Aruba seems in direction of long-idled oil refinery, as tourism drop pummels economic system By Reuters
© Reuters. Aruba’s state-owned refining firm Refineria di Aruba (RdA) is seen in San Nicolas
By Luc Cohen
SAN NICOLAS, Aruba (Reuters) – A collapse in tourism as a result of coronavirus pandemic has despatched Aruba towards one of many world’s greatest financial contractions, prompting the island to attempt to diversify past its solar and sand picture, specifically by restarting a long-idled oil refinery.
Help from the Netherlands helped the Caribbean island finance a stimulus program, blunting the impression of the economic system’s 25.5% contraction on staff and companies in 2020. That downturn was behind solely Libya, Maldives and Venezuela, Worldwide Financial Fund (IMF) information present.
However these subsidies led to a rise in Aruba’s fiscal deficit to 17% of gross home product (GDP), in keeping with the IMF, prompting some consultants and residents to argue the island ought to diversify its economic system to make sure the federal government can steadiness its finances with out Dutch help.
The 67% drop in tourism arrivals was devastating for small companies like Aruba Bob Snorkeling, which used to run a number of excursions a day earlier than the COVID-19 pandemic hit.
“When COVID got here round, they only got here crashing all the way down to as soon as a day, a couple of times per week, after which to nothing in any respect,” stated teacher and part-owner Jesus Maduro, 30, whereas sipping espresso underneath the shade of photo voltaic panels within the firm’s tree-filled yard.
However the firm saved up hire and electrical energy funds because of quarterly 4,000 florin ($2,247.19) subsidies from the federal government. Such funds helped maintain firm closures under 2019 ranges, stated Martijn Balkestein, govt director of Aruba’s Chamber of Commerce.
As a constituent nation of the Kingdom of the Netherlands, Aruba is receiving help from Amsterdam. The Netherlands has agreed to cowl Aruba’s financing wants in the course of the pandemic contingent on financial reforms, equivalent to cuts in public sector salaries carried out final 12 months. However Dutch officers have stated they in the end count on Aruba, in addition to different constituent Caribbean islands Curacao and Sint Maarten – that are a part of the Kingdom of the Netherlands however have autonomy over home affairs – to be self-reliant.
Fitch Rankings charges the island’s debt at BB, under funding grade. Aruba in 2012 issued a $253 million bond with a 4.625% yield maturing in 2023.
TALK OF REOPENING REFINERY
After closing its borders in March 2020, the island reopened for tourism final June for guests who current a destructive coronavirus check. The nation has reported 10,324 COVID-19 instances and 92 deaths.
However the native enterprise group just isn’t banking on an instantaneous rebound in tourism to revive authorities funds. The Aruba Lodge and Tourism Affiliation forecasts resort occupancy will stay at lower than half capability in 2021.
“The pandemic exhibits very loud and clear to everyone dwelling in Aruba that we can not depend on one pillar,” Balkestein stated.
To that finish, authorities are in talks with a U.S. firm searching for to construct a liquefied import terminal on the location of an oil refinery that has been idled since 2012. One other firm is searching for to restart the plant itself.
In 2012, the refinery’s former operator, U.S.-based Valero Vitality Corp (NYSE:), deserted it over low earnings.
Nonetheless, some residents hope its revival might change the fortunes of San Nicolas, the rundown refinery city on Aruba’s southeastern tip a half hour’s drive from the glitzy beachfront accommodations and casinos dotting the island’s west coast, whose largely empty mural-flanked streets are lined with shuttered dive bars.
“You’ll be able to see, it is a ghost city,” stated Kendrick Kock, a cellular phone restore store proprietor who noticed gross sales drop 50% final 12 months, prompting him to put off his two staff. “If they do not open the refinery quickly, this might be case closed for San Nicolas.”
($1 = 1.7800 florins)