In case you haven’t noticed, there is a new Cold War in the Caribbean. This time China battles the U.S. contrary to the old Cold War between the U.S. and the Soviets.
This is where the U.S. Western Hemisphere Nearshoring Act which was passed last month, comes in. This legislation promotes manufacturing in Central, South America, and the Caribbean in order to reduce U.S. dependence on China.
First, we need to define nearshoring. According to Global Negotiator, nearshoring is the transfer of business processes to companies in a nearby country, whereby both parties benefit. Nearshoring is a derivative of the business term offshoring.
This means that whilst the U.S. used to look to the far east for products and services, it now wants to promote these goods and services made available in our Hemisphere. There should be no doubt about the geopolitical component of this legislation: to reduce U.S. dependency on China and rekindle the historic friendship with its neighbors.
Nearshoring makes business sense: closer proximity allows for cheaper and quicker transportation, less environmental burden, similar time zones which improve communication, reduction of cultural and language barriers, and better control of supply chains and quality.
Where’s the beef for Curaçao? We’re not going to be the next major automotive or aerospace industry production giants, but we can become an important technology and financial hub with the key being human capital, including Curaçao’s diaspora.
The new legislation also creates a low-interest loan program, administered by the International Development Finance Corporation to induce companies to move their factories from China to our region. Under this proposal, companies would get tax benefits such as duty-free trade with the U.S. for 15 years.
In order to benefit, we should reform our outdated economic structures, improve productivity, and have a globally competitive workforce. Most of these reforms are included in the stalled deal with The Netherlands.
We could also repeat the errors of the past and ignore the opportunities as we did during the first Cold War. The U.S.-sponsored Caribbean Basin Initiative should ring a bell.
Let’s hope this time we’ll ride the waves of change, diversify our economy while raising the standard of living, and not remain stuck in the status quo.
Colombo, Sri Lanka