The econ­o­my of Bar­ba­dos seems to have fall­en from the height of pros­per­i­ty it en­joyed ten years ago. In 2003, a sur­vey by Unit­ed King­dom-based The Econ­o­mist mag­a­zine showed that on­ly the Unit­ed States, Cana­da and the Ba­hamas had high­er in­comes per capi­ta in the west­ern hemi­sphere.

Bar­ba­dos was ranked as a mid­dle-in­come coun­try with high wages and a sta­ble econ­o­my.

To­day, those times seem like a dis­tant mem­o­ry.

The Bar­ba­dos Cen­tral Bank of Bar­ba­dos re­port­ed on Tues­day that the econ­o­my there was es­ti­mat­ed to have con­tract­ed by 0.6 per cent in the first half of 2013, fol­low­ing no re­al growth in 2012.

The rate of un­em­ploy­ment was 11.6 in 2012 com­pared to 11.3 per cent in 2012, its Cen­tral Bank stat­ed.

Against this bleak eco­nom­ic back­ground, com­pa­nies from T&T are find­ing it dif­fi­cult to op­er­ate in Bar­ba­dos.

Ger­ry Brooks, chief op­er­at­ing of­fi­cer, ANSA McAL Group, told the Busi­ness Guardian on Mon­day that the eco­nom­ic sit­u­a­tion in Bar­ba­dos is "dif­fi­cult."

"Bar­ba­dos finds it­self in a dif­fi­cult eco­nom­ic po­si­tion. Growth has been less than one per cent over the last three years. The chal­lenge is an an­nu­alised prob­lem of spurring growth, which can be­come a sys­temic prob­lem. That is one of the chal­lenges. Right now un­em­ploy­ment is 11.6 per cent and it is cer­tain­ly high and not de­clin­ing. There is even the po­ten­tial to go even high­er," Brooks said.

He said Bar­ba­dos has mul­ti­ple prob­lems of low growth, rel­a­tive­ly high un­em­ploy­ment and high debt lev­els and that ANSA McAL's op­er­a­tions in Bar­ba­dos are not im­mune from the coun­try's prob­lems.

"Debt lev­el is around 83 to 85 per cent of gross do­mes­tic prod­uct (GDP). If you look at tourist ar­rivals, re­mit­tance and fi­nan­cial ser­vices, none of those has been able to re­vive suf­fi­cient­ly to con­tin­ue to spur this growth and to con­tin­ue to sus­tain it. In this con­text, all busi­ness­es is Bar­ba­dos are chal­lenged. Our busi­ness is not im­mune from that."

Brooks said that the ANSA McAL group had made sig­nif­i­cant in­vest­ments in Bar­ba­dos, in­clud­ing the ac­qui­si­tion of Bry­dens Bar­ba­dos, new tech­nol­o­gy, (Tech One ERP) and the re­cent re­pur­chase of shares.

He said that the in­vest­ment rep­re­sent­ed mil­lions of dol­lars in vi­tal for­eign ex­change go­ing in­to the Bar­ba­dos econ­o­my.

Brooks said: "We are com­mit­ted to the de­vel­op­ment of Bar­ba­dos, our peo­ple and busi­ness there. We rec­og­nize that the eco­nom­ic mod­el in small, vul­ner­a­ble states must change. Bar­ba­dos must al­so look again at its mod­el to en­sure that a cycli­cal eco­nom­ic chal­lenge does not be­come sys­temic. Each ter­ri­to­ry must al­so relook its cost pro­file as it seeks to be at­trac­tive as a des­ti­na­tion to at­tract fu­ture in­vest­ment flows and for­eign di­rect in­vest­ment."

The ANSA McAL ex­ec­u­tive said coun­tries like Chile, Co­lum­bia Pana­ma and oth­er re­gion­al des­ti­na­tions in­clud­ing Trinidad have sharp­ened both fis­cal in­cen­tives and "ease of do­ing busi­ness" to at­tract more cap­i­tal.

Brooks said: "Re­spect­ful­ly, all of the so­cial part­ners in Bar­ba­dos must look again at the costs and pro­duc­tiv­i­ty re­la­tion­ship. Quite sim­ply, costs are too high com­par­a­tive­ly. We are pre­pared to be part of a con­struc­tive di­a­logue on this. We have tak­en this ap­proach and will con­tin­ue to try to be in­no­v­a­tive as we work with our teams to bet­ter ser­vice our cus­tomers and add val­ue and en­sure the longevi­ty of our busi­ness­es."

ANSA McAL's dis­tri­b­u­tion arm in Bar­ba­dos is Bry­dens.

"Our dis­tri­b­u­tion busi­ness is for­mer­ly Bry­dens and Sons, A&R Tem­pro, and Stokes and By­noe have been ra­tio­nalised in­to Bry­dens. One of the rea­sons we did that is to im­prove the ef­fi­cien­cy around the busi­ness, take cost out of the busi­ness and al­low the busi­ness to be more com­pet­i­tive and to be able to pro­vide greater val­ue to com­peti­tors."

Fi­nan­cial ser­vices

Brooks spoke of the group's fi­nan­cial ser­vices busi­ness in Bar­ba­dos, which has the in­sur­ance arm and fi­nan­cial ser­vices com­pa­ny.

"One is Con­sol­i­dat­ed Fi­nance Com­pa­ny (CFC) and the oth­er is Bry­dens In­sur­ance, and we are ac­tu­al­ly mak­ing some changes in those busi­ness­es where they will be close­ly aligned and come un­der ANSA Mer­chant Bank, which will al­low us to be far greater ef­fi­cient and or­gan­i­sa­tion."

The third arm of the busi­ness in Bar­ba­dos is McE­near­ney Qual­i­ty, which sells cars, he said.

"The busi­ness­es have been work­ing hard to sus­tain their cur­rent po­si­tions, but there re­al­ly has been an ab­sence of growth in those busi­ness­es as has been the case with many oth­er busi­ness­es in Bar­ba­dos," Brooks said.

He said that the cost of op­er­at­ing in Bar­ba­dos is very high.

"Bar­ba­dos has to make a de­ci­sion around its labour rate in­creas­es be­cause no­body is go­ing to in­crease their in­vest­ment in Bar­ba­dos, whether it is in ICT or tourism, un­less it makes sense cost com­pet­i­tive­ly."

Re­viv­ing the econ­o­my

For the Bar­ba­dos econ­o­my to be re­vived, Brooks said there are steps the gov­ern­ment must take.

"Whether it is the fi­nan­cial ser­vices mod­el, whether it is the tourism mod­el, the gov­ern­ment has to find a for­mu­la­tion to re­turn the econ­o­my to growth," Brooks said. "Part of that in­cludes how Bar­ba­dos works with oth­er economies and po­si­tions it­self to move the econ­o­my for­ward."

Brooks said the group's busi­ness in Bar­ba­dos con­tin­ues to re­main chal­lenged.

He said the ANSA McAL Group looks at its Bar­ba­dos op­er­a­tions strate­gi­cal­ly.

"We look at Guyana, we look at Suri­name, we look at the East­ern Caribbean ter­ri­to­ries, we look at non-Cari­com ter­ri­to­ries and ask: where does it make the best sense to lo­cate a new busi­ness? In terms of new busi­ness, we are go­ing to have to take a look at the busi­ness and see which is­land is most cost com­pet­i­tive, with the best ca­pac­i­ty for growth and make the in­vest­ment on that ba­sis."

Brooks said the ANSA McAL Group wants to do more than sur­vive in Bar­ba­dos.

"We want growth, we are in the busi­ness of ex­pan­sion and lever­ag­ing our ca­pac­i­ty. We want to use our re­gion­al foot­print to move it for­ward."

Re­pub­lic Bank

Der­win How­ell, ex­ec­u­tive di­rec­tor, Re­pub­lic Bank, told the Busi­ness Guardian on Tues­day by phone that the Bar­ba­di­an econ­o­my is go­ing through a "storm", but added that Re­pub­lic Bank's sub­sidiary there is hold­ing its mar­ket share dur­ing these chal­leng­ing times.

"The econ­o­my has been pret­ty stag­nant last cou­ple years. The fig­ures of Bar­ba­dos Cen­tral Bank are not very en­cour­ag­ing. The chal­lenge is: how do we man­age a bank in that type of sit­u­a­tion?" How­ell said.

He said whether an econ­o­my is go­ing through a boom or bust, the bank­ing sec­tor is al­ways one of the last to feel the ef­fects.

"When we en­tered in Bar­ba­dos eight or nine years ago, it was at the tail of a good pe­ri­od. We had a cou­ple good years there and then things changed. Bank­ing tends to lag the econ­o­my. So when the econ­o­my gets go­ing, it takes a lit­tle while to reach the bank­ing sec­tor. Sim­i­lar­ly, when an econ­o­my goes in­to de­cline, the ef­fects, like re­duced cred­it, take a while to im­pact."

He said Re­pub­lic Bank Bar­ba­dos' mar­ket share is just above 20 per cent.

"We are hold­ing our own, we are start­ing to gain mar­ket share, but these things move month to month. The mar­ket is a very slow one right now. The Gov­ern­ment is un­der pres­sure to bal­ance its books and bal­ance the deficit. At the end of March, there was an eight per cent de­cline in tourist ar­rivals, which is the main dri­ver of the econ­o­my," How­ell said.

He said the de­cline of Bar­ba­dos' tourist ar­rivals is sig­nif­i­cant as "pret­ty much every­one in Bar­ba­dos de­pends on the tourist in­dus­try."

"Whether it is the guy who sells the air con­di­tion unit to the ho­tel, or the peo­ple who sell fish to the ho­tel or those who pro­vide beer to the ho­tel. An ex­am­ple is when Al­mond Ho­tel was closed down, banks saw a big drop in busi­ness. Those are the kinds of things that af­fect banks."

He said Re­pub­lic Bank has been work­ing with cus­tomers who have been af­fect­ed by the bad econ­o­my.

"A num­ber of our cus­tomers suf­fered some re­duc­tion in in­come, and that re­duc­tion is a re­sult of sev­er­al things. They raised VAT from 15 to 17.5 per cent. There has al­so been salary re­duc­tion. In a lot of the ho­tel ar­eas, rather than fire staff, they put them on re­duced work hours."

He said there has been an in­crease in non-per­form­ing loans be­cause peo­ple have had these salary cuts or lost their jobs.

"The in­dus­try would have seen an up­ward trend. What we have been able to do, es­pe­cial­ly with mort­gages, is to re­struc­ture loan fa­cil­i­ties in line with in­come. How­ev­er, if you have no in­come, there is no way to deal with that, but that has been in the sig­nif­i­cant mi­nor­i­ty.

"The bank­ing in­dus­try there is high­ly cap­i­talised so we can get through the storm. It is sol­id. It re­mains a chal­lenge to run a bank in any de­clin­ing econ­o­my. We have very sea­soned bankers run­ning our sub­sidiary here. Our staff here is around 500 em­ploy­ees."

How­ell said there are still signs of eco­nom­ic ac­tiv­i­ty, like peo­ple buy­ing cars and build­ing hous­es.

"Of course, you have four or five banks fight­ing for those cus­tomers. So where­as peo­ple would have bought cars every five years, they now buy cars every sev­en years."

How­ell be­lieves the Bar­ba­dos' econ­o­my will re­main stag­nant for some time.

"Cer­tain­ly, for the next year or so, things will re­main the same. We have to con­tin­ue to work hard by go­ing out there and get the good loans. We have to man­age cus­tomer re­la­tion­ships and un­der­stand their needs, both at the per­son­al and com­mer­cial lev­els. We al­so have to keep our eyes open for the good op­por­tu­ni­ties that come along."

He said Re­pub­lic Bank made a good choice by en­ter­ing the Bar­ba­dos mar­ket.

"Bar­ba­dos is one of the larg­er economies in the re­gion. When you look at our Bar­ba­dos unit in our en­tire busi­ness, it varies be­tween the sec­ond and third largest bank­ing con­trib­u­tor. It is a good econ­o­my, but it is now go­ing through its chal­lenges. One of the ben­e­fits of be­ing in a con­glom­er­ate is that when things are not good in an area, an­oth­er part of the group take up the slack. The Bar­ba­dos de­ci­sion was a good one."

Re­pub­lic Bank in Bar­ba­dos

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In Ju­ly 2003, the Re­pub­lic Bank ac­quired a 57.23 per cent ma­jor­i­ty share­hold­ing in Bar­ba­dos Na­tion­al Bank Inc. The share­hold­ing in­creased to 65.1 per cent in Oc­to­ber 2003. On Ju­ly 1, 2012, Bar­ba­dos Na­tion­al Bank Inc was re­brand­ed to Re­pub­lic Bank (Bar­ba­dos) Ltd.

On Sep­tem­ber 30, 2012, Bar­ba­dos's eq­ui­ty base stood at US$181.3 mil­lion and as­set base at US$1.1 bil­lion. In De­cem­ber 2012, Re­pub­lic Bank Ltd made a suc­cess­ful bid for the re­main­ing 34.9 per cent of the bank's share­hold­ing. Re­pub­lic Bank (Bar­ba­dos) Ltd is now a whol­ly-owned sub­sidiary of Re­pub­lic Bank Ltd.