U.S. Virgin Islands Economic Overview
Located in the eastern Caribbean, the U.S. Virgin Islands (USVI) are home to around 108,000 residents. The territory's tourism-based economy accounts for 80 percent of the gross state product of $2.5 billion. Government jobs account for some 33 percent of employment, followed by tourism and the retail sector. The per capita income is $23,000, and the standard of living in the U.S. Virgin Islands is higher than that of other Caribbean islands.
Tourism is a crucial industry to USVI. The island of St. John mostly consists of white sandy beaches and lush green parks and is known for its hiking and snorkeling. The island of St. Thomas hosts large resorts and is a regular stop for many cruise ships. The island of St. Croix has rainforests, scuba diving, remains of sugar plantations, and old forts, but its most popular and profitable attraction is the first casino in the Virgin Islands, the Divi Carina Bay Casino.
During the 18th and early 19th centuries, the main industry of the Virgin Islands was sugar cane, grown on plantations by slave labor imported from Africa. A profitable byproduct of this production was rum. Tobacco was also grown, along with some cotton.
When sugar prices dropped and the slaves were freed, the economy stagnated. By the time World War I broke out, trade and shipping had dwindled. The U.S., fearing that Germany might decide to establish a naval base on the islands, bought them from the Danish government in exchange for $25 million in gold in 1917.
Although the residents hoped that being transferred to U.S. jurisdiction would improve their economy, the sugar from St. Croix was not welcomed on the U.S. market, and with Prohibition beginning in 1919, rum was also not eagerly sought after. Known as "America’s Poorhouse," USVI nevertheless improved economically in the 1930s due to the various New Deal programs initiated by the federal government.
After World War II, tourists began to flock to the scenic islands, especially after Cuba was closed to U.S. tourists in 1962. The opening of the Harvey Aluminum Company and Hess Oil Refinery in the early 1960s further improved the economy, but tourism remains the leading industry.
The agricultural sector of USVI is small, only contributing one percent to the gross state product and resulting in most food being imported. However, fruits, vegetables, and sorghum are grown and cattle are raised. The government has allocated a parcel of land on St. Thomas for agricultural purposes, and 50 farms operate on it, raising a variety of crops and livestock. Roadside markets and private customers are the usual outlets for locally grown produce. A total of $1.6 million worth of crops is grown on the islands. Some beekeeping operations have started on the U.S. Virgin Islands, which according to the Commissioner of Agriculture are ideal for it, due to the relative isolation from pests and diseases found in other locations.
BANKING AND FINANCE
Around $2.6 billion worth of total assets are held by all of the commercial banks located in the U.S. Virgin Islands. About 2,500 employees work in the banking industry. Some major U.S. banks operate in the islands, such as Chase Manhattan, and the island of St. Thomas is known as the banking center of the Caribbean.
Eight newspapers are published in the U.S. Virgin Islands, and there are 16 television stations and 23 radio stations. Fiber optic cables and underwater cable connections to the U.S. and the Caribbean are state-of-the-art. A $15 million 911 emergency call system was successfully launched in 2009. Innovative Communications Corporation (ICC) is the largest telephone company on the islands and is also the owner of the Virgin Islands Daily News, the largest newspaper, which some feel represents a communications monopoly.
Some 2,700 people are employed in the USVI construction industry, a drop of almost 30 percent since the beginning of the recent worldwide economic crisis. Although public sector projects such as road construction and repairs are still carried out, there has been a decline in residential and investment construction. It is hoped that capital investments and new projects will revive the construction industry.
Around 27,000 students are in enrolled in USVI primary and secondary schools, taught by 1,700 teachers. Most children attend school on their home island, but some commute to a different island. In addition, 3,000 students attend institutions of higher education. The University of the Virgin Islands has almost 2,400 students, 550 staff and faculty members, and two campuses.
The U.S. Virgin Islands depend on petroleum to generate 68 percent of the energy used. Most of the petroleum comes from the Hovensa oil refinery. The Virgin Islands Water and Power Authority serves 51,000 customers, providing them with electricity at a higher price than in most of the contiguous U.S. The Energy Office of the Virgin Islands offers rebates of 50 percent as incentives for residents and businesses to use solar and wind energy systems. The goal has been set to reduce fossil fuel consumption by 60 percent by 2035.
Paradise Jam and the annual Carnival in April take place on the island of St. Thomas, as well as the International Rolex Regatta, which is the only major Caribbean regatta held by a yacht club. St. Croix hosts the Blue Bay Jazz Fest and the Ironman Triathlon. A weekend agricultural fair is sponsored by local farms every January and is a high point for residents. About 830 people work in the arts and entertainment industry on the U.S. Virgin Islands. One casino operates in St. Croix, and there is a possibility of a second one opening. A racetrack with thoroughbred horses also operates on the island.
Almost a quarter of the population on the U.S. Virgin Islands lacks insurance. Roughly 18,000 people, including the elderly and disabled, receive Social Security benefits, totaling $16.4 million. The insurance companies are regulated by the Division of Banking and Insurance, which issues tests, collects fees, and makes sure that companies are in compliance with regulations.
Around 2,300 people are employed in manufacturing in the U.S. Virgin Islands, with most of them working in the oil and rum industries. In 2008, eight million gallons (30 million liters) of rum were shipped to the U.S. in bulk and then sold to local bottlers. Exported rum contributes more than $86 million in taxes to the gross state product. Watch assembly, textiles, and electronics also contribute to the manufacturing sector, but due to lower labor costs in low-wage countries, the watch market’s output has dropped from a high of one million watches annually to the current output of around 194,000 watches in 2008. Belair Quartz is the sole remaining watch manufacturer.
MINING AND EXTRACTION
Four mining, quarrying, and extraction companies operate in the U.S. Virgin Islands. Their employees receive a total annual payroll of $1.7 million. Some $5.9 million of mined products are produced annually. Alcoa, the Aluminum Co. of America, operates a 600,000-metric-ton-a-year alumina (aluminum oxide) refinery in the islands.
More than 500 nonprofit organizations operate in the U.S. Virgin Islands, comprising charitable organizations, educational organizations, religious organizations, and other nonprofit organizations such as social welfare organizations, recreational clubs, or organizations of war veterans. Total assets reported by the sector are $178 million, and total income is $105 billion. The average asset amount reported is $1.1 million, and the average income is $670,000.
Some 6,000 people work in the retail trade in USVI, accounting for 90 percent of trade sector employment. Around $1.4 billion in sales is generated by the retail sector, and annual payroll is around $146.1 million. Clothing and clothing accessories account for 30 percent of sales ($414 million), followed by food and drink at 18 percent ($247 million). The largest duty-free port in the Caribbean is located in the U.S. Virgin Islands.
The biotechnology sector of the U.S. Virgin Islands concentrates on agricultural technology and pharmaceuticals. The 14 pharmaceutical and biotechnology companies on the islands employ 75 people and have estimated annual sales of $6.2 million. Around 16 software services and applications companies operate on the islands, employing roughly 250 people, with annual estimated sales of $5.8 million.
Some 790 miles of paved roads make up the transportation infrastructure on the islands, and two airports connect the islands to the rest of the world. The Cyril E. King Airport in Charlotte Amalie is the more popular, handling 85,000 operations annually. The harbor in St. Thomas is one of the best deepwater ports in the Caribbean, and a number of ferry companies take passengers among the islands at rates ranging from $3 to $50, depending on the distance. Car, moped, and bicycle rentals are also possible.
TRAVEL AND TOURISM
Some 2.5 million visitors come to the U.S. Virgin Islands annually, nearly two million of them via cruise ships, providing the islands with $1.5 billion annually, their main source of revenue. Popular attractions include the Virgin Islands National Park, hiking, golfing, boating, kayaking, scuba diving, and submarine rides. Hotels, condominiums, inns, guesthouses, and villas provide accommodations for tourists and more than 7,500 jobs for local residents. While the recent worldwide economic crisis had a negative impact on tourism, the territory’s Department of Tourism has launched a $1.5 million advertising campaign to combat this decline.
The island of St. Croix differs from the other Virgin Islands in that its economy is not based on tourism. Its main source of income is from the Hovensa oil refinery, the fifth largest oil refinery in the world. Some 2,000 workers are employed by the refinery, which processes some 500,000 barrels of oil a day (mostly from Venezuela). The refinery yields more than $17 billion in annual sales. About 95 percent of the distillate fuel oils, gasoline, jet fuel, kerosene, and other fuels produced by the refinery is shipped to the U.S. mainland.
-World Trade Press