Caribbean Ratings Reflect Diversity of Creditworthiness, Says S&P
by Leroy Baker, Tax-News.com, New York
05 October 2004

The differences in the sovereign ratings in the Caribbean region reflect the very different fiscal circumstances of individual states and the quality of their economic management in general, according to a recently published commentary by Standard & Poor’s.

As a consequence, both the public and private sectors will face tough challenges in the years ahead as the region’s economies begin to integrate, explained Standard & Poor's credit analyst Joydeep Mukherji.

"The Caribbean region has been growing slower in recent decades than many other parts of the developing world,” he commented, adding:

“The average annual per capita Caribbean GDP growth rate was less than 2% over the last 25 years, below the average growth rate for other developing countries, especially in Asia.”

However, growth in the Caribbean was higher than that of Latin America, where average annual per capita growth was less than 0.5%, Mukherji observed.

The analysis went on to note that improvements in Caribbean ratings will depend on individual states’ ability to bring down public debt - a task that is likely to be complicated by the need for a shift away from trade taxes to consumption-based revenues in line with international free trade agreements such as the FTAA (Free Trade Agreement of the Americas) and CSME (Caribbean Single Market Economy).

Mukherji also envisages challenges for the private sector in the region.

“The long-term evolution of sovereign ratings in the Caribbean will depend partly upon the ability of the private sector to restructure in response to global changes and contribute to better GDP growth,” he observed.

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