The past 20 years have been a nightmare for the Caribbean when it comes to extreme weather events. Since the early 2000s, the region has been devastated by literally hundreds of floods and tropical storms, and the material costs have been very high. Given the predictions for extreme weather in the near future, however, they could be even higher.
The numbers: The Caribbean was hit by 793 extreme weather events between 2000 and 2023, according to an analysis done by the Central Bank of Barbados, using data from the International Disaster Database.
Of these nearly 800 climate events, 401 were tropical storms and 252 were floods.
The costs: Tropical storms were by far the most costly natural disasters in the region, followed by earthquakes and floods.
Tropical storms caused US$181.3 billion in all of the Caribbean in the last two decades.
Floods caused US$9.4 billion in damages to the region.
A darkening horizon: “Economies within the Caribbean are highly vulnerable to both the direct and indirect effects of climate change, based on their location and size,” stated Christopher L.A. Kirch, Senior Economist at the Central Bank of Barbados, in the report..
“Over the years, these territories have experienced the negative impacts of more severe and frequent climatic events such as hurricanes and tropical cyclones, recurring droughts, increasing floods and declining shorelines due to increased sea levels,” he added.
Insider quote: “We are experiencing many damaging storms in the Caribbean, and the rise of the Caribbean Ocean can already be seen with the naked eye. The latest storm that hit Jamaica [Hurricane Beryl] interrupted our operations on the island for a day and a half,” said José Ramírez, President of Alorica’s Latin American and Caribbean operations.
“At Alorica, we are trying to improve the way we operate to reduce our carbon footprint,” he added. “Most of us living here are in coastal cities. We see the effects of climate change every day. We are forced to care.”
Broader picture: Cyclone activity in the Atlantic and the Gulf has grown more frequent over the past 30 years, according to the National Oceanic and Atmospheric Administration’s (NOAA) ACE Index.
Increasing concern: Other central banks in the region have taken notice of the impact climate change has had on their economies and on the potential damage it could cause to their financial sectors.
Both the Central Bank of Trinidad & Tobago and the Central Bank of Jamaica plan on monitoring the effects of extreme weather in the financial stability of their respective countries.
International organizations such as the IMF, ECLAC and the IDB have for years warned of the increasing costs of climate change in the region.
A recent report by the UN’s Population Fund states that climate change threatens the livelihoods and health of 41 million people in Latin America and the Caribbean.
Diversify: Natural disasters are among the main arguments for site diversification in sourcing strategies.
Caribbean governments and proponents of the region have latched onto diversification to make a case for investment in Caribbean countries. Ironically, exposure to natural disasters is a strong point against their pitch.
NSAM’s Take: It’s easy to lose track of how frequent flooding and tropical storms are in the Caribbean, and also of how materially devastating they can be for a group of countries which have struggled to catch up economically to the rest of the continent. The report cited above gives us a clearer picture of the gravity of the circumstances in which Caribbean businesses have to operate in.
There’s not much Caribbean nations or businesses can do to change that in the short-term, unfortunately. Environmentally friendly policies can only take you so far, and climate-resilient infrastructure, though useful, is not an entirely reliable failsafe.
It looks as if we’re painting a bleak panorama for the region here, but that’s only to underscore investors’ interest in the Caribbean. Countries like Guyana, Barbados, Jamaica and the Dominican Republic saw a surge of interest from investors post-COVID. Supply chain crunches and extreme weather events themselves have made diversification a must in any sourcing strategy. Over the past five years, the Caribbean has slowly built a reputation as a reliable alternative to India, the Philippines and some Latin American countries for the outsourcing of business services to the US market.
Businesses big and small have managed to set roots and thrive in the region in spite of the weather risks. Hybrid working arrangements, backup generators, anti-disaster architecture, in-country diversification; there are plenty of ways in which companies have shielded themselves against potential natural disasters.
It’s an unfortunate reality, but the Caribbean will keep facing extreme climate risks. On the other hand, foreign investors will keep landing in the territory as long as they feel that their investments can remain safe enough in the face of nature’s overwhelming power. Making them feel that way is up to the governments in each country.
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Publish date : 2024-08-22 06:30:00
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