Trouble in paradise: The Seychelles now the world's most indebted nation
The Seychelles have been a byword for Europe's elite jet-set, but this island nation of just 87,000 needed $26 million from the International Monetary Fund and defaulted on a $230-million bond. The U.S. dollar has doubled against its flaccid currency in the past year, which doubles the cost of imports that its people cannot live without and puts the island in much worse shape than even Iceland. Public and private debt are now roughly equal to the entire economy there. Left with so few resources, how can an island stay afloat?
Some island paradises are in better shape than others. French Polynesia, which some people call by the name of its main island, Tahiti, has the benefit of strong ties to France, where many of its biggest homeowners live. Hawaii is, of course, part of the United States. Visitors are way down in both places, but at least they're part of a wider safety net.
But little self-reliant islands such as the Seychelles lack those powerful connections, and because the bulk of their economies are in tourism -- and in particular, tourism that relies on long, expensive transoceanic flights -- they're getting slaughtered right now. Locals in the Seychelles estimate that the luxury hotels are clocking a pathetic 30% to 35% occupancy this year.
Fewer resources can translate into danger for the surrounding area, too. A few days ago, pirates hijacked a boat leaving the Seychelles, and another one taken in February is still missing, with three hostages at stake. Pirates are moving their operations closer to the Seychelles in part because of naval operations being launched off of Africa. If the Seychelles can't afford to police the waters (it asked European authorities for help), there will be more crime there.
Some islands, such as Samoa or Grand Cayman, have alternative industries (banana plantations, rubber farms, bank accounts out of Uncle Sam's reach) that help out. The Seychelles are looking into exploiting a reputation as an offshore tax haven, like the Cayman Islands, in an effort to bring in more cash.
Mauritius, one of the only other resort enclaves in the Indian Ocean, is turning away from the vanishing European fly-in market and trying instead to court the Saudis, who are still spending somewhat. Then again, in Mauritius, tourism only accounts for 9% of the economy, so the stakes aren't as high. In the Seychelles, tourism accounts for about a fifth of the economy.
When someone like Brian Williams talks about how important it is to vacation where your money is needed, this is the kind of place he's talking about. I can't afford to flit off to the Indian Ocean for a Seychelles holiday, but there are people who can and do. And there are plenty of Caribbean islands which are closer, more affordable, and in some ways worse off.
We like to think of these islands as beautiful, breezy droplets of heaven studding an azure sea. They're paradise, we assume. But try for a moment to see that warm, blue ocean for what it is: A wide, formidable barrier to the resources that flow from the rest of the world. Imagine that water as a desert, and see those islanders as marooned. It's not like people in the Seychelles can just move to another state and try to get work there. They're stuck on their island, and that's an increasingly desperate place.