The Caribbean, and to a large extent Central American countries, have been one of the most exemplary regions in containing the COVID-19 from the outset (in absolute numbers and as a share of country’s total population). Nonetheless, due to its pre-existing conditions —including their blue economies, these economies have been hard hit by the pandemic, notably in terms of employment, consumption and poverty.
The two subregions are characterised by many islands, including Small Island Developing States (SIDS), whose geography dictates that their populations are mostly costal and that they are particularly vulnerable to exogenous shocks, including hurricanes and the challenges of climate change. The subregions, albeit with differences across countries, have learned to get back to business relatively promptly after natural disasters and other external shocks. These are, however, small developing economies with low levels of export diversification (in terms of goods/services and markets) and where connectivity and input costs hinder development. They face high levels of external debt, many are highly dependent on remittances, and their employment structure is dominated by small-medium enterprises (SMEs) and the informal sector. Also, among other challenges, the level of poverty in several economies has increased over the past decade.
The COVID-19 pandemic has accentuated the challenges confronted by the region and has called for new initiatives to tackle long-standing issues. Harnessing the blue economy could afford some relief to these States, including in a COVID-19 context, and especially beyond for recovery and building resilience and sustainability.
In response to these changing realities, UNCTAD and UN/DOALOS organised online consultations in April and May of 2020 with the national Focal Points of the Oceans Economy Trade Strategy (OETS) Project (Barbados, Belize and Costa Rica). The objective of the consultations was to take stock of the impacts of COVID-19 on Project activities and outputs, and to adjust these to beneficiary countries’ needs. UNCTAD and UN/DOALOS aim to maximise the Project’s contribution to COVID-19 mitigation and recovery, as well as reinforce long-term resilience of oceans-based sectors. The development of these sectors is ever more important in the context of the pandemic, as well as with respect to their long-term contribution to the sustainable development of the beneficiary countries.
The consultations uncovered several common issues affecting all OETS beneficiary countries, as well as certain impacts which were country-specific. The main findings from the consultations are the following:
Regional and national responses to COVID-19
As the first cases of COVID-19 were declared in the region, governments decided to move towards complete lockdown, most of the retail business stopped operating, public services reduced to the minimum, and various country’s borders closed.
Caribbean and Central American countries were unusually challenged in securing essential goods and services, including inbound logistics for their value chains. Many lessons learned from past large scale events, such as hurricanes, simply did not apply. For example, all countries faced challenges in the purchase of essential medical equipment, and this prompted them to develop contingency and preparedness plans for access to goods and health services, as well as measures for the movement of goods and services to avoid contagion.
In that context, governments of the two subregions adopted the same approach: to call on the countries to work together to set coherent policies on health, logistics and transport. For instance, Central American countries part of SICA negotiated and purchased together medical equipment and coordinated communication and response measures related to health and risk management. Similarly, Member States of the CARICOM agreed on a Common Public Health policy which included procurement of goods. This also set common standards for the intra-regional transportation of people and goods. At present, governments remain cautious and committed to continue working together to incrementally and safely open ports and airports.
Most countries are also implementing fiscal packages that include additional health spending, temporary cash transfers for displaced workers, credit support to small and medium-sized firms and affected sectors— such as tourism, transport, and agriculture, expansion of social safety net programs for vulnerable groups (e.g., food and income support), reduction or deferral of some taxes and electricity tariffs, and tax and custom duty waivers on essential food and hygiene product imports. In addition, central banks of some economies (e.g. Aruba, Barbados, Belize, Haiti, Jamaica, and Trinidad and Tobago) are supporting economic activity by reducing policy rates and/or reserve requirements or are providing liquidity assistance through other facilities. Also, banks and other financial institutions have put in place measures to help customers with their financial obligations, such as waiving late fees and offering short-term payment deferrals.
While these measures are helping to mitigate certain impacts of the pandemic, they alone are not sufficient to drive long-term recovery of the countries from the subregions.
Remittances are expected to fall sharply as key sources of remittances for the subregions, such as the United States, United Kingdom and Canada, have only partially lifted the lockdown measures put in place due to COVID-19. In 2018, Central America received more than US$22 billion in remittances, while in the Caribbean, remittances reached US$12.7 billion the same year. Also, due to COVID-19, in May 2020 ratings agencies such as S&P Global Ratings have downgraded the Bahamas and Belize, and lowered the credit outlooks to negative for Aruba, Barbados, the Dominican Republic and Jamaica. This risks putting greater stress on these economies’ fiscal accounts. Furthermore, the lockdown has halted tax revenues and sources of foreign exchange earnings derived from exports of goods and services (notably from industries directly linked to tourism). The latter is highly damaging for these economies as they are net importers. Lack of access to foreign currency can not only disrupt supply chains but also can produce a heavy toll on food and health security. This is because it can create delays in delivery of goods and services, and raise prices, hence reducing people’s purchasing power as many are unemployed.
In addition, many countries of the subregions face long-standing external debt. Some Caribbean countries are among the most indebted economies in the world; the average debt for the subregions reached 68.5 per cent of GDP in 2019. High levels of debt restrict countries access to credit, thus further limiting their abilities to address the impacts of COVID-19. Governments are advocating for debt relief, disaster clauses in sovereign debt contracts and changes to international aid rules. At present, some funds are finding their way to the Caribbean economies; for example, from the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB).
Sectoral challenge, the Tourism sector
The most salient common issues faced by countries in the region at the sectoral level is the impact of COVID-19 on the tourism sector – the most affected sector by the pandemic worldwide. In the subregions, since mid-March, airports and ports are closed, most restaurants and hotels have shut down, in most countries recreational tourism activities are forbidden (beaches were closed), and cruise ships are not allowed to dock. The impact has been devastating, as most countries in the region are accustomed to welcoming cruise ships every day. For Costa Rica, for example, the tourism sector has for years represented about 3.5 million visitors per year which is more than half of its population. Such a reduction in foreign visitors is affecting many industries outside tourism, including fisheries which supply hotels and restaurants. The repercussions of this are serious as the sector is not only highly integrated with many other related and ancillary sectors, but it also represents a substantial share of these countries’ GDP and employment. Most notably in the Caribbean, where the tourism sector’s share in most countries’ GDP ranges between 30 and 90 per cent (direct and indirect contribution), and the sector accounts – in most countries – for more than 50 per cent of direct employment. Women are expected to be especially affected, as about 60 per cent of employees of the tourism sector are women.
How fast the sector will recover is unknown. Prospects are not very optimistic, as for many countries in these subregions major source markets are North America and the European Union, both subregions’ hit hard by COVID-19. For example, in the United States COVID-19 cases are soaring in many states – including Florida and Texas, two of the main hubs for flights connecting the United States with the Caribbean and Central America. Expectations are particularly uncertain for Caribbean countries as these depend almost entirely on foreign visitors. Concerns have arisen regarding the impacts that a slow recovery of the sector could have on local livelihoods in terms of employment, and regarding the increased pressure this could cause on natural resources to meet food and livelihood needs.
The tourism industry is looking for innovative solutions to attract tourism in a safe and monitored fashion. One of such proposed initiatives is the implementation of health standards in tourism services that ensure the safety and health of visitors and locals alike. That is, through training of tourism industry personnel to enforce social distancing recommendations, monitor guests’ body temperature, and broadly increase health and safety measures. Among other recommendations, the mainstreaming of sustainability in tourism is seen as essential for the long-term. Such initiatives could include the promotion of blue biotrade, ecotourism, heritage, and to link tourism to ecological restoration services and responsible fisheries.
COVID-19 impacts and responses in the fisheries value chains: The case of the UNCTAD-UN/DOALOS OETS project beneficiaries
The OETS Project beneficiary countries have identified the fisheries and the seafood value chains as sectors of focus under the Project. Unlike tourism, the impact of COVID-19 and related government responses in the fisheries sector has been somewhat different across the beneficiary countries. Yet, it should be noted that all countries have taken actions to keep surveillance of illegal fishing which has been seriously undermining the regions’ fish stocks for several years. During the pandemic, and until the preparation of this brief, only occasional activities of illegal fishing have been reported in Barbados, Belize or Costa Rica.
In Costa Rica, estimates of the Ministry of International Trade (COMEX) suggest that between 50 and 60 per cent of all the country’s supply chains, most notably those led by small and medium enterprises, have been hit by COVID-19. The situation is particularly worrisome for the livestock and fishery sector where it is expected that all businesses will report losses. The business climate is very fragile, the level of business debt is rising, the informal economy has expanded, prices of fish products have fallen due to overstock of fish harvested prior to the COVID-19 and demand has declined due to confinement.
Unemployment in the fishery sectors of the subregions has risen, notably in artisanal fishing. Illegal fishing is still affecting artisanal fishing but to a lesser extent due to confinement measures. Government actions to support the sector include:
- Surveillance in Caribbean and Pacific maritime zones to tackle illegal fishing;
- Early annual fisheries closures for natural regeneration of marine species (May to August instead of June-August); and
- Implementation of programs to assist fisheries and the most vulnerable economic activities that have been affected by COVID.
The COVID-19 pandemic has had a massive impact on the economy of Belize, which relies heavily on the tourism sector. The shutdown of the tourism sector has produced significant spillover effects on other industries, as the direct, indirect and induced contribution of the tourism sector accounts for about 40 per cent of the country’s GDP. One of the most affected sectors has been fisheries which is the second most important source of employment in Belize.
In the fisheries sector, the impact of COVID-19 has been different across the various fisheries. The fishing seasons for spiny lobster and for queen conch were closed before the lockdown (i.e. in February and 27 March, respectively). Fortunately, spiny lobster and queen conch catches had also been exported before the lockdown. However, in the case of finfish species, local demand dropped by about 40 to 50 per cent, due to loss of incomes of the population compound with finfish price increase (prices reflect historically high fuel prices in Belize, despite the collapse of oil prices). Although fishers with licences are authorised to continue fishing and selling their produce in existing local markets (including informal markets), they have not been able to sell their products. Estimates suggest that fish and seafood production may have dropped by 60 per cent.
Exports are estimated to have declined since the second quarter of 2020, but no specific figures were available by June 2020. No changes are expected on imports, and no measures have been implemented to impose restrictions on food or any other goods.
Illegal fishing has been reported in San Pedro (Ambergris Key) and Belize City regions during the pandemic. This trend could be in part due to the closure of government offices responsible for the granting of fisheries licenses. Available information also suggests that these activities were for self-consumption purposes and not for commercial reasons.
Main government actions to support the fisheries sector during the pandemic include regularising licences of those whose licences expired and arresting those who were found to be fishing illegally. Unemployment relief and food assistance programs are also being implemented.
Since the country’s lockdown, unemployment has been increasing rapidly. By May 2020 about 13,000 unemployment insurance claims have been reported. The government is providing unemployment aid to the tourism sector. Other sectors, including the fisheries sector are excluded.
Until June 2020, no restrictions have been imposed on commercial fishing. The impact of the lockdown on exports is not yet known, but some disruption is expected. It has been observed that local markets are capturing some of the production originally destined for export, and e-commerce programs, such as Farmfinder Global, are supporting fishers to sell their products.
Sales are, however, limited due to the lower purchasing power of the population and the measures implemented by the government to contain the pandemic and ensure access to produce. The movement of people during the day is subject to a surname-based schedule, and a nightly curfew is being implemented.
As with many countries with similar socioeconomic profiles, and particularly SIDS, COVID-19 may have a lasting negative impact on the development of the fisheries sector in Barbados as securing the necessary investment, notably for infrastructure, will remain challenging because of the global economic contraction due to the pandemic. The situation may be further constrained by government priorities to increase funds for food security, social protection, public health and other macroeconomic concerns.
The global persistence of COVID-19 may lead to deeper contraction of the global economy, with international travel and tourism sectors being particularly affected. This is likely to produce a negative impact on the Caribbean and Central American countries as these are open economies largely dependant on tourism. Decreasing aggregated demand in these economies places significant pressure on the countries’ fiscal revenues, yet a tightening of fiscal policy will not be possible unless external assistance is provided to the governments. Indeed, fiscal revenues to cope with the challenges posed by COVID-19, and the subsequent recovery period, are at present scarce amid the limited space for financial support, lack of produce and service diversity.
Blue economies will be key components for recovery and longer-term sustainability and resilience. Strong governance frameworks for maritime spaces, resources and activities will be necessary, as will the development of sustainable ocean-based value chains. Cooperation within the region and with the international community as a whole will be more the ever necessary, including to address long-standing challenges as the ones discussed above.
OETS Project Assistance
The OETS Project seeks to support its beneficiary countries in their efforts during this challenging period and beyond. The Project will provide assistance in various strategic areas drawing on workshops and report recommendations, and guided by the needs of beneficiary countries established in consultations with them.
Overall, beneficiary countries are seeking to enhance their abilities to conduct assessments of their fish stocks, their compliance with sanitary measures in the seafood sector, and improve ocean governance frameworks—including the science-policy interface. Also, they aim to develop and implement traceability mechanisms in the seafood sector, and increase training on good production practices—such as in hygienic practices in the handling, processing, storage and transportation of products. The pandemic has also demonstrated the importance of economic diversification. Therefore, countries are considering how to develop new goods and services, labelling schemes, as well as how to penetrate new markets – including premium markets. Beneficiaries are also considering how to produce value-added products and services within their ocean-based value chains, including through the development of linkages with the private sector in the form of public-private partnerships. For example, through initiatives to identify how fisheries can contribute to government priorities regarding food security.
As capital is anticipated to remain scarce in the short to medium term, OETS beneficiaries are also examining how to leverage the Project activities with their own recovery initiatives. Consideration is being given on how to build on existing projects, for instance, the Marine Conservation and Climate Adaptation Project (MCCAP) which is currently providing training and equipment to fishers for deep slope fishing in Belize. The OETS Project could provide an opportunity to continue or complement such training, which is seen as a priority by Belize in the context of COVID-19 recovery.
Any action to support trade and market development and livelihoods must go hand in hand with good ocean governance and effective economic and trade policies. Some key elements to consider during COVID-19 mitigation and recovery include:
- Diplomatic processes, and legislative and regulatory frameworks, for the sustainable management of marine space, resources and activities at all levels (global, regional, national). These must consider commitments under ocean-related international and regional agreements;
- Institutional / Operational frameworks, so as to enable effective regulation, management and co-ordination of ocean spaces, resources and activities, including MCS at the national, regional and global levels;
Effective management, which is participatory and based on science (for example, integrated stocks and ecosystem-based assessments);
- Supply chains need to be further developed so to increase value and retain benefits closer to the resource base and, with a view to build sustainable livelihoods;
- Supply chains need to be strengthened by ensuring systems for sustainable harvesting, traceability, certification, online purchase and improved marketing and transactional processes;
- Improved sanitary measures and controls, for local, national, regional and international markets, by enhanced legislation and enforcement so to gain consumer confidence and ensure food safety; and
- Economic support and rescue packages, which need to consider vulnerable coastal populations including women, the elder and the young. This could be achieved, for example, by ensuring the inclusion of vulnerable groups in rescue programs that support responsible small-scale fishers, the transition from fresh fish to value-added processed products, measures that encourage sustainable stock management, and social relief programs.
These elements form the base of blue economies, as effective ocean and trade governance practices result in better managed resources and better conservation, yielding higher long-term natural, economic and social returns. The OETS Project is dedicated to assist its beneficiaries in this process.
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