Do an analysis of the Business Environment of three (3) Caribbean Islands.

Running head: DO AN ANALYSIS OF THE BUSINESS ENVIRONMENT OF

THREE (3) CARIBBEAN ISLANDS

Do an analysis of the Business Environment of three (3) Caribbean Islands.

Peta-Gay Brown

Royale College of Arts and Social Sciences

Author Note

Submitted in partial fulfillment for the requirements of the course,

Caribbean Business Environment (MGT 405); by Peta- Gay A. Brown to the

lecturer Mr. P. Mavour (BBA , M.Th, Ms.Ed), on February 11, 2011.

Correspondence concerning this paper should be addressed to Peta- Gay A. Brown,

Department of Accounting, Royale College of Arts and Social Sciences E-mail:

lupa4eve@aol.com or lupa4eve@hotmail.com.
Do an analysis of the Business Environment of three (3) Caribbean Islands. 2

There are probably more small countries in the Caribbean than anywhere else in

the world, with some countries smaller in total size than a large US city, and with as few

as 20,000 inhabitants (Ferguson, 2007).

The area commonly known as the "Caribbean" is located between the continents

of North and South America, and east of Mexico. The Caribbean islands loop up in a

quarter circle from off the coast of Venezuela (starting with Trinidad & Tobago, then

Grenada, and so on) and ending up not far from southern Florida (with the Bahamas and

Cuba). The Caribbean has an interesting and sometimes troubled history, and with the

different colonial influences (English, French, Spanish, even Portugese and Dutch) there's

a vibrant mix of cultures and business environments (Ferguson, 2007).

The business environment is constantly changing as time goes by. There are

several factors that affect the aspects of the business environment such as benefits, costs,

and risks of conducting business. Other factors that the business environment are issues

that affect operations, which includes customers, competitors, stakeholders, suppliers,

industry trends, regulations, other government activities, social and economic factors and

technological developments. There are several Caribbean islands however throughout this

paper I will only analyse the business environment of three (3); Barbados, Bahamas, and

Cuba.

The United Nations Development Programme (UNDP) has ranked Barbados as

No. 1 on its Human Development Index in the Caribbean and Latin America. Barbados

enjoys a high standard of medicine and health services overall. When it come on to

education Barbados has an exceptionally good educational system that comprises free

primary, secondary and tertiary levels of education (PricewaterhouseCoopers 2010).

Do an analysis of the Business Environment of three (3) Caribbean Islands. 3

Housing and Office Space in Barbados has well developed residential areas, and

high quality housing for executives is available for sale or rent in many locations across

the island. Good quality, air-conditioned office space is available in Bridgetown or in

several purpose-built office complexes on the outskirts of the city (Springer 2011).

Barbados enjoys crystal clear drinking water throughout the island. The Barbados

Light & Power Company provides a highly reliable electricity service throughout the

island. Domestic current will operate appliances designed for 110 volts AC, 50-cycle

supply. Barbados is criss-crossed by an extensive network of paved roads, including a

trans-island highway that links all of the main transportation arteries

(PricewaterhouseCoopers 2010).

In keeping with its reputation as a high-end tourism destination, Barbados has

well-run hotels of international standards. Barbados has dozens of restaurants, many of

which are world-class in standard.

According to Springer (2011), the Island is highly rated for the quality of its

educational, social and healthcare services and continues to enjoy stable political and

labour relations.

Barbados has been a refuge of economic, social and political stability since

achieving independence in 1966. Barbados is renowned for being a reputable

jurisdiction for secure investment. It is a mature and increasingly sophisticated

international business and financial services domicile, offering the professionalism and

high level of management necessary to sustain its development (Tricor Caribbean

Limited 2010).
Do an analysis of the Business Environment of three (3) Caribbean Islands. 4

Barbados' business environment is a diverse but stable one. Barbados is one of the

most stable locations in the world for business. Barbados enjoys a positive image in the

marketplace as a reputable International Business Centre of choice and has been

successfully attracting Foreign Direct Investment for decades, particularly from Canada

and the USA. The country is the third leading destination for Canadian direct investment

abroad, garnering Cdn$40.8 billion of direct investment from Canada at the end of 2009

(A.M. Best Company Inc. 2010).

Companies and organizations from all around the world is looking to flourish in a

highly competitive global marketplace invest in Barbados, to capitalize on the business-

friendly environment, strong human capital, high-quality infrastructure, tax advantages,

investment protection, and good quality of life (Arrindell 2011).

The Government of Barbados recognizes the tremendous potential of international

business and financial services as economic drivers and is committed to development in

these areas. Specifically, the Ministry of International Business and International

Transport has been established to oversee the future growth of the financial services

sector.

The island enjoys a reputation as a well regulated financial services jurisdiction,

committed to the exchange of information through approved channels. On April 2, 2009,

the OECD published a list of countries assessed by the Global Forum against the

international standard for exchange of tax information. Barbados was the only

independent Caribbean nation to have made that list; the only other Caribbean country to

make the list was a US dependent territory (A.M. Best Company Inc. 2010). Despite the
Do an analysis of the Business Environment of three (3) Caribbean Islands. 5

challenges posed by the international environment, Barbados continues to thrive as a low

tax international business and financial services centre. Barbados is blessed with a safe

and secure, naturally beautiful environment (Arrindell 2011).

The Bahamas takes pride in its enduring and enviable foundation of political and

social stability. Since gaining independence in 1973, The Bahamas has maintained the

fundamentals of its political heritage while exercising the legislative freedom and

integrity resulting from its autonomy. The legal system of The Bahamas, modeled on the

British system, enjoys complete independence from the political process. The multi-tiered

Judicial System includes the Magistrates Court, the Supreme Court and the Court of

Appeal (Bahamas Investment Authority 2005).

The Bahamas is a stable, developing nation with an economy heavily dependent

on tourism and offshore banking.

The Bahamian economy was weak in the years after the Second World War, but

determined efforts to develop the tourist trade have been successful, so that it contributes

more than 60% to GDP; more recently, the government has encouraged the financial

services industry, particularly banking and insurance, which also represent substantial

components of GDP.

The Bahamian economy is closely linked to that of the US, and inflation rates are

comparable. The Bahamas run a substantial trade deficit due to very high import levels.

GDP was USD8.78bn in 2008 (est) at purchasing power parity, and GDP per head was

about USD28,600 in 2008 (est) at PPP. The economy has grown steadily since 2003

when GDP expanded by 1.9% (The Central Intelligence Agency 2001).

Do an analysis of the Business Environment of three (3) Caribbean Islands. 6

The Bahamas is internationally recognized as an established international offshore

financial centre. The Government continues to welcome further growth in this sector,

which second largest source of national income (Bahamas Investment Authority 2005).

In terms of business and communications infrastructure, the Bahamas are very

well-developed. The business environment is particularly well-attuned to the finance

sector as a result of the Bahamas' long-term policy of promoting itself as an international

finance centre, accompanied by a well-developed regulatory structure; as the economy

depends heavily on the offshore financial sector; the government tries hard to avoid use

of the island for money laundering (Infoplease 2011). An Economic Impact Assessment

of the financial services industry commissioned by the Bahamas Financial Services

Board (BFSB) found that the industry contributes about 20% to the Bahamian economy

(The Central Intelligence Agency 2001). According to McCann (2010) The Bahamas

offer a good business environment.

Trinidad & Tobago is a stable democratic nation. The country gained political

independence from Britain in 1962. It became a Republic in 1976 and has remained a

member of the British Commonwealth. Trinidad & Tobago follows the Westminster

model of government, with a bicameral parliamentary system. The Trinidad & Tobago

economy is the most diversified in the English speaking Caribbean. Nevertheless it

remains heavily reliant (accounting for almost 50% of GDP) on the oil, natural gas and

petro-chemical industries.

Trinidad & Tobago’s natural gas and oil resources have enabled it to become the

Caribbean’s most industrialized nation. While oil production and refining continue to be
Do an analysis of the Business Environment of three (3) Caribbean Islands. 7

important, petro-chemicals, and to a lesser extent steel have assumed greater importance.

More recently, LNG has also assumed the role of a major export product. Trinidad &

Tobago is the world’s leading exporter of both ammonia and methanol. The country’s

fiscal, regulatory and legal environment facilitates and supports foreign investments

(Rojas-Suárez, & Elías, 2006).

Trinidad & Tobago is the largest exporter of methanol in the Western Hemisphere

and the largest source of LNG imports into the United States. Trade liberalization and

public sector rationalization are being pursued. Private enterprise is being strongly

encouraged. While there is State involvement in public utilities and in oil, gas and

petrochemicals the Government is intensifying its efforts at divesting ownership in these

key areas. The Government has made a commitment to actively encourage foreign

investment in Trinidad & Tobago (M. Hamel-Smith & Co 2009).

By the regional standards Trinidad and Tobago is recognized for it favorable

investment climate, as captured by other survey-based indicates and indicators (Rojas-

Suárez, & Elías, 2006). According to the Heritage Foundation (2001), Trinidad and

Tobago is considered one of the freest economics in the Caribbean (after Barbados).

Areas of particularly good performance include monetary policy (due to low inflation),

low barriers to capital flows and foreign investment, and moderate level of restriction.

In conclude Bahamas economy is driven by tourism and financial services;

Barbados economy is driven by international business and financial services and on the

other hand Trinidad and Tobago economy is driven by natural gas and oil resources.

Trinidad and Tobago, Bahamas and Barbados are a stable, developing nation. It is also
Do an analysis of the Business Environment of three (3) Caribbean Islands. 8

stated that Barbados has a business environment is a diverse but stable one, and is one of

the most stable locations in the world for business.

Do an analysis of the Business Environment of three (3) Caribbean Islands. 9

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