Caribbean Property & Investment Review — Edition 75: Complete Tourism Halt, Oil Price Collapse Hits Trinidad, Historic Economic Emergency

Publication Date: 3 May 2020  |  Coverage Period: 3 April – 2 May 2020

Morning Briefing

• WTI crude oil futures briefly traded at negative prices on April 20, 2020 — an extraordinary and unprecedented event that reflects the complete collapse of global energy demand and storage capacity constraints, with severe implications for Trinidad & Tobago’s economy.
• Caribbean tourism arrivals have effectively reached zero: all borders remain closed to tourist arrivals, all cruise sailings are suspended, and the region’s hotels are operating on skeleton maintenance staffing only.
• Regional economists are now projecting Caribbean GDP contractions of 10–15 percent for full-year 2020, placing this crisis in the same league as or worse than the 1930s Great Depression in terms of its impact on open tourism-dependent economies.
• Food security is emerging as a serious concern across several smaller island economies, with import-dependent nations facing disrupted supply chains and rising food prices compounding the income shock to households.
• Caribbean property transactions remain almost entirely suspended, with land registries and legal offices operating on minimal capacity and buyers and sellers unable to complete closings in most jurisdictions.
• The Caribbean Development Bank has activated its US$722 million emergency support facility, providing critical balance-of-payments and budget support to member governments overwhelmed by the scale of the crisis.

The Oil Price Shock: Trinidad & Tobago in the Eye of Two Storms

April 20, 2020 will be recorded as one of the most extraordinary days in the history of commodity markets. West Texas Intermediate crude oil futures, the benchmark for North American oil pricing, briefly traded at negative US$37.63 per barrel — meaning that sellers were effectively paying buyers to take oil off their hands. The proximate cause was the impending expiry of May futures contracts combined with a catastrophic shortage of storage capacity as global production continued to flow into a world where demand had collapsed by perhaps 30 percent due to pandemic lockdowns. Brent crude, the global benchmark more relevant to Caribbean oil producers, did not go negative but fell below US$20 per barrel — a level not seen since 2002.

For Trinidad & Tobago, the simultaneous collapse of tourism (modest in T&T’s case) and the catastrophic fall in oil and gas prices represents an existential fiscal challenge. The government’s 2020 budget was premised on oil at US$60 per barrel — now an almost unimaginably distant figure. Natural gas, which is even more important to T&T’s petrochemical export economy, has also seen significant price deterioration. Finance Minister Colm Imbert has signalled that the government will be drawing on the Heritage and Stabilisation Fund — T&T’s sovereign wealth vehicle — to bridge the fiscal gap, but the depth and duration of the crisis means that even this buffer may prove insufficient if conditions persist.

In Guyana, the situation is paradoxically more manageable. Liza Phase 1 production, which began in December 2019, is continuing at approximately 75,000–100,000 barrels per day. While low oil prices are deeply unwelcome for the government’s revenue projections, the production volumes are relatively modest, and the project’s economics at current prices are still positive — though significantly below plan. More importantly, Guyana’s structural position as an emerging oil producer with large proven reserves means that international investors and lenders remain engaged with the country’s long-term potential even through this trough.

Tourism: The Numbers That Tell a Generation-Defining Story

The scale of the Caribbean tourism collapse in April 2020 is without precedent in the modern era. Stopover visitor arrivals to Jamaica, Barbados, the Dominican Republic, and the Eastern Caribbean islands were effectively zero during April, compared with hundreds of thousands in the same month of 2019. The Cayman Islands, Turks and Caicos, and the British Virgin Islands — smaller destinations with premium pricing — saw identical patterns. There are no meaningful comparison numbers to offer because the collapse is effectively total.

Cruise passenger numbers are similarly zero. The Caribbean receives approximately 35 million cruise passenger visits in a normal year, representing a massive economic contribution to ports from Nassau to Barbados to Cozumel. That entire revenue stream has vanished. The financial pressure on cruise lines is immense: ships are anchored in sheltered Caribbean waters consuming fuel and maintenance costs with zero revenue, while the companies burn through cash reserves at rates that are testing even the largest operators.

Airline connectivity remains essentially non-existent for leisure and tourist travel. The major carriers — American Airlines, JetBlue, British Airways, Air Canada, and WestJet — have grounded their Caribbean leisure fleets or reduced to skeleton operations serving diaspora and essential travellers only. The Jamaica Airports Authority has reported that Sangster International Airport in Montego Bay — the country’s primary tourism gateway — is processing a fraction of one percent of its normal traffic. This airlift void will be one of the defining challenges of recovery: airlines will need to rebuild confidence, crew rosters, and maintenance programmes before full schedules can be restored.

Property Market: Suspended Animation

The Caribbean property market remains in what analysts have described as suspended animation. Transactions are not completing because the machinery required to complete them — legal professionals operating normally, land registry access, bank valuations, face-to-face signings — is largely unavailable or severely disrupted under pandemic protocols. This is in some respects distinct from a market correction: prices are not necessarily falling because sellers are not selling, rather than because there are no buyers.

The National Housing Trust in Jamaica has continued to process applications remotely where possible, and has urged its member base not to lose faith in the institution’s ability to support them through the crisis. The NHT’s continued operation is genuinely significant: as one of the largest mortgage lenders in the Jamaican market, its continued availability of financing is a signal of stability in a profoundly destabilised environment. The trust has also signalled flexibility on repayment for members facing income disruption, which will be critical to maintaining its loan book quality.

Real estate agents across the region are reporting that while transaction volumes are effectively zero, inquiry activity has not entirely dried up — particularly in the luxury and diaspora segments. Some international buyers are using the lockdown period to conduct online research into Caribbean properties, with a growing cohort apparently motivated by pandemic-induced reflections on quality of life and the desirability of owning property in less densely populated, warm-climate environments. Whether this translates into actual purchase activity when restrictions lift remains to be seen, but agents are cautiously noting a pipeline of motivated prospects.

Food Security and Social Protection: The Humanitarian Dimension

The economic crisis has a humanitarian dimension that is growing in urgency. Several smaller Caribbean islands — including nations in the Eastern Caribbean and the Lesser Antilles — import the vast majority of their food supply, and the disruption to normal supply chains caused by the pandemic has created shortages and sharp price increases for basic goods. In Jamaica, the government has been managing food price pressures through market monitoring and intervention in select categories.

Governments across the Caribbean have expanded social protection programmes, with direct cash transfers, food voucher schemes, and expanded coverage of existing social programmes all being deployed. The challenge is the scale: with perhaps 30–40 percent of the formal workforce in tourism-dependent economies suddenly without income, the social protection systems that exist were simply not designed for this level of demand. International remittances — which are a critical income source for households in Jamaica, Haiti, and across the Eastern Caribbean — have also declined as the pandemic has reduced employment and incomes in diaspora communities in the United States, United Kingdom, and Canada.

Caribbean Leaders This Month

Caribbean Development Bank President Dr. Hyginus Leon has activated the bank’s emergency facility and is coordinating with member governments to deploy the US$722 million in emergency support as efficiently and urgently as possible. The CDB’s rapid response to the crisis has been a significant stabilising factor.

Barbados Prime Minister Mia Mottley continues to lead regionally in crisis communication and international advocacy, representing Caribbean small island state interests at G20 and IMF forums and pushing for debt relief and emergency financing access.

Jamaica Minister of Finance Dr. Nigel Clarke has navigated a difficult fiscal environment, maintaining Jamaica’s IMF programme commitments while deploying domestic stimulus within the constraints of the country’s fiscal framework. This balancing act reflects genuine skill under pressure.

ExxonMobil Guyana continues to maintain Liza Phase 1 operations, a remarkable operational achievement given the global disruption. The production stream, modest as it is, provides Guyana with a degree of economic resilience that its Caribbean neighbours envy.

National Housing Trust Jamaica is being tested as never before, but its continued operation and flexibility signals resilience in Jamaica’s property finance architecture at a time of maximum stress.

Pan American Health Organization Caribbean has been providing critical technical support to regional health ministries as they manage limited testing capacity, contact tracing, and healthcare surge planning. Its coordination role has been indispensable.

Cayman Islands Government has implemented among the strictest but most effective pandemic containment measures in the region, leveraging the island’s small, affluent, and highly governable population to keep case numbers extremely low.

Overall regional performer this month: The Caribbean Development Bank earns recognition for the speed and scale of its emergency response, deploying its US$722 million facility rapidly when member governments needed liquidity lifelines most urgently.

Looking Ahead

The key question dominating Caribbean economic planning is when, and under what conditions, international travel will resume. Governments in the region are monitoring developments in Europe, where some countries are beginning to discuss frameworks for phased reopening, with close attention. The nature of any travel restart — whether it requires pre-departure testing, quarantine on arrival, bilateral travel corridors, or vaccine certification — will critically shape the pace and form of the Caribbean tourism recovery.

For the property market, the next few months will test the durability of the mortgage deferral and social protection measures that have been implemented. If the crisis extends beyond three to six months — which now appears likely — the question of what happens when initial deferral periods expire will become urgent. Banks and regulators will need to consider whether to extend deferrals or begin managing the workout of distressed loans. The decisions made in this period will significantly influence whether the Caribbean experiences a property price correction or manages to hold values broadly stable.

Oil prices face a structural question: even if storage constraints ease and OPEC+ production cut agreements take effect, a return to US$60 per barrel Brent requires a global economic recovery that is many months away at minimum. For Trinidad & Tobago and Guyana, the planning environment for 2020 and 2021 involves a fundamental reassessment of fiscal frameworks premised on higher energy prices. The resilience of sovereign finances in these energy-producing states will be tested severely in the period ahead.

The Caribbean Property & Investment Review is published fortnightly for professionals and investors active in Caribbean real estate and tourism markets. All market data and assessments reflect conditions as of the publication date. This publication does not constitute investment advice.