Caribbean Islands Suffer from U.S. Problems

It doesn't take long when you arrive in Santo Domingo (Dominican Republic) to pick up on the issues that affect this country of 10 million and its economy.

The first words out of the cab driver's mouth do three things: lament the demise 40+ years ago of strongman Trujillo (who ruled for 31 years and had the local currency worth more than the USD), and lament the decline in tourism (down 30%) and the decline in "remesas" (electronic wire transfers of USD from abroad), also down 30%.

In light of the world-shaking economic problems in the USA, these island nations (and there are dozens of them in the Caribbean) are struggling with how to maintain their economies. This is easily understood in light of the economic "engine" that is the USA and its 300 million consumers. When the U.S. citizenry turns down its consumption of imported goods (raw materials, finished goods, agricultural products, etc.) it has an immediate impact on export economies, large and small. Whether that is the Dominican Republic or Brazil, the results are serious and immediate.

When the lack of capital, credit, liquidity and other financial mechanisms further exacerbate this situation, and when the tourist dollars that bankroll the casinos, fill the hotel resorts and pay the cabbies their US dollar-denominated fares disappear or diminish significantly, then there is real trouble for the islands. How this plays out for U.S. exporters, especially in light of "protectionism" that seems to be the flavor of the day from the U.S. Congress, where retaliation is easily played by the other side. Note, for example, Mexico's retaliation for the U.S. violation of NAFTA rules regarding Mexican truckers being able to move goods freely between the two countries.

How is your company responding to the threat of protectionism? To downturns in your export markets' ability to buy, pay and finance their importations? What are you doing about it? Drop me a note and let me know. Thanks for reading.

© Daniel A. Cabrera, TopExec.org, All rights reserved, 2009