Update Country Report Curaçao 17 Jun 2021

Event

Curaçao's new cabinet was sworn in on June 14th, three months after national elections were held on March 19th. The incoming prime minister, Gilmar Pisas of the centre-right Movementu Futuro Kòrsou (MFK), will face immediate challenges owing to his stance towards financial support from the Netherlands.

Analysis

Mr Pisas's new coalition government comprises the MFK, which won nine of the 21 parliamentary seats, and the Partido Nashonal di Pueblo (PNP), which holds four seats. The coalition's 13 seats will give it a legislative majority, which should help the government to implement its policy agenda.

Seven cabinet ministers have been announced so far, with appointments to the justice and economic development ministries still pending. Mr Pisas himself will serve as acting minister of justice as well as prime minister. Other appointments include Dorothy Pietersz-Janga (MFK) as minister of health-a key portfolio in the context of the ongoing coronavirus (Covid-19) pandemic. Other ministers include Ruthmilda Larmonie-Cecilia (PNP) as minister of social development and acting minister of economic development, and Javier Silvania (MFK) as minister of finance.

The new Pisas administration will immediately need to address plans for reopening the economy and encouraging economic recovery. However, its ability to do so will be complicated by the MFK's long-held pro-independence stance, which aims to reduce Curaçao's remaining links with the Netherlands (its former colonial power). The new government is likely to seek a revision of the terms on which the Dutch have provided pandemic relief funding to Curaçao. In particular, Mr Pisas has stated that he wishes to rethink the agreement between the outgoing government of Eugene Rhuggenaath and the Netherlands about the establishment of a Caribbean Agency for Reform and Development (COHO), which would oversee the disbursement and administration of Dutch funding. As this is a core requirement of the Dutch government, any attempts to renege on the agreement could jeopardise future Dutch financing, which would hamper the government's ability to inject fiscal stimulus to boost the economy.

Impact on the forecast

Once in office, we expect Mr Pisas to hold immediate talks with the Netherlands to discuss the terms of financing. Although our baseline forecast assumes that Mr Pisas will be willing to compromise, there is a risk that he abandons the deal with the Netherlands altogether, in which case Curaçao's access to financing would be jeopardised, limiting the government's ability to extend pandemic-related fiscal support. This in turn would hamper economic recovery in 2021.