Economic Activity in the Caribbean PDF

Economic activity The Caribbean business s environment can be divided into three types of economic or business activity. Primary sector The primary sector incorporates all the extractive industries, including mining (for example, bauxite), fishing, forestry and farming. In most cases, the products o...

Economic activity The Caribbean business s environment can be divided into three types of economic or business activity. Primary sector The primary sector incorporates all the extractive industries, including mining (for example, bauxite), fishing, forestry and farming. In most cases, the products of the primary sector are the raw materials that are used for secondary production. For example, bauxite is used for manufacturing aluminium and lumber is used in the building of furniture and houses. The primary sector also includes the fishing and agricultural industries. Some Caribbean countries are heavily dependent on the primary level of activity in order to earn foreign exchange. Currently, some countries export large amounts of our raw materials in their natural state instead of exploring the products that could be produced by using those same resources. This means that the secondary level of activity is perhaps not explored as much as it could be. Dependence on the primary sector presents the country with the following advantages and disadvantages: Advantages of reliance on the primary sector 1. The country is able to supply raw materials to firms for conversion 2. The country can gain a comparative advantage over others in producing certain goods 3. Creation of jobs 4. Generation of export revenues. Disadvantages of reliance on the primary sector 1. Depletion of natural resources, especially because of exploitation 2. Potential to earn more revenue if raw materials were to be converted into finished products 3. A decrease in the demand for finished products will decrease the demand for primary products and so reduce revenue. Secondary sector The secondary sector involves the changing of raw materials into finished goods. It incorporates the manufacturing and construction industries. Examples of secondary business activities include the manufacture of chemicals and of baked products, and the construction of houses, roadways and bridges. The Caribbean has a number of businesses that take the raw materials produced in the region and convert them to finished products – for example, Trinidad Cement Ltd and Grace Kennedy Jamaica. While the trading of primary products is important, secondary sector products are usually in higher demand. A dynamic manufacturing firm can take one primary product and create a number of secondary products which will generate greater revenues for itself. For example, a firm could use bananas to make banana chips, banana milk shakes, banana bread, banana-flavoured soft drinks, banana porridge mix and banana fritters. The struggle for some Caribbean countries is that they are not able to make the best use of their primary products by converting them into secondary products. Involvement in secondary production offers the following benefits and disadvantages: Advantages of involvement in the secondary sector 1. Reduction in the importation of goods that are produced using the same raw materials from the Caribbean 2. Earn foreign exchange from the products that are exported 3. One primary product can be used to create a number of secondary products 4. Creation of jobs in different areas other than the extractive industry 5. Possible increase in investment in the manufacturing sector 6. Improvement in the country’s Gross Domestic Product and so possibly its standard of living. Disadvantages of involvement in the secondary sector  1. The profit motive of manufacturing firms could lead to depletion of some primary products 2. A number of manufacturing companies are often multinationals which repatriate their profits instead of reinvesting in the host country 3. Some of the raw materials used in the secondary sector have to be imported and this uses up the foreign exchange earnings of the country. Tertiary sector The tertiary sector does not tangible produce goods, but instead provides services. Over the last decade the Caribbean business environment has become more service oriented. Some of these services include tourism, financial services, and times, the tertiary sector has become one of the main contributors to Caribbean countries’ Gross Domestic Product, with tourism being the most popular. We have seen improvements in the banking sector, transportation, insurance, telecommunications, courier services and money services, among others. The tertiary sector offers the following benefits and disadvantages to Caribbean countries: Advantages of involvement in the tertiary sector 1. Generates foreign exchange, especially from tourism Creation of jobs, especially because the sector is mostly labour intensive 2. The sector does not depend heavily on primary products and so would not deplete the countries’ natural resources 3. As mentioned, the sector contributes to the Gross Domestic Product of countries 4. Less pollution generated when compared with the primary and secondary sectors. Disadvantages of involvement in the tertiary sector 1. Services as a whole are very volatile and so may not be sustainable 2. It may require high training costs to ensure that the service being offered is the same regardless of location 3. Services such as tourism can impact on a country’s culture and values and may even lead to a change in people’s social behaviour.