The Caribbean lures plenty of tourists with its warm trade winds and sandy beaches, but the region also offers untapped business potential for investors and entrepreneurs, panelists said at a recent conference at Harvard Business School.
Three area natives discussed the region's latest developments and the ins and outs of doing business there during a panel on creating opportunities and partnerships in the Caribbean, held at the H. Naylor Fitzhugh Conference on February 21.
Harvard Business School professor Noel Watson, born and raised in Jamaica before moving to the United States for college, provided background. The Caribbean (excluding Guyana and Suriname) has a total landmass of 87,000 square miles with a population of approximately 34 million people. According to the World Bank, all Caribbean economies (with the exception of Haiti and Guyana) are classified as solidly middle-income, with a limited export base. After experiencing an annual growth rate of 1 percent from 1981 to 1990, the rate climbed to 3 percent from 1991 to 1999, due primarily to an increase in tourism and offshore financial services.
Challenges include natural disasters (those havoc-wreaking hurricanes), lack of government transparency, poverty, escalating unemployment, a growing population, and rising rates of HIV/AIDS.
Eleanor Brown, a Jamaican native, let none of the negatives dissuade her from returning to the Caribbean in 2000. As the founder and managing director of Prism Capital Services Limited, a company that sources venture capital for small- and medium-size businesses throughout the Caribbean Common Market (CARICOM), Brown helps oversee $43.7 million invested across a broad range of sectors.
"The Caribbean is an absolutely remarkable story," she said. "All the British gave us was bananas and sugar."
Yet in the thirty or forty years since most islands achieved independence, per capita GDP and political stability are high relative to most emerging economies in Africa and Latin America.
Telephones and tourism
Tourism remains a leading source of revenue for many islands, but there are still undeveloped opportunities in niche markets such as eco-tourism and package tours that include professional training or entertainment components, said Jacqueline Jones (HBS MBA '97), general manager of Clear Channel in the Bahamas.
Wireless is also doing extremely well. After Scandinavia, Jamaica has the highest telephonic penetration in the world, with 1.2 million cellular phones for a population of 2.6 million and an average phone bill of $50 per month.
| Imagine if you were around when AT&T was being broken up into the Baby Bells. That is where the Caribbean is at right now. |
| — Eleanor Brown, Clear Channel |
"The demand for inter-island and Caribbean-U.S. communication is overwhelming," said Jones, who also cited outdoor advertising as a growing market.
While Cable & Wireless has the longstanding license to provide landline phone service on many islands ("Another thing we inherited from the British," quipped Brown), some governments are working to allow more competition to occur.
"Imagine if you were around when AT&T was being broken up into the Baby Bells," she said. "That is where the Caribbean is at right now."
With the large number of baby boomers retiring in the coming years, real estate will continue to be hot, added Jones. There's also plenty of undeveloped land available for hotels and resorts that could cater to the underserved middle-tier tourist—those who can't afford $1,000 a night at the Sandy Lane in Barbados, but want a higher-end experience than the typical package tour offers.
Business, government, and the law
"I've been so positive that I don't want you to get the impression that I'm naïve," said Brown. "You need to put everything I'm saying in the context of an ambiguous legal framework and an inefficient court system. To the extent that you have to enforce your contract in certain countries, you may have a problem."
There's very little liquid capital available for entrepreneurial ventures, she added. "You need to find ways to get your ideas going in a capital-constrained environment."
One audience member raised the question of government involvement in business and the question of business-paid "donations" to authorities, particularly in Jamaica.
"There's a lot of drama," admitted Jones. "Every day you encounter ethical dilemmas."
Jones signed an agreement with Clear Channel stating that she does not engage in bribery, something the company requires of every country head. That formality aside, "You have to know who you are and have a personal set of standards. Before you do something, imagine it on the front page of the New York Times. If you're not comfortable with that, don't do it. That's a barometer I use a lot."
With that said, the indices of corruption are low in the Caribbean relative to a number of countries in Latin America, Africa, and southeast Asia, said Brown. "I don't want to create the impression that we have an insurmountable problem. In comparison to most emerging markets, we're doing very well in that regard."
Brown related the story of an Iowan she met in a bar in Jamaica, who was locating a call center on the island. How had he picked Jamaica?
The man told her that he had observed dozens of gypsy cab drivers bartering for customers at LaGuardia airport and was amazed by their salesmanship. He decided that wherever the drivers were from was where he would locate his call center. Ninety percent were Jamaican.
"I thought that was an incredible indication of the entrepreneurial energy in the Caribbean and how far we can go," she said. 