The financial services industry is emerging and America’s paradise should have a piece of the action, according to Moleto Smith, a candidate for governor of the United States Virgin Islands. Mr. Smith, owner of management consulting firm and a two decade veteran of the Territory’s government told Politic365.com that he envisions the U.S.V.I. as the leading jurisdiction in the Caribbean from which financial services firms, such as private equity firms, can operate and invest in the Virgin Islands as well as other jurisdictions throughout the Caribbean sector.
Often overlooked as a hub for investment is the Caribbean Basin, the area running from Florida westward along the Gulf coast, then south through Mexico and Central America and then eastward along the northern coast of South America. According to Mr. Smith, interest in investment in the region is being driven by the region’s natural resources, the flow of commodity trade through the region, and the need for the ability to capture new markets in the area. In addition to these factors of attraction is the significant “push” factor of what is happening in Europe. Mr. Smith noted that the financial climate in Europe may provide investors an incentive to seek other areas to invest capital, and the Caribbean may be one of those areas.
The need for investors to diversify their holdings may coincide with the need for the USVI to diversify its economy. “The economic base in the V.I. has been tourism and oil refinement, and one of those bases has pulled out“, said Mr. Smith, in reference to HOVENSA’s termination of its oil refining operations on the island of St. Croix last year. Tourism, as the remaining significant base in the V.I. economy may be finding itself on shakier ground. Mr. Smith noted that more tourist expenditures are remaining on cruiseships as a result of cruiselines refining the services they offer on board. To offset these changes, the USVI’s economy has to expand and diversify in order to include emerging and untapped markets.
Establishing a financial services sector in the USVI that is strong enough to lead the Caribbean sector means competing with established regional powerhouses including the Cayman Islands, Bermuda, and the British Virgin Islands. Barbados, headquarters of Portland Private Equity, the PE firm with controlling interests in the National Commercial Bank of Jamaica and Columbus International, a broadband provider, is also a notable powerhouse.
These established jurisdictions rely on tax neutrality, availability of the limited partnership structure, the English law tradition, and light regulation to draw investors. Might these strengths dissuade investors from coming the USVI? Probably not if one follows Mr. Smith’s rationale. “We will need to assess the laws and regulations that make it attractive for entities to come here”, said Mr. Smith, “but we have the legal framework that provides safety.”
The benefits of challenging other Caribbean jurisdictions for leadership in the financial sector may be worth it. According to The New York Times, the private equity industry has 2,600 firms in the United States alone, controlling $3 trillion in global assets and employing 8 million people.
Asked what it would take to get the electorate to buy into a vision of a new economic strategy Mr. Smith said, “One leg of the relay doesn’t run four. All stakeholders-developers, the finance community, and the general community-have to be engaged from the outset of a plan. We still need people to implement it.”