Caribbean LED Lighting Inc, one of Barbados’ fastest growing manufacturers, has become one of the latest casualties of Government’s decision to default on its foreign debt payments.
The decision to immediately suspend debt payment to international commercial creditors was announced by Prime Minister Mia Mottley a week after taking control of the reins of Government on May 24, while pointing to an out-of-control national debt in the order of $15 billion or 175 per cent of gross domestic product.
Earlier this month Barbados TODAY reported that due to this development, the Ontario-based export credit agency Export Development Canada (EDC) implemented new restrictive measures to its credit insurance coverage for Barbados.
As a result, Canadian manufacturers and suppliers that receive assistance from EDC are demanding upfront payment from Barbadian businesses when they make an order, instead of giving them as much as a 60-day grace period.
During yesterday’s Barbados Chamber of Commerce and Industry (BCCI) luncheon at the Lloyd Erskine Sandiford Centre, which was attended by the Prime Minister, the founder and Executive Chairman of Caribbean LED, Jim Reid, complained that his seven-year-old company was finding it more expensive to do business.
Reid said while he understood why the debt restructuring was necessary, it was affecting the overall cost of his operations.
“We get suppliers from seven countries and one of those is Canada, and that contract for supply was underwritten by the export government corporation, which is now withdrawing support for Barbados, which means we cannot get any credit terms from the supplier.
“We have to pay up front. That is an extra cost to our business and we are competing with very cheap, and I would say somewhat inferior products from China,” he added.
In openly complaining that “the law of unintended consequences has hit us hard”, the businessman explained to Mottley that while “you did what you thought was right for the country and I agree with you, . . . the impact of that is hurting manufacturers here who [seek] credit terms with suppliers”.
“We understand the Prime Minister had no other choice than to do what she did and we support her decision. It is just that the pain when we are all going to carry the load, sometimes the pain can hurt individual companies differently and in this case it has really hurt us,” Reid later told Barbados TODAY, explaining that firms like his would normally be given up to 60 days credit after ordering supplies, which means they would usually be able to make payments after receiving their shipments, manufacturing their products here and selling them.
“So you are talking about five to six months before we get our money, so it makes it more difficult to do business . . . . We are growing, but this just makes it difficult for us to do business in Barbados,” he insisted.
However, in response to those concerns, the Prime Minister was adamant that her move was necessary given Barbados’ dire debt situation, which she inherited from the previous Democratic Labour Party Government.
At the same time, she apologized to local firms who were now feeling the effects of the credit default.
“I am sorry. I appreciate the difficulty, but I would like also to give you the confidence of knowing that in every phase where a country has gone through debt restructuring, as long as they have taken the steps to undergo a resumption of fitness that within two, three or four years, they access international capital markets again,” the Barbados Labour Party leader said.
“We don’t want to do like those countries that went through debt restructuring, went back to bad behaviour and found themselves in a second debt restructuring, . . . but we accept that there would have been, regrettably, some unintended consequences, because we can’t literally live how we were living, with debt, and not expect to have some kind of pain or consequences,” she added, while offering to meeting with Reid to further discuss the matter with a view to finding a possible solution.
Caribbean LED, which currently exports to 18 countries, recently won contracts in Suriname and the Bahamas.
After starting operations here in 2011, the company quickly outgrew its location and had to double its floor space in 2013, hiring about 30 people at that time. The company then moved to another location and then to its current offices at Lower Estate, St Michael in February after it was forced to double its floor space again.
The company employs 50 full-time workers and produces more than 1,000 bulbs per day.