Update Country Report Curaçao 20 Aug 2021

Event

On August 10th an agreement was reached between the Netherlands, Curaçao, Sint Maarten and Aruba to create a new fiscal oversight body for the islands. This agreement was only reached following extended negotiations with Curaçao's new prime minister, Gilmar Pisas; its approval will unlock the next tranche of Dutch financing for the island.

Analysis

The agreement will create the Caribisch Orgaan voor Hervorming en Ontwikkeling (COHO), whose main purpose is to support the design of fiscal policies and the implementation of reform efforts by the three island territories. The agreement paves the way for a bill that formally creates the oversight body, to be approved by the Council of Ministers for the Kingdom on September 3rd. It will then need to be formally adopted by the legislatures of all four signatories.

This is a significant achievement, given that Mr Pisas had long criticised the concept of COHO while in opposition and had come into office pledging to renegotiate the agreement reached with the government of the former prime minister, Eugene Rhuggenaath. Mr Pisas argued that COHO infringed on Curaçao's sovereignty by imposing foreign oversight of the country's fiscal policy, in line with his long-standing aim to reduce Curaçao's dependence on the Netherlands.

Following negotiations, a compromise has been reached to assuage these concerns about sovereignty. Out of the three COHO board members to be appointed, at least two (including the chair) must have a demonstrable affinity with the countries. Curaçao will also have more influence in the reforms, with each country now responsible for creating and implementing fiscal and budgetary action plans, rather than these being devised by COHO. In addition, earlier plans for fiscal supervision by the body have been replaced by a budgetary test that will be carried out by the Financial Supervision Board, which is already an integral part of fiscal planning and oversight of the islands, making it less controversial.

The agreement allows Mr Pisas to claim a win in the sense that he, along with the other island governments, forced a compromise and upheld his election pledges. The agreement also means that much-needed Dutch financing will be forthcoming, without which there was likely to be a fiscal crunch, severely undermining the new government.

Impact on the forecast

Our forecasts are unchanged, as we had already factored in a COHO agreement and continued Dutch financing. The Netherlands will provide Curaçao with Naf168m (US$94m) over the third quarter, supporting planned payments.