Champagne bubbles may still be coming out of your head, but 2017 started with 2016’s harsh reality. The Central Bank of Curacao and St. Maarten, CBCSM, announced last week at the very end of December, that the island of Curacao had not realized any economic growth in 2016. Without economic growth, there will be no reduction in unemployment.
For many years, Curacao’s economy did not show any growth. No matter the political signature of the governments and the integrity of institutions, like the Central Bank or local investment funds and banks, it made no difference. Curacao has no economic growth and high unemployment. If one includes estimates of the shadow economy in the observations, the situation is even worse.
Years of austerity, imposed by CFT, CBCSM, and local governments have not done anything for the people; poverty remained sheer poverty. Youths with 40-50% unemployment have no other option but to pack up and try their luck elsewhere. A child even knows that high unemployment induces outmigration. The local statistics look slightly better because of it; after all, gone is gone, and only stayers count.
The CBCSM is for some the successful watchdog for inflation and monetary stability, with the peg to the US Dollar. Employment and economic growth do not seem to be part of their mandate. In the time of recession (2008-2010), access to credit for Small and Middle size Enterprises (SME) disappeared, prolonging the crisis unnecessarily long. What was needed was the opposite, an automatic injection of money into the economy when it faced a downturn.
But, instead, credit declined when the country went into trouble. Lack of finance became part of the process of strangulation of the local economy. SME could not repay loans with an economy in recession. The CBCSM, as the stabilizer, became the automatic destabilizer, deepening the recession unnecessarily with further austerity.
Ministers of Economic Affairs of several cabinets could never come up with any remedy since they lacked the mandate and power to overrule the austerity policies of the CB and the Finance Minister.
Recovery became very slow and for many, even impossible. Massive capital destruction may delay recovery indefinitely. Many people were driven into the shadow economy, or even worse, into narco-trafficking where cold cash is readily available.
To make things worse, local capital, mostly from pension funds, was given permission to invest abroad over and beyond the legally allowed percentages. Capital flight from the island was sanctioned by the CBCSM while the local economy was hemorrhaging and desperately in need of capital. A few local banks, who monopolize the economy, figured out ways to fleece the SME with relatively exorbitant interest rates and payback conditions.
With the negative trade balance of Curacao, the pressure on the local currency to devalue is increasing, and the downward spiral to the bottom, accelerating. With inflation and the dollar peg as its holy cows, not much action to create growth and employment will be forthcoming from the CB or the government.
An entrepreneurial investment fund that injects new capital into the economy and can count on adequate and timely cooperation with officials is the only option left. Giving the local mentality and the policy of the overlords in Europe, a massive capital infusion is not likely to get off the ground ever.
By Jacob Gelt Dekker
Opinion columnist for Curaçao Chronicle