The Minister of Finance, two other members of our economic policy team and myself have just concluded a visit with investors, bankers and credit ratings agencies in London, New York and Boston, to update them on the Barbados economy and our strategy for growth and adjustment in the medium term. These visits are regularly undertaken by the Bank and Ministry of Finance as part of our strategy to keep in touch with the major players in the investment community and to maintain Barbados’ profile on the international scene. I am writing to share with you the main aspects of our meetings.
Our presentation stressed that Barbados remains the most prosperous independent country in Latin America and the Caribbean, as measured by the UNDP's Human Development Index, having achieved and maintained a quality of life comparable to that of advanced countries. The Barbadian economy is highly competitive, second only to Panama in the Caribbean and Central America in the Global Competitiveness Index. Our economy has become more resilient over time: we have lost only 3 percent of real output since 2008, despite the severity of the storms that have buffeted our economy.
We acknowledged the challenges we face in restoring the economy to a sustainable growth path. Barbadians understand those challenges very well, and we know the remedies that work for us. Our biggest challenge is the gradual erosion of our share of the Caribbean tourism market in the past five years. Our tourism entrepreneurs are equal to the challenge: they continue to invest in hotels and tourist facilities of the very highest quality, including golf, polo, yachting and motor sports facilities, high-end shopping, and top-of-the-line dining. Cultural and heritage products are being developed to further enhance the Barbadian experience. Government supports these initiatives with incentives, promotional activity and investment, of which the cruise terminal is the foremost example.
Barbados' international business and financial services sector also has challenges, principally the baseless charge that we provide an avenue for aggressive tax avoidance for Canadian companies. Our response is to remind the international community that Barbados is a well-respected, well regulated jurisdiction which has built its reputation on providing opportunities for companies to enhance their international competitiveness by taking advantage of the fact that Barbados offers most of the facilities of major financial centres, at a much lower cost. Once here, companies may take advantage of our network of double taxation treaties to compete in third markets.
The fact that foreign exchange inflows have been weak ever since the onset of this prolonged recession means that Government has had to focus on containing the spending of all Barbadians, because our spending is almost all on imports, directly and indirectly. Government has done this by way of tax increases, which directly affect spending and imports, and by reducing Government expenditure, including, sadly, shedding 10 percent of the workforce in the public sector.
The fiscal strategy has done its job, and the country's foreign reserves have stabilised since the beginning of this year. However, we still face the challenge of weakness in Government revenues, which has made elusive the Government's medium term strategy of fiscal consolidation. As a result, a big push has been necessary to bring the fiscal deficit back on the track of medium term consolidation. The international community is full of admiration for the willingness of Government to contemplate a programme of such austerity, and for the strength of our social partnership, which has solidified around the need to take all necessary measures in defence of the exchange rate peg.
Our delegation had constructive meetings with two of the three largest ratings agencies, including one which does not currently rate Barbados Government debt. They are encouraged by the fact that the economic adjustment policies have stabilised the foreign exchange balances, and we agreed that it is vitally important that we achieve our fiscal target for 2014/15. They understand the reason why Barbados needs to anchor its adjustment policies on the pegged exchange rate, and why the growth strategy is led by quality and productivity enhancements in tourism, international business and agro-processing. Like the IMF, they acknowledge that the Barbados programme, tough as it is, is appropriate for our circumstances.
Growth remains the prime objective, but in small open economies sustainable growth is not an overnight thing. In his best-selling book Turnaround: Third World lessons for First World Growth, Professor Peter Blair Henry of New York University compares the experiences of Barbados and Jamaica since 1960, and infers from Barbados' superior performance that economic reforms may sometimes require years of persistent application before they yield real economic growth, but that growth which is based on policies which are appropriate and forward looking is what produces lasting advances in the quality of life for all. That is the lesson our own experience teaches us, and we should always bear it in mind.
Thank you for allowing me this opportunity to share reflections on our meetings with the investment community. I will write from time to time in this vein and I very much welcome your responses and suggestions.