CARIBBEAN WORKERS: DOWN, BUT NOT OUT

UNCLAS SECTION 01 OF 03 BRIDGETOWN 000216 SENSITIVE SIPDIS DEPARTMENT OF LABOR FOR ILAB E.O. 12958: N/A TAGS: ECON ELAB ESSO PHUM XL SUBJECT: CARIBBEAN WORKERS: DOWN, BUT NOT OUT REF: A. BRIDGETOWN 162 ¶B. BRIDGETOWN 146 ¶C. BRIDGETOWN 144 ¶D. BRIDGETOWN 136 -------------- Summary -------------- ¶1. (U) A recent survey of labor contacts throughout our region revealed an upswing in unemployment and poverty, but also a surprising degree of optimism for the months ahead. Labor leaders report that the impact of the global recession has so far not led to feared high levels of job losses. While overall tourism arrivals are down, the cruise ship business is holding steady, with record arrivals in some countries. Construction has fallen off, as many hotel projects have been put on the back burner but not abandoned. Most labor leaders expressed cautious optimism that the region will weather the economic downturn provided it does not extend past summer, 2010. End Summary. -------------- Tourism Sector Slow, Not Stopped -------------- ¶2. (U) While the cruise ship business is largely holding steady in the Eastern Caribbean through the recession, overnight stays have begun to suffer. According to St. Lucia Labor Commissioner Ray Narcise, overnight arrivals have plummeted from an average occupancy rate of over 60 percent to as low as 25 percent for smaller properties. Similar occupancy rates are occurring throughout the region as the economic downturn has started to take hold. St. Lucia's Minister of Tourism, Allen Chastenet, announced March 19 that the government is preparing a bare bones budget, including a possible retrenchment of government employment. According to the press reports, he expects to see a contraction in the economy and, although he does want to see more layoffs in the tourism industry, he expects that may become inevitable. ¶3. (U) Local hotels received a one-time boost recently due to the West Indies- England cricket matches, which were played in three five-day test matches in Antigua, Barbados and Trinidad. The Barbados Public Workers Union General Secretary, Dennis Clarke, noted that the country's alcohol sales went through the roof due to the influx of British tourists, and many rum shops ran out of product. Local hoteliers expect more cricket visitors in June when the West Indies Team hosts other international visitors. Nevertheless, Clarke noted that the cricket tourism was a one-week event and that long-stay tourism numbers for the remainder of the year looked grim. He expressed hope that there would be some spill over effect from the April Summit of the Americas in Trinidad, and said local hotels are gearing up for additional business associated with the Summit. ¶4. (U) A number of hotels have shifted to reduced hours, rotating staff on a week-to-week basis and, in some cases, laying off workers. Many hotels are facing expensive severance payments for workers that they have laid off due to generous local labor laws. At the same time, a number of big projects across the region have been put on hold, putting downward pressure on construction jobs. The President of the St. Lucia Chamber of Commerce, Christian Husbands, confirmed in a meeting on March 19 that several high-end projects in St. Lucia are back on track, having secured new financing, including a Raffles project and the Ritz Carleton hotel and resort. Both are now expected to open in 2011, he said. Husbands has called on St. Lucia hoteliers to avoid layoffs and use the downtime to improve the human capital of their employees. He said that most hoteliers are holding onto employees for now, largely because getting good staff has always been a problem in St. Lucia where trained and competent workers are a scare commodity (to say nothing of the expense of severance packages). The biggest question mark in the region seems to be the Four Seasons project in Barbados. The developer has suspended operations, laying off 700 workers, and has not announced when or if the project will come back on track. The foreign investors, including Simon Cowell of American Idol are -- according to local press reports -- looking at initiating legal action against the developer. -------------- Unemployment Up, but Not Unsustainable BRIDGETOWN 00000216 002 OF 003 -------------- ¶5. (U) Unemployment and underemployment are rising throughout the region, but are not yet at unsustainable levels. Labor contacts throughout the Eastern Caribbean estimate that unemployment rates are running at between 15 to 20 percent, but note that the informal sector is booming and that many people are underemployed but not unemployed. Public sector employment, meanwhile, is holding steady as the government sector remains the largest employer in most of the islands of the Eastern Caribbean. ¶6. (U) According to the Barbados Labor Commissioner, Victor Burnett, unemployment has risen to 9 percent, but he was confident that Barbados's strong social safety net will prevent a rise in poverty levels. He noted that under the law, full time workers can draw unemployment benefits if they are laid off after 13 weeks of employment. He added that many older workers seem to be taking early retirement due to the economic downturn. The National Workers Union General Manager, Gabby Scott, said that foreign workers are the first to be fired, resulting in a decrease in the number of illegal workers in Barbados. ¶7. (U) Barbados opposition leader Mia Mottley has pounced on the rising unemployment figures to attack the government. Observing that unemployment has gone above 8 percent and as high as 12 percent, Mottley claimed that the tourism industry was laying workers off or putting them on short working hours. She decried the lack of a dedicated safety net and noted that the "economy is going to decline by 2 percent this year and is likely to have in the vicinity of 3,000 job losses." Our labor contacts had all indicated that they expect a modest increase in unemployment but that most companies are not laying off workers. ¶8. (U) Rising unemployment may become a bigger political issue in many Eastern Caribbean countries, several of which will be holding elections in 2010 (or this year if early elections are called). This includes Dominica and St. Vincent, which will have elections no later than 2010, and St. Lucia no later than 2011. If the unemployment rate remains above 10 percent in these countries, many local labor contacts have predicted that unemployment issues will be a key rallying point for opposition parties. -------------- - Effects of Stanford, CLICO Crises Taking Shape -------------- - ¶9. (U) Senator David Messiah, General Secretary of the Antigua Workers Union, told laboff that the economic downturn and the fallout from the Stanford SEC financial fraud case has had a big impact on the economy of Antigua and especially on employment in the hotel and financial service sector. There has been an increase in part-time work, including contract employment, which is something the unions in Antigua have been fighting for a number of years. The Stanford Development Corporation officially notified 94 more employees of redundancy due to economic circumstances on March 4. An additional 250 workers were let go earlier in February. Most of the Stanford employees will be drawing unemployment starting in April, Messiah said, as the company is unlikely to rehire many of the laid off employees. Antigua Labor Commissioner Mr. Haseath Williams concluded separately that most if not all of the Stanford Corporation staff will eventually be out of work. As Stanford is the largest private-sector employer on the island, the social impacts could be significant. ¶10. (U) In St. Vincent, President of the St. Vincent Public Sector Union Cools Van Loo said his country's pension system may be negatively affected by the recent CLICO debacle in Trinidad and the Allen Stanford financial crisis as the National Insurance System was heavily invested in both institutions. He had heard that other pension funds in the region may also be negatively affected. He worried that this may have an impact on union membership, as pensions are an important part of the union benefit package for many workers. -------------- Poverty Rising, Remittances Dropping -------------- ¶11. (U) All the countries of the Eastern Caribbean still have substantial pockets of poverty, with the poverty rate (as estimated by labor contacts) ranging from 40 percent in St. Vincent to less than 10 percent in Barbados. Labor contacts BRIDGETOWN 00000216 003 OF 003 say their greatest fear is that progress in reducing poverty in the region may be reversed due to the high cost of living and the economic impacts of the declining economy, rising unemployment, and falling remittances. Despite this fear, a recent Eastern Caribbean Central Bank study on poverty in St. Kitts reported a sustained drop in poverty, with 23 percent below the poverty line, and unemployment holding steady at 9 percent. Minister of State for Sustainable Development Nigel Carty noted that the survey was completed before an increase in the minimum wage went into affect and during a period of exceptional fuel costs, and opined that the real poverty rate was closer to 15 percent. In Antigua, poverty figures have not been updated for a number of years, but union leaders say a growing number of people are living below the poverty line. The minimum wage was recently increased to 7.50 ECD (2.7 USD) which the union feels is inadequate given the current inflation rate of 4.6 to 6 percent (the union's best estimate versus the official rate of 3.5 percent). Poverty rates are rising in St. Vincent as well, they say, as the informal sector is growing and the formal sector shrinking. ¶12. (U) The growing poverty level is being impacted also by declining remittances from abroad, due to the rising unemployment rates in the US, Canada and the UK. The Inter-American Development Bank (IDB) reported on March 17 that remittances to the Caribbean dropped by over 5 percent during the first three months of 2008. In the last quarter of 2008, remittances to the region (Caribbean and Latin America) dropped to 17 billion dollars, 2 percent less than in the same period of 2007. The IDB predicts the trend will continue throughout 2009. The IDB noted that most recent figures show a 13 percent drop for 2009, compared to 2008. They cited the economic downturn in the US, Canada, and UK, sharp spikes in food and fuel prices, a harsher climate against immigration, and the weakening U.S. dollar as the major factors behind the deterioration in remittances, which had been on a steady increase since 2001. Remittances make up around 12 percent of GDP in a number of Caribbean countries. -------------- COMMENT -------------- ¶13. (SBU) With unemployment up, poverty up, remittances down, and financial crises breaking in the region, it has been surprising to hear labor leaders viewing the scene with cautious optimism. This could be a by-product of the apocalyptic predictions for these small economies that were voiced at the start of the recession, compared to which the current problems seem minor. With tourism performing better than expected so far, and with government, unions, and businesses working together to find creative alternatives to lay-offs, the employment impacts of the global slowdown have to date been muted in the region. Labor leaders and others continue to predict that the U.S. and the world will pull out of the economic tailspin by summer 2010 at the latest, and that these small economies can quickly recover. That prediction, though, is also predicated on the assumption that the offshore banking sector holds firm. But with "Tax Haven" legislation in the works in Washington and the UK, many Eastern Caribbean countries are anxious. HARDT