discussion: “In order to address the issue of convertibility you’ve got two plans – either depend on international business or make it easier for certain flagship companies to go out and invest.”