The strategic message behind US-Caribbean relations: Russia and China should not be invited to the Caribbean …

On 29 April 2022, Kamala Harris met with a number of political leaders to discuss the furtherance of relations between the United States and the Caribbean.  Topics in the closed-door meeting supposedly ranged from immigration, trade, and climate change.  The discussion reportedly leads up to next month’s Summit of the Americas, a meeting of Caribbean and Latin American leaders with the reported purpose of addressing economic, political, and these days, climate challenges impacting the region.

I note here that former U.S. senator Christopher Dodd met with the leaders of CARICOM member states reportedly on the issues of climate change, energy security, and disaster preparedness.    

From a narrative perspective, given the economic leverage the United States has in the western hemisphere, last week’s meetings and next month’s forum is about getting the rest of the region “on code” as to the wants and needs of the United States. 

Given the American perception that an emerging People’s Republic of China and an ever-pesky Russian Federation pose economic and political threats to the United States, the United States has to craft and transmit a narrative that the Caribbean can itself adapt and spread among its constituents.   

The most recent example of Chinese threats to United States’ hegemony in the Caribbean region is the new republic of Barbados’ willingness to establish a relationship with China as indicated by Barbados membership in China’s Belt and Road Initiative. 

Barbados recently became a republic, ditching Queen Elizabeth II and installing its own elected president.  This change in the head of state comes with a declining level of United Kingdom investment in Barbados currently pegged at approximately USD 5 billion.

China’s investment in Barbados reportedly exceeds the U.K.’s amount although China has a way to catch up with U.S. investment in Barbados which stands around USD 45 billion.

U.S. concerns with Russia appear to be more along the lines of political and military threats than China’s economic threats.  The U.S. is concerned that Russia is leveraging security deals with Cuba, Nicaragua, and Venezuela in order to straighten its posture in America’s backyard.

Politically, Russia’s support of authoritarian-populist regimes in Latin America poses a challenge to the U.S. political philosophy of democratic elections and private ownership of capital.

I am not privy to what Ms Harris shared with Caribbean leaders in their closed-door session.  I don’t think that Caribbean leaders took Ms Harris’ opening remarks as a pledge of altruism.  Like any holder of monopoly power, where there is a threat of entry, the monopolist offers special services or discounts in order to keep customers loyal while taking steps to kick new entrants out of the market.

If Ms Harris made this kind of appeal behind closed doors, then her strategic messaging was on point.  The goal of strategic messaging is to maintain optimal political positioning.  Optimal political positioning for the United States means maximizing sought after benefits such as a minimally challenged trade position in the Caribbean region and securing firmer support for Ukraine as that country attempts to repel an invasion from Russia. 

The Caribbean reaction from has been mixed,  While the majority of Latin American and Caribbean countries opposed Russia’s invasion, most have been ambivalent about imposing sanctions even though their trade with Russia is overall minimal.

Alton Drew

1 May 2022

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Foreign exchange rates as of 12:13 am AST. United States, Great Britain, Canada, China, Angola, Nigeria, Japan

Currency Pair21 March 202222 March 202223 March 202224 March 202225 March 2022
EUR/USD1.104981.103681.100931.100881.09905
GBP/USD1.317481.316321.320521.323061.31868
USD/CNY6.359056.355546.362586.368546.36767
USD/CHF0.931750.93220.934120.933030.93138
USD/NGN415.42415.043415.732415.115414.015
USD/ZAR14.940114.938814.874714.779514.6555
USD/AOA449.794449.794449.438448.867449.194
USD/INR75.66375.968575.975976.123876.1478
USD/JPY119.145119.274120.537121.022121.77
USD/SAR3.745243.745243.745243.745243.74524
Dollar Index98.4998.4698.7898.8498.52
Sources: OANDA, MarketWatch

Realizing that we are not American is the first step toward USVI integration into the Caribbean …

Commentary

One day while heading out of my apartment on an errand, I met a young lady seemingly out on a walk for exercise. We exchanged pleasantries and inquired about where we were both from.  She said she was from Guyana. I told her I was from the Virgin Islands.  She replied, “But you guys aren’t Caribbean.”  She was taken aback by my indignation. “Of course, we’re Caribbean!”, I said.  She quickly headed on her way with the clear message that I was insulted.  This was many years ago. After a couple decades of mellowing out (although I refuse to apologize for any passion I express regarding politics), I can see why West Indians, especially those residing in independent Caribbean island-nations, would take the position that the U.S. Virgin Islands is more American colony than Caribbean.

 All one has to do is to follow residents of the USVI on social media to realize how immersed Virgin Islanders are in American society and politics.  From American football (full disclosure. I am a 50-year Dallas Cowboys fan), baseball (you are either a Yankees or Dodgers fan), and partisan politics, Virgin Islanders have an opinion on all things American.  Peruse the local print media and you’d swear the rest of the West Indies did not exist, even with a significant portion of the territory’s population either hailing from or directly descended from parents who were born on other islands.

Virgin Islanders are not the only West Indians suffering from cultural cognitive dissonance. The people of Barbados have always been viewed as being more British than the British.  Guadeloupe is a French department, fully incorporated into France. You are in France when you visit Guadeloupe.  The British Virgin Islands and the Cayman Islands are still crown colonies of Great Britain. But just because other territories may suffer from dependency and cognitive dissonance issues doesn’t mean the Virgin Islands has to marinate in that infirmity.  Snapping ourselves out of this malaise is increasingly imperative given the cultural shifts I am seeing in the United States.

America is a divided nation.  According to data from Pew Research, approximately 77% of Americans believe the United States is more divided now than it was prior to the outbreak.  At the core of this division are differences over ideology, race, and religion.  The American Democratic Party is seen as tending toward more progressive or liberal views on ideology, race, and religion.  While the Democratic Party itself has its underlying fissures led by its distinct internal factions, its prevailing narrative is based on responsible and increasingly regulated capitalism, voting rights reform, racial equity and equality, and religious tolerance.  The Virgin Islands political landscape is dominated by the local Democratic Party, but other than the moniker “Democratic”, that is about where any serious similarities end.

The non-relatability of the vast majority of Virgin Islanders to the Republican Party is understandable.  I am to this today amazed that the Republican Party still exists in the USVI.  The narrative they have been painted with by the left—that they are racist and support corporate greed—has seeped in to the sub-conscious of a Virgin Islands with a population that is 79% Afro-Caribbean and is not a haven (yet) for corporate activity that has positively impacted USVI residents.

But the notion that USVI residents should latch on to the national Democratic Party is also puzzling. Having observed the national Democratic Party up close and personal here on the mainland, I can tell you that the national party and its ideology has nothing in common with the mores of the people of the USVI.  Virgin Islanders are, again, majority Afro peoples; they are religiously conservative; and, ironically, vehemently opposed to wasteful government spending, especially where benefits are not apparently flowing to the population. “Where deh money?” is still a refrain in VI politics, and vehemently so given the territory’s small and intimate population.

This unfounded allegiance, I believe, stems from the USVI not only appreciating its place in the Caribbean, but failing to establish a national identity of its own.  Since the territory officially transitioned on 31 March 1917 from the Danish West Indies to the Virgin Islands of the United States, it has gradually pursued Americanism.  As American ascendancy increased seemingly exponentially from World War I into the late 1960s, the Virgin Islands rode that wave.  Virgin Islanders, especially older ones, fail to see that the wave has long crested and that America’s place in the world is under severe challenge. 

The notion of democracy itself is under challenge globally.  China’s ascendance adds to skepticism that democracy must accompany capitalism in order for an economy to grow.  In addition, the likelihood of China and Russia aligning to create and deploy their own communications system for moving capital and currency is increasing.  And even in the Virgin Islands own Caribbean backyard, the idea of regional economic integration is moving from the backburner to the oven.

The Virgin Islands cannot take advantage of the shift in global economic, social, and cultural attitudes if it insists on maintaining ties with a giant sitting on its laurels.  The United States will be forced into isolationism either by its own choice or when the rest of the globe turns its back on America.  When that happens, it will be forced to cut costs and a territory that does not bring the US tax revenues and is no longer needed as a military deterrent to World War II German submarines will be on the chopping block.

To prepare for what I see as inevitable, the Virgin Islands of the United States will have to look within, create a national identity narrative, and use its labor talent and natural resources, and go its own way.  There is a waiting Caribbean region for us to integrate into.

Alton Drew

21.02.2022         

Interbank Market News Scan: U.S. inflation rate at 7.5%

Interbank, United States, Inflation. “In January, the Consumer Price Index for All Urban Consumers rose 0.6 percent, seasonally adjusted, and rose 7.5 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.6 percent in January (SA); up 6.0 percent over the year (NSA).” See report here. Source: U.S. Bureau of Labor Statistics

Interbank, Pakistan. “The buying rate of 1 SAR to PKR was Rs46.710 and selling rate of 1 SAR to PKR was Rs46.790 in the interbank market on Feb 10, 2022.” See article here. Source: BOL News

Interbank, China. “The central parity rate of the Chinese currency renminbi, or the yuan, weakened 84 pips to 6.3653 against the U.S. dollar Wednesday, according to the China Foreign Exchange Trade System.” See article here. Source: China.org

Interbank, Taiwan. “The central bank has asked exporters to sell their US dollar holdings at different times to avoid causing a sudden appreciation of the NT dollar.” See article here. Source: Taipei Times

Interbank, Japan. “Global shares rose Thursday as investors tried to gauge U.S. inflation, tensions between Russia and Ukraine and the impact of the pandemic.” See article here. Source: News4Jax

Foreign exchange rates of interest as of 8:16 am EDT

EUR/USD=1.1427

GBP/USD=1.3553

USD/MXN=20.5344

USD/GTQ=7.52045

USD/NGN=415.844

USD/GHS=6.36299

USD/VND=22,694.9

USD/JPY=115.45

USD/INR=74.6951

USD/BTC=0.00002

USD/ETH=0.00032

Source: OANDA

Dollar Index (DXY)=95.51

Source: MarketWatch

Interbank Market News Scan: As Afghanistan transitions, currency traders should wait for dust to settle in light of China’s influence …

15 August 2021

Currency pairExchange rate10-year yield, government securities
AFN/CNY0.07982.88
AFN/USD0.012331.28
Source: OANDA

The transition of political power occurring in Afghanistan today should have traders and brokers asking about the currency trade opportunities under a Taliban-led Afghanistan.  The price of the Afghani has been falling in both US dollars and Chinese renminbi over the last 90 days.  I suspect as Afghanistan moves through its transition over the next 48 hours that western investors will wait for the dust to settle on where yields Afghani-denominated securities will fall out.

After two decades in Afghanistan, the lightening quick deterioration in the ability of the government to maintain control of its territory speaks negatively about the United States as a stabilizing force in the region.  That accolade right now may belong more in China’s court than the U.S.  China has stayed engaged with Afghanistan primarily due to three concerns.

First, the protection of small and medium sized Chinese enterprises in Afghanistan; second, to stop the training of Uygur supporting insurgents from an area of Afghanistan that lies along China’s western border; and third, to maintain a vital component of its Belt and Road Initiative, a policy of transportation and communications infrastructure that facilitates the transfer of resources to China.

China is Afghanistan’s largest investor, having provided Afghanistan with telecom equipment and other telecom infrastructure.  China extracts oil in the Amu Daya basin, and also mines lithium and copper, both essential to providing telecommunications equipment and facilities.

Geographically, Afghanistan provides China with the shortest route between China, the Middle East, the Persian Gulf, and the Arabian Sea, important for cost effective movement of trade.

And because China has shown no interest in “rebuilding Afghanistan”, including altering its political, social, or ideological institutions, it has been able to maintain a dialogue with the Taliban, important now more than ever as Afghanistan sees a change in leadership.

The takeaway:  Traders should monitor the developing government relationships and take note of relative changes in income, prices, commodity availability, and interest rates.

Alton Drew

Sources:

OANDA

China to ‘capitalise’ on West’s Taliban failure as US geopolitical power diminished | World | News | Express.co.uk 

Why China and Russia might find common security ground in Afghanistan | South China Morning Post (scmp.com)

Slowly but surely, China is moving into Afghanistan (trtworld.com)

For a consultation on any regulatory or legislative discussions or announcements, please reach out to us at altondrew@altondrew.com for information on consultation rates and to reserve an appointment.

Would Virgin Islanders prefer to be an American outpost?

Growing up in the U.S. Virgin Islands I noticed the rift between those who considered themselves ancestral Virgin Islanders and those of us who were either born in or children of people born in the Eastern Caribbean.  This rift, in my opinion, was fueled by the native Virgin Islander belief that being citizens of the United States gave them a certain privilege or right to be condescending to anyone else from the Caribbean.  It was never surprising to hear a “local” refer to down-islanders as “garrot” or “islo” in reference to the fact that the person being persecuted came from further south and east in the Lesser Antilles.

It is no wonder so many of our families started separate civic organizations like the Nevis Benevolent Society or formed churches such as the Bethel Baptist Missionary Baptist Church whose membership was comprised mostly of individuals who hailed from the British Virgin Islands, St. Kitts, Nevis, Anguilla, and Antigua.

On the other hand, arguably this behavior from native-born Virgin Islanders, albeit condescending and disrespectful of those whose lineage did not historically run through the Virgin Islands from birth, may be part of a native attempt to maintain a Virgin Islands identity unique from other Caribbean nations and territories. 

Virgin Islanders have likely struggled with identity dualism since the territory was formally transferred to the United States from Denmark in March 1917.  The identity struggle likely intensified as the U.S. Virgin Islands found itself surrounded by a Caribbean tossing off governance from European powers and going their own way.  Jamaica gained its independence from the United Kingdom in 1962.  Barbados and Guyana also broke from the United Kingdom in 1966.  St. Vincent and the Grenadines went their own way in 1979, while Antigua and Barbuda and St. Christopher (St. Kitts) and Nevis gained independence in 1981 and 1983, respectively.

The schizophrenia of being a Virgin Islander and an American tends to be received with more indifference and a smirk from Caribbean nations versus respect as a Caribbean neighbor.   

This schizophrenia apparently seeped into the constitutional politics of the Virgin Islands.  In its fifth attempt in 2010 to draft a constitution for the US Virgin Islands, the constitutional drafting committee ran afoul of the US Department of Justice by recommending tax exemptions for ancestral native Virgin Islanders and native Virgin Islanders.  A native Virgin Islander is defined as someone born in the Virgin Islands on or after 28 June 1932.  An ancestral native Virgin Islander is defined as someone born in the Virgin Islands prior to and including 28 June 1932 as well as descendants of such individuals whether residing in the territory or not.

Under the proposed constitution, ancestral native Virgin Islanders and their descendants would receive a tax exemption on ownership real property.  This exemption would not flow to native Virgin islanders or any non-Virgin Islander domiciled in the territory.  A law distinguishing who would receive and not receive a tax benefit based on place and timing of birth, in the opinion of the Justice Department, would create multiple tiers of citizens. These designations, apparently not tied to a legitimate governmental interest, would run afoul of the Equal Protection Clause of the U.S. Constitution.

The Department of Justice was also concerned with the drafting committee’s apparent attempt to usurp United States sovereignty over the coastal waters of the Virgin Islands.  In its constitutional proposal, the committee provided language that the Virgin Islands would exercise sovereignty over its inter-island waters and over waters extending twelve nautical miles from each island’s coast up to the borders with international waters.  The lack of mention of US sovereignty over this twelve-mile area, in the Justice Department’s opinion, raised the concern that such a measure, if enacted, would violate federal law.  

At the end of the day, the initiative to draft a constitution adds weight to what University of the Virgin Islands professor Paul Leary identified in a 2020 opinion piece discussing the feasibility of an independent U.S. Virgin Islands.  The Virgin Islands is experiencing “the absence of a clear national identity.”  His observation is a reminder that a national identity is the platform upon which a country must be built.  The Virgin Islands are way too small to play “nation-state” politics.  The size of the territory would only lead to more intense conflict among groups of native and non-native Virgin Islanders trying to divide up a near non-existent pie.

The cohesiveness necessary for nationhood in the U.S. Virgin Islands may be two to three generations away, but given the economic circumstances of the territory, where young people constantly move to the mainland for work and business opportunity, the development of a cohesive nation may experience unacceptable delay.  In the meantime, the Virgin Islands of the United States may have to optimize its status as an American outpost in the Caribbean; subject to scorn from its independent neighbors, relying on the United States for its identity, and pushing away its Caribbean brethren.      

Our Africa index shows dollar strengthening against key currencies; Trump last ditch effort at US-Africa trade …

As of 5:10 pm AST, here are exchange rates between the United States and key African nations:

Pairs OANDA as of 18 December 2020 OANDA as of 23 December 2020 Notes 
USD/KES 110.603 109.163 Dollar weakening 
USD/NGN 379.792 380.931 On 21 December USD/NGN peaked at 383.512 
USD/GHS 5.8522 5.87027 Dollar strengthening 
USD/CDF 1951.91 1950.60 US redesignation under AGOA on 22 December 
USD/AOA 649.638 649.479 Flat 
USD/ZAR 14.6031 14.6359 Dollar strengthening 

Source: OANDA

Legal/Political events impacting US-Africa trade relationship

Trump re-designates the Democratic Republic of the Congo as a sub-Saharan beneficiary nation under the Trade Act of 1974

Yesterday, President Donald J. Trump designated the Democratic Republic of the Congo a beneficiary sub-Saharan country under the Trade Act of 1974 as amended by the African Growth and Opportunity Act and the Africa Investment Incentive Act. Pursuant to 19 U.S.C. 3703, the President has determined that the Democratic Republic of the Congo has made progress or is making progress toward the following:

(A) a market-based economy that protects private property rights for men and women, incorporates an open rules-based trading system, and minimizes government interference in the economy through measures such as price controls, subsidies, and government ownership of economic assets;

(B)the rule of law, political pluralism, and the right to due process, a fair trial, and equal protection under the law;

(C)the elimination of barriers to United States trade and investment, including by—(i)the provision of national treatment and measures to create an environment conducive to domestic and foreign investment;(ii)the protection of intellectual property; and(iii)the resolution of bilateral trade and investment disputes;

(D)economic policies to reduce poverty, increase the availability of health care and educational opportunities, expand physical infrastructure, promote the development of private enterprise, and encourage the formation of capital markets through micro-credit or other programs;

(E)a system to combat corruption and bribery, such as signing and implementing the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; and

(F)protection of internationally recognized worker rights, including the right of association, the right to organize and bargain collectively, a prohibition on the use of any form of forced or compulsory labor, a minimum age for the employment of children, and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health.

The President has also determined that the Democratic Republic of the Congo does not engage in activities that undermine United States national security or foreign policy interests; and does not engage in gross violations of internationally recognized human rights or provide support for acts of international terrorism and cooperates in international efforts to eliminate human rights violations and terrorist activities.

The Democratic Republic of the Congo lost its designation as a beneficiary sub-Saharan nation in 2010 under the Obama administration, according to the President’s executive order. With this new designation, certain textiles and apparel will be able to enter the United States duty free.

Sources: Executive Office of the President; Legal Information Institute-Cornell University

Federal Reserve releases select exchange rates as of 11 December 2020

Atlanta 14 December 2020, 9:43 PM EST

The Board of Governors of the Federal Reserve System today released the foreign exchange rates for the following foreign exchange pairs. Compare with exchange rates quoted by foreign exchange broker OANDA as of 9:59 PM EST:

Federal Reserve OANDA

EUR/USD = 1.2112 EUR/USD = 1.21443

GBP/USD = 1.3197 GBP/USD = 1.33503

USD/CAD = 1.2767 USD/CAD = 1.27508

USD/JPY = 103.880 USD/JPY = 103.93

So far, a quiet bond market …

As of 10:14 am AST 30 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .08%

6-month: .09%

12-month: .10%

2-year: .15%

10-year: .85%

30-year: 1.58%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major political/legal events impacting currencies

On 27 November 2020, President Donald J. Trump nominated Brian P. Brooks as Comptroller of the Currency for a term of five years.  As Comptroller, Mr Brooks would be responsible for administering the United States’ national banking system as well as the branches of foreign banks doing business in the United States.  Mr Brooks is currently serving as acting Comptroller.  His nomination must be confirmed by the U.S. Senate.

Source: Executive Office of the President