Report: Baha Mar delay led to $2.5B GDP loss
Senior Business Reporter
Published: Jan 11, 2017
A new economic impact assessment on the delay of Baha Mar shows the extent to which the government has forfeited hundreds of millions of dollars in tax revenue, and the grim outlook on the country and resort's reputation due to the handling of the receivership of the property and its recent sale.
The report, sent to Guardian Business by sources associated with the resort but who wish to remain anonymous, posits a $2.5 billion gross domestic product (GDP) loss for the country due to the two-year delay in opening the resort and $410 million loss in tax revenues levied from value-added tax (VAT), import duties, gaming taxes, departure taxes and National Insurance Board contributions.
"It now looks like the provisional liquidation process initiated by the Bahamas government, putting the fate of the Baha Mar project in the hands of its secured creditor, CEXIM Bank and its court-approved receivers and managers, Deloitte, will result in a two-year delay," the report states.
"The settling of certain obligations to Bahamian employees and vendors, and the announcement of a new buyer, mean that the government will make further investments in terms of concessions and deal costs to get the project opened. The lost economic benefits with this delay are staggering."
The report also spoke of "qualitative impacts" in the form of slow development of the product, reputation damage from the delay and handling of the Baha Mar liquidation and sale, lost marketing spend on promoting the destination and a protracted period of slow growth, which could contribute to social challenges.
It added that the country stalled on creating 9,000 full-time jobs from direct and indirect sources associated with the project over the two-year delay period.
Its assessment also outlined $600 million in lost income over two years and the forfeiture of 1.1 million stopover visitors. "Each visitor was expected to spend $576 per day," the assessment said.
These were likely the kinds of statistics credit ratings agency Standard and Poor's (S&P) took into account when it made the decision to downgrade The Bahamas' sovereign credit rating to junk status. Standard and Poor’s gave the country a stable outlook, however, due partly to the optimism surrounding the Baha Mar project.
"The country's largest tourism project, Baha Mar, is set to open in phases beginning in 2017. We believe that it will take time before the resort is able to operate at full capacity," S&P said in its December report on The Bahamas.
"The stable outlook balances the government's recently worsened fiscal profile, increased debt burden and already elevated external risks with the benefits of the opening of Baha Mar, along with smaller tourism projects, that will sustain long-term economic growth."