Hoogervorst (CAft): Tourism doubled, but the economy grew only 20% per capita

ORANJESTAD — Aruba needed tourism to double to achieve economic growth of 20% per capita over twenty years. According to Hans Hoogervorst, chairman of the Aruba Board of Financial Supervision (CAft), that gap demonstrates why the country must make concrete decisions about tourism growth and the costs it creates for the community.In an interview with Tito Laclé of Noticiacla this week, Hoogervorst said tourism had brought Aruba considerable prosperity but had also made the country heavily dependent on a single economic activity. “Tourism is what keeps this island afloat, and its public finances too,” he said. According to the figures he presented, the economy grew approximately 20% per capita over twenty years, while tourism activity doubled. Consequently, tourism’s pressure on the island increased far more than economic output per person.

Quality and more value per tourist

“For years, Aruba has been saying: we should not focus on quantity. We should focus on quality and more value per tourist. So far, that has not been achieved,” Hoogervorst stated.  He noted that tourism had continued to record double-digit growth even in the most recent year.

The benefits come first; the costs follow

Hoogervorst explained that the economic benefits of a new hotel become apparent quickly, while the costs its activities generate for the community may take longer to emerge or be recognised. “Normally, the costs come before the benefits. In tourism, it is more a case of the benefits coming before the costs,” he said, repeating an observation shared during the meeting with government officials.

Public dissatisfaction with tourism

He linked growing dissatisfaction with tourism to the cost of living, increasingly unaffordable homes and housing shortages. The expansion of vacation rentals, including Airbnb, forms part of that discussion. According to Hoogervorst, rapid growth in the tourist rental sector, which had been subject to little or inadequate regulation, contributed to the difficulty of controlling visitor numbers. CAft therefore considers the decision to register accommodations a positive step. “If you do that, you can curb growth,” he said.

Labour migration has long-term consequences

Another issue that Hoogervorst believes has received insufficient attention is the effect of tourism expansion on the composition of the population and collective expenditure. The sector needs more workers than Aruba can supply locally, leading to labour migration. Hoogervorst noted that, according to the figures presented, the local population still accounts for just over 60% of Aruba’s total population. His concerns include workers who live and work on the island for ten or twenty years but do not build up sufficient pension entitlements. When they reach retirement age, they may prefer to remain in Aruba because of family ties or access to healthcare, despite having limited incomes. He described this as, in a sense, “importing a degree of poverty” and urged the government to give greater consideration to the long-term consequences of labour migration. “Develop an immigration policy that causes fewer of these kinds of problems,” was his message. He clarified that CAft does not specialise in immigration, but that the impact on public finances requires attention.

Covid exposed the risk

To illustrate Aruba’s vulnerability, Hoogervorst compared the economic contraction during Covid with some of the most severe international economic crises. According to his presentation, the contraction on the islands during the pandemic approached 25%, with Aruba the hardest hit among the islands mentioned because of its dependence on tourism. “Everyone has forgotten about it again, but that is what you have to contend with,” he said. He therefore praised the rapid reduction in Aruba’s public debt. According to Hoogervorst, the country must use prosperous years to build financial buffers for the next crisis. His conclusion is that tourism growth must be assessed beyond visitor numbers alone: its effects on prosperity per resident, housing, the labour market and public expenditure must form part of the same decision-making process.