Return to: Index of "1994 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage



U.S. DEPARTMENT OF STATE
BARBADOS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                             BARBADOS

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                     1992      1993      1994

Income, Production and Employment:

Real GDP (1985 prices)              422.2     396.0     401.1
Nominal GDP (current prices)      1,696.7   1,585.7   1,640.3
Real GDP Growth Rate (pct.)          -4.0      -5.8       0.8
Sectoral Growth Rates:  (pct.)
  Agriculture/Fishing                -4.6      -9.2      -7.1
  Tourism                            -9.0      -2.0       3.2
  Manufacturing                      -5.6      -9.3      -0.3
  Energy/Gas/Water                    3.0       1.3       0.3
  Mining/Quarrying                    3.1      -9.7       4.2
  Construction                       -7.5      -8.1       2.1
  Wholesale/Retail Trade             -6.3      -7.9       2.4
  Business/General Services          -2.4      -5.3       0.9
  Transport/Storage/Communication     7.5      -3.5       1.2
  Government Services                -2.2      -5.0       0.0
Population (000s)                   262.5     263.1     263.9
Nominal Per Cap. GDP (official/$)   5,600     5,150     5,250
Nominal Per Cap. GDP (GDP/pop/$)    6,464     6,027     6,216
Labor Force (000s)                  122.5     124.8     126.3
Unemployment Rate (pct.)             17.1      23.0      24.5

Money and Prices:

Growth in Money Supply (M2/pct.)     -4.3       8.2       1.7
Prime Lending Rate (pct.) 1/        14.50     10.75      8.75
Retail Price Index (pct. change)      6.3       6.1       1.1
Average Annual Exchange Rate (USD/BDs)
  Official                           0.50      0.50      0.50
  Parallel                           0.50      0.50      0.50

Balance of Payments and Trade:

Total Exports (FOB)                 411.6     382.5     364.0
  Exports to U.S.                    53.4      62.3       N/A
Total Imports (CIF)               1,394.0   1,048.5   1,153.9
  Imports from U.S.                 494.1     377.3       N/A
Trade Balance                      -982.5    -665.9    -789.9
Current Account Balance             -29.9    -137.9      58.7
Aid from U.S.                         0.7       1.1       N/A
Aid from Other Countries              N/A       N/A       N/A
External Central Government Debt    393.8     346.3     330.6
Domestic Central Government Debt    556.8     618.3     808.5
Total Debt Service Payments (paid)  393.8     346.4     330.6


N/A--Not available.

1/ End of period.







1.  General Policy Framework

    Barbados is a British-style parliamentary democracy.  As a
result of the September 1994 general elections, the political
party comprising the government is the Barbados Labour Party,
headed by Prime Minister Owen Arthur.  The official opposition
is the Democratic Labour Party.  Seated in Parliament also is a
member of the National Democratic Party, as well as a few
independent Members of Parliament.

    As a country with a relatively narrow resource base and
limited production structure, Barbados imports much of what it
needs to survive, including energy, food, and most types of
consumer products.  Previous governments have pursued policies 
-- including high tariffs, restrictions on entry into certain
sectors of business activity (such as telecommunications and 
broadcasting), and laws which restrict the entry of
subsidiaries or branches of foreign retail establishments --
whose purpose was to protect local businesses from external
competition.  Those policies have had the unintended effects of
making both manufacturing and many services sectors
uncompetitive in terms of price (because inputs are so
expensive) and contributing to the generally high-cost wage
environment in Barbados.  Early indications are, however, that
in its efforts to reduce the high unemployment rate, the new
Barbados Labor Party government will act to lower the costs of
doing business here.  In October 1994, the new government
announced that businesses in the manufacturing, agricultural,
and fishing sectors will be able to import all inputs free of
all duties and taxes.  The policy change should result in
higher levels of goods imports, a development U.S. exporters
well may be able to take advantage of.

    In general, Barbados' trade policy seeks to stimulate
exports of goods and services (tourism and offshore financial
services), encourage domestic light manufacturing, maintain the
government's revenue base through direct taxation, and actively
manage foreign exchange reserves.  In 1993, the United States
was the leading source of imports into Barbados, followed by
CARICOM, the United Kingdom, and Canada.  Barbadian attitudes
toward the United States and toward U.S. business are also
generally favorable, as evidenced by the approximately 26
percent of the import market commanded by goods from the United
States.  According to U.S. Department of Commerce figures, U.S.
exports to Barbados grew about 13.9 percent in 1993, to U.S.
$145.5 million.

    Barbados ratified the Uruguay Round Agreements and became a
founding member of the World Trade Organization (WTO) on
January 1, 1995.


2.  Exchange Rate Policy

    Since 1975, the Barbadian dollar has been pegged to the
United States dollar at a fixed rate of Bds. $2.00 to U.S.
$1.00.  Despite intermittent problems in maintaining adequate
levels of international reserves, both of the major political
parties have formed governments committed to avoiding a
devaluation of the currency.  Any impact of this policy on U.S.
exports is probably positive, at least in the short term, since
Barbadians can buy more United States goods and services than
they would be able to if the currency were devalued.  Some
economists hypothesize, however, that the Barbadian currency is
overvalued, which contributes to making Barbadian manufactures
uncompetitive in terms of price (and perhaps quality) in
markets outside Barbados and restricts the long-term potential
output of the economy -- which could have implications for
import volumes in the long term.

    The Ministry of Finance makes foreign exchange control
policy, which is then administered by the Central Bank of
Barbados (CBB) through its Exchange Control Division. 
Individuals may convert the hard-currency equivalent of U.S.
$2,500 per year without special permission, if they are
traveling outside Barbados, by applying to a commercial bank. 
Amounts in excess of U.S. $2,500 may be obtained upon
application to the CBB.  Profits and capital from foreign
direct investment usually may be repatriated if the investment
was registered with the bank at the time the investment was
made.  The CBB may limit or delay conversions of funds
depending on the level of international reserves under its
control.


3.  Structural Policies

    Although the Barbadian economy is generally free
market-oriented, the government controls a relatively large
public sector, including a number of "parastatal" entities. 
Pricing of goods is generally left to the market, although the
prices of certain food staples, as well as utility and public
transportation rates, are set by the government.  The
government subsidizes losses incurred by the entities -- such
as the monopoly dairy and the public bus system -- which it
partially or wholly owns, but the effect of those subsidies on
U.S. exports is probably minimal.  For example, milk imports
face high tariffs, as they do in most countries.  However, even
if imports were liberalized, U.S. exporters likely would face
strong competition from many other countries with milk
surpluses, such as from those in the European Union.  Bulk
users of utilities -- such as industry -- are eligible for
resource discounts, but the trade effect of the subsidy is
probably negligible on international markets, because of the
generally higher costs of production Barbadian industry faces.

    The 1992 and 1993 reform of the direct tax system broadened
the tax base while lowering maximum rates -- a change which
resulted in an overall lower level of government revenues in
the first half of 1994 (see section four).  The previous
government announced in April 1994 that a value-added tax (VAT)
would be initiated in April 1995, which, among other things,
would replace many of the indirect taxes -- such as consumption
taxes and stamp duties on imports -- which now exist.  The new
government has not yet announced whether the VAT will be
implemented according to the previous government's plan.

    In October 1994, the new government announced that
businesses in the manufacturing, agricultural, and fishing
sectors will be able to import all inputs free of all duties
and taxes.  The policy change should result in higher levels of
goods imports, a development U.S. exporters may be able to take
advantage of.

    In regard to purchases of consumer household durables, the
government has not yet announced its policy on the amount of
down payment needed, if any, to purchases these big-ticket
items, many of which are imported from the United States.  At
one point, the previous government sought to constrain imports
by making consumers put hefty down payments on installment
purchases of durables.  Currently, no down payment requirement
is in place.


4.  Debt Management Policies

    The overall deficit on central government operations
widened slightly during the first half of 1994, from about one
percent at the end of 1993 to between one and two percent of
Gross Domestic Product (GDP) at the end of June 1994.  The
increased deficit was due to a decline in revenues -- a result
of the 1993 tax reform which reduced direct levies -- and not
to increased expenditures.  The decline in government revenues
took place even as real GDP rose 3.8 percent on an annual basis
in the first six months of the 1994 (from 0.8 percent in
1993).  The Barbadian government has continued its concerted
effort to repay foreign debt, the levels of which have declined
steadily for over three years.  As in the recent past, an
increasing share of debt is being financed locally.  As a
result of high liquidity in the banking system, commercial
banks and other local buyers were the main source of new credit
to the government to finance the deficit during the first half
of 1994.  Previously, the deficit had been financed primarily
through purchases by the National Insurance Scheme (akin to the
Social Security System) of Treasury bonds.  As a result of the
government's repayments of its external debt, net foreign
financing in the January - June 1994 period was negligible.

    With the September 1994 election of a new (Barbados Labour
Party) government, it seems unlikely that Barbados will
willingly participate in a formal International Monetary Fund
(IMF) program in order to obtain funds for structural
adjustment in the near- to mid-term.  The new Prime Minister
has repeatedly said that he will not run his country according
to IMF dictates.  In the autumn of 1991 (under the former
Democratic Labour Party government), Barbados was compelled to
ask the IMF for funds to handle a severe shortfall of
international reserves.  In exchange, the IMF required Barbados
to institute economic austerity measures to reduce government
spending in ways that were politically unpopular, including
cutting spending on public sector wages.  Government officials
have expressed their desire to continue to work with the
Inter-American Development Bank and the Caribbean Development
Bank on essential infrastructure projects, and relations
between the Government of Barbados and those institutions
appear cordial.


5.  Significant Barriers to U.S. Exports

    The introduction of the CARICOM Common External Tariff
several years ago will continue to disadvantage imports from 
countries which are not CARICOM (Caribbean Community) member
states -- including exports from the United States.  In
February 1994, Barbados eliminated its "negative list" of goods
which could not be imported or for which an import license was
necessary, and replaced it with a higher duty.  The benefit of
a duty replacing an import license is that the trade barrier is
transparent; previously, there was no way to foretell whether
the responsible Minister would approve a particular import
license application.  There is no provision of Barbadian law
that discriminates against U.S. exports in or of itself.

    U.S. standards are generally acceptable in Barbados; the
American Embassy is not aware of any cases in which Barbadian
standards have acted as a trade barrier to U.S. goods exports. 
Barbados is a member of the GATT/Tokyo Round Agreement on
Standards (Standards Code).

    Barbados permits full ownership by foreigners of
investments and property, although certain sectors are reserved
for citizens of Barbados.  There are no maximum equity position
restrictions on foreign ownership of a local enterprise or
participation in a joint venture.  Non-residents need
permission from the Central Bank to purchase real property or
stock which is traded on the Securities Exchange of Barbados,
but permission is usually granted.  A property transfer tax is
levied on real property or stock transactions conducted by
foreigners.

    The Barbadian government must approve a license in order
for foreigners to invest in utilities, broadcasting, banking,
and insurance enterprises.  Previous governments denied all
requests by investors, both domestic and foreign, to open a
television station to compete with the government-owned
monopoly, but the current government has indicated that at
least one new television venture will be licensed.  In
addition, the government has licensed only one firm to provide
basic (local) telephone service and another to provide
long-distance telephone service.  Banking and insurance
services are open to foreign direct investment provided the
required level of capital is invested and prior government
approval is obtained.  Stock exchange membership (for traders)
is closed to non-Barbadians, and only firms long-established in
Barbados may be traded on the local securities exchange.  This
situation may change as the new government assesses ways to
broaden the possibilities for attracting foreign direct
investment to Barbados.  Other services (such as travel) are
generally open to foreign investment, although the ministries
responsible for trade and for labor matters must, by law,
determine if the competition of another service provider would
be detrimental to the financial health of currently-established
Barbadian businesses.

    The government requires a Barbadian citizen to apply for
many of the requisite licenses that allow enterprises to
operate.  Thus, a foreign-owned firm might have to hire a
Barbadian.  Work permits for foreigners usually are granted
only when no Barbadian is qualified to perform.  Administrative
proceedings involving Customs clearances are sometimes
burdensome.  While no special documents are required,
occasional capricious or dilatory judgments by officials can
slow the importation of essential inputs.

    Government procurement is not handled in a transparent
manner; both sole-source and competitive contracts are tendered
and the government is not obliged to accept the lowest, or any,
bid for public works projects or for critical procurements. 
The government must "Buy Barbados" where it can, but the
Embassy has received no complaints by U.S. businesses of
discrimination against U.S. goods by Barbadian goods.  Neither
offsets nor countertrade is used in making procurements.


6.  Export Subsidies Policies

    Barbados gives priority to investments which intend to
manufacture, especially for export.  Incentives for
manufacturing are available under the Fiscal Incentives Act
(1974), which does not discriminate between foreign and
national ownership.  Any manufacturer may qualify for a maximum
10-year tax holiday by satisfying a value-added criterion or as
a so-called "enclave" (international business company, or IBC)
under Barbadian law, which, by definition, exports 100 percent
of its output.  IBCs enjoy the most advantageous tax treatment,
because the higher the level of gains and profits, the lower
the tax rate.  IBC tax rates range from a high of three percent
to a low of one percent of net profits.  However, under the
Income Tax Act, any manufacturing company in Barbados --
whether locally- or foreign-owned -- may enjoy tax reductions
which vary according to the percentage of its profits derived
from export income.  If a manufacturer derives more than 80
percent of its profits from exports, its effective tax rate can
be reduced from a maximum of 26 percent to 2.8 percent.

    Commercial and development bank financing is restricted to
Barbadian citizens, but because interest rates in Barbados are
generally higher than those in the United States, the subsidy
element likely is nil.  The Barbados Investment and Development
Corporation generally limits its export promotion efforts to
firms owned by Barbadians, although it may make exceptions for
firms which employ Barbadian citizens regardless of ownership. 
In addition, the government offers export guarantee schemes
offering letters of credit and credit insurance for Barbadian
exporters.  Also (as mentioned previously), the new Barbados
government has announced that businesses in the manufacturing,
agricultural, and fishing sectors will be able to import all
inputs free of all duties and taxes, a measure designed to
stimulate the productive sectors in Barbados.


7.  Protection of U.S. Intellectual Property

    The Government of Barbados has made efforts in recent years
to improve the legal regime to protect, as well as to acquire
and dispose of, all property rights, including intellectual
property rights (IPR).  Barbados is a signatory of the Paris
Convention of Intellectual Property Rights and the Madrid
accords, and is a member of the World Intellectual Property
Organization (WIPO).  The law of Barbados does not promote
domestic industries at the expense of foreign industrial and
intellectual property rights holders.  However, Barbados has
only limited experience with IPR matters and very few
industrial designs or patents have been registered here.  There
have been no recent court challenges or settlements for patent,
trademark, or copyright infringements although infringement is
commonplace in certain sub-sectors of the economy (e.g.,
rentals and sales of films on videocassettes, tee-shirt
production of unlicensed copyrighted images, unlicensed use of
trademarks as store names, software piracy, satellite signal
piracy).  Enforcement has not been an active priority of
government, although the Government may initiate some
challenges in court in late 1994 or the first half of 1995. 
Private parties may also initiate court challenges in that time
frame.

    Separate statutes govern and regulate IPR protection.  The
Industrial Designs Act provides for registration of industrial
designs for exclusive use by the registrant for five years,
which may be renewed for two additional consecutive five year
periods.  The Patents Act of 1981 allows for protection of
patents for 14 years.  The Trademarks Act of 1981 protects
marks initially for ten years with renewals possible for ten
year periods.  The Copyright Act protects copyrights during the
life of the author and for seven years thereafter.  There is no
specific statutory reference to trade secrets or semiconductor
chip layout designs.  In 1990, a WIPO consultant made
recommendations for changes in Barbados' IPR statutes and
administrative and enforcement procedures which are still being
considered.  Embassy cannot estimate lost U.S. import
opportunities related to local IPR protection standards.


8.  Worker Rights

    a.  The Right of Association

    Barbados boasts one of the most advanced trade union
environments in the hemisphere.  Workers have the right to form
and belong to trade unions and to strike, and they freely
exercise these rights.  There are two major unions and several
smaller ones, representing various sectors of labor.  The Civil
Service Union, called the National Union of Public Workers
(NUPW), is completely independent of any political party or the
government.  The General Secretary of the NUPW was a candidate
of the National Democratic party, while the former Director of
Education was a candidate for the Democratic Labor Party and a
Cabinet Minister.  The largest union, The Barbados Workers'
Union (BWU), was historically closely associated with the
governing Democratic Labor Party.  However, in February 1994,
Leroy Trotman, BWU General Secretary and President of the
Caribbean Congress of Labor, resigned from the DLP while
remaining in Parliament as an independent representative. 
Trotman resigned because the public and especially union
members perceived a conflict between his role as union leader
and his role as parliamentarian.  The latter required him to
support the government's economic stabilization and austerity
measures which were viewed as setting back union achievements
and harming workers.  Nevertheless, one of Trotman's deputies
in the BWU remained a government backbencher in parliament
until he was voted out of office in September, 1994.

    Trade unionists' personal and property rights are given
full protection under law.  Under a long-standing law, strikes
are prohibited in the water, gas and electricity sectors,. 
However, there have been several cases of work stoppages in the
electricity sector.  All other private and public sector
employees are permitted to strike.

    There were fewer industrial actions in 1993 than 1992,
despite severe cutbacks in personnel in the private sector.  In
the public sector, wage cuts, layoffs, and efforts to privatize
state-run enterprises continued.  Public, private, and union
sector leaders in the summer of 1993 signed a tripartite wage
policy accord that established a two- year wage freeze.  Any
increase in wages will be tied to productivity increases by
particular workers or by particular enterprises.  Critics
argued that the wage policy undermined the right of unions to
bargain collectively because it forestalled any new
company-wide or industry-wide negotiations for wage and benefit
increases.  Supporters of the tripartite pact hailed it as a
cooperative solution to the recession which prevailed at the
time.

    Trade Unions are free to form federations and are in fact
affiliated with a variety of regional and international labor
organizations.  Leroy Trotman head of the Barbados Workers'
Union, is also President of the ICFTU and President of the
Caribbean Congress of Labor.  The CCL is the main regional
labor organization; its headquarters are in Bridgetown and it
conducts many of its seminars and other programs in Barbados.

    b.  The Right to Organize and Bargain Collectively

    The right to organize and bargain collectively is provided
by law and respected in practice.  In 1993, over 25 percent of
the working population was organized, but a major loss of jobs
in the economy has resulted in a reduction in union
membership.  The BWU reported that it alone lost about 2,000
members in 1993 in the private and public sectors as a result
of adverse economic conditions.  Normally, wages and working
conditions are negotiated through the collective bargaining
process, but this was influenced by the tripartite wage accord
described in Section 8(A).

    Employers have no legal obligation to recognize unions
under the Trade Union Act of 1964.  But most do so when a
majority of their employees signify a desire to be represented
by a registered union. The act expressly prohibits employers
from discriminating against employees for engaging in trade
union activities.  However, there is no law that expressly sets
out unfair labor practices by either employers or trade
unions.  The courts commonly award monetary compensation but
rarely order re-employment.

    There are no manufacturing or special areas where
collective bargaining rights are legally or administratively
impaired.  Barbados has no specially designated export
processing zones.

    c.  Prohibition of Forced or Compulsory Labor

    Force or compulsory labor is prohibited by the constitution
and does not exist.

    d.  Minimum Age for Employment of Children

    The legal minimum working age of 16 is generally observed. 
Minimum age limitations are reinforced by compulsory primary
and secondary education policies, which require school
attendance until age 16.  Occasionally, especially among
migrant worker families, children assist in agricultural
production during peak season.  The Labor Ministry has a small
cadre of labor inspectors who conduct spot investigations of
enterprises and check records to verify compliance with the
law.  These inspectors are authorized to take legal action
against an employer who is found to have underage workers.

    e.  Acceptable Conditions of Work

    Minimum wages for specified categories of workers are
administratively established and enforce by law.  Only two
categories of workers have a formally regulated minimum wage --
household domestic workers and shop assistants (entry level
commercial workers).  Household domestics receive a minimum
wage of about U.S.$32.50 per week, although in actual labor
market conditions the prevailing wage is almost double that
amount.  There are two age-related minimum wage categories for
shop assistants.  The adult minimum hourly wage for shop
assistants is U.S. $ 1.87 per hour; the juvenile minimum wage
for shop assistants is U.S. $1.625 per hour.  Agricultural
workers (i.e., sugar plantation workers) receive a minimum wage
as a matter of practice, but such compensation is not found in
legislation.

    The minimum wage for shop assistants is marginally
sufficient to meet minimum living standards; most employees
earn more.  In 1992 an International Labor Organization (ILO)
Committee of Experts (COE) cited Barbados for not adhering to
the ILO Convention On Equal Remuneration in its wage
differentials in the sugar industry.  The COE admonished the
government to ensure the application of the principle of equal
remuneration for work of equal value to male and female workers
in the sugar industry or to provide further information on job
descriptions which might justify such wage distinction.  This
case was not resolved at years' end.

    The standard legal work week is forty hours in five days,
and the law requires overtime payment for hours worked in
excess of that.  Barbados accepts ILO conventions, standards,
and other sectoral conventions regarding maximum hours of
work.  However, there is no general legislation that covers all
occupations.  Workers are guaranteed a minimum of three weeks
annual leave.,  All workers are covered by unemployment
benefits legislation and by national insurance (Social
Security).  A comprehensive government-sponsored health program
offers subsidized treatment and medication.

    Under the Factories Act of 1993, which sets out the
officially recognized occupational safety and health standards,
the labor ministry enforces health and safety standards and
follows up to ensure that problems cited are corrected by
management.  Workers have a limited right to remove themselves
from dangerous or hazardous job situations without jeopardizing
their continued employment.  The Factories Act requires that in
certain sectors firms employing more than fifty workers set up
a safety committee.  That committee can challenge the decisions
of management concerning the occupational safety and health
environment.  Recently, however, trade unions called on the
government to increase the number of factory inspectors in
order to enforce existing and proposed safety and health
legislation more effectively, and to follow up to ensure that
problems cited are corrected by management.  Government-
operated corporations in particular were accused of doing a
"poor job" in health inspections of government-run corporations
and manufacturing plants as a priority.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                              95
Total Manufacturing                                     7
  Food & Kindred Products                   3
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           2
  Transportation Equipment                  0
  Other Manufacturing                       1
Wholesale Trade                                       379
Banking                                               (1)
Finance/Insurance/Real Estate                          88
Services                                              (1)
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  644      

(1) Suppressed to avoid disclosing data of individual companies

Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)


To the top of this page