Notes From The Margin

June 16, 2008

Marginal Picks Up His Pen – Venezuelas Claim of Barbados’ Waters


After much thought we’ve decided to come out of retirement to blog on the subject of Venezuela’s claim of Barbados’ waters. This is not a full re-opening of NFTM but we felt that given our history of blogging on Venezuela and it’s territorial claims that we might be able to provide some clarity on this issue. This article is freely reproducible (once the source is attributed). In fact we would ask that given the potential seriousness of the claim that members of the blogosphere and other media propogate this story.


Marginal

Like Barbados Free Press we saw the story today in the Venezuelan publication PetroleumWorld entitled “Barbados’ Troubled Waters”

The new government of Barbados opened the bidding process for rights to offshore blocks for oil & gas exploration on Monday and will close it on September 30. The winner announcement will be made on Nov 20th. More than 20 companies were present this week in the bid kick off, including among others, Exxon, Gazprom, Lukoil Shell, BHP Billiton of Australia, Hess Oil Company, Anadarko Petroleum Corporation, Marathon Oil and Murphy Oil, all of the United States, StatoilHydro, Petro-Canada, and Petrobras from Brazil. However, there is an issue that the IOC’s perhaps have not taken in account, that is that two of the block are in venezuelan waters, the Bottom Bay blocks Ad I and Ad II. We expect that the venezuelan government will issue a diplomatic note to the government of Barbados asking for clarification and the Venezuelan oil company PDVSA will issue a warning to the OIC’s on the issue.

The two blocks in question are the two southernmost blocks that are up for bid (Highlighted in red in the illustration). Venezuela’s claim rests on two pillars

1. It’s claim to approximately half of Guyana’s land area.

Venezuela claims everything west of the Essequibo river, the historical reasons for this can be found in our post. Venezuela and Its Claim of Most of Guyana’s Land

2. Venezuela’s Maritime Treaty with Trinidad.

In 1990 Venezuela and Trinidad agreed a treaty delineating their maritime boundary. This treaty can be found on line HERE.  This treaty allowed the development of Trinidad and Tobago’s offshore oil resources. However this treaty had two unforeseen impacts. First it tacitly recognised Venezuela’s claims on half of Guyana, and secondly it pushed Trinidad’s territorial claims north which is what led to the Maritime border dispute between Barbados and Trinidad. The impact of this can be seen in our post How Much Gas Does Trinidad Have? Indeed the main sticking point in the negotiations was the Trinidadian position that Barbados should recognise the 1990 treaty. The UNLOS council held that two countries could not bind a third without it’s consent and hence the 1990 treaty had no impact on Barbados.

The maritime boundaries are currently as seen in the diagram below. The purple line indicates Trinidad’s initial boundary claim and the brown line indicates the claim they put forward to the UNLOS Council. The green line represents the final decision of the UNLOS Council.

The result of the UNLOS is that the 1990 boundary between Venezuela and Trinidad extends into what is (and always was) legally Barbados’ waters.

Venezuela is now seeking to exercise a claim in an area that it has no right to claim. The waters under discussion can ONLY be Venezuelas if you accept that

1. Half of Guyana is actually Venezuela.

2. That two countries (Venezuela and Trinidad) can commit a third and fourth countries (Barbados and Guyana)  to some form of agreement or treaty without consulting them and without their agreement.

In short, the Venezuelan claim is baseless.

Marginal

Other interesting information on this topic.

International Law Environment by Professor Robert Volterra

Venezuela and Bird Island

Details on Aves Island – How Venezuela Controls the Caribbean Sea

Bird Island Again! – Grenada in Maritime Boundary Dispute With Venezuela.

March 3, 2008

Why We DON’T Want Obama To Win (Or Clinton For That Matter)

This is one of the more difficult posts to write, difficult because we don’t want to be misunderstood, and difficult because it’s a difficult choice to make. As we write this the Primary season of the US presidential election is rolling forward. The Republican front runner John McCain appears to have his hand on the nomination (barring something quite unexpected happening) In the Democrats camp there is a heated battle for the nomination going on between Hillary Clinton and Barack Obama.

In the Caribbean the popular sentiment is understandably for Obama, he’s personable, has an agenda for change in Washington and of course, he’s black. For the first time ever it would seem that an African American has a real chance of ending up in the White House. For a region that is mostly African in descent it’s heady stuff.

However….

As cool as it is that the United States has reached the stage of maturity that they could seriously consider a black man for the post of Commander in Chief, we on the Margin have come to the conclusion that Mr. Obama’s race is (or should be) for us in the Caribbean irrelevant.

Why have we reached this conclusion?

We have to recall the Clinton presidency (That’s Bill if you are confused) Bill Clinton was one of the most “human” US Presidents in living memory. Former President Clinton was enormously popular in the Caribbean, mostly on his personal charisma. However when you look at the effects the Clinton presidency had on the Caribbean, Bill Clinton did more damage to us than any hurricane that has struck the island chain. Why do we say this?

1. Dole/Chiquita Bananas and the WTO.  This action destroyed the livelihoods of hundreds of Caribbean farmers basically to repay a campaign contributor.

2. The Ship Rider Controversy. Remember the pressure that was brought to bear on Barbados when it resisted?

3. The OECD “Harmful Taxation” initiative.  Despite the BLP’s efforts to say that it fell apart because of Owen Arthur, we really know that it fell apart because when Bush came to power the US was no longer interested in backing the initiative.

This isn’t meant to be a US bashing post, but the fact is the Caribbean has ALWAYS done better under a Republican in the White House than a Democrat. We can see the echoes of similar policies in Mr. Obama’s current political career. With rhetoric against NAFTA (Ironically which was enacted by Clinton) and action in sponsoring the “Tax Haven Abuse Act”.

If we lived in the US we would probably vote for Mr. Obama, but the fact is that we don’t live in the US. Rather than get caught up in the euphoria that surrounds his campaign we are forced to apply the same logic that we do to our local politicians “Judge them not by what they say, but by what they do” and when judged on that scale (from a Caribbean perspective anyway) Mr. Obama is found to be less than an ideal candidate.

Marginal

February 17, 2008

Does Barbados Need An Industrial Court?

I run a small business (approx. 10 employees) if this general strike comes off next week it will cost me a significant amount of money. I have no part in this BWU/Royal Shop/Sandy Lane, and yet I will suffer a direct economic consequence of what is a Union action! In theory the Union must carry some civil liability for this cost, but in reality there is no way that I can recover this cost.

Why should I (along with everyone else) be penalised for one company’s perceived intransigence? The threat of a general strike is irresponsible and shows why we need to have an industrial court in this country.

Small Business Owner

Above is a comment by a small business owner and he asks what in our opinion is a valid question.

Historically industrial relations in Barbados has relied on a system of volunteerism. That is that collective agreements aren’t actually legal contracts but are considered to be more along the lines of “gentlemen’s agreements”; that is that either side can breach the agreement at will. Collective agreements are usually enforced by the relative power of the union and the business owner. Now here’s the funny thing… as INSANE as this system may sound, in Barbados it has actually worked! While industrial courts are well established throughout rest of the Caribbean, we in Barbados continue to function on a volunteerism basis, and have had a relatively stable IR climate for a long period of time. ‘

Now of course there are certain features of the Barbados system that make this workable, you have a very small number of very large powerful unions, and you also have a relatively homogeneous private sector. This has meant that historically, everyone knew the rules and how the game was played and everyone was prepared to give and take to make the overall system work.

Now in 2008 we still have a small number of large unions, however the private sector is no longer as monolithic as it was in the past. We have new international investors, we have regional investors, we have relatively new local players. In short we have people who are accustomed to functioning a more “rules based” industrial relations culture. They don’t know how we play the game “’bout here”

This of course leads to all sorts of complications, issues of recognition, issues of wildcat strikes. The Sandy Lane Showdown is a prime example of this. Is there a penalty for workers breaching the collective agreement? Where historically local employers have accepted the occasional wildcat strike as par for the course, someone accustomed to an environment where collective agreements are contracts will expect to be able to terminate wildcat strikers for “abandoning the job”.

Issues such as this will continue to come up. So we on the margin ask the question

Is it time that we retired the volunteerism system?

Do we now NEED an industrial court?

We think it deserves serious consideration.

Marginal

January 31, 2008

Economic Advice From Prof. Howard

Local Economist Prof. Michael Howard who has become a regular commentator on Government’s economic policies today wrote an guest column in the daily Nation offering his views on the way forward for Prime Minister Thompson’s government and Owen Arthur’s stewardship.

His comments on former PM’s Arthur are interesting:

Whether he knew it or not, Arthur was also influenced by Rostow’s misleading “catch-up” notion of Barbados becoming a “developed country”. We may have already reached there since we are now in Rostow’s stage of “high mass consumption”.

Arthur’s expansionary policies eventually led to “overheating” of the Barbadian economy. Overheating was caused by heavy expenditure on the World Cup, the bunching of lumpy capital projects, and high levels of conspicuous consumption. The positive aspects of overheating were increased employment and economic growth.

The Barbados model has now reached a critical turning point where serious decisions have to be made to reduce high levels of spending, maintain capital controls, and curb illegal immigration. Without capital controls the exchange rate will come under significant pressure, as the economy faces a possible recession.

( If you want a quick overview of Rostow’s Theory click HERE.)

The point on the removal of capital controls we have spoken about on the margin already. It does seem to be a judgement call. As we said in our post “Capital Account Liberalisation – Good or Bad? ” it seems that no one REALLY knows what will happen when capital controls come off. Prof. Howards view that the world economic situation is less favourable MAY be right.

Interestingly his other points include tax policy:

It’s likely that it may happen in a cosmetically changed format and Thompson may claim that it was his idea! Arthur’s tax policy seemed logical to us on the margin, and it favoured gradual incremental change over a period of years rather than sharp adjustments. In lowering the income tax rate he was able to address the issues with the NIS pension fund without the population feeling poorer. With his policies he began moving the economy away from income taxes which inhibit investment and towards VAT. Arthur had indicated publicly on more than one occasion that he considered moving to one tax rate for both onshore and offshore sectors to be desirable.
On the issue of VAT Prof. Howard had this to say.
We on the margin agree with the professor on this point, and are concerned that once exceptions are made to the VAT tax, it becomes easier to make further exceptions. “You zero rated sports equipment so why not this?” Also the more zero ratings the more loopholes there are for abuse. (Are rally cars sports equipment? How about clothes to train in?) The objective is socially laudable, but we believe that the Government should find another way of achieving it.
 .
We aren’t sure that we agree with Prof. Howard on one of his later points on the cost of living.

.

“Reliance on imported food is a major cause of the high cost of living in Barbados.”
.
We believe this argument ignores the fact that (1) Many of the input into local agriculture are imported, (2) Much of the imported food is so subsidized that it lands at costs BELOW the cost of local production. While the lack of competition in the distributive sector is definitely a factor it is in our view simplistic to view them as a major part of the problem of local agriculture withering, without a full examination of ALL of the factors involved.
.
That said we are happy to see input from some of the best brains “On The Hill”. Barbados is at a stage of it’s development where precious few countries have gone before. Input such as Prof. Howard’s is invaluable in helping both policymakers and the public understand the issues of the day.
Marginal

January 22, 2008

Our Thoughts On The Cabinet

PM Thompson showed the first inkling of his plans for the new term by naming a cabinet which is bolstered by some of the brightest brains in the island. We on the margin are particularly pleased to see Darcy Boyce being named to the cabinet as his skill set fills the most obvious hole in the qualifications of the elected cabinet.

Another interesting move was divorcing the International Transport ministry from the Tourism ministry and placing back with Transport and Works. The previous BLP administration had considered international transport to be the handmaiden of tourism with a focus on attracting new airlift. It will be interesting to see what new direction this brings.

International Trade, Foreign Affairs, and International Business have been joined under one Minister and one Junior minister. While we can understand the linkage, given the importance of International Business to the economy, we would have been more comfortable with it being given the exclusive focus of one minister. However we will have to see what results this brings.

Perhaps the most surprising omission was that of a Deputy Prime Minister while we have seen comments on Barbados Underground that the post exists only in tradition (let’s be clear it was the opinion of a commenter not David or one of the BU family) we on the margin view the post as having considerable importance. The Deputy Prime Minister runs the country in the absence of the PM. This is true when the PM travels or (God Forbid) becomes incapacitated or dies in office. It would be easy to dismiss the latter scenario as unlikely except for the fact that it has happened twice already.

However apart from the above comments we think that Mr. Thompson’s first cabinet appears to be a credible, well thought out team. The most obvious weakness has been adequately supported and it is clear that he has put his best brains in charge of the key ministries.

We wait to see what changes in policy will come from this new configuration.

Marginal

January 10, 2008

Politicians, It’s One Week Before Elections, Do You Know Where Your Vote Is?

With one week left to go before elections, Barbados is in the grips of one of the most intense election campaigns in recent memory. The two parties’ campaigns appear to be evenly matched, and evenly funded, and to a certain extent evenly supported. We on the Margin have been watching the silly season unfold in all its glory, and we have to admit we are unable to predict a winner at this stage.

Yes, if you listen to Waiting In Vain and Royal Rumble and the other party hacks that inhabit the blogosphere, they all predict a resounding victory for their particular party. But having spent the last week talking to many people, we think that both parties are “Whistling past the graveyard”. For as much bluster as either side makes we’re not sure that either of them has captured the hearts of the electorate.  Barbadians are looking at both parties with a skeptical eye and the hard truth is that this election could go either way.

What we have noted that this campaign has been more about accusations and counter accusations rather than issues. We would like to see some serious discussion about both parties’ visions for the next five years. While we wish that we could say that we thought we would get such reasoned debate in the next next week, we really don’t think so. We think that this next week will get wilder and dirtier with each passing day.

We on the margin would urge Barbadians,  think long and hard about both parties before you go into the polling booth. Whoever you choose is entirely up to you, but be sure to participate, be sure to cast your x. Be sure to treat that decision with the seriousness it deserves.  Hopefully we will all be better off for your doing so.

Marginal

November 27, 2007

A couple of points for the Bajan Blogosphere.

I’ve been meaning to get this off of my chest and it really has been bugging me, there are a couple of major misconceptions floating around the blogosphere and it is REALLY beginning to tick me off.

 1. The offshore industry are not crooks.

If they weren’t there your taxes would be much higher. Yes I know you read stories from the net about how “unfair” it is that they don’t pay their taxes in their home domicile, but why should you worry about propping up government innefficiency in another country?  If they really want to shift those companies back onshore they should lower their taxes. The use of “offshore” jurisdictions is an accepted part of day to day life in the financial services industry. Just ask those banks in exotic locations like Vermont for their opinion.

 2. A lawsuit is not proof of being guilty!

Being sued in a civil suit is not proof of guilt, in fact being sued in a civil suit is not proof of anything!  In fact its common practice by lawyers to spread their lawsuit as far and as wide as possible. Up to and including suing the secretary who accepted the letter for her boss that might have contained the information that might be pertinent to the suit if the planets align the right way next Thursday.  Thats how you get things like the Kingsland suit.

3. Just because the BLP/DLP said it, doesn’t mean that it’s not a good idea!

Come on! the number of partisan hacks that we have on line who disconnect any sense of intelligence from any facts is amazing. We’ve actually had people claim that Owen Arthur is infalible, that all of the development in the tourism industry occurred during Peter Morgan’s days forty years ago, and the list of absurdities goes on. And by the way, our pointing out flaws in your arguments is not proof of supporting the other side, we just aren’t supporting YOU.

4. The fact that you didn’t know about it, doesn’t mean that it’s a secret!

Let’s face it none of us know everything, but not knowing about something doesn’t mean that there is a great secret conspiracy to keep it hidden from the light of day!

5. Resorting to insults and invective are not only childish but you make the other persons point for them.

In case you haven’t noticed that’s why they leave those comments on the comment board, jackass!

6. Laws for defamation are not a bad thing (per se) !

They are supposed to stop people from publishing crap about people and rubbishing their reputations. Without them there would be no obligation to do even the slightest reserarch before publishing. (Oh, I’m sorry we are already in those circumstances in Bajan Blogworld.)

7. The more you allow party hacks to go unchallenged the more you undermine the credibility of your blog/media.

Starcom Networks gets this, just ask David Ellis. I’m not saying they shouldn’t be allowed to comment but certainly the blog owner should challenge all blatantly partisan opinions. Allow them free rein at the expense of your credibility. (Sorry, once again something we don’t worry about in the blogosphere)

8. The more you become a forum for the silly and the absurd the less the mainstream will pay attention to you.

Let’s face it the blogs no longer have the political force they had 3 months ago. They are no longer seen as “voices of the people” they are becoming part of an entertaining lunatic fringe that can be safely ignored.  We in the blogoshpere are poorer for it.

I’m sure this post won’t be popular, and will upset more than a few people, but I feel much better for getting that off of my chest.

Let the fireworks begin!

Marginal

September 15, 2007

Why The IMF Will Probably Get the VAT Reform It’s Asking For

Was reading an interesting article in the Nation today about the recently released IMF Article IV consultation. We’ve downloaded the actual document for closer reading (if you are interested you can find it HERE) The following paragraph caught my eye….

IF GOVERNMENT were to raise Value Added Tax (VAT) to 17 from 15 per cent, this would boost revenues by as much as 1.25 per cent of gross domestic product (GDP).

This comes from the International Monetary Fund (IMF) as it continues to encourage the Owen Arthur Administration to increase VAT in a bid to reduce Government’s growing debt gap.

 

The IMF further stated that additional savings could be generated if more goods and services were drawn into the VAT net.

Now at first glance this would appear to be the usual thing you find in Article IV’s “raise taxes, cut concessions” . This is not the first time that the IMF has called for VAT reform and we’d be willing to bet that it won’t be the last.

However…..

If you consider that Government is engaged in trade negotiations at the WTO, EU, US almost all of which call for the removal of tariff barriers, the above paragraph becomes far more interesting. A check of the Central Bank statistics (HERE) reveals that the Government of Barbados currently makes more than 200 million dollars a year from import duties. That ‘s a significant amount of revenue that Government will have to give up.

Now civil servants have to be paid, (and flyovers have to be paid for 😉 )so Government has to find a way either to cut expenditure, or to increase revenue. On the cost reduction side, government has been “quietly” shuffling major segments of government off into corporations (GAIA, QEH, Post Office etc.) One of the effects of corporatisation is that it reduces Government’s wage bill by abolishing Civil Servant posts and essentially making them private sector employees. It also removes the cost of running those entities from the Government tab. That’s the REAL reason why this government has been so quiet about the Departure Tax at the airport because they don’t want to pick up money to put into it, it looks as if they are serious about it being self supporting. (Ditto for the post office, and QEH).

Now despite Governments best efforts to shrink, there will always be stuff to spend money on (flyovers for example) so Government will have to raise revenue somehow. The long term strategy of the Owen Arthur administration has been to reduce taxes on income and revenue (he has even publicly stated that his long term goal is to have the same rate for the “onshore” and “offshore” sectors), so he can’t find it through income tax. This makes raising VAT the most attractive option, because of its widely distributed nature a small (read “politically defendable”) increase in the rate will result in a major boost of revenue to the treasury.

And so the IMF will more than likely get it’s VAT reform. (but not until after the election). The economic issues here apply whatever political party is in power so regardless of who wins the next election this is likely to happen.

Marginal

September 11, 2007

How The Concept Of Net Neutrality Affects Us

We on the margin are deeply concerned about a debate that is currently taking place in the US on the concept of “net neutrality” or to be more precise whether or not to allow the lack of it.  To break the concept down to a simple level, what is basically being debated in the US corridors of power is whether US telecoms should be able to charge to guarantee delivery of particular streams of packets or information. MIT’s Technology Review puts it this way:

At issue, potentially, is the ability of Internet users to visit the sites they want, with no speed difference in the delivery of data between a site that pays for preferential treatment (say, Google) and one that doesn’t (say, your favorite blog).

There is major money on the table for the winners of this debate, and the two sides are equally powerful:

On one side of the issue stand powerful Internet and software companies such as Google, Yahoo, Microsoft, and Amazon. They — and others — are arguing that all bits should be equal — that a “best effort” should be made to deliver Internet information, regardless of where it comes from.

On the other side are the powerful infrastructure companies, who own the conduits through which the traffic flows, such as Comcast, Bell South, and SBC. They argue that because they own the pipes, they ought to have the right to charge companies such as Google or Apple something extra to “guarantee delivery” of their data.

This of course will affect the fundamental nature of the internet, with far reaching consequences. The potential impacts of this bill if it gets written into law are potentially quite scary.  The site savetheinternet.com lists a number of possible impacts:

How does this threat to Internet freedom affect you?

 

For those of us on the outside of the US we could find ourselves as permanant second class citizens of the web. With things we take for granted such as blogs and the ability to access the US market with the net being automatically assigned to the slow lane. Further what impact will this have on call centres and data intensive offshore businesses that currently use Voice Over IP technology (VOIP)? The demise of Net Neutrality will negate the “death of distance” that has opened many developmental opportunities in the developing world. This is one case where what happens in the US DOES directly affect us on the margins of the globalised world.

 

Over the course of a series of articles we will be looking at Net Neutrality and how it affects us in the Caribbean and in the wider developing world.

 

Marginal

July 24, 2007

Tax Haven??? or not?

Mr. Harper has come and gone, (if you blinked you might have missed it) and most of the media furore seems to be about a very mild exchange between Mr. Harper and Mr. Arthur on the role of Cuba and the potential for a free trade area. The much anticipated (by me anyway) fireworks about tax havens just never happened.

 

However in the local media there seems to have been an expansion on Barbados’ position in today’s Nation:

“We have sought to be principled in our relationship with Canada to avoid having our jurisdiction used as a place where people defraud the Canadian treasury,” said Arthur as he concluded the Press conference at Sherbourne Conference Centre. (snip)

…In this context, Arthur added: “We recognise that it is as much to Canada’s benefit as it is to ours, and we would not allow our jurisdiction to be used for the purposes of defrauding Revenue Canada.

 

“And the relationship that we will put in place, Mr Prime Minister, is such that if there are aspects of the treaty that we need to review to make sure that the objectives of a mutually beneficial relationship are enshrined and sustained, we are prepared, in the spirit of friendship and in the spirit of constructive engagement, to be so resolved.”

Historically Barbados has always run a relatively clean offshore jurisdiction. While the country’s offshore insurance company’s have flourished, the offshore banking sector has remained relatively stunted because the banks are subject to inspection and regulation by the Central Bank of Barbados.

Mr. Arthur and Mr. Harper walk a fine line here, the real reason offshore financial centres exist is because of high taxes in the metropolitan countries. If Mr. Harper squeezes too hard, he runs the risk of pushing Canadian businesses offshore, or making them less competitive with the rest of the world. If Mr. Arthur digs in his heels too much he runs the risk that Canada might walk away from the treaty all together. It will be interesting to see how this issue is resolved.

Marginal

Next Page »

Create a free website or blog at WordPress.com.