French Antilles and French Guiana - Overview of economy

The territories that now comprise the 3 Caribbean Departments of France (CDF) were for the most part settled by French settlers throughout the 17th century. The original Carib inhabitants of the islands in the French Antilles were mostly wiped out by the settlers, who subsequently established an economic system based on large sugar plantations and imported African slave labor. Slavery based on African bondage formed the basis of the economy in French Guiana as well, though a significant number of indigenous peoples survived the French onslaught. France abolished slavery in 1848, after which time thousands of Indian and Chinese migrants came to the French Caribbean territories to supplement the newly freed labor force on the plantations. The French Caribbean territories continued under colonial rule until 1946, when they became official French departments.

Throughout the post-war period, the economies of the CDF have benefitted from high subsidies from the French government (the French mainland is referred to as the metropolis). According to the Canadian Department of Foreign Affairs (DFAIT) A Guide for Canadian Exporters (1997), for instance, French government transfers in the form of salaries, grants, and social welfare equaled approximately 55 percent of the combined GDP of the CDF in 1996. As such, many areas of activity in the economies of the CDF are controlled by the government, although there is certainly much free-market activity. In this sense, the CDF are similar to the larger French economy, which is characterized by a mixed economic system that consists of both public and private economic activity. Indeed, of the 4 largest industrialized economies in the world, France has the highest rate of public economic activity.

Economic policies of the 3 departments have generally been export-oriented, with the vast majority of exports being directed towards France, each other, and other EU members. Exports from the CDF consist mainly of agricultural products. Imports of the CDF consist mostly of higher value-added goods, such as machinery, construction equipment, and vehicles, which are more expensive than agricultural commodities. Moreover, since none of the CDF are sufficient in terms of food production, they must import large quantities of foodstuffs. As a result of these factors, the CDF run large balance of payments deficits which have led to the accumulation of massive debts. Fortunately, France has helped alleviate debt through annual transfers of aid, thereby preventing the CDF from falling into the structural adjustment program (SAP) trap that has negatively affected most of the developing world. SAPs are packages of conditions that developing countries must implement in return for debt-servicing funds from the World Bank and the International Monetary Fund (IMF). SAP conditions intended to increase revenue to pay back loans—such as cuts to social spending—have been severely detrimental to the populations of developing countries.

Despite the generous French subsidies designed to encourage development, industrial growth has been slow in the CDF, while unemployment rates remain exceedingly high. The majority of the inhabitants in the CDF are engaged in the service sector, which is also the largest contributor to GDP. In terms of employment and contribution to GDP, industry is the second leading sector, though agriculture remains highly important.

In 1986, the French government adopted a legislative program designed to stimulate the productive sectors of the CDF. The program, which included tax incentives and subsidies for new construction and business investment, has helped stimulate the CDF economies, though they remain subsidy-dependent and agriculturally export-oriented. Further pro-business reforms implemented in the 1990s led to the creation of numerous industrial and commercial zones across the CDF, characterized by tax and import duty exemptions.