The tourism sector and the global economic crisis: development implications for the Caribbean

Over the past two years the global economy has experienced substantial economic turmoil, resulting
in severe economic contraction. While there has been a recent return to growth, this situation has
impacted all economic sectors worldwide. In the highly tourism-dependent region of the Caribbean,
the impact of the global economic crisis has been most notable on the tourism sector, which, from the
early 1990s, became the key driver of economic growth for the region. The eventual emergence of
this sector reflects an economic development history which was previously underpinned by the export
of agricultural commodities, and subsequently by the adoption of the import substitution
industrialization model as promulgated by Arthur Lewis. This was further stimulated by spectacular
economic contraction in Caribbean economies during the 1980s as a result of changes in the global
terms of trade for commodities, generally low levels of competitiveness for manufactured goods, as
well as weak institutional and governance frameworks.
Ultimately, many economies began to reflect fiscal and balance of payments constraints. By
the end of the 1990s, too, evidence of declining competitiveness even in the tourism sector began to
become apparent particularly when evaluated under the framework of the Butler Tourism Area Life-
Cycle (TALC) model. The recent economic crisis, therefore, provides an opportunity to reflect on the
overall approach to economic development in the Caribbean, and to assess the implications of the
region’s response to the crisis. This analysis makes the case for the future development of the sector
to be based on two broad strategies. The first is to deepen the integration of the tourism sector into
the broader economy through the diversification of the regional tourism product, as well as the
enhancement of linkages with other sectors, while the second is to expand the tourism sector into a
total service economy through the introduction of new services. Considering linkages, the
development of clusters and value chains to support the tourism sector is identified with respect to
agriculture and food, handicraft, and furnishings. Among the new services identified are education,
wellness, yachting and boating, financial services, and information and communications technologies
(ICT). This overall strategy is deemed to be better suited to the macroeconomic realities of the
Caribbean, where high labour costs and other structural rigidities require a high-valued specialty
tourism product in order to sustain the sector’s global competitiveness.