Days after downgrading the island’s credit rating to unprecedented “junk” territory, controversial news made public via an abbreviated Research Update Report, Standard & Poor’s has waded into debate on Barbados’ political landscape via a political analysis included within its Full Analysis Report released today.
In a section titled Political Analysis: Supported By Strong Institutions And Agreement On The Importance Of Fiscal Consolidation, the influential credit rating agency said it did not expect a change of course whether Prime Minister Freundel Stuart was returned to office or Opposition Leader Owen Arthur took charge.
The comment by S&P comes in the wake of Arthur urging Stuart to call elections immediately so a new administration led by the former prime minister could fix the economy. “We don’t expect Barbados’ next elections, which will take place in the first half of 2013, to lead to any changes in the government’s policy direction or commitment to fiscal austerity,” S&P asserted in its 16-page report.
“The opposition Barbados Labour Party is led by Owen Arthur, who was prime minister from 1994-2008, in collaboration with Mia Mottley, former BLP leader 2008-2010.
“The always vocal BLP has already launched its campaign, focusing on ways to improve employment prospects, raise economic growth, and increase standards of living.
“Although some may perceive the governing styles of current Prime Minister Freundel Stuart and the Opposition Leader as very different, both parties have the same priorities — to restore growth, protect the social safety net, which includes efforts to alleviate poverty amid economic shocks, and maintain the currency peg with the US dollar,” the agency added.
S&P claimed Barbados’ political climate was characterised by “generally effective policy making, supported by public consensus on major policies and a strong social contract”, and “generally stronger institutions than those of similarly rated peers, and effective checks and balances, as well as a free flow of information and open debate on policy decisions”.
“Public consensus prevails on most of Barbados’ social and economic policies. A tripartite partnership among government, businesses, and trade unions has historically manifested itself in numerous agreements that link moderate wage increases to commitments to share profits and improve productivity,” the report stated.
“These income protocols have allowed both the government and businesses to assuage union wage demands without compromising the public purse or diminishing competitiveness.
“For instance, during the 1991 crisis, the Government cut public-sector wages by eight per cent, froze private-sector wages, and downsized the public sector as part of the International Monetary Fund’s stabilisation programme to avert the balance-of-payments crisis.
“Although the tripartite relationship remains strong, the constitutional amendment passed in 1994 no longer allows the Government to cut public-sector wages, thereby reducing policy flexibility. Nevertheless, the nominal increases (declines in real terms) in public-sector wages since the onset of the crisis and modest demands for 2012 attest to the unions’ continuous support for government’s austere policies,” it said.
S&P said corporate Barbados was also “playing its part in sharing the country’s burden over the past few years by preserving jobs through reduced work weeks and other flexible arrangements”.
The agency said when compared with “similarly rated peers and other Caribbean islands”, Barbados “has generally stronger institutions, a stable political system, a well-educated labour force, and a strong social contract”. (SC)