Economy of Barbados
Encyclopedia
Since achieving independence in 1966, the island nation of Barbados
has transformed itself from a low-income economy dependent upon sugar
production, into an upper-middle-income economy based on tourism
and the offshore sector. Barbados went into a deep recession
in the 1990s after 3 years of steady decline brought on by fundamental macroeconomic imbalances. After a painful readjustment process, the economy began to grow again in 1993. Growth rates have averaged between 3%-5% since then. The country's three main economic drivers are: tourism, the international business sector, and foreign direct-investment. These are supported in part by Barbados operating as a service-driven economy and an international business centre.
. It had been recorded that minus the marshes and gully regions, during the 1630s much of the desirable land had been deforested across the entire island. Quickly Barbados was then divided into large estate-plantations and using indentured labour mainly from the British Isles for the cultivation of tobacco
and cotton
crops were first introduced. The island, facing a large amount of competition from the North American colonies
and the neighbouring West Indian islands, switched to the crop of sugar cane. Cultivation of sugar cane was quickly introduced by the exiled Jewish community which immigrated into Barbados from Dutch Brazil
during the mid-17th century. The introduction of sugar cane became the single best move for the Barbados economy at the time, the economy boomed and Barbados had become populated with so many windmills that the island had the second highest density of windmills per square mile in the world, second only to the Netherlands http://www.barbados.org/windmill.htm. For about the next 100 years Barbados remained the richest of all the European colonies in the Caribbean region due to sugar. The prosperity in the colony of Barbados remained regionally unmatched until sugar cane production caught up in geographically larger countries such as Haiti
, Jamaica
and elsewhere. Despite being eclipsed by larger makers of sugar, Barbados continued to produce the crop well into the 20th century and to this day.
With the emancipation
of African slaves in the British Empire
in 1834, thereafter many Bajans started to place more emphasis on upward mobility and strong education to combat plantation living.
During the 1930s, politicians in Barbados started a push for more self-government along with Barbados seeking to retain more of the profits from economic growth within the country. Much of the profits were being repatriated by the British government to the United Kingdom. As the 1940s-1950s rolled around, Barbados moved towards developing political ties with neighboring Caribbean islands. By 1958 the West Indies Federation
was created by Britain for Barbados and nine other Caribbean territories. The Federation was first led by the premier of Barbados, however the experiment ended by 1962. Later Barbados tried to negotiate several other unions with other islands, yet it became likely that Barbados needed to move on. The island peacefully negotiated with Britain its own independence and became a sovereign nation at midnight on 30 November 1966.
had been completed in 1961, and there-after the island could handle most modern ocean going ships for shipping sugar or handling cargoes at the port facility.
As 1970s progressed, global companies started to recognize Barbados for its highly educated population. In May 1972 Barbados formed its own Central Bank
, breaking off from the East Caribbean Currency Authority (ECCA). By 1975 the Barbadian dollar was changed to a new fixed / constant rate of exchange rate with the US$ with the rate being changed to present day US$1 = BDS$1.98 (BDS$1.00 = ~US$0.50).
By the 1980s a growing manufacturing industry was seen as a considerable earner for the Barbados economy. With manufacturing then being led by companies such as Intel Corporation
and others, the Manufacturing industry contributed greatly to the economy during the 1980s and early 1990s.
In the early 1990s the country's economy was hid hard when real GDP per capita declined by 5.1% per year between 1989 and 1992 partly due to the 1990 oil price spike. Barbados entered into an agreement with the International Monetary Fund
financial assistance after a long and hard period of negotiations between the IMF, the government of Barbados, labour unions and employers. This led to a protocol on wages and prices in 1993. This helped prevent an inflationary spiral
and restored the island's international competitiveness thereby leading to a period of long term economic growth of 2.7% between 1993 and 2000.
As one of the founding members, Barbados joined the World Trade Organization on 1 January 1995. Following the membership in the World Trade Organization (WTO), the Government of Barbados aggressively tried to make the Barbados economy fully WTO compliant. This led to collapse of much of the manufacturing industry of Barbados during the late 1990s in favour of many companies like Intel and others moving to lower cost Asian economies. During the late 1990s more companies started to become interested in Barbados' offshore sector, until it over took sugar as the new chief money maker. In 1999-2000 the Organisation for Economic Co-operation and Development
(OECD) "blacklist" was circulated with Barbados listed in error. The negative fallout stymied new investment into Barbados' offshore sector Barbados for near two years as Barbados authorities acted swiftly successfully proving that Barbados' economy was regulated sufficiently to ward off financial criminal activity and that it was not a "tax haven" as charged, but instead a low-tax regime.
As the global recession hit in 2001, the offshore sector in Barbados slightly contracted further thereby making Tourism as the new chief money maker, after having earlier eclipsed manufacturing and sugar cane. The Government of Barbados further changed legislation to transform the Barbados economy into one which fosters investment. Leading to several new Hotel developments. The government continues to try maintaining constraint from personal involvement in the Hotel activity and instead seeks private investment into the Barbados economy for future growth.
Several large hotel projects like the Port Charles Marina project in Speightstown
helped the tourism industry continue to expand in 1996-99, and more recently the new Hilton Hotel on Needhams Point, Saint Michael in 2005.
Various firms from Wall Street
in New York provide routine economic analysis of the Barbadian economy. This has included such firms as Standard & Poor's
and Moody's
.
The main factors responsible for the improvement in economic activity include an expansion in the number of tourist arrivals, an increase in manufacturing, and an increase in sugar production. Recently, offshore banking and financial services also have become an important source of foreign exchange
and economic growth
.
Economic growth has led to net increases in employment in the tourism sector, as well as in construction and other services sub-sectors of the economy. The public service remains Barbados' largest single employer. Total labor force has increased from 126,000 in 1993 to 140,000 persons in 2000, and unemployment has dropped significantly from over 20% in the early 1990s to 9.3% at the end of 2000.
The Barbados government encourages the development in: financial services, informatics, e-commerce, tourism, educational and health services, and cultural services for the future. In 2000 based on Barbados' level of growth - (at the time) Barbados was supposed to become the world's smallest developed country by 2008. This had then been restated as being achievable by around 2025.
In October 2009, Dr. Delisle Worrell, who is slated to become the replacement Governor of Barbados' Central Bank of Barbados
and current Executive Director of the Centre for Money and Finance at the UWI Cave Hill Campus revealed that "the average Barbadian now earns between BDS$200 and BDS$499 per week...."
Overall estimates of his finds showed that:
("VAT") it covers almost all items at a 15% tax rate and a 7.5% for hotel accommodations. Exported goods and services, prescription drugs and a few other specific items are zero rated under the legislation. The VAT replaced several other taxes such as: the Consumption Tax, Stamp Duty, Surcharge, Excise Tax and an Environmental Levy.
The island continues to wean off of taxes outside of the VAT system. In 2002 the Barbados government increased the level of people in Barbados who are exempt from having to pay taxes on their homes. This has steadily grown with the island heading for a possible rate of 0% taxation in all other areas.
The government has also toyed with the idea of making retirement savings as tax exempt, to encourage Barbadians to spend less on goods and to encourage Barbadians to save more income as they once used to.
Source: Barbados Government website containing the text of the majority of the above tax treaties
The bilateral tax treaty negotiated with Canada in particular has been a political-football for the government of that country. The treaty was made to allow the profits for IBCs and offshore bank
ing companies to be repatriated to Canada tax-free after paying taxes in Barbados. The aim was mainly for companies like the Canadian Imperial Bank of Commerce
(CIBC), Royal Bank of Canada
(RBC), and Scotiabank
, which (along with Barclays of the United Kingdom), when-combined control a healthy majority of Barbados' local Commercial Banking sector. In essence the treaty makes the economy of Barbados almost an unofficial part of the Canadian economy and it was aimed at allowing Canadian companies to extract profits back to Canada more easily. During the Canadian national elections of 2003 and 2006, it was cited that the former Minister of Finance and later Prime Minister Paul Martin
had international shipping companies that operated in Barbados' offshore sector under the bilateral treaty possibly saving his company from higher taxes in Canada.
") are yams, sweet potatoes, corn, eddoes, cassava, and several varieties of beans. Inadequate rainfall and lack of irrigation has prevented the development of other agricultural activity, although some vegetable farming takes place on a commercial scale. Some cotton is also grown in drier parts of the island, but until cotton can be picked by machine it is unlikely that output will rise to its former level.
Oil production is also undertaken in Barbados, with much of the on-shore activity taking place in Woodbourne, Saint Philip.
The export markets have been severely damaged by competition from cheaper Caribbean and Latin American competitors. But domestic manufacturing also faces serious potential problems, as trade liberalization means that the government can no longer protect national industries by imposing high tariffs on imported goods. Thus, Barbadian manufacturers must compete with those from other regional economies, whose wage costs and other overheads are usually much lower. The other significant industrial employer is the petroleum sector, where oil deposits are located in the southern parishes but oil has not been produced in commercial quantities; although the island's small oil refinery was closed in 1998 and refining moved to Trinidad and Tobago, where labour and other costs are cheaper.
The real problem for Barbados is that tourist facilities are too densely concentrated on the south coast, which is highly urbanized, while the Atlantic coast, with its rugged shoreline and large waves, is not suitable for beach tourism. There are few large brand-name hotels (the Barbados Hilton was closed for refurbishment in 2000) which makes marketing the island in the United States difficult. On the other hand, the absence of conglomerates and package tours results in a far greater trickle-down of tourist spending among the general population.
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Barbados
Barbados is an island country in the Lesser Antilles. It is in length and as much as in width, amounting to . It is situated in the western area of the North Atlantic and 100 kilometres east of the Windward Islands and the Caribbean Sea; therein, it is about east of the islands of Saint...
has transformed itself from a low-income economy dependent upon sugar
Sugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
production, into an upper-middle-income economy based on tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
and the offshore sector. Barbados went into a deep recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
in the 1990s after 3 years of steady decline brought on by fundamental macroeconomic imbalances. After a painful readjustment process, the economy began to grow again in 1993. Growth rates have averaged between 3%-5% since then. The country's three main economic drivers are: tourism, the international business sector, and foreign direct-investment. These are supported in part by Barbados operating as a service-driven economy and an international business centre.
Pre-independence
Since the first settlement by the British in 1625, through history the economy of Barbados was primarily dependent on agricultureAgriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
. It had been recorded that minus the marshes and gully regions, during the 1630s much of the desirable land had been deforested across the entire island. Quickly Barbados was then divided into large estate-plantations and using indentured labour mainly from the British Isles for the cultivation of tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
and cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
crops were first introduced. The island, facing a large amount of competition from the North American colonies
Thirteen Colonies
The Thirteen Colonies were English and later British colonies established on the Atlantic coast of North America between 1607 and 1733. They declared their independence in the American Revolution and formed the United States of America...
and the neighbouring West Indian islands, switched to the crop of sugar cane. Cultivation of sugar cane was quickly introduced by the exiled Jewish community which immigrated into Barbados from Dutch Brazil
Dutch Brazil
Dutch Brazil, also known as New Holland, was the northern portion of Brazil, ruled by the Dutch during the Dutch colonization of the Americas between 1630 and 1654...
during the mid-17th century. The introduction of sugar cane became the single best move for the Barbados economy at the time, the economy boomed and Barbados had become populated with so many windmills that the island had the second highest density of windmills per square mile in the world, second only to the Netherlands http://www.barbados.org/windmill.htm. For about the next 100 years Barbados remained the richest of all the European colonies in the Caribbean region due to sugar. The prosperity in the colony of Barbados remained regionally unmatched until sugar cane production caught up in geographically larger countries such as Haiti
Haiti
Haiti , officially the Republic of Haiti , is a Caribbean country. It occupies the western, smaller portion of the island of Hispaniola, in the Greater Antillean archipelago, which it shares with the Dominican Republic. Ayiti was the indigenous Taíno or Amerindian name for the island...
, Jamaica
Jamaica
Jamaica is an island nation of the Greater Antilles, in length, up to in width and 10,990 square kilometres in area. It is situated in the Caribbean Sea, about south of Cuba, and west of Hispaniola, the island harbouring the nation-states Haiti and the Dominican Republic...
and elsewhere. Despite being eclipsed by larger makers of sugar, Barbados continued to produce the crop well into the 20th century and to this day.
With the emancipation
Emancipation
Emancipation means the act of setting an individual or social group free or making equal to citizens in a political society.Emancipation may also refer to:* Emancipation , a champion Australian thoroughbred racehorse foaled in 1979...
of African slaves in the British Empire
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...
in 1834, thereafter many Bajans started to place more emphasis on upward mobility and strong education to combat plantation living.
During the 1930s, politicians in Barbados started a push for more self-government along with Barbados seeking to retain more of the profits from economic growth within the country. Much of the profits were being repatriated by the British government to the United Kingdom. As the 1940s-1950s rolled around, Barbados moved towards developing political ties with neighboring Caribbean islands. By 1958 the West Indies Federation
West Indies Federation
The West Indies Federation, also known as the Federation of the West Indies, was a short-lived Caribbean federation that existed from January 3, 1958, to May 31, 1962. It consisted of several Caribbean colonies of the United Kingdom...
was created by Britain for Barbados and nine other Caribbean territories. The Federation was first led by the premier of Barbados, however the experiment ended by 1962. Later Barbados tried to negotiate several other unions with other islands, yet it became likely that Barbados needed to move on. The island peacefully negotiated with Britain its own independence and became a sovereign nation at midnight on 30 November 1966.
Post independence
Following independence from the United Kingdom on 30 November 1966 sugar cane still remained a chief money-maker for Barbados. The island's politicians tried to diversify the economy from just agriculture. During the 1950s-1960s visitors from both Canada and the United Kingdom started transforming tourism into a huge contributor for the Barbadian economy. The man-made Deep Water Harbour port at BridgetownBridgetown
The city of Bridgetown , metropolitan pop 96,578 , is the capital and largest city of the nation of Barbados. Formerly, the Town of Saint Michael, the Greater Bridgetown area is located within the parish of Saint Michael...
had been completed in 1961, and there-after the island could handle most modern ocean going ships for shipping sugar or handling cargoes at the port facility.
As 1970s progressed, global companies started to recognize Barbados for its highly educated population. In May 1972 Barbados formed its own Central Bank
Central Bank of Barbados
The Central Bank of Barbados is the national monetary authority responsible for providing advice to government of Barbados on banking and other financial and monetary matters. The Central Bank of Barbados, was established by Act of parliament on 2 May 1972...
, breaking off from the East Caribbean Currency Authority (ECCA). By 1975 the Barbadian dollar was changed to a new fixed / constant rate of exchange rate with the US$ with the rate being changed to present day US$1 = BDS$1.98 (BDS$1.00 = ~US$0.50).
By the 1980s a growing manufacturing industry was seen as a considerable earner for the Barbados economy. With manufacturing then being led by companies such as Intel Corporation
Intel Corporation
Intel Corporation is an American multinational semiconductor chip maker corporation headquartered in Santa Clara, California, United States and the world's largest semiconductor chip maker, based on revenue. It is the inventor of the x86 series of microprocessors, the processors found in most...
and others, the Manufacturing industry contributed greatly to the economy during the 1980s and early 1990s.
In the early 1990s the country's economy was hid hard when real GDP per capita declined by 5.1% per year between 1989 and 1992 partly due to the 1990 oil price spike. Barbados entered into an agreement with the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
financial assistance after a long and hard period of negotiations between the IMF, the government of Barbados, labour unions and employers. This led to a protocol on wages and prices in 1993. This helped prevent an inflationary spiral
Hyperinflation
In economics, hyperinflation is inflation that is very high or out of control. While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases...
and restored the island's international competitiveness thereby leading to a period of long term economic growth of 2.7% between 1993 and 2000.
As one of the founding members, Barbados joined the World Trade Organization on 1 January 1995. Following the membership in the World Trade Organization (WTO), the Government of Barbados aggressively tried to make the Barbados economy fully WTO compliant. This led to collapse of much of the manufacturing industry of Barbados during the late 1990s in favour of many companies like Intel and others moving to lower cost Asian economies. During the late 1990s more companies started to become interested in Barbados' offshore sector, until it over took sugar as the new chief money maker. In 1999-2000 the Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
(OECD) "blacklist" was circulated with Barbados listed in error. The negative fallout stymied new investment into Barbados' offshore sector Barbados for near two years as Barbados authorities acted swiftly successfully proving that Barbados' economy was regulated sufficiently to ward off financial criminal activity and that it was not a "tax haven" as charged, but instead a low-tax regime.
As the global recession hit in 2001, the offshore sector in Barbados slightly contracted further thereby making Tourism as the new chief money maker, after having earlier eclipsed manufacturing and sugar cane. The Government of Barbados further changed legislation to transform the Barbados economy into one which fosters investment. Leading to several new Hotel developments. The government continues to try maintaining constraint from personal involvement in the Hotel activity and instead seeks private investment into the Barbados economy for future growth.
Several large hotel projects like the Port Charles Marina project in Speightstown
Speightstown
Speightstown , also known as Little Bristol, is the second largest town centre of Barbados. It is situated north of the capital city of Bridgetown, in the northern parish of Saint Peter....
helped the tourism industry continue to expand in 1996-99, and more recently the new Hilton Hotel on Needhams Point, Saint Michael in 2005.
Various firms from Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
in New York provide routine economic analysis of the Barbadian economy. This has included such firms as Standard & Poor's
Standard & Poor's
Standard & Poor's is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock-market indices, the US-based S&P 500, the Australian S&P/ASX 200, the Canadian...
and Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
.
Current
Offshore finance and informatics are important foreign exchange earners, and there is also a light manufacturing sector. The government continues its efforts to reduce the unacceptably high unemployment rate which it met in the 1990s, encourage direct foreign investment, and privatize remaining state-owned enterprises.The main factors responsible for the improvement in economic activity include an expansion in the number of tourist arrivals, an increase in manufacturing, and an increase in sugar production. Recently, offshore banking and financial services also have become an important source of foreign exchange
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
and economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
.
Economic growth has led to net increases in employment in the tourism sector, as well as in construction and other services sub-sectors of the economy. The public service remains Barbados' largest single employer. Total labor force has increased from 126,000 in 1993 to 140,000 persons in 2000, and unemployment has dropped significantly from over 20% in the early 1990s to 9.3% at the end of 2000.
The Barbados government encourages the development in: financial services, informatics, e-commerce, tourism, educational and health services, and cultural services for the future. In 2000 based on Barbados' level of growth - (at the time) Barbados was supposed to become the world's smallest developed country by 2008. This had then been restated as being achievable by around 2025.
Wages
Barbadians have ranked as being on the high end of wages in the Americas. The only legislated minimum wage in Barbados is for shop assistants, where wages can be no less than BDS$5.00 (~ US$2.50) per hour.In October 2009, Dr. Delisle Worrell, who is slated to become the replacement Governor of Barbados' Central Bank of Barbados
Central Bank of Barbados
The Central Bank of Barbados is the national monetary authority responsible for providing advice to government of Barbados on banking and other financial and monetary matters. The Central Bank of Barbados, was established by Act of parliament on 2 May 1972...
and current Executive Director of the Centre for Money and Finance at the UWI Cave Hill Campus revealed that "the average Barbadian now earns between BDS$200 and BDS$499 per week...."
Overall estimates of his finds showed that:
- There was a roughly 4,400 workers, who earned less than BDS$200 per week.
- There were 32,800 workers who earned between BDS$200 and BDS$499 a week.
- About 19,100 workers who earned from BDS$500 to BDS$999,
- 3,700 workers who earned between BDS$1000 and BDS$1300, and
- 4,100 who earned more than BDS$1300 a week.
General
In 1997 Barbados implemented a general taxation which covers most items. Known as the Value-Added TaxValue added tax
A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...
("VAT") it covers almost all items at a 15% tax rate and a 7.5% for hotel accommodations. Exported goods and services, prescription drugs and a few other specific items are zero rated under the legislation. The VAT replaced several other taxes such as: the Consumption Tax, Stamp Duty, Surcharge, Excise Tax and an Environmental Levy.
The island continues to wean off of taxes outside of the VAT system. In 2002 the Barbados government increased the level of people in Barbados who are exempt from having to pay taxes on their homes. This has steadily grown with the island heading for a possible rate of 0% taxation in all other areas.
The government has also toyed with the idea of making retirement savings as tax exempt, to encourage Barbadians to spend less on goods and to encourage Barbadians to save more income as they once used to.
Bilateral treaties
Barbados has several bilateral tax treaties, mostly aimed at removing double taxation on companies that operate in the Barbados economy. Since Barbados is at times considered an expensive place to conduct business, the treaties are mainly a measure to provide some savings to international businesses operating in Barbados. Some of the countries which Barbados has taxation agreements with are:- BotswanaBotswanaBotswana, officially the Republic of Botswana , is a landlocked country located in Southern Africa. The citizens are referred to as "Batswana" . Formerly the British protectorate of Bechuanaland, Botswana adopted its new name after becoming independent within the Commonwealth on 30 September 1966...
, - Canada,
- China,
- CARICOM,
- CubaCubaThe Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
, - Finland,
- MaltaMaltaMalta , officially known as the Republic of Malta , is a Southern European country consisting of an archipelago situated in the centre of the Mediterranean, south of Sicily, east of Tunisia and north of Libya, with Gibraltar to the west and Alexandria to the east.Malta covers just over in...
, - MauritiusMauritiusMauritius , officially the Republic of Mauritius is an island nation off the southeast coast of the African continent in the southwest Indian Ocean, about east of Madagascar...
, - Mexico,
- Norway,
- Sweden,
- Switzerland,
- the United Kingdom,
- the United States and
- VenezuelaVenezuelaVenezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
.
Source: Barbados Government website containing the text of the majority of the above tax treaties
The bilateral tax treaty negotiated with Canada in particular has been a political-football for the government of that country. The treaty was made to allow the profits for IBCs and offshore bank
Offshore bank
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...
ing companies to be repatriated to Canada tax-free after paying taxes in Barbados. The aim was mainly for companies like the Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce
The Canadian Imperial Bank of Commerce is one of Canada's chartered banks, fifth largest by deposits. The bank is headquartered at Commerce Court in Toronto, Ontario. CIBC's Institution Number is 010, and its SWIFT code is CIBCCATT....
(CIBC), Royal Bank of Canada
Royal Bank of Canada
The Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,...
(RBC), and Scotiabank
Scotiabank
The Bank of Nova Scotia , commonly known as Scotiabank , is the third largest bank in Canada by deposits and market capitalization. It serves some 18.6 million customers in more than 50 countries around the world and offers a broad range of products and services including personal, commercial,...
, which (along with Barclays of the United Kingdom), when-combined control a healthy majority of Barbados' local Commercial Banking sector. In essence the treaty makes the economy of Barbados almost an unofficial part of the Canadian economy and it was aimed at allowing Canadian companies to extract profits back to Canada more easily. During the Canadian national elections of 2003 and 2006, it was cited that the former Minister of Finance and later Prime Minister Paul Martin
Paul Martin
Paul Edgar Philippe Martin, PC , also known as Paul Martin, Jr. is a Canadian politician who was the 21st Prime Minister of Canada, as well as leader of the Liberal Party of Canada....
had international shipping companies that operated in Barbados' offshore sector under the bilateral treaty possibly saving his company from higher taxes in Canada.
Agriculture
About 16,000 hectares (39,500 acres), or 37.2% of the total land area, are classified as arable. At one time, nearly all arable land was devoted to sugarcane, but the percentage devoted to ground crops for local consumption has been increasing. In 1999, 500,000 tons of sugarcane were produced, down from the annual average of 584,000 tons in 1989–91. In 2001, sugar exports amounted to US$22 million, or 8.4% of total exports. Major food crops ("Ground provisionsGround provisions
Ground provisions is the term used in West Indian nations to describe a number of traditional vegetable and fruit staples that are planted in the ground, such as yams and cassava. They are often cooked and served as a side dish in local cuisine. Caribbean recipes will often simply call for ground...
") are yams, sweet potatoes, corn, eddoes, cassava, and several varieties of beans. Inadequate rainfall and lack of irrigation has prevented the development of other agricultural activity, although some vegetable farming takes place on a commercial scale. Some cotton is also grown in drier parts of the island, but until cotton can be picked by machine it is unlikely that output will rise to its former level.
Animal husbandry
Livestock rearing isn't a major occupation in Barbados, chiefly because good pasture has always been scarce & imported animal feed is expensive.The island must import large quantities of meat and dairy products. Most livestock is owned by individual households. Estimates for 1999 showed 23,000 head of cattle, 41,000 sheep, 33,000 hogs, 5,000 goats, and 4,000,000 chickens. Poultry production in 1999 included 9,000 tons of meat and 1,000 tons of hen eggs. Apart from self-sufficiency in milk and poultry, the limited agricultural sector means that Barbados imports large amounts of basic foods, including wheat and meat.Fishing
The fishing industry employs about 2,000 persons, and the fleet consists of more than 500 powered boats. The catch in 2000 was 3,100 metric tons. Flying fish, dolphin fish, tuna, turbot, kingfish, and swordfish are among the main species caught. A fisheries terminal complex opened at Oistins in 1983.Forestry
Fewer than 20 hectares (50 acres) of original forests have survived the 300 years of sugar cultivation. There are an estimated 5,000 ha (12,350 acres) of forested land, covering about 12% of the total land area. Roundwood production in 2000 totaled 5,000 cu m (176,500 cu ft), and imports amounted to 3,000 cu m (106,000 cu ft). In 2000, Barbados imported $35.3 million in wood and forest products.Mining
Deposits of limestone and coral were quarried to meet local construction needs. Production of limestone in 2000 amounted to 1.5 million tons. Clays and shale, sand and gravel, and carbonaceous deposits provided limited yields. Hydraulic cement production totalled 267,659 tons in 2000, up from 106,515 in 1996.Oil production is also undertaken in Barbados, with much of the on-shore activity taking place in Woodbourne, Saint Philip.
Manufacturing
The manufacturing sector in Barbados has yet to recover from the recession of the late 1980s when bankruptcies occurred and almost one-third of the workforce lost their jobs. Today, approximately 10,000 Barbadians work in manufacturing. The electronics sector in particular was badly hit when the U.S. semi-conductor company, Intel, closed its factory in 1986. Leaving aside traditional manufacturing, such as sugar refining and rum distilling, Barbados's industrial activity is partly aimed at the local market which produces goods such as tinned food, drinks, and cigarettes. Many industrial estates are located throughout the island. A cement factory is located in St.Lucy.The export markets have been severely damaged by competition from cheaper Caribbean and Latin American competitors. But domestic manufacturing also faces serious potential problems, as trade liberalization means that the government can no longer protect national industries by imposing high tariffs on imported goods. Thus, Barbadian manufacturers must compete with those from other regional economies, whose wage costs and other overheads are usually much lower. The other significant industrial employer is the petroleum sector, where oil deposits are located in the southern parishes but oil has not been produced in commercial quantities; although the island's small oil refinery was closed in 1998 and refining moved to Trinidad and Tobago, where labour and other costs are cheaper.
Construction
A construction boom, linked to tourism and residential development, has assisted the recovery of a large cement plant in the north of the island that was closed for some years and reopened in 1997.Tourism
Tourism is Barbados's crucial economic activity and has been since the 1960s. At least 10 percent of the working population (some 13,000 people) are employed in this sector, which offers a range of tourist accommodations from luxury hotels to modest self-catering establishments. After the recession years, tourism picked up again in the mid-1990s, only to face another slowdown in 1999. This drop was in part due to increasing competition from other Caribbean countries such as the Dominican Republic, and in part to a reduction in visits from cruise ships as they shifted to non-Caribbean routes or shorter routes such as the Bahamas. Cruise ship visitors totalled 445,821 in 1999, a reduction from 517,888 in 1997, but stay-over visitors rose to 517,869 in 1999, setting a new record. Overall, the country witnessed over US$700 million in tourism receipts in 1999.The real problem for Barbados is that tourist facilities are too densely concentrated on the south coast, which is highly urbanized, while the Atlantic coast, with its rugged shoreline and large waves, is not suitable for beach tourism. There are few large brand-name hotels (the Barbados Hilton was closed for refurbishment in 2000) which makes marketing the island in the United States difficult. On the other hand, the absence of conglomerates and package tours results in a far greater trickle-down of tourist spending among the general population.
Informatics
Informatics employed almost 1,700 workers in 1999, about the same number as the sugar industry. The island has been involved in data processing since the 1980s and now specializes in operations such as database management and insurance claims processing. Costs in Barbados are higher than elsewhere in the Caribbean (although still only half of costs in the United States), but the island offers strong advantages such as a literate English-speaking workforce and location in the same time zone as the eastern United States. Despite these factors, employment has fallen in recent years, reflecting increasing mobility on the part of foreign companies, which frequently relocate to lower-cost areas.Financial services
The financial services sector has also faced problems as licenses issued to new financial companies have slowed down since 1998. There are an estimated 47 offshore banks, as well as hundreds of other insurance and investment companies, all catering to overseas clients. Figures are hard to track, but it is estimated that these financial activities earned BDS$150 million in foreign earnings in 1995. In 1998, approximately 7,500 people were employed in the banking and insurance sector. The financial sector is also under threat of sanctions from the EU and the Organization for Economic Cooperation and Development (OECD), both of which have expressed concerns about money laundering, tax evasion, and other financial improprieties in Caribbean offshore centres.Rum
Barbados has three commercial rum distilleries: West Indies Rum Distillers Ltd, Mount Gay Rum and Four Square. There is also St. Nicholas Abbey, a smaller boutique operation.Retail
Retailing is an important economic activity, especially in Bridgetown where there are large department stores and supermarkets. In the countryside, most stores are small and family-run. Some 18,000 people work in the retail sector.Facts & figures
GDP (purchasing power parity):- $5.466 billion (2008 est.)
- county comparison to the world: 157
GDP (official exchange rate):
- $3.777 billion (2008 est.)
GDP - real growth rate:
- 1.5% (2008 est.)
- county comparison to the world: 174
GDP - per capita (PPP):
- $19,300 (2008 est.)
- county comparison to the world: 63
GDP - composition by sector:
- agriculture: 6%
- industry: 16%
- services: 78% (2000 est.)
Labor force:
- 128,500 (2001 est.)
Labor force - by occupation:
- agriculture: 10%
- industry: 15%
- services: 75% (1996 est.)
Unemployment rate:
- 10.7% (2003 est.)
Population below poverty line:
- NA%
Household income or consumption by percentage share:
- lowest 10%: NA%
- highest 10%: NA%
Inflation rate (consumer prices):
- 5.5% (2007 est.)
Budget:
- revenues: $847 million (including grants)
- expenditures: $886 million; including capital expenditures of $NA (2000 est.)
Central Bank discount rate:
- 12% (January 2008)
- county comparison to the world: 24
Agriculture - products:
- sugarcane, vegetables, cotton
Industries:
- tourism, sugar, light manufacturing, component assembly for export
Industrial production growth rate:
- -3.2% (2000 est.)
- county comparison to the world: 161
Electricity - production:
- 1.003 billion kWh (2007)
- county comparison to the world: 145
Electricity - consumption:
- 939.9 million kWh (2007)
- county comparison to the world: 145
Electricity - exports:
- 0 kWh (2003)
Electricity - imports:
- 0 kWh (2003)
Oil - production:
- 1111 oilbbl/d (2007)
- county comparison to the world: 104
Oil - consumption:
- 8674 oilbbl/d (2006 est.)
- county comparison to the world: 149
Oil - exports:
- 1750 oilbbl/d (2005)
- county comparison to the world: 116
Oil - imports:
- 10710 oilbbl/d (2005)
- county comparison to the world: 136
Oil - proved reserves:
- 2200000 bbl (349,772,049 l) (1 January 2008 est.)
- county comparison to the world: 93
Natural gas - production:
- 29.17 million cu m (2006 est.)
- county comparison to the world: 85
Natural gas - consumption:
- 29.17 million cu m (2006 est.)
- county comparison to the world: 109
Natural gas - exports:
- 0 cu m (2007 est.)
- county comparison to the world: 200
Natural gas - imports:
- 0 cu m (2007 est.)
- county comparison to the world: 199
Natural gas - proved reserves:
- 141.6 million cu m (1 January 2008 est.)
- county comparison to the world: 101
Exports:
- $385 million (2006)
- county comparison to the world: 170
Exports - commodities:
- manufactures, sugar and molasses, rum, other foods and beverages, chemicals, electrical components
Exports - partners:
- Trinidad and Tobago 15.5%, Jamaica 13.5%, UK 9.4%, US 9.3%, Brazil 8.3%, Saint Lucia 7.2%, Saint Vincent and the Grenadines 4.5% (2007)
Imports:
- $1.586 billion (2006)
- county comparison to the world: 158
Imports - commodities:
- consumer goods, machinery, foodstuffs, construction materials, chemicals, fuel, electrical components
Imports - partners:
- US 37.7%, Trinidad and Tobago 22.6%, UK 5.9% (2006)
Debt - external:
- $668 million (2003)
- county comparison to the world: 159
Economic aid - recipient:
- $2.07 million (2005)
Currency (code):
- Barbadian dollar (BBD)
Exchange rates:
- Barbadian dollars per US dollar - NA (2007), 2 (2006), 2 (2005), 2 (2004), 2 (2003)
Fiscal year:
- 1 April - 31 March
Further reading
- The Commonwealth of Nations - Barbados economy
- Totally Barbados - Economy – Barbados Private Sector Trade Team
See also
- BarbadosBarbadosBarbados is an island country in the Lesser Antilles. It is in length and as much as in width, amounting to . It is situated in the western area of the North Atlantic and 100 kilometres east of the Windward Islands and the Caribbean Sea; therein, it is about east of the islands of Saint...
- Barbadian dollar
- Central Bank of BarbadosCentral Bank of BarbadosThe Central Bank of Barbados is the national monetary authority responsible for providing advice to government of Barbados on banking and other financial and monetary matters. The Central Bank of Barbados, was established by Act of parliament on 2 May 1972...
- List of Barbadian companies
External links
- CIA World Factbook
- Barbados Eligible For Dividend Tax Benefits, Says IRS - Tax-News.com
- Standard & Poor's review on B'dos Economy -- Positive points - 27 July 2006
- WTO reports on trade policy of Barbados - 18 September 2008
- WTO announces role for Barbados in Task Force - February, 09th, 2006
- A summary of the Budget - The B'dos Annual budget for the year 2006-2007
- Value Added Tax refunds total $44.2M (US$22.1M)
- Barbados 2005 economic performance to be reviewed