A GRIM OUTLOOK FOR 2009 FORECASTED AT THE BAHAMAS

UNCLAS NASSAU 000056

SIPDIS

STATE FOR WHA/CAR, SANTO DOMINGO FOR USFCS, USDOC FOR ITA
MICHELLE BROOKS

E.O. 12958: N/A
TAGS: BEXP EFIN ETRD ELAB PGOV BF
SUBJECT: A GRIM OUTLOOK FOR 2009 FORECASTED AT THE BAHAMAS
BUSINESS OUTLOOK SEMINAR

REF: A. NASSAU 013

B. NASSAU 041


1. SUMMARY: Presenters at the Annual Bahamas Business
Outlook Seminar held on January 15 painted a grim financial
picture for the year ahead. Prime Minister Ingraham
delivered the key note address, noting diversification is not
necessarily the golden ticket to alleviating economic woes,
while public and private sector participants offered ideas on
how to make the economy viable once again. Each presenter
echoed the same message: the present circumstances are
bleak, the future is uncertain and one can only hope that
ingenuity will bring some reprieve to this economic storm.
The Minister of Tourism detailed plans aimed at making The
Bahamas a more affordable destination in hopes of spurring
tourism. END SUMMARY.

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OVERCAST FORECAST
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2. During the keynote speech at the annual Bahamas Business
Outlook seminar on January 15, PM Ingraham said he expects
2009 to mirror last year's economic woes. He emphasized that
diversification is not the solution to the present economic
condition, noting that countries that are diversified have
not been exempt from economic adversity. On the good news
side, the PM said tourist arrivals performed better than
projected at the end of 2008 and property values for high-end
real estate remained stable despite a decrease in property
purchased by foreigners. The PM also noted that the GCOB is
creating a capital works proposal geared towards creating
jobs and business opportunities for Bahamians.


3. Sarkis Izmirlian, Chairman and CEO of Baha Mar, decried
the high energy costs that led to a significant loss for Baha
Mar resorts on Cable Beach in 2008. The hotels were charged
a daily energy utility fee of $37 on occupied rooms, which
created a financial burden for hotel properties already
suffering from low occupancy rates. Izmirlian reported the
desire to protect jobs but noted that lay-offs are a
possibility if Baha Mar properties do not generate more
business in 2009. The resort has already decided to close
for eight weeks beginning in August of this year (reftel A).

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SILVER LINING
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4. In an attempt to attract travelers to their properties,
Baha Mar is currently working with the Ministry of Tourism to
make The Bahamas a more affordable destination. Minister of
Tourism Vincent Vanderpool-Wallace explained the GCOB is
unwilling to decrease wages for hotel employees and instead
is seeking ways to reduce the costs of air travel. The
Minister noted that discussions with U.S. Congress to grant
an international tax concession to airlines traveling to the
Caribbean have been favorable so far.


5. In an effort to boost travel and investment from other
countries, Izmirlian's team will meet with high level
officials from China in the next two weeks to discuss
partnership in the Baha Mar project (reftel B). Izmirlian
was optimistic about the upcoming meeting and said he hopes a
partnership with China will be announced within the next six
months. However, he made clear Baha Mar will continue to
operate the resort, albeit with financing by the China ExIm
bank and construction by China State Construction Co. If the
arrangement is successful the project is expected to be
completed within the next three years.


6. COMMENT: The PM is reluctant to hold an economic summit
at this time because he says there is little more the GCOB
can do to stimulate the economy given the global economic
climate. The Business Outlook conference provided clear
signals that the country should brace itself for a difficult
year. Even if Chinese tourism to The Bahamas picks up, it is
unlikely it will make up for the drop in U.S. tourism levels
to the island nation. Most Bahamians agree that the best
course of action is to brace for a bad 2009 and hope for an
upswing in the economy in 2010.
ZUNIGA-BROWN