Mr. Prosper

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  • Topic: Caribbean Community, Caribbean, CARICOM Single Market and Economy
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  • Published : February 14, 2013
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The Implications of the Current Global Financial\Economic Crisis on Integration “The Caribbean Experience”

Diedron Lewis [1]
Samantha C. Joseph[2]
Khellon Q. Roach[3]

Abstract

The current financial crisis has brought with it a number of challenges for global economies. The impact of the crisis on the survival of regional blocs has attracted much attention in international circles. More so, the interdependence and interconnectedness of global and regional economies have increased their vulnerability and exposure to the contagion effects of the present crisis. Caribbean countries are no different in this respect. The challenges coming out of the crisis have exacerbated the already difficult economic conditions within the region. Reduced exports, foreign reserves, government revenues, remittances and employment are some of the challenges facing regional economies.

In light of the crisis and its associated challenges, the Caribbean is now at a critical decision point with respect to its drive for deeper regional cooperation. The crisis threatens the core of the region’s integration initiative and also provides opportunities to strengthen regional ties. This paper, therefore, examines whether the strategic responses of individual CARICOM member states facilitates or hinders deeper integration within the region. The paper posits that the sustainability of the region’s integration initiative lies in the adoption of a pragmatic and coordinated regional response to the crisis.

Keywords: CARICOM, Global Financial Crisis, Integration

1. Introduction

The current crisis started with the failure of the Subprime Mortgage Market in the USA. There were a number of key operating factors that contributed to the current financial meltdown; including the existence of a highly innovative and deregulated global financial system, rising assets prices and readily available credit. However, while many may attribute the main cause of the global financial crisis to the lack of appropriate and effective regulatory frameworks in developed countries, others have cited the ethical failings of high powered bankers and business persons in the US.

This was further compounded by the existence of an integrated and interconnected global community which reflected the vulnerability and openness of world economies to contagion risks and shocks (Raja 2008). Thus, the financial crisis, though having its origin in developed countries, has generated a global recession that has severe consequences for the prospects of economic growth and development in developing countries.[i] Moreover, Caribbean countries which are characterized by their high degree of openness and vulnerability are also exposed to the contagion effect of the global financial crisis which threatens their economic stability and vision for deeper integration.[ii]

The current crisis has exposed the vulnerability of small states in the region reflected in a number of critical challenges these states face. Most notably, there has been a steady decline in tourism industry in the Bahamian and Antigua and Barbuda; a decline in exports of key commodities such as bauxite and alumina in Jamaica and Guyana and a decrease in remittances to Jamaica, Grenada and Guyana. These negative fallouts coupled with several others are contributing to increasing unemployment in the region and possibly even increasing the incidence of poverty in the Caribbean region. Never before, has our interconnectedness been more apparent as the virtues and dangers of globalization are now experienced in real time. This has not only been evident in the recent global financial crisis, but also by the recent outbreak of the H1N1 virus. These events have underscored that today’s risks and crises know ‘no’ borders.

Therefore, while globalization offers the prospect of a more dynamic environment in which the Caribbean might be expected to prosper, there is also greater risk of exposure to negative...
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