Caribbean Tourism

Government & Economy of Aruba

Gold was discovered in 1825, but the mine ceased to be economic in 1916. In 1929, black gold brought real prosperity to Aruba when Lago Oil and Transport Co, a subsidiary of Exxon, built a refinery at San Nicolas at the east end of the island. At that time it was the largest refinery in the world, employing over 8,000 people.

In March 1985 Exxon closed the refinery, a serious shock for the Aruban economy, and one which the Government has striven to overcome. In 1989, Coastal Oil of Texas signed an agreement with the Government to reopen part of the refinery by 1991, with an initial capacity of 150,000 barrels a day, but despite plans to increase it, present capacity is only about 140,000 b/d.

Aruba has three ports. San Nicolas is used for the import and transshipment of crude oil and materials for the refinery and for the export of oil products. There are also two sea-berths at San Nicolas capable of handling the largest tankers in the world. Oranjestad is the commercial port of Aruba, and it is open for day and night navigation. In 1962 the port of Barcadera was built to facilitate shipment of products from Aruba’s new industrial zone on the leeward coast.

The economic crisis of 1985 forced the Government to turn to the IMF for help. The fund recommended that Aruba promote tourism and increase the number of hotel rooms by 50%. The Government decided, however, to triple hotel capacity to 6,000 rooms, which it was estimated would provide employment for 20% of the population. Hotel construction has expanded rapidly and marketing efforts have attracted investors and visitors from as far afield as Japan. By 1990 tourist accommodation in 15 major high rise and low rise hotels reached 3,326 rooms, with many more available in small hotels, guest houses and apartments. Nevertheless, by 1992 the Government was facing a financial crisis because of state guarantees totalling NG516 mn for three hotel projects which had run into financial difficulties and on which work had ceased: the 466-room Beta Hotel (NG170 mn), the 376-room Eagle Beach Hotel (NG186 mn) and the 411-room Plantation Bay Hotel (NG160 mn). Although the Dutch government provided a loan for the hotels’ completion in 1992, the Aruban government now faces heavy interest and principal repayments for 15 years to banks. These will be funded by unpopular higher excise duties, petrol prices and import duties. In mid-1993, the Plantation Bay Hotel was sold to the Marriott chain. In 1995 its opening raised the total to 6,626 rooms in hotels, a figure which rose to 7,103 by 1996. By 2000 nearly all the hotels had undergone alterations, adding rooms or upgrading existing facilities. Total employment in tourism absorbs 35% of the workforce.

The economy is now overwhelmingly dependent on tourism for income, with around 650,000 stayover visitors a year, producing revenue of US$600 mn. Over half of tourists come from the USA; the next largest country of origin is Venezuela. A further 250,000 passengers arrive on cruise ships.

Efforts are being made to diversify away from a single source of revenues into areas such as re-exporting through the free trade zone, and offshore finance. Aruba is still dependent on the Netherlands for budget support and the aim is to reduce the level of financial assistance. New legislation has been approved to encourage companies to register on the island by granting tax and other benefits. Regulations are generally flexible and unrestricting on offshore business, although efforts are being made to ensure an efficient level of supervision.

There is no unemployment on Aruba and labour is imported for large projects such as the refinery and construction work. Turkish guest workers came to help get Coastal started and Philippinos work in the high rise hotels. The Government is encouraging skilled Arubans to return from Holland but is hampered by a housing shortage and a consequent boom in real estate prices.

Also see
Aruba - Money / business guide

You are suggested to visit the links below for further information of Government & Economy of Aruba:

Aruba Government 2010
The Governor of Aruba - Official Website

Aruba Chamber of Commerce
Doing Business in Aruba
Growing Aruba’s Economy
Aruba Economy Profile 2010

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