Dear Editor,  

  Did the CFT set the Kingdom on fire (1)? On April 7th last, when the whole world was battling the coronavirus, the CFT struck a blow to the public trust in its raison d’être with a devastating recommendation to the RMR that was potentially worse than the coronavirus itself.

   The advice of the CFT was devoid of any compassion or sense of solidarity and showed complete disregard for the scale and ferocity of the corona outbreak. At issue here was the request made by the various countries of the Kingdom on this side of the Atlantic for budget support from the financially better off partner of the Kingdom. These countries need financial support to overcome the social, health, and economic consequences of this crisis, unprecedented in both magnitude and scope.

   In its analysis, the CFT seems to have taken an insular approach to a crisis that does not recognize borders. To effectively contain the spread of this virus in the islands, the authorities implemented a total lock-down. Needless to say, the lock-down, while necessary, has had a crippling effect on the economy. It has brought the most important foreign exchange-generating sector of the economy to a virtual standstill.

   To preserve the productive capacity of the islands and to protect public health, immediate and determined action was necessary. As in many other countries, the authorities presented rescue plans for coping with this dreadful crisis. However, the price tag of the rescue packages exceeded the lending capacity of these countries, which are just emerging from an already nagging economic crisis.

   Sint Maarten is still recovering from Hurricane Irma, while Curaçao and Aruba are coping with the spillover effects of the crisis in Venezuela.

   While the CFT has recommended that the request be partially honoured, it contends that the islands need to make the necessary fiscal room for this financial support in their own budgets.

   What the CFT does not seem to grasp is that this pandemic is not an economic crisis, but rather, a complex public health crisis with far-reaching social and economic consequences (2). Even if we are successful in winning this battle locally, we will not be able to lift the lock-down until this pandemic is won globally, without risking a resurgence of this virus.

   We are engaged in a war against an invisible foreign enemy that does not recognize borders. This brings us into the areas of defense and foreign affairs—a purview of the Kingdom government. The legitimacy of the Kingdom lies in providing for this fundamental need throughout its realm. Therefore, one can argue that the economic consequences of this war should be viewed as the cost of defending the Kingdom against a foreign invader—namely, the coronavirus.

   By advising against the full financing of the requests, the CFT has unleashed a wave of protest tantamount to setting on fire the very basis of the Kingdom. While this pandemic may be temporary, the consequences of the CFT’s advice may be with us for a long time.

   The leaders of the Kingdom need to manage this crisis so that when we declare victory against this pandemic, the Kingdom also will emerge as a victor.

 By Emsley Tromp 

Dr. Emsley Tromp is the former President of the Central Bank of Curaçao and St. Maarten

• On April 8, 2020, I issued a comment on the CFT’s advice to the RMR that focused mainly on the internal inconsistencies of their advice. The subsequent decision of the RMR yesterday, however, led me to this afterthought.

            (2) I am in agreement with both the CFT and the RMR that the path of the agreed upon fiscal consolidation has to continue albeit corrected for the current crisis. To argue now about this agreed upon path will only make what has to be done now to overcome this crisis more difficult.

Seven-year-old Kodiba Uzoma wrote a letter to Dr Gerstenbluth as part of his school assignments. He asked Curaçao Chronicle to deliver this letter to the doctor, which we did. 

The letter shows this little boy's appreciation of the work Dr. Gerstenbluth is doing for the island.

Dr. Gerstenbluth’s reaction was “WOW, thank you very very much!”.

The letter says:

Dear Dr. Gerstenluth,

My name is Kodiba. I am 7 years old and a grade 2 student of the Curaçao American Preparatory School.

I want to thank you for all of what you are doing to protect us from the Covid-19 and for the information to help us stay away from the virus.

Whenever I see you on TV you look tired.

I hope you get enough rest from work.

I like that you can speak Dutch, English and Papiamento very well so everyone on the island can understand you.

My dad told me that you are an Epidemiologist, which is why you have been able to help us in this Covid-19 situation.

I hope to study well in school, so that some day I can be able to help my community in a time of trouble, like you are doing.

Keep up the good work! We are praying for you.

From Kodiba Uzoma

Thank you Kodiba, we know you will study hard and become very successful in life.

Curaçao Chronicle

The legal mandate of the Cft is to monitor the fiscal situation in the countries of Curaçao and Sint Maarten based on the Rijkswet Financiele Toezicht (Rft.) On March 27, 2020, the Council of Ministers of the Kingdom of the Netherlands (RMR) invoked article 25 of the Rft allowing Curacao a period of noncompliance with article 15, sub 1 of the Rft.

Pursuant to this decision, the Cft was asked to advise the RMR on the liquidity needs of the countries for the month of April related to the COVID-19 outbreak. With this request, Cft was accorded a task potentially in conflict with its legal mandate to report the extent to which the countries are complying with the Rft.  In the CFT’s recommendation of April 7, 2020, to the RMR, it appears that these seemingly contradictory tasks have necessarily permeated the Cft’s advice.   On various points, the CFT’s recommendation seems guided by the committee’s legal function rather than the current urgent situation confronting the countries as a result of the COVID-19 crisis.

The very fact that the RMR invoked article 25 of the Rft implies that the countries are allowed to deviate from the provisions of article 15 sub 1. Yet Cft overlooks this fact in its advice to RMR and continues to insist on Curacao’s adherence to the provisions of article 15 sub 1 as contained in its previous recommendations.  The objective of Curacao’s request to the RMR was to obtain the necessary funds to finance among others the extra healthcare expenditures needed as a consequence of the coronavirus outbreak and to provide assistance to the private sector to avoid an economic catastrophe.

Cft starts its response to RMR by acknowledging that the loss of revenue of the government of Curaçao is realistic based on the projections of the Central Bank. It emphasizes that those projections may actually be on the lower side since they were premised on the partial lockdown in effect at the time, and a total lockdown was promulgated on March 30, 2020.  According to a recently issued Note, IMF estimates the 2020 financing fiscal gap for Curaçao at 22 percent of the GDP comprising both a shortfall in fiscal revenue and higher expenditure.

CFT Evaluation of the Curaçao request

In its evaluation of the strategy underpinning Curacao’s request for financing to the RMR, Cft states that the reallocation of the funds in the context of the groeistrategie is inconsistent with previous agreements.  In addition, the other measures announced by the government do not seem to get Cft’s approval. However, Cft’s evaluation is in contravention of the RMR’s decision to allow noncompliance of article 15 sub 1 for Curaçao.

Cft is further of the opinion that the measures proposed by the government should be more austere given Curacao’s fiscal situation. The Cft is of the opinion that the private sector is not making sufficient sacrifice. Here again the committee overlooks the overriding objective of the government’s assistance program underpinning the financing request. The very fact that the sector will get 80% of the relevant minimum/SVB wage benchmark, implies in itself a sacrifice of at least 20%. The Cft departs from an economic contraction of 14.9% as projected by the Central Bank. By arguing for a much more austere program, Cft is increasing the downside risk for the Curaçao economy.

As support for small and medium-sized enterprises, the government proposes a credit facility to maintain productive capacity. In its evaluation Cft states that the sector itself has to make a larger contribution to the credit facility. The credit facility is based on the projected needs of the sector. To the extent that a small and medium-sized enterprise does not make use of the facility and uses its own funds or seeks access to other sources in itself implies a sacrifice by the sector.  Arguing that the sector needs to make a larger contribution seems presumptuous.

Cft also is of the opinion that an additional supplement for the “onderstandtrekkers” is not sufficiently argued since it does not seem to have a direct link to the current crisis. What Cft again overlooks is that in practice the “onderstandtrekkers” allowance is a de facto supplement. Therefore, the economic standstill means that their primary income also would have dried up.

While Cft argues that Curaçao should not deviate from previous agreements when it relates to, among other things, the groeistrategie, the committee does not maintain the same line of reasoning when it comes to the begrotingskamer and national planbureau, for example.

The Cft concludes its evaluation by arguing that Curacao’s budgetary situation does not justify additional loans preferring instead a more austere package financed by creating the necessary fiscal room in the current budget. Here again, the Cft seems to argue against the RMR decision of March 27, 2020. Before the corona crisis, it was contended that social constraints prevented the creation of any additional fiscal room. By arguing now in a much more untenable situation for additional loans, Cft again seems to be insensitive to our current social economic realities.[1]

Liquidity Needs

In determining the liquidity needs of the government, Cft seems to condone the buildup of arrears when it refers to SVB since the committee does not have sufficient insights into the liquidity of SVB. The government should regularize its arrears. It should not depend on Cft’s insight into the liquidity position of any institution.

Cft is using this opportunity to advise the RMR to draw its attention to Cft’s previous advice rather than advise the RMR within the context of the current coronavirus crisis. This again reflects the conflicting situation for Cft as it had to advice the RMR on matter it previously as advised against.

The additional monitoring suggested by the government for this special program gets only lip service from the Cft. It is not clear to me why the Cft does not seem to support this additional audit function proposed by the government to monitor the rescue program.

Emsley D. Tromp

Former Central Bank president

[1] In a Note dated April 6, 2020, titled “Curaçao and Sint Maarten: Impact of COVID-19,” the IMF stated that “Assuming that financing is provided as loans, the debt-to-GDP ratio in Curaçao would rise to close to 90 percent of GDP, and in Sint Maarten to 91 percent of GDP in 2020.” These disproportionately high debt-to-GDP ratios were the overriding criteria used by Holland to provide the island with debt relief in 2009. Allowing them to again reach those ratios is tantamount to denying them the possibility to realize one of the most important objective of the 10-10-10 constitutional restructuring.

Dear editor,

 Many in the business community just think of themselves, look at when they come out in the media and what they talk about—this is the sentiment you hear in the street and on social media.

  To what degree the above is true is no doubt debatable. What is certain, however, is the contentious relationship that the business community organizations have with both the government and employees. Again, to varying degrees. Recent deliberate nasty comments regarding work permits don’t help either in their quest for an audience, sympathy, or assistance.

  No doubt, every country, St. Maarten included, is going through unprecedented rough economic and social times due to the COVID-19 pandemic, which will only get worse in the short run. It’s going to get very bad for many, the most affected will be the working class and unemployed and the most vulnerable people in our society. Government is doing their best considering their handicaps. Hindsight is always 20/20.

  So instead of realizing the gravity of the totality of the situation, these business organizations insist, head strong, on focusing their efforts, no matter how biased, on extraordinary requests in times of crisis. The possibility for such assistance is indeed problematic in numerous ways.

  So where does that leave us—stuck between a rock and a hard place until someone or something gives. If only our interest is focused on one sector of society, the other sectors will have to give. That is a different type of St Maarten we all would not want to live in.

  The other option of course is that we could simply work together and negotiate our differences. To achieve some sort of cooperation in spite of our different interests among the unions, government, and business organizations, amongst others, has to start and end with respect, fairness, and compassion from all sides in negotiating.

Pedro de Weever