This is good for Tourism? Inflation in Aruba at Historic Levels … “Aruba is also Becoming too Expensive”

“Aruba is also becoming too expensive.”

It appears that Aruba is handling their inflation as well as they handled the Natalee Holloway investigation.

Are the tourism powers that be in Aruba going to sit back and tell us this is good for their tourism and that its flourishing? Maybe some one would like to inform tourism and government officials of simple economics. Aruba is experiencing double digit inflation. Who who be their next Prime Minister, Jimmy Carter?

Why would a traveler want to go some where that is more expensive than comparable locations? Thus, the only incentive that Aruba tourism has is to lower their prices. Thus, when they say they have an increase in tourism is it really a financial increase? When you increase tourism by 8% but have to slash your prices by 30%, is there really a profit?

From the figures of the Central Bureau of Statistics (CBS) it appears that the inflation in 2007 has reached a historic record of 10.2 percent in December; was 8.6 percent in November. 

“The 6-percent difference between the 4.2 percent inflation of our most important business-partner the United States and the unprecedented high inflation of 10.2 percent of Aruba shows that the bbo has drastically influenced the price increase in Aruba.”

Inflation reaches historic record, (Amigoe, January 23, 2008)

ORANJESTAD – From the figures of the Central Bureau of Statistics (CBS) it appears that the inflation in 2007 has reached a historic record of 10.2 percent in December; was 8.6 percent in November.   

From the published figures that go back till 2000 it appears that the monthly inflation has never been this high in the past 7 years.  The average inflation of the past 24 months is 6 percent.  The average in December 2006 was 3.6 percent.

The tariffs for water, electricity, and gas that increased tremendously due to the international oil prices that increased to record heights, have influenced the increase of this year.

Also the introduction of the sales tax (bbo) had its effect on the increase, even though we do not know yet what that effect on the inflation figure is exactly.   

Before the introduction of the bbo, the MEP-government has calculated that the effect will be 3.1 percent and they lowered the tax on wages and income to compensate this.  The opposition and the employers- and employees’ unions are of the opinion that the effect of the bbo is more than the 3.1 percent calculated by the government in advance.  AVP-leader Mike Eman indicated this morning that his party is of the opinion that the bbo worsens the effects of the oil prices.   

“The 6-percent difference between the 4.2 percent inflation of our most important business-partner the United States and the unprecedented high inflation of 10.2 percent of Aruba shows that the bbo has drastically influenced the price increase in Aruba.”

Eman says that from the CBS-figures it appears that the inflation difference between the US and Aruba has never been higher than 1.5 percent since 1997.   There were years that the inflation of Aruba and that of the US were practically the same.  “You can afterwards see the changes in the years that the MEP-government has taken the increase of import costs’ measures.  We are now in the danger area with the bbo as crowning touch.  This 10.2-percent inflation is very damaging for the stability of our economy, the business costs, and the buying power of the citizens”, said Eman. 

According to Eman, the inflation is in the double digits, which had also caused enormous impoverishment in South-America, deteriorated the mid-class, and has driven away the confidence of investors.  “This is what the Oduber-cabinet is currently doing to Aruba.”  The consequences are enormous, says Eman.  Other than the impoverishment and the further eroding of the buying power, Aruba is also becoming too expensive.  “Our competition position is liable to be pushed aside.  This puts pressure on the balance of payments.  A decline in foreign exchange has negative consequences for our monetary stability.”  People’s interest in saving money is also dropping due to the high inflation, because the interest on the saved amount is counterbalanced by the monetary depreciation.  This will also cause the interests on loans to stay high or even increase more, says Eman.   

Finance-minister Nilo Swaen (MEP) indicated that he has received the figures, but he doesn’t want to comment on them yet.  “I want to study these figures first.”