Curaçao Tourism: It’s All Gone Caracas!
RiskWatchdog’s discovery that Caribbean tourism endured something of a slump in 2008 is hardly worthy of front page news. After all, with credit in thin supply, jobless numbers on the rise and confidence at record lows, the last thing on the minds of most consumers last year was the need to top up tans and sip on Pina Coladas. As such, latest estimates published by the World Tourism Organisation (UNWTO) that the region’s tourism numbers grew by 2.0-3.0% in 2008 – a far cry from the 6.6% rate of growth enjoyed in 2007 – practically passed me by.
Well almost… What did intrigue me was the truly spectacular performance of the little island of Curaçao, part of the island group known as the Netherlands Antilles. Stay-over tourists to Curaçao from Venezuela rocketed by 310% y-o-y between January-May 2008, driving the total numbers up by 41% in the first five months of the year. RiskWatchdog acknowledges the role played by the island’s renowned coral reefs (which I have been informed by colleagues makes it an excellent spot for scuba diving) and picturesque sandy beaches, but the real answer to the Curaçao conundrum lies at the hands of Venezuelan President Hugo Chávez.
In recent years, there has been a widening gap between Venezuela’s official exchange rate (pegged at 2.15 Venezuelan bolivars to the dollar since 2005) and the black market rate (known as the ‘parallel rate’) – a dual exchange rate system allowed to flourish under Chávez. Unsurprisingly, scores of Venezuelans have taken advantage of a US$5,600 travel allowance to buy dollars abroad at the cheap fixed exchange rate and sell them back home on the parallel market (and possibly escape the country’s high murder rates and runaway inflation for Curaçao’s touristic delights, at least for a while). If further evidence were needed, the chart below shows how growth in Venezuelan stop-over visitors has surged hand in hand with a weaker black market bolivar.
A Parallel Universe
Can the mighty Curaçao continue to defy Caribbean trends? Well, going by the trend in play, it can be assumed that Venezuelan holidaymakers dominated the island’s beaches for the remainder of 2008, as the parallel exchange rate hit a low of VEF6.00/US$ in Q408. However, the outlook in 2009 looks far from sunny, in my view. Firstly, President Chávez has recently cut in half the travel allowance in a bid to stem the outflow of dollars from the country (at a time of dwindling petro-dollar earnings). This, in turn, will likely mean that less dollars find their way to the Netherlands Antilles. Secondly, I believe that the authorities may be tempted to devalue the official exchange rate from VEF2.15/US$, while limiting the number of dollars it disperses to the private sector.
With these factors in mind, it appears that Curaçao’s unstoppable tourism performance since 2006 may hit stormier waters. Venezuelan holidaymaking can no longer be relied on to shore up the island’s tourism sector – more proof, if it were needed, that Chávez’ misguided economic policies have had significant repercussions beyond Venezuela’s shores.
January 16th, 2009 at 1:06 pm BST
Great blogpost. Going Caracas!