“WILD COOT, why ‘Mr Joseph’ sprawling out your name over the newspapers? He cannot see that you wish to remain innocuous, sorry, I mean incognito?”
My old lady friend was on the telephone to me early Tuesday morning. I said: “I respect the gentleman, but he is apparently only looking at the shadow, not the bone. Whose echo?”
Actually, Sandals cannot pack up now, “Mr Joseph”. Its eggs are in the basket. Perhaps it may be interesting if we compare the real benefits and see who comes out laughing.
The point that I was trying to make, and perhaps made badly, is that the decision to offer concessions to Sandals has created a multiplicity of problems that are affecting the entire industry that is responsible for most of the foreign exchange. We need to ask ourselves if the “mauga” benefits that have been trotted out to us compare with or compensate for the damage to the overall industry.
More tourists are coming because Sandals advertise that they are here. The foreign exchange so far does not show more spending. Neither do the spin-off benefits (shopping, taxis and so on). The name Sandals makes Barbados better known. Barbados was always well known. As a matter of fact, that is why Sandals is here.
There is now imbalance in the industry. It is suspected that other hotels are following Sandals and keeping their money bookings abroad with their agents. They have been bawling for more benefits. Some say that they have been told, “Invest like Sandals and you will get equal benefits” – an impracticality.
Now let us look at an advantage given. Since Sandals pay no taxes, the non-payment of taxes favourably affects the bottom line of its trading. If the net profitability of trading is conservatively 20 per cent and the trading gross US$128 million in turnover in a year, then if the taxes on net profitability and others is, say, 25 per cent of profitability, the taxes not paid become transferable into the pricing structure of rooms and food.
Therefore, the hotel has a tremendous advantage over others in the island. Therefore, besides the fact that other hotels do not get these concessions, there is a big advantage in pricing rooms and food to the benefit of Sandals.
The same thing happened in Jamaica when it defaulted on international loans. Vultures bought the debt at a discount in US dollars, then demanded full payment that the Bank of Jamaica could not answer.
They agreed to take the full US loan amount in a Jamaican dollar asset. Some hotels on the north coast were built at an affectively cheaper cost. So do not tell me that the ability to price cheaper is not influencing people to choose Sandals when coming to Barbados.
Indeed, the booking arrangement is disconcerting in that only token US dollars ever arrive in Barbados. Remember, the overall loan to build is to be repaid in US dollars.
If I were in charge of Sandals, I would look at borrowing in Barbados dollars to pay the “90 per cent Barbadian(?)” workers. Then I would repay my Barbados obligations in US dollars to Trinidad, thus ensuring that I get the most favourable rate for my borrowing facilities here. Do not tell me that the Central Bank, in its present parlous state, can object.
Therefore, “Mr Joseph”, if Sandals has our best interest at heart, it would agree to bring some meaningful foreign exchange in the form of US dollars and not just numbers of tourists.
After all, if conditions were to deteriorate in Barbados because of a failing economy, then crime, poverty and begging would be the order of the day, and the vaulted shining star of the Caribbean will lose its grandeur, the same grandeur that attracted Sandals in the first place.
We should ask Sandals if it pays tax in Jamaica.
“Mr Joseph”, I do not know for certain if that would rectify the charge of people hoarding foreign exchange outside of Barbados. Confidence lost takes a long time to be regained. Just look at Jamaica. It is only now beginning to crawl out of its problems. In 1970 you could not find a more loyal person than a Jamaican. Miami has been the beneficiary of the loss of confidence.
You cannot stop all the leakage. We in Barbados do not have the resources to support giving a credit card to every citizen to shop online. It is desirable but the Wild Coot always cautioned the Central Bank to put a cap on the distribution. However, credit cards earn the banks at least 28 per cent, and upward.
• Harry Russell is a banker. Email: quijote70@gmail.com
