The US-based ratings agency Standard & Poor’s (S&P) continues to be prominent in the Caribbean region but an economics analyst reports the agency in its ratings work has also pointed to some positive situations which could mean solid opportunities for savvy investors.
The Bahamas may be a case in point and Melissa Marchand, publisher of Global News Matters which produces the fortnightly Market Dynamics Caribbean newsletter, noted S&P had assigned a BBB rating to the Bahamas Government’s proposed $300MM international bond issue but, “the rating is a reflection of what S&P considers ‘generally prudent policies’ pursued by consecutive governments.”
Marchand counselled potential investors to look beyond the headlines where they would see the rating, suggesting “that the agency sees the Bahamas having sufficient capacity to meet its financial commitments.”
She reports the $300MM in foreign currency would be used to finance the 2013-14 budget deficit. While the ratings agency was optimistic about the current state of play it saw some issues looming: “S&P deems the Bahamas debt structure to be tenable,” however, “S&P has warned that the Bahamas will be subject to another downgrade of its credit rating if it does not follow through on VAT (value added tax) advances and other revenue collection reforms over the next six to nine months.”
Marchand said the Bahamas, “keen to get it right,” was bringing in a team from New Zealand to guide the the country through the complexities of the VAT, planned to launch on July 1, 2014. The value added tax, she posited, “is definitely worth watching as it could spark a surge for the Bahamas.” Indeed, an Inter-American Development Bank (IDB) study, cited in a December edition of Market Dynamics Caribbean, forecasts the VAT could grow the economy by 16.5% over a period of 12 years.
Those in the renewable energy sector will be interested to know the IDB reports that the Bahamas has not implemented efficiency and conservation measures that could cut energy demand in hotels and homes by 27 percent.
Marchand believes the IDB’s 2013-17 country strategy “underscores the importance of energy reform, as power outages in the Bahamas are four times higher than the Caribbean average. Of 240 financial institutions based in the Bahamas, only two percent offer incentives for renewable energy or energy efficient projects.”
Opportunities will arise, she believes, “as the IDB helps the Bahamas establish special purpose vehicles to finance private sector and residential energy projects.”
Published every two weeks, Market Dynamics Caribbean covers more than 30 economies in the Caribbean region, including the Dutch, French, Spanish and English Caribbean.
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