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Market Situation

  
CARICOM
The economic, political, and social environments of the different Caribbean island nations vary greatly in their impact on real estate, as they do in the different states of the U.S. However, even though the Caribbean countries are not a federated union like the U.S., they are coming together under the umbrella of the Caribbean Community (Caricom). This is a trading group of 12 island nations and three coastal countries with a market of 14 million people that did US$6 billion in trade with the U.S. in 1997. The member countries of Caricom are: Antigua and Barbuda, The Bahamas, Belize, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, Suriname, St. Vincent & the Grenadines, Trinidad and Tobago.1

In fact, Caricom was created in 1973 to work towards a single Caribbean currency. This is still in the planning stages, but some aspects of common market area will be effective from the end of 2000. For example, there will be free movement of capital and services among the countries from June 2000. Freedom of movement for people and services are being introduced. The treaty of 1973 is also being rewritten to permit intellectual property agreements and bilateral investment treaties. In 2000, a Caribbean Court of Justice will be created which will consider trade disputes as well as have the role of interpreting the Caricom treaty. The Caricom area currently has a customs union with tariffs harmonized on imports from third countries. The regional capital market is also beginning to take root through cross-listing of stocks on the Barbadian, Jamaican, and Trinidadian stock exchanges.2

The ultimate goal of having a single currency faces serious difficulties from the wide differences in the countries' economic situations and policies. The process of reaching common targets in terms of limits on debt service ratios, currency exchange rate stability, and the maintenance of international reserve will be a slow one. This is understandable given the poverty of the region, and the wide disparities in income that exist. For example, the per capita income of Barbados is US$7,500. In comparison, the per capita income in Jamaica is one-third of that in Barbados, while in Grenada it is 1/30th.3 The largest importer of U.S. goods out of the Caricom countries is the Dominican Republic, which is now the 7th largest market for U.S. goods in the Western Hemisphere.4

HUD goes island hopping
The United States Department of Housing and Urban Development (HUD) announced in October 1999 that it would work with the Overseas Private Investment Corporation (OPIC) towards creating a domestic and international mortgage market in the Caribbean and Central America. Their first effort is a US$20 million financing plan for 5,000 families who were made homeless in Santo Domingo by Hurricane Georges. HUD will assist in the development of financing mechanisms to encourage U.S. private investors to originate mortgages for low-income families at competitive interest rates and reduced fees. HUD and OPIC will also work together to promote U.S. private sector investment in the homebuilding and mortgage industries in this region, and in emerging markets generally.5

Tourism
The warm climate, beaches, and ocean are the foundation of tourism in the Caribbean, which is a major industry for the region. There are signs that the Caricom countries are developing a region-wide cooperative approach towards encouraging growth in the tourism industry. For example, in 1997, the Caribbean Tourism Organization and the Caribbean Hotel Association developed together the first Caribbean Hotel & Tourism investment conference. Their goal was to provide a forum for private sector developers and public policy makers to meet and develop positive relationships. The hope is that the amount of capital available for tourism projects in the region will grow through better understanding between these two groups. By 1997, 25 million visitors came to the Caribbean and spent a record US$13.3 billion. An increase in tourists coming to the region is predicted to be 4.6% annually through 2005. The Caribbean Tourist Office therefore estimates that US$12 billion in development capital is needed to construct 22,000 new rooms and renovate existing space.6

The Bahamas is currently enjoying a thriving tourism industry that received a strong stimulus to renovation and development from the opening of the Atlantis mega-resort in the mid-1990s. More than US$1.0 billion has been invested in renovations, expansions, and developments in the hotel sector of Grand Bahama Island and Nassua/Paradise Island. Some significant highlights include the US$290 billion Lucayan mega-resort on 7.5 acres of Grand Bahama Island beachfront. Also, Atlantis Paradise Island completed a US$450 million expansion that doubled its rooms, and added a convention center and a casino, as well as other facilities. Many other expansion and development projects have been or are nearing completion. The Bahamas also has improved infrastructure facilities, with the most dramatic perhaps being The Cat, a catamaran that completes the trip from Miami in under 5 hours.7

The Dominican Republic has seen and continues to see tremendous growth in the tourism sector. In the first six months of 1999, the number of visitors to the country rose 9.6%, and the American Society of Travel Agents has named it as the #1 top emerging international destination. The government is helping the growth by investing and supporting investment in the transportation infrastructure. US$203 million will be invested in airport improvements in a public/private partnership, and US$104 will be spent in 1999-2000 on new roads and road improvements. Thirty-one new hotels are planned for the country in 1999-2000, and will create 9,500 new rooms accounting for US$480 million in investment capital. The largest new project is privately funded US$250 million project in the Samana area, and will be a multi-hotel development with an emphasis on sailing.8

Even the little island nation of Grenada has significant current development in its tourism industry. For example, a Venezuelan company, the Mount Hartman Development corporation, is constructing a US$75 million hotel with an 18-hole golf course. This resort will achieve name recognition quickly, as it will be managed by the Ritz-Carlton Corporation. This project is not without controversy. In fact, the displacement of poor farmers from the site is a recurring source of often legitimate protest impacting development projects throughout the Caribbean. The transfer of the island's small water supply to resort use from domestic use when there is insufficient capacity to accommodate both is also a problem in Grenada that repeats itself around the region.9

Another big project in Grenada, the Blue Lagoon hotel and marina, is a major influx of US$140 million in development capital. However, controversy about its financing illustrates another recurring regional issue: the democratic deficit that occurs when project capital and government institutions develop questionably close relationships. The Blue Lagoon hotel has been financed by Czech-born Victor Kozeny, a billionaire who is hated in the Czech Republic for allegations that he plundered the privatization programs there. After obtaining an Irish passport, Kozeny moved to the Bahamas. He has now cultivated connections with the government of Grenada to such an extent that he has been named an Ambassador-at-Large.10



Political Environment

  
Dominican Republic
On first look, a visitor to the Dominican Republic would assume that the political environment would be quite favorable for the presiding government. From 1997 through 1999, the country's GDP has increased more than 6% annually, its position within Caricom is strong, and political structures are stable. However, President Leonel Fernandez is not popular because the strong economic growth, largely due to the strength in the tourism sector, has not benefited much the mass of poor Dominicans. A 1999 inflation of 6.5% is also not helping the government. As the next presidential elections approach in May 2000, all the politicians in the Dominican Republic must face the contradictory tensions that define politics throughout Latin America: progressing reform while addressing the need for redistribution.11

Jamaica
The political environment in Jamaica is as difficult as its economic situation, or rather, increasingly difficult because of it. For example, from 1991-1999, GDP per person shrank by 7%, and is expected to continue to contract until at least 2001. Forty-one percent of government revenues go out to payments on the interest on debt alone. Drug dealing, violent crime, police brutality, and corruption are significant problems. The murder rate in the capital, Kingston, is high. In a city of around 3/4 of a million people, there were 953 murders (1998) and 145 fatal shootings of suspects by the police (1998). There have been two episodes of rioting in the year 1998-99. Tourism has been negatively affected by international media coverage of the drugs and crime problems in Jamaica. While a major change in the political figures, parties, and structures of Jamaica is not expected, further social unrest in the face of such stagnation is a continuing risk.12



Real Estate Practices

  
Bahamas
It is illegal for real estate transactions to be conducted by an unlicensed practitioner. This licensing requirement has been mandated by the national government.

For more details on doing business in the Bahamas real estate market, click hereont> for information published by the Bahamas Real Estate Association (BREA).

Jamaica
Real estate sales professionals must possess a license to legally conduct transactions in Jamaica. While no continuing education courses are required to maintain the license, there are education and testing prerequisites before a license can first be obtained. A high school education is the first, minimum requirement. Then the practitioner must pass a one-month (100 hour) Salesman's Course, and pay an annual license fee. Salespeople have one further course after two years of practice, called a Dealers Course, which comprises a further 160 hours of education. For those wishing extensive training for Dealers/Brokers/Valuers, there is a four-year Land Economy course also offered, as with the other courses, by the College of Arts, Sciences, and Technology (CAST).

The law of agency in Jamaica mandates that practitioners represent one specific side in the buying and selling equation. In other words, dual agency is illegal.

Commissions on residential real estate transactions in Jamaica are generally 5%. Commissions when the transaction involves a Jamaican and a foreign real estate practitioner are usually pre-agreed, and a 50-50 split is not uncommon, especially for co-brokering arrangements.

Trinidad & Tobago
Real property sale/transfer documents must be formally written and signed by both buyer and seller. The property, price, and parties must be identified, but outside of these requirements, there are no standard contract forms/styles used or required in Trinidad & Tobago. An attorney can write up the sales contract after the parties to the transaction have reached agreement. However, if a real estate practitioner is used, he or she may also make up the contract document. The custom in real estate sales transactions in Trinidad & Tobago is initial payment of a 10% deposit and then payment of the balance in 90 days, although other time lengths can be agreed upon. Also, when a real estate professional has been used, their commission is 3-5%.

The most significant consideration in the decision to issue a mortgage in Trinidad & Tobago is the ability to verify the property's value and prove that its title is free of encumbrances.

A stamp duty must be paid on all real property transfers. It is a percentage of the sale price that is a graduated tax. When the stamp duty is paid, then a Board of Revenue stamp is applied to the transfer documents. The purchaser receives a registered copy of the transfer documents that then serve as proof of ownership. The originals are kept in file with the Department of the Register General.13



Land Rights/Usage

  
Trinidad & Tobago: titling system
Land in Trinidad & Tobago is titled under two systems, the old common law system (U.K.) and the newer Torrens system (Australia). Most of the land in the country is held under the old system and the deeds for these lands are kept, registered, and can be searched for at the Deeds Registry of the Registrar General's Department. Under the new, Torrens system, the title is backed by a Land Assurance Fund against which claims can be made by anyone who has been deprived of their interest in land by fraud. The government in case of claims exceeding total Fund holdings assures the Fund. Title searches take 2-3 weeks. The purchaser must have an attorney make up the title/deed. Closing of the transaction is also the responsibility of the purchaser and his/her attorney. Titles in Trinidad & Tobago are either freehold or leaseholds, with the two common leasehold terms being either 25 or 999 years. The purchaser should have a careful title search conducted, as a property may be constituted of lands held under both the old and new title systems. This is not necessarily a bar to a transaction, but at the same time should not be left undiscovered.14

Trinidad & Tobago: land rights case
There is currently a land rights case in Trinidad that may set wide precedents. Six Trinidad citizens are taking a suit before the former British colony's highest court, the Privy Council in London. Their cause is the return of part of 12 square miles of land that formerly were a U.S. military base. The central issues are land use and compensation. The suit claims that while the colonial government of Trinidad received compensation from the U.S. government at the time of use (WWII), some but not all the landowners were compensated. The suit contends that compensation was for houses and crops not land. Therefore, as the public purpose of the land transfer - the military base - is over, then the land should be returned.

The U.S. government signed the land back to the government of Trinidad & Tobago in 1988. The government has created a special Chaguaramas Development Authority to direct the development of the tourism industry on the land, as it has a great deal of prime coastline. The government has no desire to give back such prime land, and has won two victories in domestic courts. The suitors contend these judgements were politically motivated and now look to London for a less-biased (in the suitor's view) judgement. Legal observers suggest that the case has wider implications for the status of land throughout the Caribbean and in Canada that was rented to the U.S. during WWII by British colonial governments.15



Foreign Ownership

  

Barbados     Dominican Republic     Haiti     Jamaica      Trinidad & Tobago

Barbados
The government of Barbados has an aggressive program for attracting foreign investment through the Barbados Investment and Development Corporation (BIDC). Foreign nationals have the same legal protections as domestic investors. However, foreign investors must get government approval for their investments and need to register their investments with the country's Central Bank to ensure the free repatriation of their profits and capital. Real property are strongly protected: mortgage claims can be pursued in court, and liens can be placed on both built and chattel property.16

Dominican Republic
President Leonel Fernandez proclaimed Decree 2543-45 in January 1998 that abolished restrictions on the ownership of real property by foreigners. Foreigners now have the same freedom to purchase or invest in real estate, as do citizens of the Dominican Republic.17

Haiti
Property rights in Haiti are not secure. According to the U.S. Department of State, Haitian law and bureaucracy negatively effect real property law and land tenure for both foreigners and citizens. There are several ongoing property disputes between U.S. and Haitian private entities. The 1987 Haitian constitution also gives the government expropriation rights, but only for public use, and with fair compensation. There is not a history of expropriation, but in 1997-8, a large U.S. company approached the U.S. embassy in Port-au-Prince about a case of unfair compensation. Corruption is a problem and crime is high, but political violence is rarely directed at foreign investment.18

Jamaica
There are no restrictions on foreign investment in Jamaica. Foreigners are free to purchase real estate with the same freedom and legal protection as Jamaican citizens. The only regulatory policies that may affect real property investments are environmental impact assessments. Section 18 of the Jamaican constitution protects property rights; including restricting government expropriations to those that are required for justifiable public purpose and for which fair compensation is given. There have not been any major investment disputes in Jamaica in the 1990s. They're two investment incentive regimes for real property. The Hotel Incentives Act offers both income and dividend tax relief for up to 15 years, as well as duty-free importation of construction materials. The Resort Cottages Incentives Act allows the same incentives, but for a 7-year period.19

Trinidad & Tobago
The Foreign Investment Act of 1990 has set out the legal framework for the foreign acquisition of real property. Under the Act, individuals and companies can purchase up to a limit of one acre of land for residential purposes and up to five acres for commercial purposes. Foreign real property purchasers also must register all the particulars of payment method and personal identification through his/her attorney to the Minister of Finance. Under the FIA, foreigners nay buy freehold property, or lease property. Property in excess of the stipulated amounts can be acquired through the granting of a license by the President. There are also incentives for tourism projects which can be granted through the approval of an application by the Minister for Tourism.20



Recommended Resources

  
Bahamas Real Estate Association (BREA)
P.O. Box N-8860
Nassau
BAHAMAS
Tel: 242-324-4564
Fax: 242-322-4649

REALTORS® Association of Jamaica (RAJ)
9 Aldington Ave.
Kingston, 10
JAMAICA
Tel: 876-960-8831
Fax: 876-960-8831*
Internet: www.realtors-ja.comont>
E-mail: realtorsja@colis.comont>
Caribbean Tourism Organization, www.caribtourism.comont>.

Caribbean Hotel Association, www2.chahotels.com
American Association of Chambers of Commerce in Latin America, www.aaccla.orgont>.

Endnotes
1 - www.caricom.orgont>.
Caricom web site; Robb, Drew, "Central America and the Caribbean," World Trade, vol. 11, no. 9, pp. 30-33, September 1998.
2 - Canute, James, "Globalization spurs Caribbean nations to move faster towards common market," Financial Times, World Trade section, p. 5, August 13, 1999.
3 - See endnote 2.
4 - Robb, Drew, "Central America and the Caribbean," World Trade, vol. 11, no. 9, pp. 30-33, September 1998.
5 - "OPIC and HUD join to promote homeownership in Central America and Caribbean, Create mortgage market for U.S. investors," AACLA E-News, October 13, 1999, www.aaccla.orgont>.
6 - Gibbs, Melanie F., "Caribbean has sunny future," National Real Estate Investor, vol. 39, no. 5, p. 108, May 1997.
7 - "Bahamas," Successful Meetings, Island Guide, pp. 4-6, June 1999.
8 - "1999 Successes fuel Dominican Republic's aggressive tourism development plans for the year 2000," Business Wire, September 28, 1999.
9 - Payne, Douglas W., "Letter from Grenada; Grenada selling land to foreign investors," The Nation, vol. 268, p. 22, March 22, 1999.
10 - See endnote 9.
11 - "The America's: Calling the blind man's bluff," The Economist, vol. 352, no. 8138, p. 40, September 25, 1999.
12 - "The America's: The Caribbean's tarnished jewel," The Economist, vol. 353, no.8139, pp. 37-38, October 2, 1999; Haddock, Fiona, "Jamaican optimism," Global Finance, vol. 13, no. 9, pp. 33-34, September 1999.
13 - M. Hamel-Smith & Co., "Doing business in Trindad & Tobago," Trinidadlaw.com web site, www.trinidadlaw.comont>.
14 - See endnote 13.
15 - Fineman, Mark, "Trinidadians make case for return of choice real estate," Los Angeles Times, Part A, p. 5, June 11, 1999.
16 - U.S. Department of State, Country Commercial Guide, Fiscal Year 2000: Barbados.
17 - "Foreign ownership restrictions abolished," Latin American Database, International Trade Administration (U.S.), Dept. of Commerce, 1998; "Dominican Republic opens its real estate market," World Trade, vol. 11, no. 5, p. 24, May 1998.
18 - U.S. Department of State, Country Commercial Guide, Fiscal Year 2000: Haiti.
19 - U.S. Department of State, Country Commercial Guide, Fiscal Year 2000: Jamaica.
20 - M. Hamel-Smith & Co., "Doing business in Trindad & Tobago," Trinidadlaw.com web site, www.trinidadlaw.com.



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