Caribbean countries, a set of mostly Small Island Developing States (SIDS), are threatened by both economic and natural hazards.

Nations have specialized in tourism and commodity exports, disproportionally exposing them to global economic cycles through changes in tourism demand and commodity prices. They are also located in a region that is highly exposed to a range of natural hazards —from volcanic eruptions to earthquakes and hurricanes— which damage their infrastructure stock, reduce tourism demand, and destroy agricultural production. Hazards have often caused severe damage to economies and Livelihoods in the region.

Despite their varying national capacities and exposure to natural hazards and economic volatility, the countries of the Caribbean have sustained long-term development progress. Their specialization in sectors where they have a comparative advantage (tourism and commodities) has led to relatively high income levels.

But high income levels have also come, historically, with high exposure to global business cycles and natural hazards, which has resulted in high economic volatility, high unemployment, and persistent inequality and poverty. Economic growth has slowed over the past 10 years, and more recently, the COVID-19 pandemic has demonstrated that, although the region was prepared to handle shocks, it is vulnerable to and dependent on changes in global tourism demand.

Taking a holistic approach to resilience, this report assesses the historical and future impacts of shocks in the Caribbean, policy responses to those shocks, and gaps in resilience building.

It offers two main findings and a series of recommendations for policy makers.

Finding 1: Caribbean countries have achieved resilience levels that have allowed them to support economic development despite large recurring damages and losses from multiple hazards and shocks.
But this relies to a large extent on informal mechanisms that neither systematically protect the poor and most vulnerable groups nor prevent the loss of human capital. Businesses in the region have invested in disaster preparedness, staff training, and backup infrastructure like water tanks and electric generators. Remittances from abroad have blunted declines in consumption after disasters. In many cases, governments have prepared adeptly for extreme events, also benefiting from regional collaboration mechanisms to monitor and forecast hurricanes and organize a coordinated response when the impact exceeds individual countries’ response capacity. Past efforts have, however, left some people behind. One in five people in the region still lives in poverty and past shocks have contributed to pushing people into and keeping them in poverty.

Finding 2: Caribbean countries are not prepared for the new challenges posed by climate change, compounded by uncertainty on future tourism markets and a lack of fiscal space.

The strategies that have worked in the past will not be enough in the future. Climate change threatens to intensify natural hazards and brings new sources of volatility though impacts on health, agriculture yields, and coastal landscapes. The post-COVID-19 world brings more uncertainty on prospects for tourism. Many countries have also depleted their fiscal space and coping capacity while dealing with past crises.

These new challenges call for more consistent approaches to resilience, building on stronger institutions, robust analytics, and more transparent prioritization. To boost resilience and better prepare for the shocks and stresses of the future, this report recommends that Caribbean governments focus on three main areas:

• Increasing government efficiency by improving investment management and infrastructure maintenance, clarifying procurement rules for emergency situations, allocating budgets transparently, ensuring fiscal rules are robust, and layering risk financing strategies;

• Empowering households and the private sector by increasing both the coverage and adequacy of social protection, strengthening worker skills for resilience, improving access to finance, and facilitating access to risk information;

• Reducing future physical risk by investing in critical infrastructure, better enforcing building codes and standards, systematically considering emerging and changing risks, and planning to build back better after shocks.

Caribbean countries face difficult trade-offs for food security

The World Food Programme estimates that 2.9 million people in the Caribbean were food insecure in July 2020, compared to 1.2 million in April. Most Caribbean countries depend on food imports to satisfy domestic demand, making them vulnerable to disruptions in the food chain caused by the COVID-19 pandemic. And since they export perishable, labor-intensive foods, they are also vulnerable to disruptions in logistics and customs delays.

Agriculture accounts for 23 percent of employment in the Caribbean (62 percent in Haiti) and has always been an integral part of the Caribbean economy. The sector is characterized by a dual system: large-scale, export-oriented traditional plantation crops such as sugarcane and bananas juxtaposed by small-scale farming of staple local crops. Most of the poor rely on agriculture for their livelihoods.

Climate change will severely impact the Caribbean agriculture sector, which will need to adapt. It already suffers regularly from severe hurricane and drought damage and, as temperatures rise, several crops will experience heat stress and lack the ideal climate conditions for maximizing yields.

Recent modelling results show that the largest negative impact of climate change in Latin America and the Caribbean will be on sugar cane, followed by maize and cotton. The study finds that, compared to a scenario without climate change, maize yield losses due to climate change through 2030 in the Caribbean will be roughly 16.5 percent.

The fisheries sector could offer an avenue for growth and food security in the region but is also challenged by climate change impacts.

Within the CARICOM region, it employs 200,000 fishers and 100,000 people in fish processing, marketing, and other supporting roles. Fish supplies 7 percent of protein intake in the Caribbean, and the sector supplies 1 percent of all Latin American fish production and about 0.2 percent of total world fishery production.

The aquaculture sector is a promising source of growth and jobs, but its development in the Caribbean has been slower than the global average. As of 2014, the Caribbean only constituted about 0.05 percent of world total aquaculture production.

The fisheries sector is already affected by overfishing, habitat alteration, poor management, and other challenges, which are only compounded by the effects of climate change.

Sea level rise, rising sea surface temperatures, ocean acidification, and increasing storm intensification have the most widespread impacts on fisheries in the Caribbean. Sea level rise has already caused beach erosion and the relocation of housing and fishery landing sites.

Recent storms and hurricanes have also caused significant damage —for example, in Jamaica, Hurricane Gustav caused $14 million in damages to the marine fisheries sector, mainly through the loss of fishing gear, while in Dominica, Tropical Storm Erika caused over $2 million in damages, 95 percent of which was to boats and engines.

Climate change impacts can also directly affect—and even alter—the physiology, behavior, growth, distribution, reproductive capacity, and mortality of fish. Sea surface temperature extremes caused repeated mass bleaching events on the Mesoamerican Barrier Reef System in Belize, Honduras, and  Guatemala in 1993, 1998, 2005, and 2010. Coral bleaching damages critical fish habitats, decreases fish production, and impacts the protection of beaches and landing sites.

Productivity in fisheries is predicted to decrease in tropical and temperate regions and increase closer to the poles because marine organisms are expected to shift geographical distributions to maintain their appropriate thermal environments.
Under current climate conditions and policies, these impacts will be unequally distributed, with tropical developing countries and SIDS experiencing the greatest impacts.