Economy of Aruba
Encyclopedia
The economy
of Aruba
is an open
system, with tourism
currently providing the largest percentage of the country's income. Because of tourism's rapid growth in the last 80 years, related industries like construction
have also flourished. Other primary industries include oil refining and storage, as well as offshore bank
ing. Although the island's poor soil and low rainfall limit its agricultural prospects, aloe
cultivation, livestock
, and fishing
contribute to Aruba's economy. In addition, the country also exports art and collectibles, machinery, electrical equipment, and transport equipment. Aruba's small labor force and low unemployment rate have led to a large number of unfilled job vacancies, despite sharp rises in wage rates in recent years.
With such a large part of its economy dependent on tourism, the Aruban government is striving to increase business in other sectors to protect against possible industry slumps. Their current focus is on expanding technology
, finance
, and communications
.
islands, a plantation economy
never developed on Aruba due to its arid climate. Early Spanish
explorers considered the island of little value, partly because the poor soil made growing crops difficult and partly because their attempts to find gold turned up empty-handed. However, long after the Dutch
obtained control of Aruba, they found the gold the Spanish had been seeking.
conditions. With a healthy demand for aloe products, it became an important part of Aruba's economy. In fact, for many years, the country was aloe's top exporter. But over the years, many aloe fields were replaced by buildings, diminishing its production and exports declined.
The oldest company on the island, Aruba Aloe, has recently instituted changes in the hopes of becoming Aruba's leading product manufacturer. It built a new, modern facility, an aloe museum, and designed new packaging. Although most of their product line sells in the national market, a 2005 exporting deal with a U.S. company and sales through their website have increased their international market.
, the island became an attractive spot for oil refineries. The Lago Oil and Transport Company, owned by Exxon
, opened in 1929. At the time, Lago's oil refinery and storage facility was the largest in the world. Following in their footsteps, the Eagle Oil Refinery opened soon after. Over the next few decades, the oil industry took over as Aruba's primary economic force.
The Eagle Oil Refinery shut down and was dismantled in the late 1950s. But the Lago refinery kept going until 1985, when the demand for oil fell and Exxon closed it. In 1991, the Coastal Oil Company bought it, scaled down operations, and reopened it. Although its reopening didn't raise Aruba's oil industry to its previous heights, it did revive that sector and continues to be a key contributor to the country's economy.
In 1947, Aruba's government founded a tourist board to explore the possibility of developing a tourism industry. Several years later, cruise ship
s began to dock in Oranjestad
, Aruba's capital city. The island's first luxury hotel was built in 1959, giving the fledgling industry a good start. Over the years, tourism grew and helped create a prosperous economy.
As the oil industry waned, tourism increased in importance. The government offered fiscal incentives to spur growth of hotels and other tourist-oriented businesses. Their efforts resulted in a steady and rapid rise in tourism. When a surplus of these jobs couldn't be filled, they placed a one-year moratorium on new hotel construction and new tourist corporations.
Following the terrorist attacks of Sept. 11, 2001, tourism temporarily declined because of grounded flights and travel fears. Aruba stepped up its visible security force in tourist areas to heighten safety and reassure visitors.
After a short time, tourism rebounded strongly.
Another potential threat to the industry occurred in 2005, when the May 30 disappearance of vacationing Alabama teen Natalee Holloway
made international news. Claiming that Aruban authorities weren't taking the case seriously enough, her mother and the Governor of Alabama called for a nationwide boycott of Aruba. However, the U.S. federal government didn't back the proposed boycott. Aruba's reputation as one of the safest islands in the Caribbean may have helped it overcome any negative stigma caused by the case. The amount of tourism in June, 2005, actually rose by 9% from the previous year.
- $2.400 billion (2007 est.)
GDP - real growth rate: 1.0% (2007 est.)
GDP - per capita: purchasing power parity - $21,500 (2007 est.)
GDP - composition by sector:
agriculture:
0.4%
industry:
33.3%
services:
66.3% (2002 est.)
Inflation
rate (consumer prices): 8.7% (2007)
Labor force: 41,500 (2004 est.)
Unemployment rate: 6.9% (2005 est.)
country comparison to the world: 86
Budget:
revenues: $507.9 million
expenditures: $577.9 million (2005 est.)
Public debt: 46.3% of GDP
country comparison to the world: 43
Central bank discount rate: 5% (2008)
country comparison to the world: 80
Industries: tourism, transshipment facilities, oil refining
Agriculture - products: aloes; livestock
; fish
Electricity - production: 800 million kWh (2006 est.)
country comparison to the world: 151
Electricity - consumption: 744 million kWh (2006 est.)
country comparison to the world: 149
Electricity - exports: 0 kWh (2007)
Electricity - imports: 0 kWh (2007)
Oil - production: 2356 oilbbl/d (2007)
country comparison to the world: 100
Oil - consumption: 7102 oilbbl/d (2006 est.)
country comparison to the world: 155
Oil - exports: 233300 oilbbl/d (2005)
country comparison to the world: 49
Oil - imports: 238200 oilbbl/d (2005)
country comparison to the world: 41
Oil - proved reserves: n/a
Natural gas - production: 0 cu m (2007 est.)
country comparison to the world: 93
Natural gas - consumption: 0 cu m (2007 est.)
country comparison to the world: 112
Natural gas - exports: 0 cu m (2007 est.)
country comparison to the world: 40
Natural gas - imports: 0 cu m (2007)
country comparison to the world: 61
Natural gas - proved reserves: 0 cu m (1 January 2006)
country comparison to the world: 104
Exports: $124 million f.o.b.; note - includes oil reexports (2006)
country comparison to the world: 192
Exports - commodities: live animals and animal products, art
and collectibles, machinery and electrical equipment, transport
equipment
Exports - partners: Panama 29.7%, Colombia 17%, Netherlands Antilles 13.2%, US 11.3%, Venezuela 10.9%, Netherlands 9.2% (2007)
Imports: $1.054 billion f.o.b. (2006)
country comparison to the world: 171
Imports - commodities:machinery and electrical equipment, crude oil
for refining and reexport, chemicals; foodstuffs
Imports - partners: US 54.6%, Netherlands 12%, UK 4.7% (2007)
Debt - external: $478.6 million (2005 est.)
country comparison to the world: 165
Economic aid - recipient: $11.3 million (2004)
Currency
: Aruban guilder/florin
Exchange rates: Aruban guilders/florins per US dollar - NA (2007), 1.79 (2006), 1.79 (2005), 1.79 (2004), 1.79 (2003)
Fiscal year:
calendar year
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
of Aruba
Aruba
Aruba is a 33 km-long island of the Lesser Antilles in the southern Caribbean Sea, located 27 km north of the coast of Venezuela and 130 km east of Guajira Peninsula...
is an open
Open economy
An open economy is an economy in which there are economic activities between domestic community and outside, e.g. people, including businesses, can trade in goods and services with other people and businesses in the international community, and flow of funds as investment across the border...
system, with tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
currently providing the largest percentage of the country's income. Because of tourism's rapid growth in the last 80 years, related industries like construction
Construction
In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking...
have also flourished. Other primary industries include oil refining and storage, as well as offshore bank
Offshore bank
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...
ing. Although the island's poor soil and low rainfall limit its agricultural prospects, aloe
Aloe
Aloe , also Aloë, is a genus containing about 500 species of flowering succulent plants. The most common and well known of these is Aloe vera, or "true aloe"....
cultivation, livestock
Livestock
Livestock refers to one or more domesticated animals raised in an agricultural setting to produce commodities such as food, fiber and labor. The term "livestock" as used in this article does not include poultry or farmed fish; however the inclusion of these, especially poultry, within the meaning...
, and fishing
Fishing
Fishing is the activity of trying to catch wild fish. Fish are normally caught in the wild. Techniques for catching fish include hand gathering, spearing, netting, angling and trapping....
contribute to Aruba's economy. In addition, the country also exports art and collectibles, machinery, electrical equipment, and transport equipment. Aruba's small labor force and low unemployment rate have led to a large number of unfilled job vacancies, despite sharp rises in wage rates in recent years.
With such a large part of its economy dependent on tourism, the Aruban government is striving to increase business in other sectors to protect against possible industry slumps. Their current focus is on expanding technology
Technology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
, finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
, and communications
Telecommunication
Telecommunication is the transmission of information over significant distances to communicate. In earlier times, telecommunications involved the use of visual signals, such as beacons, smoke signals, semaphore telegraphs, signal flags, and optical heliographs, or audio messages via coded...
.
History
Unlike many CaribbeanCaribbean
The Caribbean is a crescent-shaped group of islands more than 2,000 miles long separating the Gulf of Mexico and the Caribbean Sea, to the west and south, from the Atlantic Ocean, to the east and north...
islands, a plantation economy
Plantation economy
A plantation economy is an economy which is based on agricultural mass production, usually of a few staple products grown on large farms called plantations. Plantation economies rely on the export of cash crops as a source of income...
never developed on Aruba due to its arid climate. Early Spanish
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
explorers considered the island of little value, partly because the poor soil made growing crops difficult and partly because their attempts to find gold turned up empty-handed. However, long after the Dutch
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
obtained control of Aruba, they found the gold the Spanish had been seeking.
Gold
With the discovery of gold on Aruba in 1800, mining became the island's foremost industry. Aruba's economy boomed. However, by 1916 the gold supply had mostly been tapped out, making it impossible for companies to turn a profit. As the gold mining industry waned, so did the economy.Aloe
First planted on Aruba in 1850, aloes throve in its desertDesert
A desert is a landscape or region that receives an extremely low amount of precipitation, less than enough to support growth of most plants. Most deserts have an average annual precipitation of less than...
conditions. With a healthy demand for aloe products, it became an important part of Aruba's economy. In fact, for many years, the country was aloe's top exporter. But over the years, many aloe fields were replaced by buildings, diminishing its production and exports declined.
The oldest company on the island, Aruba Aloe, has recently instituted changes in the hopes of becoming Aruba's leading product manufacturer. It built a new, modern facility, an aloe museum, and designed new packaging. Although most of their product line sells in the national market, a 2005 exporting deal with a U.S. company and sales through their website have increased their international market.
Oil
Despite setbacks caused by the troubled gold and aloe industries, Aruba's economy didn't suffer long. Because of its location near VenezuelaVenezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
, the island became an attractive spot for oil refineries. The Lago Oil and Transport Company, owned by Exxon
Exxon
Exxon is a chain of gas stations as well as a brand of motor fuel and related products by ExxonMobil. From 1972 to 1999, Exxon was the corporate name of the company previously known as Standard Oil Company of New Jersey or Jersey Standard....
, opened in 1929. At the time, Lago's oil refinery and storage facility was the largest in the world. Following in their footsteps, the Eagle Oil Refinery opened soon after. Over the next few decades, the oil industry took over as Aruba's primary economic force.
The Eagle Oil Refinery shut down and was dismantled in the late 1950s. But the Lago refinery kept going until 1985, when the demand for oil fell and Exxon closed it. In 1991, the Coastal Oil Company bought it, scaled down operations, and reopened it. Although its reopening didn't raise Aruba's oil industry to its previous heights, it did revive that sector and continues to be a key contributor to the country's economy.
Tourism
Cruise ship
A cruise ship or cruise liner is a passenger ship used for pleasure voyages, where the voyage itself and the ship's amenities are part of the experience, as well as the different destinations along the way...
s began to dock in Oranjestad
Oranjestad, Aruba
Oranjestad is the capital and largest city of Aruba, which is in the Caribbean north of Venezuela. Oranjestad is located on the southern coast near the western end of the island country...
, Aruba's capital city. The island's first luxury hotel was built in 1959, giving the fledgling industry a good start. Over the years, tourism grew and helped create a prosperous economy.
As the oil industry waned, tourism increased in importance. The government offered fiscal incentives to spur growth of hotels and other tourist-oriented businesses. Their efforts resulted in a steady and rapid rise in tourism. When a surplus of these jobs couldn't be filled, they placed a one-year moratorium on new hotel construction and new tourist corporations.
Following the terrorist attacks of Sept. 11, 2001, tourism temporarily declined because of grounded flights and travel fears. Aruba stepped up its visible security force in tourist areas to heighten safety and reassure visitors.
After a short time, tourism rebounded strongly.
Another potential threat to the industry occurred in 2005, when the May 30 disappearance of vacationing Alabama teen Natalee Holloway
Natalee Holloway
Natalee Ann Holloway disappeared on May 30, 2005, during a high school graduation trip to Aruba, a Caribbean country within the Kingdom of the Netherlands. An American student from Mountain Brook, Alabama, Holloway graduated from Mountain Brook High School on May 24, 2005, shortly before the trip...
made international news. Claiming that Aruban authorities weren't taking the case seriously enough, her mother and the Governor of Alabama called for a nationwide boycott of Aruba. However, the U.S. federal government didn't back the proposed boycott. Aruba's reputation as one of the safest islands in the Caribbean may have helped it overcome any negative stigma caused by the case. The amount of tourism in June, 2005, actually rose by 9% from the previous year.
Statistics
GDP: purchasing power parityPurchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
- $2.400 billion (2007 est.)
GDP - real growth rate: 1.0% (2007 est.)
GDP - per capita: purchasing power parity - $21,500 (2007 est.)
GDP - composition by sector:
agriculture:
0.4%
industry:
33.3%
services:
66.3% (2002 est.)
Inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
rate (consumer prices): 8.7% (2007)
Labor force: 41,500 (2004 est.)
Unemployment rate: 6.9% (2005 est.)
country comparison to the world: 86
Budget:
revenues: $507.9 million
expenditures: $577.9 million (2005 est.)
Public debt: 46.3% of GDP
country comparison to the world: 43
Central bank discount rate: 5% (2008)
country comparison to the world: 80
Industries: tourism, transshipment facilities, oil refining
Agriculture - products: aloes; livestock
Livestock
Livestock refers to one or more domesticated animals raised in an agricultural setting to produce commodities such as food, fiber and labor. The term "livestock" as used in this article does not include poultry or farmed fish; however the inclusion of these, especially poultry, within the meaning...
; fish
Fish
Fish are a paraphyletic group of organisms that consist of all gill-bearing aquatic vertebrate animals that lack limbs with digits. Included in this definition are the living hagfish, lampreys, and cartilaginous and bony fish, as well as various extinct related groups...
Electricity - production: 800 million kWh (2006 est.)
country comparison to the world: 151
Electricity - consumption: 744 million kWh (2006 est.)
country comparison to the world: 149
Electricity - exports: 0 kWh (2007)
Electricity - imports: 0 kWh (2007)
Oil - production: 2356 oilbbl/d (2007)
country comparison to the world: 100
Oil - consumption: 7102 oilbbl/d (2006 est.)
country comparison to the world: 155
Oil - exports: 233300 oilbbl/d (2005)
country comparison to the world: 49
Oil - imports: 238200 oilbbl/d (2005)
country comparison to the world: 41
Oil - proved reserves: n/a
Natural gas - production: 0 cu m (2007 est.)
country comparison to the world: 93
Natural gas - consumption: 0 cu m (2007 est.)
country comparison to the world: 112
Natural gas - exports: 0 cu m (2007 est.)
country comparison to the world: 40
Natural gas - imports: 0 cu m (2007)
country comparison to the world: 61
Natural gas - proved reserves: 0 cu m (1 January 2006)
country comparison to the world: 104
Exports: $124 million f.o.b.; note - includes oil reexports (2006)
country comparison to the world: 192
Exports - commodities: live animals and animal products, art
Art
Art is the product or process of deliberately arranging items in a way that influences and affects one or more of the senses, emotions, and intellect....
and collectibles, machinery and electrical equipment, transport
Transport
Transport or transportation is the movement of people, cattle, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline, and space. The field can be divided into infrastructure, vehicles, and operations...
equipment
Exports - partners: Panama 29.7%, Colombia 17%, Netherlands Antilles 13.2%, US 11.3%, Venezuela 10.9%, Netherlands 9.2% (2007)
Imports: $1.054 billion f.o.b. (2006)
country comparison to the world: 171
Imports - commodities:machinery and electrical equipment, crude oil
Oil
An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....
for refining and reexport, chemicals; foodstuffs
Imports - partners: US 54.6%, Netherlands 12%, UK 4.7% (2007)
Debt - external: $478.6 million (2005 est.)
country comparison to the world: 165
Economic aid - recipient: $11.3 million (2004)
Currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
: Aruban guilder/florin
Exchange rates: Aruban guilders/florins per US dollar - NA (2007), 1.79 (2006), 1.79 (2005), 1.79 (2004), 1.79 (2003)
Fiscal year:
calendar year