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Euromoney Country Risk

Caribbean country risk survey Q1 2013 results: Bahamas retains top spot, Trinidad second

High debt levels and declining economic outlook continue to affect region’s risk profile.

Bahamas is the safest country in the Caribbean, according to country risk experts, but budget-related weaknesses and sluggish economic growth could threaten the country’s top position after confidence in the sovereign slipped in Q1-2013.

Trinidad and Tobago is now the second-safest sovereign in the Caribbean, with a global rank of 40. Investment associated with the oil and gas industries remains a key driver of economic growth and a main fiscal strength for the government of the islands.

Improved government stability and lower institutional risk had a positive bearing on Trinidad’s overall risk assessment in Q1 2013. Meanwhile, total public sector debt stood 46% of GDP in 2012, the sixth lowest in the Caribbean.

Barbados, the third-safest sovereign in the Caribbean, fell nine places in the ECR global rankings to 53. The country’s fall in the rankings came as analysts downgraded its ECR score by 2.1 points to 55.5.

ECR experts believe Barbados’s falling tourist revenues and widening budget deficit constitute a substantial threat to its risk rating. Public sector debt in Barbados is expected to reach 72.2 % of GDP in 2013, according to IMF estimates, while the deficit is expected to widen to 6.1% in 2013, from 5.7% last year.

Poor fiscal discipline is a key factor in explaining the Caribbean’s lowly position in Euromoney’s Country Risk Survey. Economic scores fell in six of the region’s 14 economies in Q1 2013: Bahamas (-1.9), Barbados, (-2.1), Belize, (-1.7), Cuba (-1.3), Grenada (-0.9) and Jamaica (-1.1).

In total, seven Caribbean countries are included in ECR tier five – the survey’s riskiest category. Jamaica, Belize, Grenada, Suriname, Antigua and Barbuda show no signs of lifting themselves out of tier five, due to crippling debt burdens and under-developed financial and political institutions.

Moody’s sees a high probability that Jamaica, Belize and Grenada will lapse into default. “The bond swaps in [Jamaica and Belize] this year didn’t go far enough to fixing the Caribbean’s unsustainable mix of debt and deficits,” says Warren Smith, the president of the Caribbean Development Bank, as reported by Bloomberg.

Belize was unable to make a $23.1 million coupon payment on its outstanding $543.8 million in 2029 super bonds last year. The situation represents a second default in a six-year period.

Political problems, ranging from worsening institutional and policymaking risks to corruption concerns, continue to undermine investor safety across large parts of the Caribbean.

The region’s high debt levels are deterring investment and constraining economic growth in the region, according to Marla Dukharan, group economist at RBC Caribbean Banking.

“Many Caribbean economies are net energy importers,” she says. “Their high energy bill has led to a strain on the balance-of-payments position in recent years. This means they are less able to invest in infrastructure projects and boost economic growth.”


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