Major Economies of the Caribbean

Located far away from the hustle and bustle of many of the busiest cities of the world, the Caribbean region is known as one of the world’s top vacation destinations. With as many as 43.7 million residents as of 2021 and more than 7,000 individual islands (plus 13 sovereign states and 12 dependencies), the Caribbean archipelago includes some very dynamic economies.

Trinidad and Tobago

The twin-island nations of Trinidad and Tobago have a relatively high gross domestic product (GDP) per capita compared to other territories in the region. The Republic of Trinidad and Tobago is considered to be a high-income economy by the World Bank. A high-income economy is defined by the World Bank as a nation with a gross national income per capita of $12,696 or more.

In 2011, the Organization for Economic Co-operation and Development (OECD) removed Trinidad and Tobago from its list of developing countries.

According to the World Bank, Trinidad and Tobago’s real GDP is $15,384 (2020 estimate). Trinidad is highly dependent on petrochemical and liquefied natural gas exports as a result of its large oil and natural gas reserves, and the Republic has had a robust economy over the last decade (primarily because of rapid growth in its production of natural gas and the country’s substantial exports of petrochemicals).

As a member of the Caribbean Community and Common Market (CARICOM), Trinidad benefits from trade alliances among other Caribbean states. CARICOM is a group of twenty developing countries that work together to shape policies for the region and encourages economic growth and trade.

Jamaica

For many years, Jamaica was mostly known for its reggae music, crystal clear beaches, and a distinct accent. However, the Caribbean island’s financial industry made headlines in 2015, when Bloomberg reported that the Jamaica Stock Exchange (JSE) was the world’s best-performing stock market for 2015.

While the S&P 500 reported negative returns in 2015, the JSE market index rose by 97%. This came as a result of foreign acquisitions and a recovering economy.

The Jamaican economy is powered by export revenues from its agriculture and mining industries. In addition to being one of the largest producers of bauxite (a sedimentary rock that’s the chief commercial ore of aluminum), Jamaica also exports alcoholic preps for beverages, cassava, raw sugar, and raw coffee beans. Jamaica is also a member of CARICOM, a common market in the Caribbean.

In recent years, the government of Jamaica has been working on economic reforms that have gained support from the International Monetary Fund (IMF), and the World Bank.

Cayman Islands

Many people wish that they could avoid paying income taxes without getting into trouble with the law—the residents of the Cayman Islands are afforded the luxury of doing so. Known as one of the world’s top tax havens, the Cayman Islands imposes a 0% tax rate on income earned by individuals.

There are also no corporate taxes, no capital gains, and no gift or property taxes in the Cayman Islands, although this may change. In 2021, there have been proposed global reforms that would impact the statuses of all tax havens, including the Cayman Islands. (After years of negotiation, the G7 has come to a deal—which was presented to G20 countries in July 2021—that would require companies to face a 20% tax on earnings, above a 10% margin, in countries where its products or services are consumed. Another part of the plan would set a minimum global minimum corporate tax rate of 15%.)

As a result of its tax-neutral status, the Cayman Islands has attracted many wealthy people and corporations to incorporate business entities in its jurisdiction. The primary source of the government’s revenue comes from indirect taxes, such as value-added tax (VAT) and customs duties. Like most tax havens, the majority of the law firms, accountants, and company managers in the Cayman Islands focus their efforts on serving the financial services industry.

The government of the Cayman Islands also makes a substantial amount of money from fees associated with registering and renewing offshore companies and hedge funds.

Unlike Jamaica and Trinidad and Tobago, the Cayman Islands use a fixed exchange rate regime.

Dominican Republic

The Dominican Republic has one of the largest GDPs among the different Caribbean territories, but it’s dependence on tourism negatively dropped the GDP in 2020 to -$6.7 billion. Strong trading relationships and large remittance payments helped to contribute to the expansion of the island’s economy. In fact, remittances serve as one of the island’s largest sources of foreign exchange.

In addition to being one of the Caribbean’s largest producers and exporters of sugarcane, the Dominican Republic exports cigars, sugar cane, refined petroleum, and bananas. Some of the island’s key trading partners are the United States, China, and Haiti. 

The Bottom Line

Much more than a holiday destination, the Caribbean region consists of small island economies that are major players in a wide range of global industries. The twin-island state of Trinidad and Tobago, for example, has fueled its economic growth with export revenues from oil and gas. On the other hand, Jamaica is one of the world’s leading producers of bauxite. The Cayman Islands are a well-known offshore tax haven for multinational corporations and billion-dollar financial service companies.