The Caribbean Single Market needs a boost

Designed to foster and facilitate economic integration in the Caribbean and to enhance the region’s level of international competitiveness, the Caribbean Single Market and Economy (CSME) represents one of the main pillars for development and growth in the region. Twelve member states, all members of the Caribbean Community (CARICOM), agreed in 1989 to coordinate on economic, social and trade policies and to guarantee the free movement of individuals, goods, services and capital.

The CSME is, first and foremost, intended to benefit the people of the region by leveraging the positive macroeconomic impact of integration and standardized trade and labor arrangements. The Caribbean is a small market, and the regional economic vision will be greatly enhanced if there is an attractive and enabling environment for investment. International investors are often put off by small deal size and fragmentation, therefore the CSME can greatly assist with this challenge.

By focusing on three core initiatives, the CARICOM can catalyze capital inflows, invigorate the regional economy and contribute to sustainable development goals.

Improve the investment regime

The CARICOM region can do much more to attract a larger share of private global investment flows. At present, however, the Caribbean investment regime resembles a pot-pourri of complex regulations that differ from country to country.

This inconsistency undermines attractiveness and ultimately constrains economic development of the region as it deters potential investors who are looking for easily accessible markets. Harmonizing existing regulations within the CSME would lead to greater clarity and help to attract investors.

Develop a regional Caribbean stock exchange

Based on its growth in the last few years, the CARICOM region is ready to improve its integration with global financial markets. Yet, the lack of a regional platform for security trading hampers development and hinders the CSME from reaching its full potential.

Over the years, there have been many proposals for a Caribbean-wide stock exchange, and it is imperative that this be considered as a priority. A regional exchange would represent a milestone on the road towards deeper economic integration by giving issuers access to a wider capital base and expanding offerings to local and international investors alike. Lower costs and increased market liquidity would provide further incentives and allow the Caribbean to strengthen the region’s value in international money markets.

Even without a fully fledged regional exchange, there are efforts underway. For example, the Barbados-based renewables investor MPC Caribbean Clean Energy Ltd. cross-listed its shares on both the Jamaican and the Trinidad and Tobago stock exchanges.

Remove capital controls

Capital controls limit the flow of capital in and out of a country and often include restrictions on how much money can be converted into foreign currencies. Although government intervention in the countries that make up the CARICOM decreased as a result of financial liberalization in the 1990s, financial controls in the region remained extensive.

For example, the existing regime of exchange control regulations in many Caribbean countries makes it unnecessarily hard for international investors to effectively mobilize and deploy capital. Tight control mechanisms on the cross-border activities of international firms slow down the development of regional financial markets and restrict business partnerships between regional players and their international counterparts.

The Caribbean market can benefit from fully liberalizing capital movements within the CSME. The removal of capital controls would clear the way for a liquid and freely convertible currency, which would boost the inflow of global investment funds.

Walk the talk

Economic integration within the Caribbean region has been a political priority since the creation of the CARICOM in 1973 and the decision to establish the CSME in 1989. Now, more than ever, the heads of government from around the Caribbean, including Prime Minister Mia Mottley, see the CSME as a key requirement to unlock the region’s economic potential.

But despite the advantages that come with unifying a still highly fragmented market, the implementation of integration initiatives has been slow and urgently needs to pick up steam.

It’s time to turn words into deeds.

Martin Vogt, managing director at MPC Renewable Energies