CARICOM Secretary-General highlights Region’s Climate Change and EU Blacklisting concerns at International Conference in Romania

Address by the CARICOM Secretary-General, Ambassador Irwin LaRocque to the International Conference on Building Resilience to Natural Disasters, Bucharest, Romania, 12 March 2019 

This forum is extremely timely and in keeping with our thrust in the Caribbean Community (CARICOM) as we have embraced building resilience, including to natural disasters, as a matter of priority. The Caribbean along with the Pacific Islands are among the most disaster-prone regions in the world.

I welcome this initiative by Romania which demonstrates your support of, your interest in, and your concern for our Community, as we face the existential challenge posed by climate change. Despite the relatively recent establishment of formal ties with CARICOM, Romania has demonstrated a keen interest in the issues that affect our Region, and has been very supportive of our efforts to combat our challenges. Minister Melescanu, I thank you and your Government most sincerely.

Small-Island and Low-Lying Coastal Developing States (SIDS) such as us in CARICOM, have been vociferous about the dangers posed by the effects of climate change. Scientific report after scientific report, put out by international agencies and respected academia, have warned of its catastrophic consequences.

During two weeks in September 2017, Hurricanes Irma and Maria demonstrated starkly what those consequences mean for Caribbean SIDS. Those events occurred with global temperatures which have risen by around one degree centigrade above pre-industrial levels.

Caribbean scientists had projected that 1.5 degrees centigrade would result in significant impacts on our region. This has been corroborated by the latest report from the Intergovernmental Panel on Climate Change (IPCC), which also showed that we will attain the 1.5 degree centigrade warmer world much sooner than anticipated - by 2030.

The IPCC agrees with the region’s scientists that such a level of warming would cause extreme temperatures, increases in the frequency and intensity of mega storms, increase in the amount of unseasonal heavy rainfall, and an increase in the intensity or frequency of droughts.

But the world continues on track towards a 3°C rise, maybe higher.

There can be no question that for us in the Caribbean, climate change is an existential threat. It has been recorded that between 2000 and 2017, Member States of our Community suffered at least seven major disasters in which damage ranged from 33% to 226% of the affected country’s GDP.

The estimated cost of reconstruction after the 2017 devastation by Hurricanes Irma and Maria has been put at US$5 billion region-wide.

A sum of that magnitude is way beyond the capacity of the Caribbean Catastrophic Risk Insurance Facility (CCRIF), which we established as the first multi-country risk pool in the world. It provides quick financial relief following a disaster. The Facility is itself in need of recapitalisation.

For us therefore, especially with the prediction of more intense and frequent mega storms, seeking to build resilience against that phenomenon is urgent.

Resilience has been defined, in the context of disasters, as the ability of a system, community or society exposed to hazards, to resist, absorb, accommodate and recover from its effects in a timely and efficient manner. This includes through the preservation and restoration of its essential basic structures and functions.

For us, resilience includes:

Social Protection for the most vulnerable persons as they are the most affected by disasters;

Safeguarding Infrastructure with the implementation of building codes to ensure human safety and welfare, as well as strengthening public infrastructure such as bridges and sea defences, which is a key component of building the Region’s resilience;

Economic Diversification which is enhanced through building economic resilience to reduce the incidents of income volatility;

Environmental Protection and;

Operational Readiness which allows for the continuity of Government and business operations.

As the Foreign Minister of Dominica, the Honourable Francine Baron stated “we need to incorporate resilience in everything that we do moving forward, from infrastructure, to our economy, to our social sectors”.

An IMF study found that for every dollar spent in building resilience, savings can be as much as seven dollars in damage and reconstruction costs after a disaster.

With that concept in mind, the CARICOM Comprehensive Disaster Management (CDM) Strategy was designed in 2001 by the Caribbean Disaster Emergency Management Agency (CDEMA). It seeks to manage hazards including hurricanes, earthquakes, floods, landslides, pandemics, through all phases of the disaster management cycle. These include prevention, mitigation, preparedness, response, recovery and rehabilitation with everyone involved - public and private sectors - all segments of civil society and the general population.

While we appreciate the assistance after catastrophic events, in order to build the resilience necessary to mitigate the effects, we must have access to concessional development financing well in advance of a disaster.

The need for building resilience is emphasised by the fact that these disasters play havoc with public finances, diverting expenditure towards recovery and rehabilitation and away from planned development. 

We find ourselves in extraordinary circumstances which therefore require extraordinary solutions.

The key factor that must be addressed is the sustainable financing of these efforts at resilience. However, there are significant factors which constrain us in that regard.

The IMF has also identified issues specific to our Member States, the majority of which are middle-income countries. According to an IMF study, CARICOM countries “exhibit extreme versions of long-term low growth, high debt, significant vulnerabilities and limited resilience to shocks which set them apart from other middle-income states”.

Most of our countries have high ratios of government debt to GDP and, in some instances, at unsustainable levels. Statistics from both the United Nations Economic Commission for Latin America and the Caribbean (UNECLAC) and the Caribbean Development Bank (CDB) point to the fact that two-thirds of the CARICOM countries have debt-to-GDP ratios above the 60% threshold, generally regarded as the benchmark for debt sustainability. It must be noted that a significant portion of the debt is due to external economic shocks and from the reconstruction after natural disasters.

Almost unbelievably, reconstruction after disasters adds to the GDP and per capita income increases.

Being labelled as middle-income countries, we cannot access concessional development financing, since the principal criterion for such funding is GDP per capita.

I cite, for example, the case of The Bahamas, classified as an upper middle-income country, which sustained cumulative damage and loss of US$700 million by hurricanes that hit between 2015 and 2017. Yet, there was no access to concessional financing due to their classification.

From our perspective, there is an urgent need for the international community and international financial institutions to change the criteria for access to concessional development financing by middle-income SIDS. Substantial weight must be accorded to our vulnerability in this regard. The OECD has begun looking at the issue. We need the support of all OECD Member States.

In seeking to reduce our vulnerabilities and build our economic resilience through diversification of our economies, financial services is a significant contributor to public finances in many CARICOM States. It is a source of funding for building resilience. It is now under threat as it confronts the unwarranted labelling of some of our countries as non-cooperative tax jurisdictions by the EU.

At this juncture, I would like to acknowledge and thank the Government of Romania for its understanding of our concerns with regard to the EU’s actions and processes, and its assistance in bringing them to the attention of the appropriate EU authorities.

The EU’s actions are despite the fact that the countries in question are not designated as non-compliant by the relevant regulatory authorities, such as the Financial Action Task Force and the OECD Global Forum.

While the CARICOM States are supportive of global initiatives to promote tax good governance, we continue to be concerned about the lack of transparency, dialogue and consultation, the extent of the reforms that have been demanded and the ambitious timeline for executing such reforms.

Blacklisting amounts to an attack on our economies.

It now appears that CARICOM Member States will be caught in an indeterminate process, dictated by ECOFIN, since the EU has already signalled its intention to update the criteria from time to time.  

This is clearly an infringement on the sovereign right of affected States to self-determination.

Blacklisted jurisdictions face major reputational damage and disruptive controls on their financial transactions. Blacklisting influences the strategies of international banks, resulting in de-risking and their withdrawal of crucial correspondent banking relationships.

The EU has also announced the intention to monitor investor citizenship and residence programmes.  The OECD has also published a report on what they deem to be potentially high-risk residence and citizenship-by-investment programmes which referenced several CARICOM Member States.   

Were it not for the revenue resulting from its Citizenship-by- Investment Programme, Dominica’s recovery from the disasters of 2015 and 2017 would not be so advanced.

Even as we thank the EU for providing some assistance for our disaster management strategy, ECOFIN appears bent on destroying our attempts at ensuring economic viability, and thus the very efforts at building resilience.

The events of recent years have clearly demonstrated that climate change and its effects are wreaking havoc in our Community. We must prepare for the next catastrophic hurricane, flood or drought since climate change is our new normal.

Building resilience requires significant investment to reduce risks and vulnerabilities to prepare for the impact of such intense climate-based events.  It demands serious and urgent action.  Our very existence is at stake.

I welcome today’s discussions and look forward to its conclusions.

I thank you.