September 27, 2024 Growing the USVI Economy Through Manufacturing & Retail

The economy of the US Virgin Islands is diversifying with the help of the Small Business Administration’s State Trade Expansion Program.

The U.S. Virgin Islands (USVI)—comprised of three main islands, St. Croix, St. John, and St. Thomas—has long been renowned for its vibrant tourism industry, attracting millions of visitors each year with pristine beaches, lush mountains, rich culture and warm hospitality. However, global disruptions such as the COVID-19 pandemic and natural disasters have underscored the need for economic resilience and diversification. The territory’s reliance on tourism, while lucrative at times, has proven vulnerable during periods of crisis.

In response, the U.S. Virgin Islands Economic Development Authority (USVIEDA) has embarked on a strategic initiative to strengthen the small manufacturing and retail trade sectors, with the support of programs like the U.S. Small Business Administration’s State Trade Expansion Program (STEP).

The Need for Economic Diversification and Vision 2040

The devastation wrought by hurricanes Irma and Maria in 2017, coupled with the economic fallout from the COVID-19 pandemic, exposed the risks of the USVI’s narrow economic base. In 2020, the territory experienced a decline in tourist arrivals compared to previous years. Service exports, primarily driven by visitor spending, dropped by 43.5 percent that same year, contributing to a 2.2 percent decrease in the USVI’s GDP. Notably, during the COVID- 19 pandemic, the USVI tourism rebounded and did extremely well when compared to other Caribbean islands, but the memories from the experience were lasting.

The territory leadership thus saw the urgent need for a multi-generational economic plan aimed at diversification and sustainability. So, Vision 2040 was born—a strategic roadmap that outlines recommendations for fostering sustainable economic growth, wealth generation and job creation across the USVI. By emphasizing the growth of key industries such as retail trade, light manufacturing, renewable energy, agro-processing and ocean tech, Vision 2040 aims to establish a more varied economy that is futureproofed against potential tourism disruptions.

2022 census data revealed that the USVI’s retail sector emerged as a standout performer, with an average revenue per establishment of $3.73 million. This surpasses the average revenue per establishment across all sectors under President Biden’s American Rescue Plan, which stands at $3.10 million. Additionally, Retail Trade establishments reported a revenue per employee of $287,281, underscoring the sector’s vitality and its role in the territory’s broader economic landscape.

The light manufacturing sector also plays a crucial role in the USVI economy, generating $25 million in exports annually. With a focus on rum production and other subsectors such as watchmaking, the USVI also possesses the necessary infrastructure to support modern logistics as a light manufacturing hub, including deep-water port facilities and two international airports for cargo and shipping.

The Vital Role of the State Trade Expansion Program (STEP)

At the forefront of Vision 2040 and the territory’s efforts to diversify the USVI economy is the U.S. Small Business Administration’s State Trade Expansion Program (STEP). This initiative, administered by USVIEDA’s Enterprise Zone Commission, has been instrumental in helping our small retail businesses navigate the global market. STEP provides financial support for USVI enterprises to participate in international trade shows, conduct market research and develop export strategies—essential steps for expanding their reach.

The program’s impact has been profound since it first appeared in the USVI in 2011. By reducing the barriers to entry into international commerce, STEP has empowered local business owners to scale their operations and introduced small manufacturers to global markets – from a mom-owned skincare company, Hygge, that’s alleviating eczema symptoms with local remedies internationally, to a local bakery, In the Mix, expanding globally and sharing USVI culinary traditions with the mainland United States and beyond.

Iveliz Petersen from St. Croix sought out to make her own soap that would help her son find some of the relief he needed for his eczema. From those humble beginnings rooted in necessity, Hygge Suds was launched, now expanding into a full line of hand-crafted, all natural vegan products with the same care poured into every product as when she was making soap for her son.

In the Mix Cakery & Café in St. Croix, owned by Cherise Jarvis, is a family-owned business rooted in the dedication to preserve and elevate traditional Virgin Islands baking techniques and traditions. Cherise’s daughter left her lucrative job in the mainland United States to return to the islands and help her mother take the business to new heights. Together, they’ve not only perfected the art of creating baked goods that capture the essence of local flavors but have also innovated by making these treats ready to ship globally, allowing customers far and wide to savor the taste of the USVI.

These entrepreneurs are not only supporting themselves and their families but also driving significant economic change by contributing to a more resilient economy. The support offered through STEP has not only fostered growth in individual businesses but has also strengthened the overall economic fabric of the USVI by encouraging a more robust and diverse export sector.

Cultural & Creative Exports: A Unique Selling Point for USVI Businesses

Entrepreneurs in the USVI are harnessing the territory’s rich cultural traditions and natural materials and remedies, blending them with modern consumer demands to create unique products that resonate globally. For example, LaVela, a handmade fragrance brand, incorporates traditional ingredients like hibiscus, turmeric, and lemongrass into its offerings. LaVela was founded by Amandla Williams, a native Virgin Islander born and raised on Saint Thomas, who is steadfast in her mission to elevate USVI culture and heritage through her entrepreneurial endeavors. Through the support of STEP and USVIEDA’s Accelerator Program, Williams has been able to refine LaVela’s products and expand its market presence.

Additionally, Christa’s Art Gallery on Saint Croix showcases a range of artwork that celebrates the USVI’s rich history and what it means to be Caribbean. Thanks to the STEP program, founder Christa-Ann Davis Molloy has been able to expand her reach beyond the islands, sharing the essence of the territory with the world by attending trade shows such as the recent NY Now show in New York City in August.

“Made in the USVI”, a program of the territory’s Enterprise Zone Commission, further promotes locally made goods, emphasizing the quality and authenticity of products born out of the USVI’s unique cultural and environmental landscape. This initiative has gained traction, particularly in the wake of the pandemic, which saw a rise in people starting businesses inspired by a pause in traditional tourism jobs. This program organizes seasonal pop-up shops across the USVI, giving both residents and visitors the opportunity to purchase locally made products. The diverse selection includes art, books, candles, jewelry, apparel, and food items, perfect for special occasions like the holiday season and cultural carnival events.

Strategic Location and Trade Relationships

The USVI’s geographic position in the Caribbean offers significant advantages for trade, particularly with Latin American markets. The territory’s proximity to key shipping routes and its political status as a U.S. territory enable businesses to enjoy the benefits of U.S. law and the U.S. dollar while accessing a broader international market and having less traditional regulation.

For example, the USVI’s exemption from the Jones Act, which typically mandates that goods transported between U.S. ports be carried on U.S.-flagged vessels, provides additional flexibility in shipping options. This exemption has the potential to lower transport costs, making the USVI more attractive to international shippers and enhancing its role as a central hub within the Caribbean region.

The Future is Bright

Looking ahead, the USVI’s efforts to strengthen its small manufacturing and retail trade industries are expected to continue yielding positive results. The combination of government support through initiatives like STEP, the entrepreneurial spirit of local businesses, and strategic investments in the territory’s economic infrastructure all combine to position the USVI for sustained growth. As the territory continues to diversify its economy and build on its strengths, it is poised to become a model of resilience and innovation in the Caribbean, while it continues to hold our hearts as an iconic visitor destination as well.

Nadine Marchena Kean is the Managing Director of the U.S. Virgin Islands Enterprise Zone Commission. A native of the Virgin Islands, Mrs. Marchena Kean attended Bernard M. Baruch College, City University of New York and earned a BBA in International Marketing with a minor in public relations.

Mrs. Marchena Kean has honed her economic development skills working for trading companies such as NI (National Intergroup) World Trade and Mitsui & Co. and Sogasosha, where she worked in the New York office as well as at the Tokyo headquarters.

Celina Morris is a native of St. Thomas, an island in the U.S. Virgin Islands, and is the Director of Marketing of the U.S. Virgin Islands.

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