Investing In The Caribbean: Comprehensive Outlook on Conducting Business in the Region
The Caribbean is not only a paradise for tourists but also a hotspot for investors. With a growing economy, a large consumer market, and a skilled workforce, the region offers many opportunities for businesses across various sectors. In this article, we will explore some of the target industries that have the most potential for investment in the Caribbean, such as high-tech agribusiness, renewable energy, tourism, technology, and business support. We will also highlight the advantages and challenges of doing business in the Caribbean, and provide some tips and resources for investors who are interested in this dynamic and diverse region.
The Caribbean has seen an upward trend in foreign direct investment (FDI), with 247 FDI projects in the region from 2015 to 2020, and yearly investments increasing by 25.9 percent, from 5.8 billion to 7.3 billion USD during that period. This increase was mainly driven by higher demand for commodities and critical minerals, as well as by the post-pandemic recovery of the region. The renewable energy sector also received significant investment, with the World Bank partnering with Caribbean governments to invest nearly $500 million dollars in clean and resilient energy projects by 2025
According to the World Bank, 82.33% of the Caribbean’s workforce has an advanced education, which is higher than the global average of 77.4%. The region also attracts 30 million affluent visitors each year, who spend an average of $1,230 per person, which is more than twice the global average of $594. The region has a total market size of $369 billion, which was expected to grow by 3.7% at the end of 2023.
The Caribbean is one of the world’s top tourist destinations, with its stunning scenery and vibrant cultures drawing visitors from across the globe. However, the region’s greatest threat is its vulnerability to climate change and exposure to natural disasters, which have exposed the vulnerabilities and inequalities of its economies. The greatest recent threat to the tourist industry was COVID-19, which saw a sharp decline in international arrivals between 2020 and 2021. However, before that, the Caribbean welcomed more than 25 million foreign visitor arrivals, which contributed $49 billion to the area’s GDP. The top five countries in the Caribbean by the number of foreign visitor arrivals in 2019 were Dominican Republic (6.4 million), Puerto Rico (1.6 million), Jamaica (2.6 million), Cuba (4.2 million), and the Bahamas (1.8 million).
IMF, https://www.imf.org/en/Blogs/Articles/2023/06/27/caribbean-climate-crisis-demands-urgent-action-by-governments-and-investors 2023
To recover from the crisis of the Pandemic, and to diversify its tourism offerings, the Caribbean is developing niche tourism segments, such as health and wellness, adventure, cultural, and eco-tourism. For example, St. Lucia has launched the Wellness Tourism Strategy, which aims to position the island as a premier destination for health and wellness. The Caribbean also has the potential to attract more high-end and luxury tourists, who are willing to pay more for exclusive and personalized experiences.
Caribbean Tourism Statistics - tourismanalytics.com 2021
If you are looking for a place to start, relocate, or expand your business in the Caribbean, you have plenty of options to choose from. Each country has its own advantages and challenges, depending on your industry, market, and goals. For instance, Puerto Rico offers a unique opportunity to enjoy the benefits of being a US territory, such as tax exemptions, credits, and deductions, as well as access to the US market and currency. St. Lucia is another attractive destination, with its high ranking on the ease of doing business index, low corporate tax rates, stable democracy, and diverse economy. Jamaica is the largest and most populous English-speaking island in the region, with a vibrant culture, a growing tourism sector, and a supportive environment for entrepreneurship and innovation. In 2018, the FDI in Jamaica accounted for 12% of the total FDI in the Caribbean, at $800 million USD, up from $700 million the year before.
Turks and Caicos Islands is a British Overseas Territory that boasts a strong and growing economy, a pro-business environment, and government-backed tax incentives, especially for fintech investment. Dominican Republic is a Spanish-speaking country that has a large and dynamic market, a strategic location near the US and Latin America, and a variety of sectors to invest in, such as tourism, agriculture, manufacturing, and renewable energy. These are just some of the examples of the potential and diversity of the Caribbean region, which offers a range of opportunities for investors and businesses.
The Caribbean has abundant natural resources, such as sun, wind, water, and geothermal, which can be harnessed to generate clean and renewable energy. However, the region still relies heavily on imported fossil fuels, which are costly and polluting. To reduce its dependence on oil and gas, and to mitigate the effects of climate change, the Caribbean is investing in renewable energy projects, such as solar, wind, hydro, and geothermal. For example, the World Bank is partnering with Caribbean governments to invest nearly $500 million in renewable energy projects in the region by 2025. The Caribbean also has opportunities to export its surplus renewable energy to neighboring markets, such as the US and Central America.
The Caribbean has a rich agricultural heritage and a variety of crops, such as coffee, cocoa, sugar, fruits, and spices. However, the sector faces challenges such as low productivity, climate change, and market access. To overcome these challenges, some Caribbean countries are investing in high-tech agribusiness, which uses technology and innovation to improve efficiency, quality, and sustainability. For example, Jamaica has launched the Agri-Tech Hub, which aims to foster collaboration and innovation among farmers, researchers, and entrepreneurs
An often under-realised advantage the Caribbean has is its strategic location, which allows for greater connectivity to major markets and regions, such as the US, Latin America, and Europe. The region also offers a favorable business environment, with low tax rates, stable political systems, and a skilled labor force. These factors make the Caribbean an attractive destination for business support services, such as outsourcing, offshoring, and nearshoring. For example, the Caribbean has a strong presence in the global business process outsourcing (BPO) industry, which provides services such as customer service, data entry, and accounting. The region also has the potential to expand its business support services to other areas, such as legal, engineering, and design.
References:
Caribbean Association Of Investment Promotion Agencies. (2024). Caribbean industry opportunities. CAIPA Secretariat. https://www.investincaribbean.org/industry-opportunities/
Caribbean tourism statistics. (n.d.). tourismanalytics.com. https://tourismanalytics.com/caribbean.html
Foreign direct investment in Latin America and the Caribbean rose by 55.2% in 2022, reaching a historic high. (2023, July 10). Comisión Económica para América Latina y el Caribe. https://www.cepal.org/en/pressreleases/foreign-direct-investment-latin-america-and-caribbean-rose-552-2022-reaching-historic#:~:text=In%202022%2C%20Latin%20America%20and,Caribbean%20(ECLAC)%20revealed%20today
Timthomas. (2023, January 31). Best places to start relocate or expand a business in the Caribbean. Investment Monitor. https://www.investmentmonitor.ai/features/best-place-to-start-a-business-in-the-caribbean/?cf-view
UNCTAD. (2023, July 5). The Caribbean: Development news, research, data. World Bank. https://www.worldbank.org/en/country/caribbean
The World Bank. (n.d.). The Caribbean: Development news, research, data. World Bank. https://www.worldbank.org/en/country/caribbean
