Greenland – new and poor country?

November 26, 2008

Greenland, an arctic island with a population of 57,000, voted for self-governance from Denmark in a referendum on Tuesday. The “Yes” camp won an overwhelming 75 percent of the vote.

Shrimp and halibut fishing and tourism form the backbone of the economy but the island is rich in minerals and its waters may hold vast hydrocarbon reserves.

The resources setting is very much like one of Iceland, although Greenland – made up mostly of Inuit people who live in small, isolated villages – does not have a huge banking sector. (Neither does Iceland these days, some might argue.)

In fact the country does not have roads between towns either. Travel is only possible by boats or planes, weather permitting.

“The conceit is that Greenland would be a commodity economy. However, commodity based economies, as we are seeing, are prone to booms and busts,” writes Marc Chandler, FX strategist at U.S. bank Brown Brothers Harriman.

An eventual independent Greenland is likely to come at a cost. Greenland receives yearly subsidies of 3.2 billion Danish crowns ($557.6 million) from Copenhagen, about a third of its gross domestic product.

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