Banking on a Sound Economy for Curaçao.

The Curaçao banking sector may indeed be proud of the fact that despite the global crisis in the last decade, local retail banks manage time and time again to score positive business results. That is partly due to a conservative attitude, both from the banks and the supervisor, the Central Bank. At the same time, the banks realize that they do not live 'on an island' and that they benefit from other sectors in the community going through a sound development as well.

Without exaggeration, it may be stated that the global financial crisis largely passed by the Curaçao banks. Where the effects were felt, they could be taken care of and be compensated relatively easy, thanks to a strong starting position. Often the banks have been criticized for being ‘much too cautious’ (i.e.: reluctant) in providing loans to consumers and businesses. When the global crisis started to manifest itself in 2008, all of a sudden it became apparent how this conservatism pays off. In many countries, banks have toppled over or are still balancing on the edge of the abyss. Fortunately, the banking community in Curaçao has been spared that fate. Our banks have continuously showed sound financial results.

Recent publications of the company results over 2012 have again shown that the local banks are not only profitable, but they also have very healthy balance sheets. From these figures also emerges that at different banks, revenue and assets have increased and that earnings have gone up likewise, all of which in itself is an excellent sign. Despite the relative conservatism the credit portfolios have continued to grow. The careful evaluation of projects before extending credit has prevented large real estate bubbles as has been the case in many other parts of the world, which benefit neither the banks nor the communities. In this context it should definitely be mentioned that the careful control by the Central Bank (of Curaçao and St. Maarten) on the financial sector undoubtedly is also at the basis of this. The regulatory body has asserted its authority at crucial times and has recently stepped on the brakes in order to limit the lending in connection with foreign exchange developments.

Towards the future

For the future of our industry the motto remains that continuity of the soundness of the local banking system should be based on a balanced and sound management at the individual banking institutions, and as a collective.

In addition, the banks, as far as their future is concerned, highly depend on the social developments of which they form an integral part.

Just like any other entity, both civilian and institutional, the banks also benefit from, for example, the following fundamental points of departure:

• A stable political environment based on a parliamentary democracy, with the Dutch King as head of state.
  
• Respecting international treaties on human rights, liberty of religion and expression, press freedom, et cetera.
  
• An independent Court of Justice with the possibility of going all the way to the highest Court of Appeal (Hoge Raad) in The Netherlands.
  
• A modern Civil Code accommodating several jurisdictions.
  
• Modern deep-sea harbors and international airport.
  
• Low inflation.
  
• A local currency that is stably linked to the US dollar.
  
• Advanced telecommunication services.
  
• A modern financial and business services infrastructure (local offices of international banks, accounting firms, law offices and consultancies).

It is primarily a public task to ensure that Curaçao has an attractive investment climate, characterized by a flexible labor market, a supple admissions policy for entrepreneurs, sufficient supply of a qualified work force, legal certainty and political stability, attractive fiscal regulations, low inflation, et cetera.

In addition, it is up to the Government to be steering, stimulating and regulating in a market-driven environment. Apart from the administrative tasks, care for a sound financial state management and sustainable growth of the economy, the Government should not lose sight of its responsibilities with regard to social aspects such as thorough education, medical care with everything that comes with it (healthy lifestyle), suitable homes, (the effects of) population ageing, care for the socially disadvantaged, etc.

Banks can only stay healthy if other actors in the economy are also in good shape. When stating this, of course traditional sectors are thought of, but perhaps there are also new sectors that need to be developed, because they have the potential to grow considerably, and to help Curaçao forward. In that light the banks set their minds especially to the following expected developments that may be considered solid foundations for the economy.

• Despite the intense competition in the Caribbean in the field of tourism, Curaçao has already shown to hold its own in this area. Tourism is already the main economic pillar for Curaçao and the island has everything to further develop this sector and to become less dependent than it used to be on just a few markets for the increase in visitors.
  
• The international financial services sector has long been one of the main pillars of the Curaçao economy and the sector in cooperation with the government is doing its utmost to remain competitive and strengthen the sector.
  
• Thanks to the strategic location of the island and thanks to its excellent infrastructure in seaports, the airport and the free zone, the logistic sector offers tremendous growth potential that is far from being exhausted.
  
• The plans on the table for the expansion of the activities in shipbuilding and ship repair offer perspective. These include the activities for the dismantling of ships, the expansion of the work of the Curaçao Dry Dock Company (CDM) for ship repairs, the building of small and medium-sized ships, as well as a training institute wholly concentrated on this industry sector.
  
• There is good business perspective in the further development of the real estate market regarding second homes for wealthy people from other countries, who are looking for suitable locations under the sun. That sector has known a considerable growth up to recently. Once the global crisis abates, these activities can be picked up again.
  
• The contracts for the oil refining will expire in 2019. Modernization of the refining process is necessary, requiring hefty investments so it can meet the quality and environmental standards of the 21st century.

It goes without saying that the banks also see a role reserved for themselves in these developments. Where possible, through financing the banks will literally chip in to make these developments possible. It’s true: our banks operate on the islands of Aruba, Bonaire, Curaçao, St. Maarten, St. Eustatius and Saba. But nevertheless, they are very aware of the fact that they have to look beyond their own borders to better cope with external challenges. Even when policy is flawlessly regulated on these islands, developments in the region or regarding important trade partners still may have a major impact on everyday business on the Islands. That is precisely why it is always a wise thing to save something for a rainy day. Caution remains a golden rule for the future too.

Enough challenges ahead

In the last decades banks have gone through huge developments in their arsenal of products and services, not in the least by incorporating technological developments: online banking, e-commerce, mobile banking, et cetera. The prognosis is justified that these developments will also continue just as speedy in the years to come. In that respect, the banking industry should get ready to also have everything in place in the near future and to continue to keep a close eye on security. One can safely assume that the possibilities for use of newer communication tools will further affect this process. It is now up to the banks to stay on top of things in order to maintain their ground in the fierce competition between banks, telecommunication companies and tech companies, as well as to keep the bond with the customers alive. In short, a lot of challenges lie ahead in their own industry as well.

L. Rigaud
President Curaçao Bankers' Association