One of my friends, an Argentine-born economist by profession turned restaurateur, decided to write to his friends and colleagues, and share some of his thoughts on paper.
I know that would be of interest to you!
He writes: The current Coronavirus Pandemic is particularly difficult for Aruba.
First and foremost, because we are a single-product economy.
Beyond Tourism, other productive activities are marginal.
Then our tourism is almost exclusively tied to the USA, a single address, and in turn our domestic market only functions as long as tourism thrives.
Above all, we entered the pandemic in dire fiscal situation, due to the high deficit/ debt of the public sector.
Hopefully, we will manage to fully control the virus, and the few infected will completely cure, but that still leaves us with tourism in a coma.
We will eventually begin to see the light when the USA recovers and gets it travel appetite back, as for the rest of the world, the weapons we used to battle the virus, almost killed the patient.
So, NOTHING will happen in the coming months!
As an small island, we do not have the tools to reverse this economic crisis, on our own.
Given these unfortunate circumstances, the island requires a NEW DEAL, for the XXI century.
We must rethink everything.
And there is no point in discussion BBO/AZV or deferred payments, because THERE WILL BE ZERO PAYMENTS, over the next 3 or 6 months.
The lucky ones will be on minimum wage.
Employers and business owners, will not pay themselves salaries, so their businesses survive.
Then zero income = zero payments of mortgages, taxes, you name it.
Given the crisis we are facing, the Public Sector must react smartly, and strategically.
When our money reserves run out, then what??
Therefore, we must manage our scarce resources very well.
Our lives depend on the steady generation of electricity, water, the provision of medicines and food.
And this is where the NEW DEAL comes in, between the private and public sector, to manage our dwindling resources, and stretch them to the max.
We need to think about everything differently.
Nothing can stay the same, in finance, labor, consumption, import, etc.
This will help us lay a better foundation for a future economy, at the end of this crisis, as we are looking into a still unknown future.
This New Deal, is about shared economic sacrifices, GOA must lead the discussions, generate projections and actions based on the new reality.
If we don’t manage the crisis, the crisis will manage us.
The success of this NEW DEAL will allow us to survived the global disaster, and launch Aruba into the future with a still-breathing economy.
• Labor contracts: Wages, taxes and labor mobility
• Tax: Level of taxation
• Import: High importance for food and medicines, zero importance to chips and salsa and non-essential goods.
• Energy and Water: Recalculate prices and rates based on new oil values , taking into account only maintenance investments. Social rate for the most unprotected.
• Transportation: Limit the use of automobiles, to save foreign currency for the purchase of much-needed fuels.
• Food import: Coordinate between large wholesalers to optimize the use of resources, not competing but complementing each other in the provision of all essential stuff.
• Social: More people will spiral into need, without work. GOA must guarantee the minimum needs of that population.
• Financial: GOA along with private banks and the Central Bank, must obtain funds to finance these needs in the Netherlands. The capital market is too difficult.
• Private banks, together with the Central Bank, must also make an effort and not only defer income. They must understand that the rest of the economy is not deferring income, but that the income it does not generate today is simply lost.
I humbly make this small contribution of ideas, derived from my professional background in Economics. If the ideas here are of interest to you, I will gladly make myself available to discuss them; with everyone’s contribution we can work together for the good of Aruba.