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Caribbean Islands Foreign Trade and Balance of Payments
Barbados had expected trade to achieve its goal of export-led
economic growth by the mid-1980s. By 1985, however, Barbados had
experienced significant declines in all sectors that traditionally
accounted for the majority of its foreign exchange earnings. The
poor performance was a result of constricting regional demand for
Barbadian goods and tighter trade restrictions in the Caricom
market.
Barbados' foreign exchange earnings were derived from numerous
goods and services. Sugar and molasses accounted for nearly 80
percent of agricultural exports in 1985 and contributed 10 percent
of total merchandise exports. This sector, however, accounted for
only 4 percent of total foreign exchange earnings and has continued
to decline in importance since the early 1960s.
The manufacturing sector provided Barbados with 85 percent of
the total value of merchandise exports and 30 percent of total
foreign exchange. In 1985 electronic components represented 60
percent of total manufactured goods; secondary exports included
clothing, chemicals, and rum. Tourism was the greatest foreign
exchange earner in 1985; receipts totaled 38 percent of exported
goods and services.
Approximately 23 percent of Barbadian exports went to other
Caricom countries in 1985. Guyana and Trinidad and Tobago absorbed
68 percent of regional exports, whereas St. Lucia, Jamaica,
Grenada, and St. Vincent and the Grenadines together accounted for
21 percent. The other 11 percent went to numerous other regional
trading partners. Preliminary figures for 1986, however, suggested
that Caricom trade would fall significantly, perhaps by as much as
20 percent. The United States purchased most of Barbados'
electronic components and accounted for 18.4 percent of total
merchandise exports. Britain and Canada constituted 5.8 percent and
1.4 percent of the Barbadian export market, respectively; the
remainder was sent to numerous other countries.
Overall, exports declined 10.1 percent in 1985 because of
decreased demand for all items. Electronic components, sugar, and
clothing fell 10 percent, 12.2 percent, and 30.6 percent,
respectively. Barbados did not expect a significant change in
market conditions in the near future and was developing a market
strategy that focused on extraregional economies to absorb sugar
and manufactured products.
In addition to declining demand for Barbadian exports, the
island's foreign exchange position was also negatively affected by
currency devaluations in Trinidad and Tobago and Jamaica, as well
as by large wage increases given to workers in the Barbadian
tourist and manufacturing sectors. These two problems had a
combined effect of lowering the country's competitive position in
the region. Because of wage increases and the relatively expensive
Barbadian dollar, goods and services originating in Barbados were
more expensive than those of the country's primary competitors.
In 1985 Barbados' primary imports were capital goods, food and
beverages, fuels and chemicals, and miscellaneous durable goods;
these represented 21.7, 15.3, 10, and 5 percent, respectively, of
total imports. Other consumer and intermediate goods included
textiles, animal feeds, and other unspecified goods. The United
States provided 41 percent of total imports and was the trading
partner causing the single largest deficit. It was followed by
Caricom countries, which shipped 14.7 percent of total imports; the
remaining 29.2 percent came from numerous other countries. Britain
and Canada supplied 9.1 percent and 5.1 percent, respectively.
Trinidad and Tobago furnished 70 percent of all Caricom goods
imported by Barbados, and Jamaica supplied 21 percent; the
remaining 9 percent represented less significant trade
relationships with other regional partners.
Barbados' balance of payments position was relatively healthy
at the close of 1985, in spite of trading problems. Exports of
goods and services had exceeded imports, providing a current
account surplus of US$40.3 million. The surplus occurred when there
was a fall in both absolute exports and imports; however, strong
tourist receipts narrowed the trade deficit.
The capital account experienced heavy outlays to repay private
loans, and much of this debt was essentially replaced by public
borrowing. There was a capital account surplus of US$46 million in
1985. When added to the current account and adjusted for errors and
omissions, the overall balance of payments was US$22.4 million.
Informed observers suggested that Barbados might experience
only slight growth in the late 1980s because of declining
manufacturing trade. An increase in tourist receipts and an
improved competitive position were expected to help the country
adjust to a decline in foreign earnings, but it appeared that
increased borrowing would be needed for at least the five-year
economic planning period beginning in 1988. Such borrowing would
cause Barbados' 1985 debt service ratio of 8 percent of exports to
double by the early 1990s. Furthermore, it was expected that a
deficit in the current account in later years would cause the
overall balance of payments to become negative as well. The need to
purchase more intermediate goods and increase borrowing to maintain
development goals, as well as greater regional competition in the
tourism and manufacturing markets, was the most likely reason for
this adjustment.
Data as of November 1987
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