Putting OurShoulders to the Wheel While Praying for Miracles!
Dear Sir
US has embarked on surgical strikes againstTaliban. If repercussions start by Bin Laden's cells, US' securitywould be stepped up, shipping lanes bringing our food may undergosecurity checks increasing costs to us and holdup time. ShouldAntrax or small nuclear weapons be used, (may already be poisedwithin US and her sympathetic countries for quick use), medicalfallout could be astronomical. Does our government have fundsto assist us in a massive medical situation or in what seems along economic winter ahead? Warren Buffet says he thinks a deeprecession is ahead.
Yet, in the face of absolute economic uncertainty and war, we'reabout to borrow to build two new $40M buildings. Government saysspending will stimulate our economy. (Classic textbook reasoning,fine if you're the US!) But as helpless isles dependent on everydollar of incoming cash flows (especially via tourism), shouldn'twe remain liquid (in cash) and take a "wait and see"approach? Why burden ourselves now? How much of our overall debtburden do these new loans make up? If there's talk of civil servantcut-backs, why build two? What if the second building isn't ableto rent? Already other buildings sit vacant. If investors' moneygets too tied up in vacant buildings that are unable to pay backmortgages, they may feel Cayman isn't the place to have theirfunds and pull out. This could leave us all in a lurch of foreclosures,for it's investors, (via our banks) who provide our loans.
The US has the wherewithal to furiously kick-start her economy.She'll issue bonds, (borrow from public to build roads, etc.,and pay back low interest).
She'll print money at will. She'll drop federal interest rates,(tempts public to borrow, which stimulates the economy), or givetax cuts, (tax relief entices public to spend), or by spendingherself, (e.g., producing weapons). She'll toss the new deficits(like we toss dirty socks into a pile) into her already $5.7 trilliondollar debt bin she's been carrying from the WWII, Korean, andVietnam wars. Racking up these trillions too have been the timesshe's kick-started past recessions plus her huge social policiesto combat her population's cocaine epidemic.
Cayman doesn't have such luxury of flexibility. We hang in a delicatebalance. Our economy is based strictly on cold, hard cash. "Whatwe see is what we get, when we can get it". Cash flows, (i.e.,revenue, income) come to us in via tourism, import duties, realestate, but these are declining so fast, we wonder how governmentwill pay loans, (much less, how we'll pay our own). To borrow,proposals of where the next cash flows will come from have tobe met; else the bank takes the collateral. What's the collateral,Glass House? What if our economy worsens? See the ramifications?Consider the base population here is too limited to tax plus mostsalaries exit the country via expats. Now, our other revenue provider,offshore banking industry, is under more scrutiny which may casteven more dependence on tourism.
Will these new building loans cost us our national airline, thenwake to find we've to pay a US carrier to run our tourists in?We may end up in the same boat as Antigua, Barbados, Grenada,St. Lucia and Turks and Caicos. They pay $1.5-2M per year subsidyto American Air (AA) to fly their tourists in; then AA doubledthe airfares. In Turks, AA abruptly pulled out. Since September11th, all airlines have cut back to minimize costs plus insurancehas increased, so AA could pop any astronomical figure on us,we'd no choice but to pay it, plus be at their mercy of doubledairfares, and what if they pulled out? If so, a snowballing effectcould set in of less tourists, less hotels and businesses functioning,more closing, inability to meet our loans, defaulting, foreclosings,losing our collateral. Would be a shame, just as we were supposedto enjoy lower interest rates.
Other isles are aggressively marketing, e.g., discounts, so thisChristmas many of our repeat tourists may try elsewhere and gethooked. Since CAL is our own most powerful advertising tool and"Sir Turtle" is the icon that built tourism, shouldn'twe immediately plug an aggressive "PR" overseas marketingand safety campaign to thrust CAL more into the limelight? Swissairand other airlines axed their planes, many sit on tarmacs; someare going straight from assembly lines to be parked (ironically)at the 'Evergreen' airstrip in southern US. Isn't now is a goodchance to negotiate lower leases for newer jets since CAL's jetsare older and racking up costlier maintenance? Other competingcarriers have decreased flights in, allowing CAL an opportunityat a bigger piece of the pie. Now that more dependence seems fallingon CAL, shouldn't we strengthen CAL by adding more dynamism tomanagement, marketing and BOD, and be ready as tourism (hopefully)regains momentum? Preparation we do now may save our country later.Even though Bush recently gave AA a $800M bailout, AA (like thePan Am-Lockerbie case) still faces a flood of civil million-dollarlawsuits when this moratorium lifts, so travel experts warn Caribbeanisles who still have national airlines to hang on to them sincethe isles mentioned above now may face a probable full AA "pullout" if demands for more concessions (e.g., waiving landingfees and more monetary support) aren't met. (Internet, CaribbeanAviation News, Oct 9.)
We need Financial Secretary's (CPA), Rolston Anglin's, (CPA) andLyndon Martin's, (MBA) input plus several community think-tanksstarted, e.g., on finance and tourism, for if we dig ourselvesinto a pit with loans on buildings that may stand empty and loseCAL in the process, we may have to turn to the IMF. If so, Godhelp us! (Ask Jamaicans what IMF did to their economy. Jamaicapays 62% interest on every dollar borrowed from IMF. She evenborrows against her un-mined bauxite since she's already soldoff her every resource thus far!) This brings the question everyone'sbuzzing aboutis our government intending to borrow from Mr. Dart?What will his requests be? We don't want to "look a gifthorse in the mouth," but neither do we want to be bandiedabout like Belize. As for construction, Ritz's new "go ahead"aims to incorporate laborers already out of work. Mightn't thisalleviate government's reason to build now?
Intense questions boil in our minds. Sure, we want our hands heldin this dark and told we're going to be "OK", but moreso, we need proof, clarity and assurance every angle is analyzedbefore government financially commits us to anything. Bring backthose '70's-style town hall meetings nights of truthful, fruitfuldialogue where all cards get laid on the table and debating ofpros and cons could go on all night. That way, when our countrymakes a move, we know its direction. New news is this war maylast a number of years and Bush wants everyone staying home. Caribbeantourism will suffer, in fact the world's global trading economyhangs in peril. All we can do is put our shoulders to the wheel,pray for miracles, and knowing we've tried our best, leave therest to God.
"In those moments of crisis, only the imagination is moreimportant than knowlede," Albert Einstein.
Pamela DaCosta