Aruba turns to long-down oil refinery as drop in tourism weighs on economy
A collapse in tourism due to the coronavirus pandemic has sent Aruba to one of the world’s biggest economic contractions, prompting the island to try to diversify beyond its image of sun and sand, including restarting a long-failed oil refinery.
Aid from the Netherlands helped the Caribbean island fund a stimulus package, mitigating the impact of the economy’s 25.5% contraction on workers and businesses in 2020. This slowdown did not was behind only Libya, Maldives and Venezuela, according to data from the International Monetary Fund (IMF).
But these subsidies led to an increase in Aruba’s budget deficit to 17% of gross domestic product (GDP), according to the IMF, prompting some experts and residents to argue that the island should diversify its economy to ensure that the government can balance its budget without the Dutch. assistance.
The 67% drop in tourist arrivals has been devastating for small businesses like Aruba Bob Snorkeling, which used to run multiple tours a day before the COVID-19 pandemic hit.
âWhen COVID happened, they broke down to once a day, once or twice a week, and then to nothing at all,â said instructor and co-owner Jesus Maduro, 30, while sipping coffee in shadow of solar panels. in the tree-lined backyard of the company.
But the company maintained rent and electricity payments with quarterly government grants of 4,000 guilders ($ 2,247.19). These payments have kept business closures below 2019 levels, said Martijn Balkestein, executive director of the Aruban Chamber of Commerce.
As the constituent country of the Kingdom of the Netherlands, Aruba receives assistance from Amsterdam. The Netherlands has agreed to cover Aruba’s financing needs during the pandemic subject to economic reforms, such as public sector wage cuts implemented last year. But Dutch officials said they ultimately expected Aruba, along with the other Caribbean islands, CuraÃ§ao and Sint Maarten – which are part of the Kingdom of the Netherlands but have autonomy in matters of internal affairs – be autonomous.
Fitch Ratings rates the island’s debt at BB, under the investment category. Aruba issued in 2012 a bond of $ 253 million with a yield of 4.625% maturing in 2023.
TALK ABOUT THE REOPENING OF THE REFINERY
After closing its borders in March 2020, the island reopened to tourism last June for visitors who test negative for the coronavirus. The country has reported 10,324 COVID-19 cases and 92 deaths.
But the local business community is not banking on an immediate rebound in tourism to restore public finances. The Aruban Hotels and Tourism Association predicts that hotel occupancy rates will remain below half of capacity in 2021.
âThe pandemic is making it very clear to everyone who lives in Aruba that we cannot rely on just one pillar,â Balkestein said.
To this end, the authorities are in talks with a US company seeking to build a liquefied natural gas import terminal on the site of an oil refinery that has been down since 2012. Another company is seeking to restart the plant. -even.
In 2012, the former refinery operator, US company Valero Energy Corp (VLO.N), abandoned it due to low profits.
Still, some residents are hoping its rebirth could change the fortunes of San Nicolas, the dilapidated refinery town on the southeastern tip of Aruba, a half-hour drive from the glittering beachfront hotels and casinos dotting the area. west coast of the island, whose largely empty frescoed streets are lined with shuttered dive bars.
âYou can see, it’s a ghost town,â said Kendrick Kock, a cellphone repair shop owner who saw sales drop 50% last year, prompting him to lay off its two employees. “If they don’t open the refinery soon, that would be the closed case for San Nicolas.”
(1 USD = 1.7800 guilders)
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