Jamaica_Country_Report_2010

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Country Report

December 1, 2009

Jamaica

© 2009, The PRS Group, Inc. ISSN: 1054-5689

Jamaica Table of Contents

Page Country Forecast Map..................................................................................................................................................................... 2 Highlights .......................................................................................................................................................... 3 Current Data...................................................................................................................................................... 5 Comment & Analysis ..................................................................................................................................... 11 Forecast Scenarios Most Likely Five-Year Regime Scenario: JLP (50% Probability) ...................................................... 17 Second Most Likely Five-Year Regime Scenario: PNP (45% Probability)....................................... 24

Third Most Likely Five-Year Regime Scenario: National Unity (5% Probability) ......................... 26 Forecast Summary.................................................................................................................................. 28 Political Framework Players To Watch.................................................................................................................................... 31 Political Players....................................................................................................................................... 32 Country Conditions Climate for Investment & Trade Overview ................................................................................................................................................... 1 Tariff and Non-tariff Barriers ................................................................................................................. 4 Policies ....................................................................................................................................................... 4 Legal Framework...................................................................................................................................... 6 Corruption and other Bureaucratic Obstacles ...................................................................................... 8 International Agreements........................................................................................................................ 9 Labor Conditions.................................................................................................................................... 12 Background Geography............................................................................................................................................... 13 Recent History ........................................................................................................................................ 13 Social Conditions.................................................................................................................................... 15 Government ............................................................................................................................................ 15 Political Conditions ................................................................................................................................ 16 Foreign Relations.................................................................................................................................... 16

Page 2 Map

Political Risk Services Jamaica Country ForecastReproduction without written permission of The PRS Group is strictly prohibited.

REV2003

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Negril

Montego Bay

Black River

Mandeville

Alligator Pond

Discovery Bay Ocho

Rios

May Pen●

Port Esquivel

Spanish TownKingston

Portmore

Port Antonio

Morant Bay

Rocky Point

C a r i b b e a nS e a

Jamaica Channel

C a r i b b e a n S e a

Jamaica

Political Risk Services 1-Dec-2009 Reproduction without written permission of The PRS Group is strictly prohibited.

Highlights 1-Dec-2009 • Page 3

Jamaica Country Forecast

Highlights MOST LIKELY REGIMES AND THEIR PROBABILITIES 18-Month: JLP 50% Five-Year: JLP 50% FORECASTS OF RISK TO INTERNATIONAL BUSINESS

Turmoil Financial Transfer

Direct Investment

Export Market

18-Month: High C- (C) A- (B+) B- (B) Five-Year: Moderate C- (C) B C+ ( ) Indicates change in rating. * Indicates forecast of a new regime. KEY ECONOMIC FORECASTS

Years

Real GDP Growth %

Inflation %

Current Account ($bn)

2004-2008(AVG) 1.1 13.8 -1.54 2009(F) -3.5 8.6 -1.00 2010-2014(F) 1.0 9.4 -1.90

JLP Swimming against the Tide

Key Points To Watch…

The global financial and economic crises have battered Jamaica’s economy, and Prime Minister Bruce Golding’s JLP government has been forced by desperate circumstances to pursue a new stand-by loan with the IMF, the country’s first in more than a decade. Unfortunately, negotiations have hit an impasse, resulting in a prolonged delay in securing the $1.2 billion in funds, with no clear end in sight…

At the same time, efforts to reduce violent crime, a task that political leaders have long identified as essential to the country’s economic prosperity, have made little headway…

The JLP is not in any serious trouble just yet. The party won the 2007 election, its first victory in 18 years, not so much because voters believed that Golding would be able to deliver on his promises to reduce crime and invigorate the economy, but because the PNP had been given too many chances to prove that it could not, and the JLP was the only alternative available. As such, Golding and his party did not take power saddled by high expectations, and it is acknowledged that the current problems were years in the making, years during which the PNP, not the JLP, was making all of the policy choices…

Political Risk Services Jamaica Country Forecast 1-Dec-2009 Reproduction without written permission of The PRS Group is strictly prohibited.

Page 4 • 1-Dec-2009 Highlights

However, Golding cannot count on the PNP’s long record of ineffectiveness to afford him political protection indefinitely. Any hope of averting a catastrophic debt crisis will require the extension of a financial lifeline from the IMF, which at the very least will require severe austerity measures that are certain to weaken the government’s popular support…

The PNP has applied heavy pressure on Golding’s government, which holds a slim two-seat majority in the Parliament. The opposition has challenged the legal claim of several JLP lawmakers to their legislative seats, on the grounds that their dual-citizenship should have disqualified them from contesting the 2007 elections. Three have already successfully defended their seats in court-ordered by-elections, the most recent held in September 2009. But more cases are pending, and any serious dent in the JLP’s popularity could weaken the party’s chances of retaining seats that are put back into play in future by-elections…

Good Intentions Will Not Be Enough

Upon entering office, Golding made clear that he sees private investment as crucial to lifting the Jamaican economy out of the doldrums, and Finance Minister Audley Shaw proposed a “five-pillar” approach involving tax reform, spending cuts, investment promotion, debt reduction, and energy management to achieve that objective…

Unfortunately, the JLP government’s plans ran into a wall in the form of the global economic downturn, which contributed to a significant weakening of all of the main engines of economic growth. The economy is currently on track to shrink by 3%–4% in 2009, contributing to a revenue shortfall that will widen the budget deficit to about 9% of GDP. Meanwhile, this year’s current account deficit, while significantly smaller than the massive deficit recorded in 2008, will amount to roughly 10% of GDP…

The government’s massive financing needs have contributed to growing doubts that Jamaica will be able to make the nearly $1 billion in interest and amortization payments falling due on its foreign debt in 2009/2010. Even if the government secures a loan from the IMF and averts a debt crisis, there will be limited scope for any significant tax cuts in the foreseeable future, and given the pressure to rein in the deficit, tax increases are likely…

In general, no new restrictions are likely to be placed on foreign ownership or business operations, and the government will actively encourage investments in key targeted sectors, including mining, energy, and tourism. However, the results of that effort are likely to be disappointing unless authorities manage to make a serious dent in violent crime, which is a general deterrent to investment in the country and has encouraged the outward migration of the most-skilled and best-educated portion of the labor force…

Investors will also be discouraged by the country’s grossly inadequate infrastructure, a problem that is compounded by the periodic damage resulting from the country’s location in Hurricane Alley, and is unlikely to improve until the government’s financial position becomes more secure. The various deterrents, along with the apparent stalling of regional integration efforts, will hold growth to an average of just 1% per year through 2014.

Economic Forecasts for the Three Alternative Regimes

JLP PNP National Unity Growth

(%) Inflation

(%) CACC ($bn)

Growth (%)

Inflation (%)

CACC ($bn)

Growth (%)

Inflation (%)

CACC ($bn)

2009 -3.5 8.6 -1.00 -4.2 9.2 -1.20 -4.0 9.0 -0.90 2010-2014 1.0 9.4 -1.90 0.6 10.4 -2.30 1.3 9.9 -1.80


Current Data 1-Dec-2009 • Page 5

Political Fact Sheet

CAPITAL:

Kingston

CONSTITUTION: August 6, 1962

ADMINISTRATIVE SUBDIVISIONS: 12 parishes; Kingston-St. Andrew corporate area

POPULATION: 2008: 2.71 million

AREA: 10,991 sq. km.

OFFICIAL LANGUAGE: English

STATUS OF PRESS: free

SECTORS OF GOVERNMENT PARTICIPATION:

communications, electricity, public services

CURRENCY EXCHANGE SYSTEM: free-floating

EXCHANGE RATE: 11/20/2009 $1=87.80 Jamaican dollars

ELECTIONS: House of Representative members are elected for a maximum five-year term; last, September 3, 2007; next, by September 2012.

HEAD OF STATE: Queen Elizabeth II (1952); represented by Governor General Patrick Allen (2009) HEAD OF GOVERNMENT: Prime Minister Bruce Golding (2007) OFFICIALS: Kenneth Baugh, Deputy Prime Minister, Foreign

Affairs & Foreign Trade Christopher Tufton, Agriculture Dorothy Lightbourne, Attorney General, Justice Olivia Grange, Culture, Youth & Sports Bruce Golding, Defense, Planning &

Development Andrew Holness, Education Clive Mullings, Energy Audley Shaw, Finance & Public Service Rudyard Spencer, Health & Environment Karl Samuda, Industry, Commerce & Investment Daryl Vaz, Information & Telecommunications Pearnel Charles, Labor & Social Security James Robertson, Mines & Energy Dwight Nelson, National Security Edmund Bartlett, Tourism Michael Henry, Transport & Works Horace Chang, Water & Housing LEGISLATURE: Bicameral Parliament: 21-member Senate, appointed by the governor general, and 60-member House of Representatives. Seat distribution in the House: Jamaica Labor Party (JLP), 32; People's National Party (PNP), 28.

JamaicaDatabank

Reproduction without written permission ofThe PRS Group is strictly prohibited.Political Risk Services

1-Dec-2009

1999-2003 Average

2004-2008 Average 1999 2000 2001 2002 2003

Domestic Economic IndicatorsGDP (Nominal, $bn) 8.77 12.04 7.74 7.94 9.10 9.68 9.40Per Capita GDP ($) 3384 4485 3035 3089 3514 3709 3574Real GDP Growth Rate (%) 1.6 1.1 0.9 0.7 1.5 1.3 3.5Inflation Rate (%) 7.7 13.8 5.8 8.2 7.0 7.1 10.3Capital Investment ($bn) 2.29 3.16 1.88 2.12 2.37 2.64 2.46Capital Investment/GDP (%) 26.1 26.3 24.3 26.7 26.0 27.3 26.2Budget Revenues ($bn) 2.37 3.29 2.30 2.38 2.23 2.36 2.60Budget Revenues/GDP (%) 27.3 27.3 29.7 30.0 24.5 24.4 27.7Budget Expenditures ($bn) 2.79 3.89 2.62 2.46 2.69 3.08 3.10Budget Expenditures/GDP (%) 31.9 32.2 33.9 31.0 29.6 31.8 33.0Budget Balance ($bn) -0.42 -0.60 -0.32 -0.08 -0.46 -0.72 -0.50Budget Balance/GDP (%) -4.6 -4.9 -4.1 -1.0 -5.1 -7.4 -5.3Money Supply (M1, $bn) 0.84 1.12 0.86 0.79 0.85 0.92 0.78Change in Real Wages (%) 4.5 -0.9 10.2 3.0 3.2 3.1 3.0Unemployment Rate (%) 14.4 10.8 15.7 15.5 15.0 14.2 11.8

International Economic IndicatorsForeign Direct Investment ($bn) 0.56 0.79 0.52 0.47 0.61 0.48 0.72Forex Reserves ($bn) 1.27 2.00 0.55 1.05 1.90 1.64 1.19Gross Reserves (ex gold, $bn) 1.27 2.00 0.55 1.05 1.90 1.65 1.19Gold Reserves ($bn) 0.00 0.00 0.00 0.00 0.00 0.00 0.00Gross reserves (inc gold, $bn) 1.27 2.00 0.55 1.05 1.90 1.65 1.19Total Foreign Debt ($bn) 3.82 5.75 3.02 3.38 4.15 4.35 4.19Total Foreign Debt/GDP (%) 43.3 48.0 39.0 42.6 45.6 44.9 44.6Debt Service ($bn) 0.66 0.83 0.60 0.48 0.59 0.80 0.81Debt Service/XGS (%) 13.7 11.7 13.6 10.1 12.7 16.7 15.4Current Account ($bn) -0.64 -1.54 -0.22 -0.37 -0.76 -1.07 -0.77Current Account/GDP (%) -7.0 -12.2 -2.8 -4.7 -8.4 -11.1 -8.2Current Account/XGS (%) -13.2 -20.3 -5.0 -7.8 -16.3 -22.4 -14.6Exports ($bn) 1.44 2.08 1.50 1.56 1.45 1.31 1.39Imports ($bn) 3.05 5.28 2.69 3.00 3.07 3.18 3.33Trade Balance ($bn) -1.61 -3.21 -1.19 -1.44 -1.62 -1.87 -1.94Exports of Services ($bn ) 1.99 2.55 1.98 2.03 1.90 1.91 2.14Income, credit ($bn) 0.20 0.41 0.17 0.19 0.22 0.22 0.22Transfers, credit ($bn) 1.14 2.15 0.76 0.97 1.09 1.34 1.52Exports G&S ($bn) 4.77 7.19 4.41 4.75 4.66 4.78 5.27Liabilities ($bn) 0.03 0.00 0.02 0.02 0.05 0.03 0.02Net Reserves ($bn) 1.24 1.99 0.53 1.03 1.85 1.62 1.17Liquidity (months import cover) 4.8 4.9 2.4 4.1 7.2 6.1 4.2Currency Exchange Rate 46.837 66.194 39.044 42.986 45.996 48.416 57.741Currency Change (%) -9.7 -4.8 -6.8 -10.1 -7.0 -5.3 -19.3

Social IndicatorsPopulation (million) 2.59 2.68 2.55 2.57 2.59 2.61 2.63Population Growth (%) 0.8 0.6 0.8 0.8 0.8 0.8 0.8Infant Deaths/1000 14 15 16 14 13 14 14Persons under Age 15 (%) 30 30 32 30 30 30 30Urban Population (%) 53 53 53 53 53 53 53Urban Growth (%) 0.8 0.6 0.8 0.8 0.8 0.8 0.8Literacy % pop. 85 85 85 85 85 85 85Agricultural Work Force (%) 21 20 24 19 19 21 21Industry-Commerce Work Force (%) 19 18 19 19 19 19 19Services Work Force (%) 60 63 57 62 62 60 60Unionized Work Force (%) 16 16 16 16 16 16 16Energy - total consumption (1015 Btu) 0.15 0.16 0.15 0.15 0.15 0.15 0.16Energy - consumption/head (109 Btu) 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Current Data 1-Dec-2009 ~ Page 6-7

JamaicaDatabank

Reproduction without written permission ofThe PRS Group is strictly prohibited.Political Risk Services

1-Dec-2009

1999-2003 Average

2004-2008 Average

Domestic Economic IndicatorsGDP (Nominal, $bn) 8.77 12.04Per Capita GDP ($) 3384 4485Real GDP Growth Rate (%) 1.6 1.1Inflation Rate (%) 7.7 13.8Capital Investment ($bn) 2.29 3.16Capital Investment/GDP (%) 26.1 26.3Budget Revenues ($bn) 2.37 3.29Budget Revenues/GDP (%) 27.3 27.3Budget Expenditures ($bn) 2.79 3.89Budget Expenditures/GDP (%) 31.9 32.2Budget Balance ($bn) -0.42 -0.60Budget Balance/GDP (%) -4.6 -4.9Money Supply (M1, $bn) 0.84 1.12Change in Real Wages (%) 4.5 -0.9Unemployment Rate (%) 14.4 10.8

International Economic IndicatorsForeign Direct Investment ($bn) 0.56 0.79Forex Reserves ($bn) 1.27 2.00Gross Reserves (ex gold, $bn) 1.27 2.00Gold Reserves ($bn) 0.00 0.00Gross reserves (inc gold, $bn) 1.27 2.00Total Foreign Debt ($bn) 3.82 5.75Total Foreign Debt/GDP (%) 43.3 48.0Debt Service ($bn) 0.66 0.83Debt Service/XGS (%) 13.7 11.7Current Account ($bn) -0.64 -1.54Current Account/GDP (%) -7.0 -12.2Current Account/XGS (%) -13.2 -20.3Exports ($bn) 1.44 2.08Imports ($bn) 3.05 5.28Trade Balance ($bn) -1.61 -3.21Exports of Services ($bn ) 1.99 2.55Income, credit ($bn) 0.20 0.41Transfers, credit ($bn) 1.14 2.15Exports G&S ($bn) 4.77 7.19Liabilities ($bn) 0.03 0.00Net Reserves ($bn) 1.24 1.99Liquidity (months import cover) 4.8 4.9Currency Exchange Rate 46.837 66.194Currency Change (%) -9.7 -4.8

Social IndicatorsPopulation (million) 2.59 2.68Population Growth (%) 0.8 0.6Infant Deaths/1000 14 15Persons under Age 15 (%) 30 30Urban Population (%) 53 53Urban Growth (%) 0.8 0.6Literacy % pop. 85 85Agricultural Work Force (%) 21 20Industry-Commerce Work Force (%) 19 18Services Work Force (%) 60 63Unionized Work Force (%) 16 16Energy - total consumption (1015 Btu) 0.15 0.16Energy - consumption/head (109 Btu) 0.06 0.06

2004 2005 2006 2007 2008

10.14 11.16 11.96 12.95 13.993826 4180 4463 4796 5162

1.4 1.0 2.7 1.6 -1.013.6 15.3 8.6 9.3 22.02.68 2.99 3.35 3.41 3.3726.4 26.8 28.0 26.3 24.12.80 3.00 3.21 3.66 3.7927.6 26.9 26.8 28.3 27.13.26 3.34 3.77 4.27 4.8232.2 29.9 31.5 33.0 34.5

-0.46 -0.34 -0.56 -0.61 -1.03-4.5 -3.1 -4.7 -4.7 -7.40.90 1.00 1.18 1.29 1.252.5 0.8 1.8 2.2 -11.8

12.2 11.2 10.3 9.9 10.6

0.60 0.68 0.88 0.87 0.931.85 2.17 2.32 1.88 1.771.85 2.17 2.32 1.88 1.770.00 0.00 0.00 0.00 0.001.85 2.17 2.32 1.88 1.775.12 5.38 5.80 6.12 6.3450.5 48.2 48.5 47.3 45.30.80 0.90 0.64 0.91 0.8813.2 14.4 8.8 11.6 10.3

-0.51 -1.07 -1.18 -1.74 -3.22-5.0 -9.6 -9.9 -13.4 -23.0-8.4 -17.1 -16.3 -22.2 -37.71.60 1.66 2.13 2.23 2.763.55 4.25 5.08 5.79 7.75

-1.95 -2.59 -2.95 -3.56 -4.992.30 2.33 2.65 2.70 2.780.27 0.33 0.38 0.52 0.571.89 1.94 2.09 2.39 2.446.06 6.26 7.25 7.84 8.550.01 0.01 0.00 0.00 0.001.84 2.16 2.32 1.88 1.776.2 6.1 5.5 3.9 2.7

61.197 62.281 65.744 68.950 72.797-6.0 -1.8 -5.6 -4.9 -5.6

2.65 2.67 2.68 2.70 2.710.8 0.8 0.4 0.7 0.413 13 16 16 1629 29 28 33 3353 53 53 53 530.8 0.8 0.4 0.7 0.488 88 88 80 8021 21 20 18 1819 19 17 17 1760 60 63 65 6516 16 16 16 16

0.16 0.15 0.16 0.16 0.160.06 0.06 0.06 0.06 0.06

Current Data 1-Dec-2009 ~ Page 6-7


1-Dec-2009 Comparison: Jamaica

Page 8 • 1-Dec-2009 Current Data

Reproduction without written permission of The PRS Group is strictly prohibited

Regional Real GDP Growth (2008): N&C America

-2 0 2 4 6 8 10

Jamaica

United States

Canada

Mexico

Haiti

El Salvador

Costa Rica

Nicaragua

Trinidad & Tobago

Honduras

Guatemala

Cuba

Dominican Republic

Panama

(percent)

Regional Inflation Rates (2008): N&C America

0.0 5.0 10.0 15.0 20.0 25.0

Canada

United States

Mexico

Cuba

El Salvador

Panama

Dominican Republic

Honduras

Trinidad & Tobago

Guatemala

Costa Rica

Haiti

Nicaragua

Jamaica

(percent)


1-Dec-2009 Comparison: Jamaica

Current Data 1-Dec-2009 • Page 9

Reproduction without written permission of The PRS Group is strictly prohibited

Regional Current Account/GDP (2008): N&C America

-30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0

Nicaragua

Jamaica

Honduras

Panama

Dominican Republic

Costa Rica

Haiti

El Salvador

Guatemala

United States

Cuba

Mexico

Canada

Trinidad & Tobago

(percent)

Economic Performance ProfileCountry's Ranking Relative to All Countries

Covered by Political Risk Services2004-2008

4485

1.1

13.8

10.8

26.3

-4.9

-12.2

11.7

-4.8

BEST 25% NEXT 25% NEXT 25%

GDP Per Capita ($)

Real GDP Growth (%)

Inflation (%)

Unemployment (%)

Capital Investment (% of GDP)

Budget Balance (% of GDP)

Current Account (% of GDP)

Debt Service Ratio

Currency Change (%)

WORST 25%


Page 10 • 1-Dec-2009 Current Data

Social Indicators as of 2008

Primary Energy

Energy Consumption (1015 Btu): 0.16

Per Capita Consumption (109 Btu): 0.06

Population

Annual Growth 0.4%

Infant Deaths per 1,000 16

Persons Under Age 15 33%

Urban Population 53%

Urban Growth 0.4%

Literacy 80%

Work Force Distribution

Agriculture 18%

Industry-Commerce 17%

Services 65%

Unions 16%

Ethnic Groups

black (91%), mixed race (6%), East Indian and other (3%)

Languages

English, Jamaican Creole

Religions

Protestant (63%), Roman Catholic (4%), other (33%)


Comment & Analysis 1-Nov-2009 • Page 11

Jamaica

Country Forecast Comment & Analysis

JLP Swimming against the Tide

The global financial and economic crises have battered Jamaica’s economy, and Prime Minister Bruce Golding’s Jamaica Labor Party (JLP) government has been forced by desperate circumstances to pursue a new stand-by loan with the IMF, the country’s first in more than a decade. Unfortunately, negotiations have hit an impasse, resulting in a prolonged delay in securing the $1.2 billion in funds, with no clear end in sight. All the while, the financial pressure is building, fueling speculation of a forced restructuring of the country’s massive public debt. At the same time, efforts to eliminate the scourge of violent crime, a task that political leaders have long identified as essential to the country’s economic prosperity, have made only limited headway. According to former top security officials, the biggest stumbling block is the police force itself, which they claim has been thoroughly corrupted by organized crime rings. The fact that those same officials were removed from their posts after expressing that opinion is hardly reassuring. The JLP is not in any serious trouble just yet. The party won the 2007 election, its first victory in 18 years, not so much because voters believed that Golding would be able to deliver on his promises to reduce crime and invigorate the economy, but because the People’s National Party (PNP) had been given too many chances to prove that it could not, and the JLP was the only alternative available. As such, Golding and his party did not take power saddled by high expectations, and there is widespread acknowledgment among the public that the current problems were years in the making, years during which the PNP, not the JLP, was making all of the policy choices. A poll conducted in August showed 47% of respondents expressing approval of Golding’s performance as prime minister, compared to 38% who rated his performance unsatisfactory. However, in another August opinion survey, 37% of respondents indicated that they would vote for the PNP at the next election, compared to just 31% who affirmed their support for the JLP. Seen together, the data from the two polls suggest that Jamaicans are unhappy with the current state of affairs, but they have not completely lost faith in Golding, nor are they confident that putting the PNP back in power would improve matters.


Page 12 • 1-Nov-2009 Comment & Analysis

But that is about all Golding has going in his favor, and he cannot count on the PNP’s long record of ineffectiveness to afford him political protection indefinitely. Any hope of averting a catastrophic debt crisis will require the extension of a financial lifeline from the IMF, which at the very least will require severe austerity measures that are certain to weaken the government’s popular support. But the alternative would be far worse, for both the JLP and Jamaica, as the economic conditions that would prevail if Golding’s administration should fail to win the IMF’s support would make the anemic growth recorded on the PNP’s 18-year watch seem impressive by comparison. The PNP has applied heavy pressure on Golding’s government, which holds a slim two-seat majority in the Parliament. The opposition has challenged the legal claim of several JLP lawmakers to their legislative seats, on the grounds that their dual-citizenship should have disqualified them from contesting the elections. Three have already successfully defended their seats in court-ordered by-elections, the most recent held in September 2009. But more cases are pending, and any serious dent in the JLP’s popularity could weaken the party’s chances of retaining seats that are put back into play in future by-elections. Negotiating for a Lifeline

Jamaica has consistently posted sizeable current account deficits, but a loosening of fiscal and monetary constraints ahead of the 2007 elections fueled strong demand pressures that in combination with sharply higher prices for fuel and food imports widened the gap to 23% of GDP in 2008. Lacking the reserves or capital inflows required to finance such a large current account shortfall, the government had no choice but to add to the already burdensome public debt, which currently amounts to about 115% of GDP. Although lower commodities prices and weaker domestic demand have contributed to a fall in the imports bill in 2009, the beneficial impact on the balance of payments has been offset to a large degree by a prolonged shutdown of bauxite mining operations (resulting in an estimated $900 million in export losses), decreased inflows of remittances, and the poor performance of the tourism sector. Consequently, while the current account deficit is forecast to narrow this year, it will still amount to more than 10% of GDP. The task of financing this year’s deficit has been complicated by growing doubts that Jamaica will be able to make the nearly $1 billion in interest and amortization payments falling due on its foreign debt in 2009/2010, especially after the government failed to strike a deal with Jamaican lenders to restructure the domestically held portion of the public debt, a development that prompted the downgrading of the government’s sovereign debt rating in August 2009. The situation has been made all the worse by the



depletion of international reserves, the result of a $300 million government bailout for local financial firms and a sharp decline in flows of all of the main sources of foreign exchange. It was against that backdrop that Jamaica turned to the IMF for $1.2 billion in balance-of-payments support. Both Prime Minister Golding and Finance Minister Audley Shaw insisted in late November that a loan agreement was imminent and that the two sides are merely hammering out the details of the deal. However, it is a safe bet that some of those details include conditions that will prove politically challenging to implement. Various sources indicate that the key sticking point is the IMF’s insistence that the government sell the country’s flagship air carrier, which loses about $150 million annually and is currently carrying about $650 million in debt. The government has displayed indecision over whether to pursue the partial privatization of Air Jamaica or to retain ownership and instead bring in private partners to manage and operate the airline. Negotiations have proceeded in fits and starts, resulting in the serial extension of the deadline for concluding a deal. The government failed to make any response to opposition claims that a planned partial sale of the airline to Indigo Partners had fallen through, which seemed to confirm the rumors. More recently, some officials have indicated that the government will not be able to cover the immediate costs of divestment unless a deal is concluded with the IMF. If the IMF is indeed conditioning its support on the sale of the airline, that could pose something of a dilemma for the government. Matters have not been helped by the unfortunately timed sacking of Bank of Jamaica (BoJ) Gov. Derick Latibeaudiere, who was leading the negotiations with the IMF. On October 31, Finance Minister Shaw issued a terse statement announcing that Latibeaudiere had resigned as head of the BoJ, a position he had held for 13 years. Shaw, who had expressed dissatisfaction with what he deemed to be the overly cautious monetary stance of the BoJ back in September, offered no explanation for Latibeaudiere’s departure. A few days later, however, Prime Minister Golding revealed that Latibeaudiere had been fired. The main point of contention was Latibeaudiere’s unwillingness to renegotiate a contract that Golding characterized as “absurd.” The prime minister noted that the BoJ governor’s total annual compensation of more than $425,000 was nearly triple his base salary, and included allowances for entertainment, housing, and vehicles that Golding assailed as “unconscionable” in light of the country’s dire financial straits.



The reshuffle of the negotiating team did little to reassure credit rating agencies, three of which downgraded Jamaica’s rating following Latibeaudiere’s departure. The new head of the BoJ is Brian Wynter, who had been working as an advisor to the Caribbean Regional Technical Assistance Center (CARTAC), and stepped into the post in late November, a week earlier than initially planned. However, the lead role in talks with the IMF has been taken over by Wesley Hughes, who was appointed financial secretary at the Ministry of Finance earlier this year. Push to Narrow Fiscal Gap

Even if the government secures a loan from the IMF before the end of the year, aversion of a debt crisis will hardly solve Golding’s political problems. The budget for 2009/2010 originally targeted a deficit amounting to 5.5% of GDP, but that forecast was based on projected revenues that included anticipated proceeds from the sale of Air Jamaica and a handful of state-owned sugar refineries. The exclusion of that income (at the insistence of the IMF) widened the projected deficit to 6.6% of GDP, and by the end of the April–June quarter revenues were running about 10% below budget, suggesting that the actual deficit would exceed 10% of GDP. A supplementary budget approved in October included increases in the general consumption taxes on telephone calls and communications equipment and a hike in the departure tax that are projected to boost revenues by somewhat less than $20 million, bringing the budget deficit down to 8.7% of GDP. However, that is still more than two percentage points higher than the original forecast, and the IMF undoubtedly took note of the fact that non-debt spending was cut by a mere 2.5% in the supplemental budget. Back in August, Prime Minister Golding had suggested that it might be necessary to cancel as much as one-fifth of planned spending in order to maintain fiscal stability. Given the large share of the budget eaten up by debt repayment, achieving a savings of that magnitude will require either public-sector layoffs (which Golding insisted earlier in the year were out of the question) or gutting social programs. The government has already imposed a freeze on public-sector wages, and further steps to trim the public-sector wage bill (either through salary cuts or layoffs) would undoubtedly provoke angry protests from the unions. At the same time, Golding’s administration will be loath to reduce spending on social services at a time of extraordinary economic hardship among the population. In political terms, the latter course represents the path of least resistance, but either option would create serious problems for the JLP. Making destitute Jamaicans bear an unequal share of the burden of austerity is a lower-risk strategy than doing battle with the unions,



but poor and working-class Jamaicans make up a sizeable portion of the JLP’s electoral base, and the implementation of policies that alienate that bloc will undermine Golding’s chances of winning a second term at elections that must be held by September 2012.

It appears that Golding is prepared to take his chances with the unions. In mid-November, he announced that the permanent secretary in the Office of the Prime Minister, Patricia Sinclair-McCalla, would be leaving that post to head up a special eight-member unit responsible for drawing up a plan to rationalize the public sector. In all, it is estimated that some 15,000 civil service positions could be cut.

Economic Squeeze

The economy contracted by 1% in 2008, and a much bigger decline is forecast for 2009, as an adverse external climate wreaks havoc with three pillars of the island’s economy. A steep drop in demand for alumina contributed to a plunge in prices for bauxite, prompting bauxite miners to cut back production. One of the three mines shut down in response to weak prices has reopened, but losses are expected to total more than 7% of forecast nominal GDP in 2009. Concerns about the troubled state of the industry have been amplified by the difficulties of United Company Rusal, a Russian company that controls more than 50% of Jamaican bauxite-alumina production and is currently in negotiations with its creditors to restructure the company’s crushing debt burden.

Tourism, another key industry, has also been hit by the global recession. Although the number of visitors to Jamaica actually showed a small year-on-year increase in the first two quarters of 2009, revenues fell slightly, indicating that visitors are spending less.

Preliminary data for the third quarter indicates that export activity is beginning to pick up, but officials estimate that the economy contracted by 3%–4% (year-on-year) in the July–September period, reflecting a weakening of domestic consumption and investment. One source of the decline is a fall in remittances, which dropped by 12.9% (year-on-year) over the first six months of 2009. Although the decline slowed in the second quarter, flows of remittances are likely to remain sluggish until employment conditions in the US improve. In any case, annual flows will come in well below the level in 2008, resulting in a reduction of household purchasing power that will weaken domestic consumption.

Domestic demand has also been weakened as a result of a public-sector wage freeze introduced in the 2009/2010 budget. The Finance Ministry claims that the wage freeze has helped to prevent the loss of 22,000 jobs, but the move will nevertheless have a negative impact on personal spending levels, as will taxes introduced in the main budget and the supplementary budget approved in October 2009. On balance, the economy is forecast to shrink by 3.5% in real terms in 2009, with the risks weighted toward the down side, owing to the persistent danger of hurricane-related damage to the agricultural sector.



The prospect of a deal with the IMF, which would also provide access to other multilateral loans and support, has helped to foster currency stability that in combination with a public-sector wage freeze, constrained government spending, and lower prices for imports of fuel and food will help to hold inflation to less than 9% in 2009, a significant improvement over last year’s average of 22%.

The economic prospects are not much brighter for 2010. Austerity measures implemented as part of a lending deal with the IMF will continue to dampen domestic consumption, and despite an expected improvement in export performance, the trade sector is not large enough to lead a recovery. Consequently, another contraction of 2%–3% is forecast for 2010. Higher prices for imported commodities, particularly fuel, and an increase in tariff rates for electric power will push up energy and transportation costs, but weak domestic demand will dampen price pressures, holding the annual inflation rate within the 9.5%–11.5% target band next year. Both the growth and inflation forecasts for 2010 assume the conclusion of an agreement with the IMF no later than January 2010. Should negotiations with the IMF hit a prolonged impasse, a likely debt crisis would result in a much more pronounced economic contraction, while a sharp plunge in the value of the local dollar would trigger a surge in consumer prices.

Both imports and exports fell by about 50% (year-on-year) over the first half of 2009, which, owing to the relative size of the two totals, resulted in a year-on-year decrease in the trade deficit by $1.07 billion. The trend in the trade figures was reproduced in the current account balance, which narrowed to just $198 million in the January–June 2009 period, compared to the $1.37 billion shortfall recorded during the same six-month period in 2008. Higher oil prices will contribute to a widening of the external deficits over the second half of 2009, but generally weak domestic demand, an expected improvement in the performance of the tourism industry, and the beginning of a recovery in the export sector will hold the current account shortfall to $1 billion this year, about one-third the total in 2008.

Assuming a near-term default is avoided, debt-service payments will be substantial once again in 2010. An expected rise in commodity prices will contribute to a widening of the trade balance, resulting in an increase in the current account shortfall to more than $2 billion next year. The country’s balance-of-payments position is unsustainable, but the options for addressing the problem are limited. The government’s failure to tackle violent crime will deter investment in the tourism and goods exports sectors, a prospect that in combination with the country’s dependence on imports of food, fuel, and other staples precludes any significant narrowing of the trade imbalance in the foreseeable future. Consequently, regardless of the outcome of current negotiations with the IMF, the risk of a debt crisis will persist unless the government is able to restructure its debt in a carefully managed manner.


Forecast Scenarios 1-Dec-2009 • Page 17

Jamaica

Country Forecast Forecast Scenarios

SUMMARY OF 18-MONTH FORECAST

REGIMES & PROBABILITIES

JLP 50%

PNP 35%

National Unity 15%

SUMMARY OF FIVE-YEAR FORECAST


JLP 50%

PNP 45%

National Unity 5%

Most Likely Regime Scenario 18-Month Forecast Period: JLP (50% Probability) Five-Year Forecast Period: JLP (50% Probability) The global financial and economic crises have battered Jamaica’s economy, and Prime Minister Bruce Golding’s Jamaica Labor Party (JLP) government has been forced by desperate circumstances to pursue a new stand-by loan with the IMF, the country’s first in more than a decade. At the same time, efforts to eliminate the scourge of violent crime, a task that political leaders have long identified as essential to the country’s economic prosperity, have made only limited headway. The JLP is not in any serious trouble just yet. The party won the 2007 election, its first victory in 18 years, not so much because voters believed that Golding would be able to deliver on his promises to reduce crime and invigorate the economy, but because the People’s National Party (PNP) had been given too many chances to prove that it could not, and the JLP was the only alternative available. As such, Golding and his party did not take power saddled by high expectations, and there is widespread acknowledgment among the public that the current problems were years in the making, years during which the PNP, not the JLP, was making all of the policy choices.

JLP Growth (%)

Inflation (%)

CACC ($bn)

2009 -3.5 8.6 -1.00 2010-2014 1.0 9.4 -1.90


Page 18 • 1-Dec-2009 Forecast Scenarios

Recent poll data indicates that although Jamaicans are unhappy with the current state of affairs, they have not completely lost faith in Golding, nor are they confident that putting the PNP back in power would improve matters. But that is about all Golding has going in his favor, and he cannot count on the PNP’s long record of ineffectiveness to afford him political protection indefinitely. Any hope of averting a catastrophic debt crisis will require the extension of a financial lifeline from the IMF, which at the very least will require severe austerity measures that are certain to weaken the government’s popular support. But the alternative would be far worse, for both the JLP and Jamaica, as the economic conditions that would prevail if Golding’s administration should fail to win the IMF’s support would make the anemic growth recorded on the PNP’s 18-year watch seem impressive by comparison. The PNP has applied heavy pressure on Golding’s government, which holds a slim two-seat majority in the Parliament. The opposition has challenged the legal claim of several JLP lawmakers to their legislative seats, on the grounds that their dual-citizenship should have disqualified them from contesting the elections. Three have already successfully defended their seats in court-ordered by-elections, the most recent held in September 2009. But more cases are pending, and any serious dent in the JLP’s popularity could weaken the party’s chances of retaining seats that are put back into play in future by-elections. Consequently, the possibility that an early election might be held within the 18-month forecast period cannot be ruled out. Assuming the government’s loss of its majority reflected a decline in its popular support, the JLP’s chances of remaining in power in the event of a snap election forced upon Golding will be no better than even, and would be even worse if an early return to the polls was prompted by the collapse of negotiations with the IMF. As long as the JLP retains its majority, Golding will have time to produce results, as the next election is not required until September 2012. However, voters who pushed the JLP over the top at the 2007 election did so in the hope that they were not merely trading one incompetent, inefficient, and untrustworthy regime for another, and the prime minister will need to prove that such hopes were not misplaced if he is to avoid being returned to opposition after just one term. At present, his prospects for success are not especially bright. Carrying out the structural reforms aimed at addressing the chronic fiscal strains and unsustainable external deficits that have pushed Jamaica to the brink of a debt crisis will require a strong commitment from the government, and the prolonged delay in reaching a lending agreement with the IMF does not bode well in that regard. Likewise, the recent replacement of top security officials shortly after they indicated that a chief stumbling block to tackling the crime problem was corruption within the police force is hardly reassuring. Consequently, the



JLP’s chance of remaining in power for the entire five-year forecast period will not be improved by managing to survive for a full term. Embracing Foreign Investment

At his inauguration in September 2007, Prime Minister Golding declared that invigorating the country’s lethargic economy would be the top priority for his government, and made clear that he sees private investment as crucial to lifting the Jamaican economy out of the doldrums. He pledged to marshal the country’s institutional resources behind the effort to attract new capital, and to pursue a fiscal program aimed at rapidly reducing the public-debt burden and freeing up additional resources for productive investment. As part of that effort, he promised to plug up the drain on state resources resulting from widespread corruption and to address a serious crime problem that has undermined efforts to exploit the island’s enormous tourism potential and created a deterrent to foreign investment more generally. Finance Minister Audley Shaw proposed a “five-pillar” approach involving tax reform, spending cuts, investment promotion, debt reduction, and energy management. The most ambitious target was a proposed reduction of the public debt burden from more than 130% in 2007 to 95% of GDP by the end of the current parliamentary term, to be accomplished through spending restraint, caps on new debt, and moves to reduce debt-service costs by replacing expensive domestic debt with lower-interest loans from multilateral agencies. Unfortunately, the JLP government’s plans ran into a wall in the form of the global economic downturn, which contributed to a significant weakening of all of the main engines of economic growth, none of which could have been said to be humming even before the global crisis erupted. The economy is currently on track to shrink by 3%–4% in 2009, contributing to a revenue shortfall that will widen the budget deficit to about 9% of GDP. Meanwhile, this year’s current account deficit, while significantly smaller than the massive deficit recorded in 2008, will amount to roughly 10% of GDP. The government’s massive financing needs have contributed to growing doubts that Jamaica will be able to make the nearly $1 billion in interest and amortization payments falling due on its foreign debt in 2009/2010, especially after the government failed to strike a deal with Jamaican lenders to restructure the domestically held portion of the public debt, a development that prompted the downgrading of the government’s sovereign debt rating in August 2009. The situation has been made all the worse by the depletion of international reserves, the result of a $300 million government bailout for local financial firms and a sharp decline in flows of all of the main sources of foreign exchange.



It was against that backdrop that Jamaica turned to the IMF for $1.2 billion in balance-of-payments support. Both Prime Minister Golding and Finance Minister Audley Shaw insisted in late November that a loan agreement was imminent and that the two sides are merely hammering out the details of the deal. However, it is a safe bet that some of those details include conditions that will prove politically challenging to implement. Various sources indicate that the key sticking point is the IMF’s insistence that the government sell the country’s flagship air carrier, which loses about $150 million annually and is currently carrying about $650 million in debt. The government has displayed indecision over whether to pursue the partial privatization of Air Jamaica or to retain ownership and instead bring in private partners to manage and operate the airline. Negotiations have proceeded in fits and starts, resulting in the serial extension of the deadline for concluding a deal. The government failed to make any response to opposition claims that a planned partial sale of the airline to Indigo Partners had fallen through, which seemed to confirm the rumors. More recently, some officials have indicated that the government will not be able to cover the immediate costs of divestment unless a deal is concluded with the IMF. If the IMF is indeed conditioning its support on the sale of the airline, that could pose something of a dilemma for the government. Even if the government secures a loan from the IMF and averts a debt crisis, Golding and Shaw will still face the daunting task of imposing fiscal discipline, which will require harsh austerity measures. Under the circumstances, there will be limited scope for any significant tax cuts in the foreseeable future, and tax increases are likely. In general, no new restrictions are likely to be placed on foreign ownership or business operations, and the government will actively encourage investments in key targeted sectors, including mining, energy, and tourism. However, the results of that effort are likely to be disappointing unless authorities manage to make a serious dent in violent crime, which is a general deterrent to investment in the country and has encouraged the outward migration of the most-skilled and best-educated portion of the labor force. Investors will also be discouraged by Jamaica’s grossly inadequate infrastructure, a problem that is compounded by the chronic damage resulting from the country’s location in Hurricane Alley, and is unlikely to improve until the government’s financial position becomes more secure. In mid-November 2009, Golding announced that the permanent secretary in the Office of the Prime Minister, Patricia Sinclair-McCalla, would be leaving that post to head up a



special eight-member unit responsible for drawing up a plan to rationalize the public sector. In all, it is estimated that some 15,000 civil service positions could be cut. Although the staff reductions are primarily a cost-saving measure, Golding has touted the efficiencies that will be realized due to the streamlining effort. However, it is quite probable that the result will be understaffing in some areas, which will contribute to a worsening of bureaucratic obstacles. In any case, a poorly managed regulatory framework will continue to pose difficulties for investors. Trade Liberalization Will Continue

Despite significant opposition to trade liberalization among Jamaican interest groups, notably organized labor, the JLP government will, in the main, follow its predecessor’s lead in pursuing the course of regional economic integration and the lowering of barriers to trade. In general, the JLP regime will seek to promote the growth of exports through the pursuit of free trade agreements (FTAs) with its key trading partners and the diversification of markets for the country’s goods. That said, Golding has expressed skepticism about Jamaica’s participation in the Caribbean Community (Caricom) Single Market and Economy (CSME). He recognizes that steps must be taken to deal with the loss of preferential status for Jamaican goods in key markets, and that regional integration will force domestic businesses to become more competitive. In addition, the creation of the CSME is expected to provide a more effective platform for negotiating broader trade agreements with regional blocs in Europe and the Americas. However, while he supports a single market for the region, Golding has expressed doubts about the efficacy of establishing a single economy, a plan that will require the integration of political and legal institutions. The prime minister has taken the position that moves in that direction, such as the creation of the Caribbean Court of Justice (CCJ) as the court of final appeal for Caricom countries, are detrimental to Jamaican interests and sovereignty. Back in mid-2005, Golding proposed requiring the approval of the CSME and the CCJ by means of a referendum in each country. More recently, however, he has blasted other members of Caricom for becoming distracted from the CSME project. Indeed, the member countries of the Organization of Eastern Caribbean States has announced plans to form a sub-regional economic union that will then join the CSME en bloc, while three Caricom members have joined the Bolivarian Alternative for the Americas (ALBA), a trade alliance sponsored by Venezuelan President Hugo Chávez that is designed to counter the economic influence of the US in Latin America. Golding is clearly troubled by the lack of progress toward establishing the CSME, which represents Jamaica’s only means of boosting its intra-regional trade, and, somewhat ironically, is likely to remain one of the project’s most vocal boosters in the coming years.



Violence and Other Disturbances Will Not Subside

There is no end in sight for the plague of violence, particularly urban gang battles in Kingston often involving the drug trade, and turmoil will continue to pose a significant problem for any likely government holding power during the forecast period. The paramilitary tactics used by the police have drawn heavy criticism, and while they have helped to halt the rise in violent crime rates, they have not as yet brought a measurable reduction. The cloud of violence over the country has hurt the tourism sector, despite the efforts of many tourist facilities to increase security. Adding to the disorder is the persistence of unholy alliances between political parties and gangs, as well as widespread poverty, disparities in material wealth, and limited opportunities for improvement in living standards. The government will find it difficult to develop social policies that can significantly reduce the level of violent crime. Only when (and if) the economy begins to show signs of sustainable recovery will the government be able to ease the debt burden that poses an obstacle to devoting sufficient financial resources to programs aimed at enhancing social order. Modest Recovery, at Best

The economy contracted by 1% in 2008, and a much bigger decline is forecast for 2009, as an adverse external climate wreaks havoc with three pillars of the island’s economy. A steep drop in demand for alumina contributed to a plunge in prices for bauxite, prompting bauxite miners to cut back production. One of the three mines shut down in response to weak prices has reopened, but losses are expected to total more than 7% of forecast nominal GDP in 2009. Concerns about the troubled state of the industry have been amplified by the difficulties of United Company Rusal, a Russian company that controls more than 50% of Jamaican bauxite-alumina production and is currently in negotiations with its creditors to restructure the company’s crushing debt burden. Tourism, another key industry, has also been hit by the global recession. Although the number of visitors to Jamaica actually showed a small year-on-year increase in the first two quarters of 2009, revenues fell slightly, indicating that visitors are spending less. Preliminary data for the third quarter indicates that export activity is beginning to pick up, but officials estimate that the economy contracted by 3%–4% (year-on-year) in the July–September period, reflecting a weakening of domestic consumption and investment. One source of the decline is a fall in remittances, which dropped by 12.9% (year-on-year) over the first six months of 2009. Although the decline slowed in the second quarter, flows of remittances are likely to remain sluggish until employment conditions in the US



improve. In any case, annual flows will come in well below the level in 2008, resulting in a reduction of household purchasing power that will weaken domestic consumption.

Domestic demand has also been weakened as a result of a public-sector wage freeze introduced in the 2009/2010 budget. The Finance Ministry claims that the wage freeze has helped to prevent the loss of 22,000 jobs, but the move will nevertheless have a negative impact on personal spending levels, as will taxes introduced in the main budget and the supplementary budget approved in October 2009. On balance, the economy is forecast to shrink by 3.5% in real terms in 2009, with the risks weighted toward the down side, owing to the persistent danger of hurricane-related damage to the agricultural sector.

The prospect of a deal with the IMF, which would also provide access to other multilateral loans and support, has helped to foster currency stability that in combination with a public-sector wage freeze, constrained government spending, and lower prices for imports of fuel and food will help to hold inflation to less than 9% in 2009, a significant improvement over last year’s average of 22%.

The economic prospects are not much brighter for 2010. Austerity measures implemented as part of a lending deal with the IMF will continue to dampen domestic consumption, and despite an expected improvement in export performance, the trade sector is not large enough to lead a recovery. Consequently, another contraction of 2%–3% is forecast for 2010. Higher prices for imported commodities, particularly fuel, and an increase in tariff rates for electric power will push up energy and transportation costs, but weak domestic demand will dampen price pressures, holding the annual inflation rate within the 9.5%–11.5% target band next year. Both the growth and inflation forecasts for 2010 assume the conclusion of an agreement with the IMF no later than January 2010. Should negotiations with the IMF hit a prolonged impasse, a likely debt crisis would result in a much more pronounced economic contraction, while a sharp plunge in the value of the local dollar would trigger a surge in consumer prices.

The lack of progress toward launching the CSME suggests that significant tangible benefits from regional integration will not be realized until later in the forecast period, at the earliest, and then only if steps are taken to enhance the competitiveness of domestically produced goods. Over the medium term, the government will focus substantial attention on the tourism sector, which accounts for about 15% of GDP. However, hopes that tourism will experience healthy growth capable of leading an economic recovery will be disappointed unless steps taken to address the crime problem yield results. Although growth in excess of 2% per year is possible by the end of the forecast period, the annual average for the five-year forecast period will be just 1%, far below the levels required to substantially reduce the country’s debt burden.



Fiscal and monetary tightening will hold consumer price increases in check over the medium term, but currency weakness and strong pressure for wage hikes will make it difficult to significantly reduce inflation from current levels, and consumer prices are forecast to rise by an annual average of 9.4% over the five-year forecast period ending in 2014.

Both imports and exports fell by about 50% (year-on-year) over the first half of 2009, which, owing to the relative size of the two totals, resulted in a year-on-year decrease in the trade deficit by $1.07 billion. The trend in the trade figures was reproduced in the current account balance, which narrowed to just $198 million in the January–June 2009 period, compared to the $1.37 billion shortfall recorded during the same six-month period in 2008. Higher oil prices will contribute to a widening of the external deficits over the second half of 2009, but generally weak domestic demand, an expected improvement in the performance of the tourism industry, and the beginning of a recovery in the export sector will hold the current account shortfall to $1 billion this year, about one-third the total in 2008.

Assuming a near-term default is avoided, debt-service payments will be substantial once again in 2010. An expected rise in commodity prices will contribute to a widening of the trade balance, resulting in an increase in the current account shortfall to more than $2 billion next year. The country’s balance-of-payments position is unsustainable, but the options for addressing the problem are limited. The government’s failure to tackle violent crime will deter investment in the tourism and goods exports sectors, a prospect that in combination with the country’s dependence on imports of food, fuel, and other staples precludes any significant narrowing of the trade imbalance in the foreseeable future. As such, the size of the current account deficit will remain worrisome, averaging $1.9 billion per year through 2014. Regardless of the outcome of current negotiations with the IMF, the risk of a debt crisis will persist unless the government is able to restructure its debt in a carefully managed manner.

Second Most Likely Regime Scenario

18-Month Forecast Period: PNP (35% Probability) Five-Year Forecast Period: PNP (45% Probability)

If the legal challenge to the eligibility of a group of JLP lawmakers to hold their seats fails to result in a shift in party control over the disputed seats, the PNP’s return to power within the five-year forecast period would require an early election, which is unlikely as long as the JLP manages to keep factional tensions in check. However, PNP leader Portia

PNP Growth (%)

Inflation (%)

CACC ($bn)

2009 -4.2 9.2 -1.20 2010-2014 0.6 10.4 -2.30



Simpson-Miller has pledged to maintain heavy pressure on Golding’s government, which faces some difficult choices in the near term, particularly with regard to fiscal policy, and serious mistakes could leave the government so divided and weakened as to necessitate an early return to the polls. Even in that event, the PNP’s chances of being returned to power would hinge on the party’s ability to present a credible plan for reviving the economy, a task that proved problematic in the past. Although Simpson-Miller was re-elected as PNP leader in mid-September 2008, she could face a renewed challenge from faction leaders who are known to regard her as an intellectual lightweight. Unfortunately, none of her rivals can touch Simpson-Miller in terms of popular appeal. Consequently, the likely effect of a move in that direction would be a further reduction in the PNP’s chances of unseating the JLP during the forecast period. Policies Would Promote Investment and Trade

A PNP government’s policies would reflect the party’s embrace of free-market principles and its desire to present a welcoming attitude toward foreign investors. No new restrictions would be placed on foreign ownership or business operations, and efforts would be made to attract new investment in the mining and tourism sectors. However, any PNP regime coming to power during the 18-month forecast period would confront the same problems facing the current administration, which would limit its ability to address the main deterrents to investment. In general, a PNP regime would seek to promote the growth of exports through the pursuit of free trade agreements with its key trading partners and the diversification of markets for the country’s goods. Weak Economy

Economic problems would probably be a key contributing factor in the emergence of any regime other than a majority JLP government during the forecast period. Upon its return to government, the PNP would confront an onerous public debt burden, a gaping fiscal deficit, and the challenge of shoring up a tourism sector weakened by concerns about safety. The PNP would face pressure to restrain expenditures, reducing its flexibility to employ fiscal measures to stimulate growth. Real GDP growth would expand by an annual average of just 0.6% over the forecast period. Monetary authorities would continue to pursue policies aimed at holding inflation in check, although increased fiscal strains would make their task exceedingly difficult. The likely depletion of foreign exchange reserves that would accompany the persistent stagnation of the economy would undermine the currency, increasing the risk from



imported inflation. Consumer prices would rise by an annual average of 10.4% through 2014. The poorer economic performance and violence-related weakness of the tourism sector would be reflected in large current account deficits averaging $2.3 billion annually over the forecast period. The ascent of a PNP government in a climate of heightened social tensions would encourage investors to take a wait-and-see approach, reinforcing the shortages of capital that have contributed to balance of payments difficulties. A PNP government would have only limited access to international financial markets, and would seek to maintain good relations with the IMF in order to ensure financial assistance from the World Bank, the IDB, and the Caribbean Development Bank. The government would have difficulty meeting some of the demands under the agreement, particularly with regard to budget and inflation targets, but some slippage would probably be forgiven. Third Most Likely Regime Scenario 18-Month Forecast Period: National Unity (15% Probability) Five-Year Forecast Period: National Unity (5% Probability) In the event of a change of leadership, the PNP might adopt a more conciliatory approach toward the JLP government in hopes of obtaining some measure of influence. While in opposition, Golding expressed hope for a greater spirit of cooperation between the PNP and the JLP, and should he encounter resistance from within his own party, he might be willing to seek the cooperation of the PNP on initiatives aimed at reducing crime and reviving the economy. However, such a scenario is unlikely in the absence of internal strife within the JLP that posed a threat to the government’s majority. Infighting Would Impede Policy Development

A government that included both the JLP and the PNP would be no less inclined to pursue investment-friendly policies than would be the case with either party governing on its own. Nevertheless, the partnership would be fraught with tension, and political sparring would impede the development and implementation of a coherent economic program, regardless of the preferred policies of leading officials.

National Unity

Growth (%)

Inflation (%)

CACC ($bn)

2009 -4.0 9.0 -0.90 2010-2014 1.3 9.9 -1.80



Under this or almost any scenario, overall trade policy would be determined largely by Caricom and by developments in other regional trading blocs. Tax cuts and limited import restrictions would help to improve Jamaica’s terms of trade, as would a more competitive exchange rate. The regime would work actively to secure favorable access to other markets, particularly the US and the EU. Broad Alliance Not a Solution for Economic Troubles

The economic difficulties that would most likely precede the formation of a national unity government would be reflected in slow growth and high inflation in the early part of the forecast period. Although the forging of a JLP-PNP coalition might temporarily bolster international confidence, chronic infighting would negate many of the potential benefits of such an arrangement. On that basis, real GDP growth would remain sluggish, averaging 1.3% per year through 2014. The assumed instability that would precede the establishment of a national unity government would probably provoke some capital flight, creating yet another source of inflation. However, the currency would stabilize as the government settled in and confidence was at least minimally restored. Even so, inflation would remain high, averaging 9.9% per year through 2013. The current account deficit would expand early in the forecast period, as economic sluggishness hampered growth in exports and political and social tumult dampened activity in the tourism sector. The deficit would remain substantial over the medium term, averaging $1.8 billion per year, as tourism receipts and general export levels remained far below potential.



Forecast Summary

SUMMARY OF 18-MONTH FORECAST


JLP 50%

PNP 35%

National Unity 15%

RISK FACTORS CURRENT

Turmoil Moderate SLIGHTLY MORE SLIGHTLY MORE SLIGHTLY MORE

Investment

Equity Moderate SLIGHTLY LESS SLIGHTLY LESS SLIGHTLY LESS

Operations High Same Same Same

Taxation Low Same Same Same

Repatriation Moderate Same Same Same

Exchange Low Same SLIGHTLY MORE SLIGHTLY MORE

Trade

Tariffs Moderate SLIGHTLY LESS SLIGHTLY LESS SLIGHTLY LESS

Other Barriers Moderate Same Same Same

Payment Delays Moderate SLIGHTLY MORE SLIGHTLY MORE SLIGHTLY MORE

Economic Policy

Expansion Very High SLIGHTLY MORE SLIGHTLY MORE SLIGHTLY MORE

Labor Costs Low Same Same Same

Foreign Debt High MORE MORE MORE

SUMMARY OF FIVE-YEAR FORECAST


JLP 50%

PNP 45%

National Unity 5%

RISK FACTORS BASE

Turmoil Moderate Same Same SLIGHTLY MORE

Restrictions

Investment Moderate SLIGHTLY LESS SLIGHTLY LESS Same

Trade Moderate SLIGHTLY LESS SLIGHTLY LESS Same

Economic Problems

Domestic High Same Same Same

International Very High Same Same Same

* When present, indicates forecast of a new regime



JamaicaReal GDP Growth Under Alternative Regimes

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

2004 2005 2006 2007 2008e 2009f 2010-2014f

(pe

rcen

t)

JLP PNP National Unity

JamaicaInflation Under Alternative Regimes

8

10

12

14

16

18

20

22

2004 2005 2006 2007 2008e 2009f 2010-2014f

(pe

rcen

t)


JamaicaCurrent Account Under Alternative Regimes

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

2004 2005 2006 2007 2008e 2009f 2010-2014f

($b

illio

ns)



Political Framework 1-Dec-2009 • Page 31

Jamaica Country Forecast Political Framework

Players To Watch

Bruce Golding: The leader of the JLP since early 2005, Golding delivered on his promise to end the party’s prolonged exclusion from power, guiding the JLP to victory at the September 2007 election. Golding has advocated liberal reforms to revive the economy, and has also spoken of the need for greater cooperation between the JLP and the PNP to deal with the country’s economic and social problems. However, the PNP has made clear that it plans to make life as difficult as possible for Golding, a threat that has become especially potent owing to the government’s failure to reduce crime and an increasingly gloomy economic outlook…

Audley Shaw: The finance minister will be responsible for implementing the JLP’s debt-reduction program while also fulfilling the party’s pledge to boost spending on education and health. The turmoil in the global economy has created serious difficulties for Shaw, who is likely to bear the brunt of popular discontent over austerity measures that appear to be unavoidable…

Jamaica Labor Party: The party won 32 of the 60 seats in the Parliament at elections held in September 2007, ending the PNP’s long reign of 18 consecutive years in power. Although the party criticized the PNP for moving too quickly in deregulating the economy while in opposition, the JLP’s orientation on most issues is quite similar to that of the PNP, and the government is expected to promote a decidedly pro-business policy agenda…

People’s National Party: The PNP supports free-market policies aimed at creating an attractive climate for foreign investment and enhancing the country’s ties with key trading partners, a stance that is completely compatible with the policy approach outlined by Prime Minister Golding. However, PNP leader Portia Simpson-Miller warned that her party intended to be Golding’s “worst nightmare,” and she is doing her level best to make good on that threat…

Business: The backing of Jamaica’s main business organizations undoubtedly played a role in the JLP’s victory, creating a political debt that will reinforce Golding’s inclination to pursue pro-business policies. The business community’s cooperation will be crucial to the success of the government’s efforts to ease fiscal strains, hold inflation in check, and combat crime, and top business leaders have indicated that they are prepared to work with the JLP to achieve those objectives…

…more on these and other Players in the Political Players section


Page 32 • 1-Dec-2009 Political Framework

Political Players Bruce Golding (Prime Minister)

A JLP dissident who left the party in 1995 to form the National Democratic Movement (NDM), Golding returned to his roots ahead of the 2002 elections, and, in early 2005, replaced Edward Seaga as the JLP’s leader. Golding delivered on his promise to end the party’s prolonged exclusion from power, guiding the JLP to victory at the September 2007 election. He advocates liberal reforms to revive the economy, and has also spoken of the need for greater cooperation between the JLP and the PNP to deal with the country’s economic and social problems. However, the PNP has made clear that it plans to make life as difficult as possible for Golding, a threat that has become especially potent owing to the government’s failure to reduce crime and an increasingly gloomy economic outlook. Born on December 3, 1947, in Ginger Ridge, St. Catherine, Golding was educated first at Jamaica College (1963–1966), where he received a B.S. in economics, and subsequently studied at the University of the West Indies (1966–1969). He gained experience as a member of the National Lotteries Commission (1968–1972), a member of the Central Executive of the JLP (1969–1995), and a member of the House of Representatives for St. Catherine West (1972–1976). Golding also served as the general secretary of the JLP (1974–1984), a member of the Senate (1977–1980), and the deputy leader of government business in the Senate (1980). In addition, he was a member of the Electoral Advisory Committee (1973–1983), and of the House of Representatives for South Central St. Catherine (1980–1989). Between 1980 and 1989, he served as minister of construction, and between 1984 and 1995, the chairman of the JLP. He also served as shadow minister of finance (1989–1995). Golding disrupted the political scene in 1995 by defecting to form the NDM. He does not fit the stereotype of the charismatic Caribbean leader, but the NDM showed significant promise under his guidance in its early days. However, while the NDM’s efforts to attract disenchanted JLP members met with some success, its failure to woo the JLP’s business backers or make inroads within the PNP’s traditional bases of support undermined its hopes of becoming a meaningful third force in the country’s politics. He rejoined the JLP in 2002, citing the improved prospects for greater cooperation between the PNP and the JLP with the impending infusion of “new blood” into the leadership of both parties as the reason for his return. Golding was elected chairman of the JLP in November 2003, positioning him as the favorite to succeed Seaga, who came under heavy pressure to retire after guiding the JLP to defeat in three consecutive general elections. Nevertheless, Golding faced a challenge from Pearnel Charles, who won the



backing of the party’s old-guard faction. The brutal campaign was highlighted by Charles’ accusations that Golding and his supporters planned to rig the vote, a charge that led to the postponement of the planned November 2004 election. In the end, Charles dropped out of the race, clearing the way for Golding to succeed Seaga. Golding resigned his Senate seat in March 2005, and the following month scored a landslide victory in a by-election to fill Seaga’s vacated seat in the House of Representative for the West Kingston constituency. His shadow Cabinet, unveiled in May, did not include some prominent members of the old guard, a development that raises doubts about the JLP’s unity going forward. In contrast, the composition of the Cabinet formed after the JLP’s victory at the September 2007 election reflects Golding’s recognition of the need to reward party veterans who stuck by the JLP during its prolonged period in the political wilderness. The move is expected to foster internal stability, but it is expected that Golding will gradually bring in new blood once the government is settled. Jamaica Labor Party (JLP)

The party won 32 of the 60 seats in the Parliament at elections held in September 2007, ending the PNP’s long reign of 18 consecutive years in power. Although the party criticized the PNP for moving too quickly in deregulating the economy while in opposition, the JLP’s orientation on most issues is quite similar to that of its rival, and the government is expected to promote a decidedly pro-business policy agenda. Founded in 1943 as the political arm of the Bustamante Industrial Trade Union (BITU) and originally led by the trade union’s founder, Sir Alexander Bustamante, the JLP traditionally has stood for cautious reform. As the more conservative of the two main parties, the JLP was initially favored by business interests put off by the PNP’s social democratic activism. However, the party’s adoption of a less accommodating stance under the leadership of Edward Seaga prompted many members of the business community to switch their allegiance to the PNP, a development that contributed to the JLP’s extended period in opposition. The JLP suffered a crushing defeat in the 1997 elections, when it won 40% of the popular vote, but only nine seats in the 60-member House of Representatives. Even before its loss in 1997, the JLP was undergoing a serious crisis, as Seaga’s authority was called into question by critics who railed against his autocratic style and blamed him for the party’s poor electoral showing in 1993 and 1997. The JLP suffered a damaging blow when Golding defected to form the NDM in 1995, and its reputation was badly tarnished by its expulsion of rebel members from western Jamaica, who subsequently allied with Golding and joined the NDM.



The 1997 balloting decisively rejected the JLP, which was perceived as divided and disorganized. Despite the criticism of Seaga at that time, a surge in his party’s popularity, along with his bold vision for Jamaica’s future, rekindled hopes of the party’s return to high office following the 2002 elections. However, in large part owing to popular mistrust of Seaga, the JLP failed to dislodge the PNP from government, winning just 25 seats in the October 2002 elections. The JLP’s disappointing loss fueled speculation that Seaga might be replaced as the party’s leader. Although pressure for a change in leadership eased following the JLP’s impressive showing at local elections held in June 2003, at which the party won control of 12 of the country’s 13 constituencies, subsequent signs of an improvement (of sorts) in the economic outlook convinced some leaders within the party that it would have no hope of wresting political control from the PNP at the next general election without a leadership change. In June 2004, Seaga announced that he would not seek another term as JLP leader. Golding succeeded him as party leader in early 2005, but not before engaging in a bruising campaign with Pearnel Charles, the favored candidate of the JLP’s old-guard faction. Although the change in leaders did not immediately boost the JLP’s standing, a steep decline in support for the PNP beginning in late-2006 created an opportunity for the JLP that Golding moved aggressively to exploit. The party engaged in an unrelenting (and blatantly sexist) campaign to undermine confidence in PNP leader Simpson-Miller’s leadership and intellectual abilities. Although the strategy might have played a role in the JLP’s recent electoral success, it clearly fostered bitter feelings that will rule out cooperation from the PNP as long as Simpson-Miller remains that party’s leader. Labor

The two major labor unions, the BITU and the National Workers’ Union (NWU), are historically linked to the JLP and the PNP, respectively, although since the 1950s they have focused their efforts on collective bargaining rather than party politics. Some union leaders have taken on overtly political roles, but workers generally distrust attempts by their leaders to link shop-floor issues to partisan battles. The two unions claim about 80% of the total unionized workforce as members. Although both belong to the umbrella Jamaica Confederation of Trade Unions (JCTU), they rarely are able to present a united front. Among the country’s many minor unions are the Jamaican Union of Public Officers and Public Employees; the Jamaica Civil Service Association; the Union of Technical, Administrative, and Supervisory Personnel; and the Jamaica Teachers Association. Other important smaller unions include the Dockers and



Marine Workers Union, and the University and Allied Workers Union, which is linked with the Workers Party of Jamaica (WPJ). In February 2004, the JCTU struck a landmark deal with the government under which union leaders agreed to a two-year wage freeze for public-sector employees in exchange for a pledge from the Patterson administration to shelve plans to eliminate as many as 15,000 civil service positions as a cost-cutting measure. However, the unions made clear that they expected to receive substantial pay increases once the pact expired. Although the PNP delivered, more recent economic woes have forced Golding’s government to impose a wage freeze, and a significant reduction of the public-sector work force appears to be unavoidable, a prospect that points to potentially damaging battles between the government and the unions. Military

The Jamaica Defense Force, some 4,000 strong, has generally refrained from involvement in party politics, retaining considerable public respect and authority. The military plays a major role in efforts to combat the illegal drug trade. During periods of factional partisan disruption, the military helps to maintain order. Seaga’s JLP government used the armed forces more frequently during the 1980s, but the public did not identify the military directly with the JLP. The military’s presence calms public fears about the government’s ability to cope with political violence. Most officers are politically conservative and generally friendly toward the US. The rank and file are divided in their support between the JLP and the PNP, but loyalty to military service supersedes partisan affiliation. During the political instability of the 1970s, the PNP’s leftist propaganda against the military aroused its distrust. In June 1980, a few officers planned a coup against Michael Manley’s government, but the army’s high command discovered and quashed the plan. People’s National Party (PNP)

The failure of four successive PNP governments to revive the economy or reduce crime finally caught up with the party at the September 2007 election, when it was narrowly defeated by the JLP, ending its 18-year reign. Although the policy stances of the PNP and the JLP are compatible, PNP leader Simpson-Miller did not take her defeat gracefully, and has made good on her warning to Golding that the PNP intended to play its opposition role aggressively. Founded in 1939, by Norman Manley, the PNP began as a nationalist party spearheading the movement for Jamaica’s independence from the UK. The PNP has evolved into a center-left social democratic party supporting extensive economic reform within the framework of a mixed economy and a parliamentary democracy. Its broad appeal encompasses manual workers, the urban poor, the professional middle class, and



younger voters. The PNP emphasizes international and regional action, while the JLP traditionally has a domestic focus. Its trade union affiliate, the NWU, shares dominance over the labor movement with the JLP’s union affiliate, the BITU. The PNP was returned to power 1989, after more than eight years in opposition, but quickly came under criticism that Prime Minister Michael Manley (Norman’s son) was not focusing enough attention on the needs of the poor. The PNP was further hurt by a scandal arising from charges that several government ministers and senior civil servants used public funds to lavishly furnish their homes. Nevertheless, indications of an economic rebound and Patterson’s assumption of the party’s leadership post produced a rebound during 1992–1993, paving the way for a landslide electoral victory in March 1993. The PNP solidified its position even further in the December 1997 elections, in which it won 51 of the 60 parliamentary seats. However, in 2002, amid growing dissatisfaction with the government’s failure to reverse the decline of the economy, the PNP’s parliamentary strength was reduced to 35 seats in the October 2002 elections. (It subsequently lost another seat to bring its total down to 34.) Even so, it still retained a comfortable majority in the Parliament, and appeared to be invigorated by a leadership change that saw former Local Government Minister Simpson Miller replace Patterson as prime minister in March 2006. However, Simpson Miller’s mishandling of a campaign finance scandal that erupted in October 2006 eroded her popular support, and she never managed to fully recover before the 2007 election. Because of the PNP’s traditional commitment to reform, its members have occasionally divided along left-right lines. Since the party’s electoral defeat in 1980, the moderate wing has solidified its hold on the party secretariat, cutting all ties with the Workers’ Party of Jamaica. Manley contended that it was necessary to draw business funding back to the party. Most of the left-wing activists who remained in the party also shifted ground, abandoning advocacy of a socialist transformation of society. Audley Shaw (Minister of Finance and Planning)

The finance minister will be responsible for implementing the JLP’s debt-reduction program while also fulfilling the party’s pledge to boost spending on education and health. The turmoil in the global economy has created serious difficulties for Shaw, who is likely to bear the brunt of popular discontent over spending cuts that will be required to establish fiscal stability. A taste of the difficulties that Shaw would face came just days after he was sworn in, when the Nurses Association of Jamaica (NAJ) declared that the JLP had promised to



double the pay of nurses upon taking office. Shaw, who was the shadow finance minister for a decade before entering the Cabinet, categorically denied claims by NAJ President Edith Allwood-Anderson that he had ever made such a promise, and while he concurred that the nurses deserved a significant pay increase, he made clear that such a concession was not possible at this time. Unfortunately for Shaw, Allwood-Anderson produced a recording from a July 2006 Founders’ Day function at which he stated in reference to the doubling of nurses’ salaries, “I would like to give the commitment that, as minister of finance, that would have to be just the starting position,” adding that the cost of financing the pay increase amounted to the losses incurred by “just one scandal.” The gaffe is unlikely to be the last made by a government in which most of the main players have never before been burdened by the responsibilities of power. It is possible that Shaw fell into a habit of making promises that the JLP’s prolonged exclusion from power meant he never had to keep. But if he thought the nurses would not remember what he said, or would not hold him accountable, he was obviously mistaken. Under a wages agreement reached in 2008, the Jamaica Civil Service Association, representing 200,000 workers, agreed to a two-stage 22% salary increase; workers will receive a 15% increase retroactive to January 2008 and an additional 7% in January 2009. The National Workers Union, the country’s largest trade group, refused to sign, as did the NAJ and the teachers’ union.

Political Risk Services 1-Aug-2009 Reproduction without written permission of The PRS Group is strictly prohibited.

Climate for Investment & Trade 1-Aug-2009 • Page 1

Jamaica Country Conditions

Climate for Investment & Trade Overview Openness to Foreign Investment

The Government of Jamaica (GOJ) seeks to attract foreign direct investment and markets itself to companies in Europe, North America and the Caribbean region. The GOJ encourages foreign investment as a source of development and has no policies or regulations that reserve certain sectors exclusively for Jamaicans. Prime Minister Bruce Golding (Jamaica Labor Party), elected in September 2007, after 18 years of rule by the People’s National Party, publicly warns of the negative consequences of red tape as a hindrance to potential foreign investment.

Numerous measures which once inhibited foreign investment, such as the Foreign Exchange Control Act and the list of areas reserved for local investment only, have been eliminated. Thus, Jamaica does not have any legal impediment to direct foreign investment and applies the principle of national treatment to foreign investors.

With the investment landscape reformed, attention has turned to the reduction of processing and approval times for investment-related applications. In particular, USAID has been providing assistance to the GOJ and the Private Sector Organization of Jamaica for a Regulation, Legislation, and Process Improvement Project (LEGS and REGS) to remove some of the obstacles to doing business in Jamaica. The project staff is currently revising an existing Developer’s Manual to provide updated information on the administration, legislation, regulation and requirements involved in the development approval process in Jamaica. The manual has been revised, but there is still much streamlining required in achieving the Prime Minister’s 90- day turnaround deadline for approvals.

The LEGS and REGS Project has been paying dividends, as a 2009 World Bank Doing Business Report listed Jamaica in the top ten countries for the Latin America and Caribbean Region in which it was easiest to do business. Jamaica ranked above its regional peers and compared favorably with OECD countries in areas such as starting a business and hiring and firing workers. It should be mentioned that, while Jamaica’s Redundancy Act makes it expensive to cut staff due to the relatively high severance payments tied to length of service (see Labor section below), the Jamaican system still ranks higher than its regional peers in the 2009 World Bank Ease of Doing Business Report for the category of Hiring Workers. It only scores lower than its peers in the subcategory of Firing Costs.

The Companies Act and the Securities Act govern acquisitions, mergers and takeovers for publicly traded companies. In 1996, the Securities Act was revised to bring it in line with international regulations. The takeover code was redesigned to ensure the integrity of the securities market while protecting minority shareholders. Jamaica’s legal system is based on English common law principles and rules covering the enforceability of contracts are based thereupon. The Jamaican judicial system therefore recognizes and upholds the sanctity of contracts. However, in the 2009 World Bank Doing Business Report, Jamaica slipped 25 rank positions for Enforcing Contracts, falling from 102 in 2008 to 127 in 2009. There are no limits on

Political Risk Services Jamaica Country Conditions 1-Aug-2009 Reproduction without written permission of The PRS Group is strictly prohibited.

Page 2 • 1-Aug-2009 Climate for Investment & Trade

foreign ownership or control, and the Embassy is not aware of any economic or industrial policy that has discriminatory effects on foreign investors.

Foreign investors are generally granted national or Most Favored Nation treatment, subject to the rules of their Bilateral Investment Treaties (BITS). There are no screening mechanisms for foreign investments, but if investors apply for government incentives, they could be required to meet some basic pre-requisites and due diligence may be done by the approving agency. This process is not discriminatory and is not intended to impede investment. Jamaica has also undertaken a comprehensive program of trade and financial liberalization, and no sector remains closed to foreign investment. However, projects that affect national security, have a negative impact on the environment, or involve sectors such as life insurance, media or mining are subjected to regulation and certain restrictions.

Jamaica’s privatization program is open to participation by foreign investors, except for those that are on the restricted list due to national security concerns. The National Investment Bank, which administers privatization, is mandated to ensure that the process is fair and transparent. However, in some privatization transactions, the participation of local investors may lead to added points in the scoring of proposals. When large entities are being privatized, advertisements are placed in international newspapers such as the Financial Times, New York Times and Wall Street Journal to attract foreign investors. An information memorandum accompanies privatization proposals and includes the specific requirements under which bidders are allowed to participate and the criteria by which proposals will be evaluated. Foreign investors have won most of the privatization bids in the last five years. The government is currently reviewing some of the remaining parastatals with an eye to divestiture.

The country is party to both multilateral and bilateral treaties, which provide for non-discrimination. Local laws do not distinguish between local and foreign investors. The Embassy is not aware of any discrimination against foreign investors at the time of initial investment or after the investment is made. However, under the Jamaican Companies Act, investors are required either to establish a local company or to register a branch office of a foreign-owned enterprise. Branches of companies incorporated abroad must also register with the Registrar of Companies if they intend to operate in Jamaica. The Companies Act, which came into effect in February 2005, allows foreign companies to hold lands without registering in Jamaica. There are no laws or regulations requiring firms to adopt articles of incorporation or association, which limit or prohibit foreign investment, participation or control. The Embassy is not aware of any other ways private firms could restrict foreign investment.

Foreign direct investment (FDI) flow was USD 779 million in 2007, down from 850 million in 2006 according to the United Nations’ World Investment Report. The dynamism in FDI was most evident in the construction, telecommunications, tourism, and mining sectors. Despite significant foreign investment over the years, Jamaica’s annual GDP growth has been an anemic 1 percent on average, indicating that foreign investment does not directly translate into GDP growth. Jamaica appears to lack the absorptive capacity to benefit from investments requiring high skilled employment, and a significant portion of inputs are not sourced locally.

The introduction of competition in the telecommunications sector has attracted three mobile providers and multiple internet service provides including three licenses that are being issued to wireless service providers. The GOJ has issued two additional fiber-optic licenses to reduce the cost of Internet rates. Highway 2000, Jamaica’s first toll road, is being constructed by French company Bouygues under a build, operate, and transfer (BOT) model. Two segments of the project, costing over USD 500 million, are completed. A third leg connecting Kingston and the resort area of Ocho Rios should be completed by end of 2010.



With the onset of the global economic crisis, there has been significant slowdown in some of Jamaica’s critical foreign exchange earners. Growth in the bauxite and tourism sectors has slowed. The construction boom of the last three years, which brought in over USD 1 billion in FDI in the accommodation sector, has weaned. Future projects in the sector have been postponed until the global economic climate improves. This includes investments from Spanish hotel chains and the high-end Harmony Cove Tourism Development. A Brazilian company, Infinity BioEnergy, is in negotiations to acquire the assets of Jamaica’s sugar industry.

Transparency of the Regulatory System

A Fair Competition Act (FCA) was implemented in 1993 and is administered by the Fair Trading Commission. The main objective of the FCA is to prevent business interests and government policies from hindering the efficiencies to be gained from a competitive system. The FCA deals with misleading advertisements, price-fixing, collusion, unfair trading practices and interlocking directorships. To date the FTC has investigated over 5,000 cases, the majority of which are consumer protection related.

There are laws and policies covering taxation, labor, health and other issues to avoid distortions or impediments to the efficient mobilization and allocation of investment. However, investors argue that the Redundancy Act, which deals with severance payment, is a disincentive to investment funds. In 2001, the mandate of the Anti-Dumping and Subsidies Commission was expanded through the implementation of a Safeguards Act, which protects producers from import surges. The GOJ also established the Office of Utilities Regulation to act as regulator of the country’s utilities.

Although there has been improvement in the approval process for investment projects, it can still take anywhere from three months for Free Zone projects to over a year for green-field projects. Having recognized the problem, the GOJ has intensified its efforts to reduce bureaucracy as well as improve transparency and customer service levels within the public sector. A Ministry of Development was established to deal with investment bottlenecks. As stated above, the private sector, GOJ and USAID have also joined forces to implement a project (LEGS and REGS) to identify and deal with key legislation, regulations and processes that constrain business. The project is currently addressing the reform process with regard to the approval for development and building permits. It should be noted that as a result of this work, Jamaica was the top reformer globally this year on Dealing with Construction Permits, in the World Bank Doing Business 2009 Report, improving its rank on that indicator by 25 spots to 49th place.

The Embassy is not aware of any informal regulatory processes managed by NGOs or private sector associations or of any private sector and/or GOJ effort to restrict foreign participation in industry standards-setting consortia or organizations. However, in December 2004, the Free Trade Commission (FTC) implemented a non-legislative code of conduct governing the petroleum industry. The mandates of this code place restrictions on property sales and contracts between marketing companies and retailers, and are enforceable through fines levied by the FTC. Proposed legislation is available for public comment and submissions are generally invited from members of the public for items considered to be controversial. The legal, regulatory and accounting systems are transparent and consistent with international norms, and Jamaica has adopted the new International Financial Reporting System.

Foreign/Free Trade Zones/Ports

Jamaica’s Free Zones Act allows investors to operate solely with foreign exchange in activities such as warehousing, refining, manufacturing, redistribution, processing, assembling, packaging, and services such as insurance and banking. Incentives offered include a 100-percent tax holiday in perpetuity, no import licensing requirements, and exemption from customs duties on construction and raw materials, capital goods, and office equipment. Manufacturing companies operating in the Free Zones are allowed to sell 15



percent of their production on the local market with the approval of the responsible minister. Duty-free zones are primarily found in airports, hotels, and tourist centers and, as with free zone activities, do not discriminate on the basis of nationality. The Kingston and Montego Bay Free Zones provide factory space for the above listed activities. Amendments have also been made to the Jamaica Export Free Zone Act to allow for the establishment of Single Entity Free Zones, with individual companies now designated as free zones. The Kingston Free Zone has recently developed an Informatics Park.

Tariff and Non-tariff Barriers In order to protect local producers, import duties on certain agricultural products (such as chicken and vegetables) and certain consumer goods carry higher duty rates. In addition to import duties, certain items such as beverages and tobacco, motor vehicles, and some agricultural products carry an additional stamp duty and special consumption taxes. A Customs User Fee of 2% applies to all imports. Most imported items are subject to 16.5 percent general consumption tax (GCT).

There is also now a Standards Compliance Fee (SCF) of 0.3%.The SCF is collected by Jamaica Customs on behalf of the Jamaica Bureau of Standards. The Bureau checks for a number of standards, including labeling standards.

Strict regulations govern the importation of drugs and pharmaceuticals, with safety, efficacy and quality the primary indicators for approving a drug for use. The Food and Drug Act requires that all drugs distributed or sold in Jamaica are assessed and registered. In addition to reviewing the scientific data supplied on the uses and side effects of the drug, special attention is paid to information on its stability under conditions of high temperature and humidity typical of the tropics; results of the analysis of a recently produced batch; approval status in the country of manufacture or export; and clinical summaries of tests done on humans where the drug is a new chemical entity. Typically, a drug will not be admitted for use in Jamaica until it has been safely used in the country of origin for a period of more than one year.

Policies Conversion and Transfer

Jamaica has no restrictions on holding funds or on transferring funds associated with an investment, as the country liberalized its foreign exchange market in 1991. However, foreign exchange transactions must be conducted through authorized foreign exchange dealers, cambios and bureaux de change at market-determined rates. Foreign exchange is generally available, but companies tend to source large amounts of foreign exchange over a three to four day period. There are currently no plans to change the policies affecting investment remittances and there is no delay period currently in effect for remitting investment returns. There is no legal parallel market (tiered system) for foreign exchange following liberalization and there are no limitations on the inflow or outflow of funds for any transaction. Recently surveyed U.S. companies indicated no problems or delays in accessing foreign exchange or remitting investment returns.

Performance Requirements

Jamaica is a signatory to the World Trade Organization Agreement and is in compliance with most Uruguay Round obligations, including the TRIMS Obligations. There are no performance requirements imposed as a condition for investing in Jamaica. The GOJ offers a number of incentives to attract investments, particularly those that generate foreign exchange and expand employment. Some current incentives are non-compliant with the WTO Agreement on Subsidies and Countervailing Measures and should have been phased out by 2003, but have not been. However, Jamaica was granted an extension by the WTO to revise its incentives and is awaiting reports from the World Bank-affiliated Foreign Investment



Advisory Service and a local Tax Review Committee to complete the process. Chief among the current incentives are:

• The Export Industry Encouragement Act (EIEA) - entitles companies manufacturing products for export to non-CARICOM member countries benefits such as exemption from income and dividend taxes for up to ten years, and exemption from import duties on raw material and machinery during the incentive period. Service industries were included in 1990 and in 1996 the EIEA was amended to include companies that do not export 100 percent of their output.

• The Hotel Incentives Act - entitles hoteliers to income and dividend tax relief for up to ten years. Hoteliers may also receive an exemption from import duties for constructing or expanding hotels, but must have at least ten rooms and facilities for other activities. Income tax relief is granted for 15 years to hotels that meet certain qualifications including: having 10 to 350 rooms, facilities for holding conferences and operation by a qualified general manager. The Resort Cottages Incentives Act allows for income and dividend tax relief and duty-free importation of articles required to construct and equip resort cottages for up to seven years.

• The Motion Picture Industry Encouragement Law - motion picture producers can receive duty relief on imported goods for use in motion picture production as well as income tax exemption from the date of release or exhibition of each motion picture produced in Jamaica for a period of nine years. Producers are also granted a tax deduction of 70 percent of the capital expenditure incurred in acquiring facilities either in the year in which the cost is incurred or in any subsequent year at the option of the producer.

• Approved farmer status under the Income Tax Act - certified persons or companies engaged in growing food or seed crops, horticulture, aquaculture, tobacco and animal husbandry are eligible for income tax relief for up to ten years, renewable as well as concessionary duty rates on farm vehicles.

• The International Finance Company Act - available to finance companies conducting business solely with foreigners. With regard to Jamaican operations, non-residents must hold at least 95 percent of the loan capital. Profits of an approved corporate body are taxed at a rate of only 2.5 percent.

• The Shipping Incentives Act - approved shipping corporations are granted import duty and income tax concessions for a period of ten years.

• The Foreign Sales Corporation Act - provides exemption from income tax for five years for qualified income arising from foreign trade. U.S. law through the Tax Information Exchange Agreement (TIEA) reinforces this incentive.

• The Industry Modernization Program (IMP) and Moratorium on Duties - under the IMP, companies are exempt from general consumption tax on capital goods acquired for modernization. The Minister of Finance may award a moratorium on import duties on capital items for up to three years to companies, which do not qualify under existing incentive legislation and have the potential to contribute significantly to foreign exchange earnings.

• Accelerated Depreciation - certified companies are allowed to deduct 50 percent of the full cost of new machinery in the year of purchase and a further 50 percent in the following year.

• Other Incentives - a number of development banks provide concessionary financing for projects. The Jamaican National EXIM Bank provides concessionary interest rate loans for trade financing, while the Development Bank of Jamaica offers reduced lending rates to the productive sectors. The National Investment Bank of Jamaica also provides equity and quasi-equity financing for key economic sectors listed under the National Industrial Policy.

Foreign investors and their investment are generally granted national treatment status, subject to the rules outlined in their BIT. In essence, Jamaica has no performance requirements, except for companies with Free Zone status, which must export at least 85 percent of their output. Foreign firms are allowed to participate in GOJ-financed or subsidized R&D programs on a national treatment basis. Work permits are granted by



the Ministry of Labor for a specified period, but are subject to the individual obtaining a working visa from the Jamaican Consulate available in or near their home state. Since 2005, foreign nationals who are conducting business on short-term basis will not require a business visa once they will be in Jamaica for a period not exceeding thirty days. However, foreign nationals will need a business visa to enter Jamaica if they are conducting business for periods exceeding thirty days. Foreign nationals who need visas for entry to Jamaica will require a business visa to conduct business.

All importers are subject to the same procedures when trading in goods and services. To qualify for entry certificates, importers must obtain, inter alia, a supplier invoice, a certificate of value and origin, a declaration of value, and a bill of lading and sight. Products imported into Jamaica must also meet specific acts administered by the Jamaica Bureau of Standards. In December 2001, Jamaica imposed the International Organization for Standardization ISO date representation (yy/mm/dd) as the official format for trade, but date labels are still accepted in the traditional European style (dd/mm/yy). The Jamaican economy is relatively open, but some non-tariff barriers remain. For instance, the Veterinary Division requires certification from a U.S. federal agency for all products containing animal and animal by-products irrespective of quantity or form. Highly processed products such as cookies and chips therefore require certification from a government veterinarian. The Coffee and Coconut Industry Boards also have to issue import certificates for coffee beans and cooking oils, respectively, but importers can experience lengthy delays in obtaining these permits. Under intense pressure from farmers cooperatives, the GOJ instituted a 100 percent Common External Tariff (CET) plus an 80 percent Additional Stamp Duty (ASD), compounded to 260 percent, on whole chicken and leg-quarters and a number of imported vegetables.

Legal Framework Expropriation and Compensation

Property rights are protected under Section 18 of the Jamaican Constitution. Expropriation of land may take place under the Land Acquisition Act, which provides for compensation on the basis of market value. Expropriation can take place before compensation is paid, but interest for the period between the expropriation and the compensation settlement must be paid. According to the law, the purpose of any expropriation must be transparent, and compensation for expropriated property must be adequate. If informal negotiation on compensation fails, the investor has recourse in the courts. Jamaica has signed bilateral agreements for the reciprocal promotion and protection of investments with a number of countries, including the United States. The Embassy is not aware of any litigation between the Jamaican government and any private individual or company based on expropriation or on compensation for expropriation. There are currently no laws that force local ownership.

Dispute Settlement

Disputes between enterprises are handled in the local courts, but foreign investors can refer cases to the International Center for Settlement of Investment Disputes (ICSID). There have been cases of trademark infringements in which U.S. firms took action and were granted restitution in the local courts. The Jamaican Constitution provides for an independent judiciary with a three-tier court structure. Claims may be brought before the Magistrate or Supreme Court. Appeals on decisions made in these courts can be taken before the Court of Appeal and then to the Judicial Committee of the Privy Council in the United Kingdom. Plans were afoot for the Privy Council to be replaced by the Caribbean Court of Justice (CCJ), which will consider and determine appeals in civil and criminal matters from common law courts within CARICOM member states. However, the then-opposition Jamaica Labor Party (JLP) opposed the process and took the case to the Privy Council which supported their position. If Jamaica were to replace the Privy Council with the CCJ it will likely require a national referendum, although it is not likely in the near-term. Jamaica has effective



means for enforcing property and contractual rights through: (1) The Judgment and Awards (Reciprocal Enforcement) Act; (2) The Judgment (Foreign) (Reciprocal Enforcement) Act; (3) The Arbitration (Recognition and Enforcement of Foreign Awards) Act; and, (4) The Maintenance Orders (Facilities for Enforcement) Act. Under these acts, judgments of foreign courts are accepted and enforced in all cases where there is a reciprocal enforcement of judgment treaty with the relevant foreign state.

A number of disputes, involving foreign investors and GOJ, on the one hand, and foreign investors and a local association, on the other, arose during 2005. The first dispute, which is yet to be resolved as of early 2008, involves the implementation of a levy by the GOJ on in-coming telephone calls for a Universal Access Fund to finance computers and other information-related activities in Jamaican schools. However, U.S. long-distance telephone companies have been resisting the move and have requested that the Federal Communications Commission put pressure on Jamaica to desist from collecting the fees.

There is a Bankruptcy Act dealing with personal insolvency, a Companies Act dealing with corporate insolvency, and other statutes such as the Bills of Exchange and the Sale of Goods Acts dealing with commercial matters. There are also extensive common law principles, which are written and consistently applied. Under the bankruptcy laws, creditors can petition for an order against an individual or a winding up order against the company and will be entitled to share in the assets of the bankrupt on a pro-rata basis, after certain specified preferential creditors such as redundant employees. The claimant has the option of settling a claim in the currency in which the debt or obligation was incurred or in local currency.

Jamaica, a signatory to the International Center for Settlement of Disputes (ICSID) since 1965, accepts international arbitration of investment disputes between Jamaicans and foreign investors. Local courts also recognize and enforce foreign arbitral awards. International arbitration is also accepted as a means for settling investment disputes between private parties. However, acting in its role as an international tribunal, the CCJ will interpret and apply the Revised Treaty of Chaguaramas, including the CARICOM Single Market and Economy. There is no formal domestic arbitration body in Jamaica, but disputing parties can use arbitration proceedings to settle their disputes. These proceedings would be guided by the Arbitration Act which sets out the procedures disputing parties would follow once they agree on arbitration and is read in conjunction with the Arbitration Clauses Protocol Act, which in turn makes reference to how foreign arbitral awards will be addressed. If a foreign investor’s country has a BIT with Jamaica, then the rules of this treaty would apply. Other foreign investors are given national treatment and civil procedures would apply.

Right to Ownership and Establishment

All private entities are entitled to establish and own business enterprises and engage in all forms of remunerative activity, subject to, inter alia, labor, registration and environmental requirements. Private entities are also free to establish, acquire and dispose of interests in business enterprises. Public and private enterprises have equal access to markets, credit and business operations, such as licenses and supplies. However, if the GOJ has to compete with the private sector, it will do so on a competitive basis so as to not distort the market.

Protection of Property Rights

The Jamaican Constitution guarantees property rights. Jamaica has a system of registered titles set out in the Registration of Titles Act, which recognizes and provides for the enforcement of secured interests in property by way of mortgage. It also facilitates and protects the acquisition and disposition of all property rights, though working through Jamaica’s cumbersome bureaucracy can result in significant delays. In particular, it sometimes takes a long time for landowners to secure titles. Squatting, especially on crown



(government) lands has also become a challenge in the last ten years. Jamaica is a member of the World Intellectual Property Organization (WIPO) and is a signatory of the Bern Convention. Jamaica and the U.S. have an Intellectual Property Rights Agreement and a BIT, which provide assurances to protect intellectual property. However, Jamaica remains a special 301 “Watch List” country, largely because the patent law is not compliant with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). A Geographical Indications Act (GI) was passed in 2004 to protect products that originate from localities where a particular quality or reputation is attributable to its geographical origin. General law provides protection for trade secrets. Protection against unfair competition is also provided by the general law and the Fair Competition Act.

The Copyright Act of 1993, as amended, complies with the TRIPS Agreement and adheres to the principles of the Bern Convention, and covers works ranging from books and music to computer programs. Amendments in June 1999 make explicit the provision of copyright protection on compilations of works such as databases and make it an offense for a person to manufacture or trade in decoders of encrypted transmissions. It also gives persons having rights in encrypted transmissions or in broadcasting or cable program services a right of action against persons who infringe their rights. The act needs to be amended to give effect to the provisions of the WIPO WCT and WPPT (Internet) Treaties to which Jamaica acceded in 2002. The Trademark Act of 1999 is also compliant with the TRIPS Agreement and provides the owner of registered trademarks exclusive rights for up to ten years, renewable. It provides for the protection of “well-known” marks under the Paris Convention. A TRIPS compliant Layout Designs Act has also been in effect since June 1999. The act provides protection for layout-designs for integrated circuits and gives the rights owner the exclusive right to reproduce, import, sell or otherwise commercially exploit the layout-design and to authorize other persons to do so. That right is in place for ten years and may be transferred by the rights owner.

Corruption and other Bureaucratic Obstacles Jamaica has a Corruption Prevention Act (CPA), which established a Corruption Prevention Commission in 2003 to, among other things: (1) receive, examine and document the statutory declarations of public sector workers; (2) receive and investigate any complaint regarding an act of corruption; and, (3) conduct investigation into acts of corruption, if satisfied there are reasonable grounds to do so. To date there has been no enforcement, as the commission lacks the capacity to enforce the filing of declarations. Recent reports suggest that noncompliance is running at over 30 percent. However, the commission will be working with the Director of Public Prosecution to have enforcement measures implemented. The Embassy is not aware of any disproportionate application of corruption measures against foreign investors, but some members of the private sector perceive that the law is not applied impartially among locals. During a recent panel discussion on governance, a GOJ Senator also stated that Jamaica had not done well in eliminating corruption from the public sector.

Jamaica is a signatory of the OECD Anti-Bribery Convention and has ratified the Inter-American Convention Against Corruption. Anti-corruption initiatives have been taken within the Jamaica Constabulary Force as well as some private sector organizations. Prosecutors also continue to take part in regional anti-corruption conferences, with one such conference developed by the United States Department of Justice (USDOJ). However, Jamaica is not a signatory to the UN Anticorruption Convention. The Embassy is not aware of any U.S. firm identifying corruption as an obstacle to foreign investment. Transparency International (TI) performed a formal study of corruption in 2003. The TI report identifies widespread political, petty, and narcotics-related corruption as being prevalent in Jamaica. According to Transparency International’s Perception Index, the perception of corruption in Jamaica has worsened in the



past three years. The island has slid from a score of 3.7 out of 10 in 2006, to 3.3 in 2007, down to 3.1 in 2008. This score places Jamaica in the same category as Benin, Gabon, Guatemala, and Mali.

Corruption may well be the single greatest concern among Jamaicans, most of whom believe it one of the root causes of the high crime rate. In the past year, 16 police officers have been arrested for alleged acts of corruption, but only one has been at senior level. Despite numerous allegations of public corruption, the last conviction of a politician on corruption charges was in 1981. In recent times only one politician has been arrested on charges of corruption; he is currently awaiting trial.

Under the Corruption Prevention Act (CPA), it is an offense to solicit or accept a bribe. Public servants can be imprisoned for up to ten years and fined as much as JMD ten million if found guilty of engaging in acts of bribery. Individuals and companies are also criminally liable if they bribe foreign public officials and can be prosecuted and face the same penalties. The legislation covers public officials who meet the JMD two million salary threshold and those working in sensitive positions such as police and military officers. However, it is well known that a number of public officials have been delinquent in complying with mandatory filing. The creation of the CPA could be viewed as evidence that GOJ officials are taking anti-corruption efforts seriously. However, financial constraints have crippled the commission’s ability to fully execute its mandate of enforcing asset declarations. In 2007, The GOJ passed into law the Proceeds of Crime Act (POCA), a powerful legal tool that allows for both criminal and civil forfeiture and criminalizes money laundering related to narcotics offenses, fraud, firearms trafficking, human trafficking, terrorist financing and corruption, and applies to all property or assets associated with an individual convicted or suspected of involvement with a crime.

More active enforcement of the POCA by the GOJ would certainly strengthen anti-corruption efforts.

U.S. investors should be aware of the U.S. provisions of the Foreign Corrupt Practices Act (FCPA) which, in general, prohibits corrupt payments to foreign officials for the purpose of obtaining or keeping business. See the U.S. Department of Justice website for more information. http://www.usdoj.gov/criminal/fraud/fcpa/

The CPA also contains provisions for the extradition of Jamaican citizens for crimes of corruption. In April 2002, Prime Minister Patterson tabled a code of conduct in Parliament for government ministers. The 49-point code covers such issues as conflict of interest and integrity in the conduct of public and private business. The agency responsible for combating corruption is the Commission for the Prevention of Corruption. Other “watchdog” organizations operating in Jamaica include Transparency International, Jamaicans for Justice, Families Against State Terrorism and the Farquharson Institute of Public Affairs.

International Agreements Preferential Tariff Arrangements. Jamaica has enjoyed preferential tariff arrangements with the United States under the Caribbean Basin Initiative (CBI) and the Caribbean Basin Economic Recovery Act, with the countries of the European Union under the Lome Convention (succeeded by the Coutonou Agreement and recently the Economic Partnership Agreement (EPA)), with Canada under CARIBCAN, and with other English- speaking Caribbean states under CARICOM. CARICOM, of which JAMAICA is a leading member, also has bilateral trade agreements with Costa Rica, Cuba, Dominican Republic, Colombia, and Venezuela.

The CBI provides duty-free entry to the United States to qualifying products of Jamaican origin (except textiles, footwear, handbags, luggage, work gloves, leather apparel, tuna fish, petroleum and petroleum products, and watches and watch parts from countries that do not enjoy Most Favored Nation status). An



amendment was made to CBI provisions in 1990 (CBI II) allowing additional duty reduction on certain leather-related products, including handbags, luggage, flat goods, work gloves, and wearing apparel. To meet CBI eligibility standards, products must contain at least 35 percent value added in Jamaica, of which U.S. materials must comprise 15 percent of the value of the finished product. Articles assembled in Jamaica from 100 percent U.S. components are also given duty-free treatment (with certain exceptions, including textiles/apparel for which the U.S. duty is levied only on the value-added in Jamaica).

In May 2000, the U.S. Senate passed the Caribbean Basin Trade Partnership Act (CBTPA). The aim of this Act is an expansion of the benefits provided under the CBI to Caribbean firms that export to the United States. In effect, it will restore the margin of preferences CBI countries enjoyed prior to the implementation of the North American Free Trade Agreement (NAFTA) as well as improve the range of economic opportunities available to the countries. The Jamaican garment industry has not expanded under CBTPA as predicted due to: (1) the removal of preferential access to key markets following the removal of the quota system; (2) competition from low cost producers; (3) a large untrained labor force; (4) small factories that inhibit the achievement of economies of scale; (5) dependence on a few markets and on imported inputs; and, high overhead costs. In fact, the garment industry has all but disappeared, with only one firm employing about 50 workers remaining in the free zone. Jamaica has also signed a Tax Information Exchange Agreement (TIEA) with the United States allowing U.S. taxpayers to deduct legitimate business expenses incurred in attending business meetings and conventions in Jamaica.

Jamaica exports certain items duty-free to Canada under CARIBCAN. Eligible items must meet a national-origin standard of 60 percent of the factory price originating in Jamaica, Commonwealth Caribbean countries, or Canada. Textiles, garments, lubricating oils, clothing, footwear, luggage, handbags, and leather garments are excluded from CARIBCAN. Processed and fresh vegetables comprise most of the trade under CARIBCAN. Alumina, representing approximately 80 percent of all exports to Canada, was already admitted duty-free prior to the establishment of CARIBCAN.

The Cotonou Agreement, signed in 2000, replaced four Lome Accords and introduced a comprehensive framework for African Caribbean and Pacific (ACP) -EU relations focusing on economic development, the reduction and eventual eradication of poverty, and the smooth and gradual integration of ACP states into the global economy. In this regard the Cotonou Agreement allows the ACP and the EU to engage in WTO compliant (CARIFORUM Economic Partnership Agreement (EPA) Negotiations, 2000). The Economic Partnership Agreement or EPA, a trade partnership required by the Cotonou Agreement to replace the trade component of Lome IV, was signed in January 2008. The EPA is expected to help ACP countries, including CARIFORUM, reduce poverty and achieve economic growth through sustainable trade with Europe.

Jamaica has been a leading member of the Caribbean Community and Common Market (CARICOM) since 1973 when four countries signed the Treaty of Chaguaramas. Over the years membership has grown to 15. There are also five (5) associate members and The Bahamas is a member of the community, but not the common market. In 1989 a decision was taken to further deepen the integration process by establishing the CARICOM Single Market and Economy (CSME). This was expected to pave the way for the creation of a single economic space, where people, goods, services and capital could move freely. To effect the CSME, a Revised Treaty of Chaguaramas was signed in 2002. In January 2006, CARICOM Heads of Government met in Jamaica to sign the single market aspect of the CSME, although at the time only six member countries, including Jamaica, had completed the process to bring the CSM into being. Six other countries have subsequently joined the CSM and the economic integration aspect of the CSME commenced in 2008.



Bilateral Investment Agreements. Jamaica has investment treaties with the United States (Feb. 1994, which came into force in March 1997), Argentina (Feb. 1994), France (Jan. 1993), Italy (Sept. 1993), Germany (Sept. 1992), Netherlands (Apr. 1991), Switzerland (Dec. 1990), the United Kingdom (Jan. 1987), China (1998), Cuba (May 1997), Egypt (Feb. 1999), Indonesia (Feb. 1999) and Zimbabwe (Feb. 1999) and is presently negotiating bilateral investment agreements with South Korea, Costa Rica, Belgium, Russia and Canada. Jamaica has also signed and ratified double taxation agreements with the U.S., Canada, CARICOM, China, Switzerland, Germany, Norway, Sweden, Denmark and the United Kingdom.

OPIC and Other Investment Insurance Programs. The Overseas Private Investment Corporation has identified infrastructure, telecommunications, construction, tourism and renewable energy as areas where its programs can have an impact in Jamaica. OPIC political risk insurance can insure up to USD 40 million per project. OPIC also provides medium to long-term financing to ventures with significant U.S. participation. OPIC can normally guarantee or lend from USD 0.1 to 250 million per project. OPIC has historically committed more than USD 750 million in insurance and financing to support over 80 projects in Jamaica in industries such as construction, energy, telecommunications, and tourism. The country became a signatory to the Multilateral Investment Guarantee Agency in 1986 and ratified the agreement in 1987.

The foreign exchange market remained relatively stable for the first nine months of 2008, depreciating by 1.6 percent. However, by October the effects of the global financial crisis became evident, with the local currency slipping by over eight percent to the first week of December. The sharp depreciation has been underpinned by a confluence of demand and supply factors led by increased margin calls from overseas creditors. Demand pressures were also compounded by increasing Jamaican dollar liquidity as local financial institutions converted maturing debt instruments into hard currency. The increased demand for hard currency could not have come at a worse time, as it coincided with the slow period for inflows and the traditional demand spike for foreign currency to purchase Christmas supplies. But one of the single greatest shocks to the foreign exchange market came from the negative ratings released by the three main ratings agencies. But a currency adjustment was not unexpected given the 16.8 percent spike in inflation to September, 2008, which represented an almost 15 percent real appreciation in the currency. And with confidence waning and rising inflation rendering returns on local instruments negative, investors were always going to switch to foreign assets to hedge against any further erosion in real returns. High commodities prices led by oil imports had also influenced a USD 793 million deterioration in the current account balance to June 2008. With foreign investment inflows drying up and the capital market shut, there would have been a shortfall in the supply of foreign inflows required to finance the current account, thus forcing the exchange rate to adjust.

To address the instability, the Central Bank drew on its arsenal of monetary tools to temper demand pressures. On October 15, the Bank introduced a temporary USD loan facility for institutions affected by margin calls. Two days later the Bank complemented this response by hiking interest rates by up to 1.2 percent. The bank followed up by facilitating the flow of credit among financial institutions to moderate the pressures in the foreign exchange market, while assisting the continued functioning of the inter-bank credit market. At the same time, the Bank sold over USD 400 million or 20 percent of its stock of Net International Reserves (NIR) to the currency market to shore up supplies, thus, bringing NIR down from USD 2.1 B in 2007 to USD 1 .7B in December 2008. However, these policy responses were not sufficient to alleviate the demand pressures in the currency market, due to a build up in Jamaica dollar liquidity stemming from maturing debt instruments. To remove this liquidity, the Bank embarked on an even more aggressive monetary program, offering an attractive short term instrument with interest payable at 20.5 percent as well increasing the cash reserve requirement by two percentage points to 11 percent. Interest rates were further hiked to as high as 24 percent for one year instruments. These measures were accompanied by an 18-month GOJ USD indexed bond with a coupon of 11.5 percent.



Labor Conditions Jamaica had an estimated labor force of 1.3 million at the end of January 2008, of which 10.2 percent was unemployed. Since 1999 there has been a steady increase in the numbers of people trained in information technology, particularly for call centers, and most of these workers have been absorbed by the growing call center industry. There has also been a jump in the number of university graduates, but the numbers have been depleted by migration to North America and the UK. This has apparently led to a shortage of highly educated and experienced labor as evidenced by the number of advertisements for these workers in the newspapers weekly. On the other hand, there has been a marked increase in the number of work permits issued to expatriates, particularly in the services sectors. In 2007, a total of 5,927 permits were issued, down 6.3 percent, suggesting a falloff in the demand for permits as some tourism projects are completed.

Jamaica has an active and strong trade union movement with membership equal to an estimated 20 percent of the labor force, although the movement is considerably weaker now than historically has been the case. Labor relations have traditionally been adversarial due to the level of distrust between workers and management. However, both parties have attempted to enhance the relationship between them by enacting a program for the management of labor cooperation (PROMALCO).

Jamaica has a number of labor friendly laws including the Employment (Termination and Redundancy Payments) Act, 1974 (as amended) (ETRPA). Under the Act, subject to some exclusions, employees with not less than two years continuous employment, who are dismissed on the grounds of “redundancy” are entitled to redundancy payment. As a general rule, workers with up to ten years continuous employment are entitled to two weeks payment for every year as well the requisite notice pay, while workers with over ten years continuous employment are entitled to three weeks payment plus notice pay (notice pay is the period in which the employee must give notice to their employer before leaving their position except in certain cases such as firing for cause).

Jamaica has ratified the following ILO Conventions: Right of Association (Agriculture) Convention 1921 – ratified July 8, 1963; Freedom of Association and Protection of the Right to Organize Convention, 1948 - ratified December 26, 1962; and, Right to Organize and Collective Bargaining Convention, 1949 – ratified December 26, 1962. The GOJ is adopting the ILO policy on HIV/AIDS in the workplace. The GOJ, working in conjunction with the ILO and local stakeholders, has also developed a national plan of action on flexibility in working time to guide flexible working arrangements in Jamaica. Under the Work Permit Act, a foreign national who wishes to work in Jamaica must first apply for a permit issued by the Ministry of Labor. The law, which seeks to give first preference to Jamaicans, requires organizations planning to employ foreign nationals to prove that attempts were made to employ a Jamaican national.

Sources: JAMAICA COUNTRY COMMERCIAL GUIDE FY 2009, US & FOREIGN COMMERCIAL SERVICE AND US DEPARTMENT OF STATE; PRS Data files.

Political Risk Services 1-Aug-2009 Reproduction without written permission of The PRS Group is strictly prohibited.

Background 1-Aug-2009 • Page 13

Jamaica Country Conditions

Background Geography Jamaica is the third-largest island in the Caribbean Sea, after Cuba and Hispaniola, and it is the largest English-speaking island of the Commonwealth Caribbean. Lying 144 kilometers south of Cuba, Jamaica is located at the crossroads of trade routes between North and South America and between Europe and the Panama Canal. The terrain varies from a narrow northern coastal plain to a broader plain in the south and an interior limestone plateau interspersed with many rivers and streams. The uneven plateau surface, broken by numerous upland ranges, exceeds 1,250 meters only in the Blue Mountains, which cross the island northeast of Kingston, the capital and only major city. Jamaica’s major natural resources are good agricultural land and substantial reserves of bauxite ore containing low alumina content. Its pleasant tropical climate is enhanced by constant sea breezes, making tourism potentially lucrative.

During January, Kingston sees low temperatures averaging 19ºC, high temperatures averaging 30ºC, and an average of three days of significant precipitation; during July, its average temperatures range from 23ºC to 32ºC, and it receives an average of four days of significant precipitation.

Recent History October 18, 2000: Walcott Brown, the policeman leading an ongoing investigation into allegations of police involvement in drug smuggling, was shot in both arms by unknown gunmen as he left his home.

March 2001: Seven people (three under 18 years old) died during raids on the homes of murder and robbery suspects; however, when local residents claimed that the police had beaten and then executed them; Amnesty International (AI) then hired a Danish pathologist, whose autopsies indicated that they were shot at close range, six in the head, and issued a report describing police violence as a state of emergency.

June-July 2001: A police gun raid touched off several days of street battles between rival gangs in West Kingston, killing nearly 30 people in July after a similar bout of violence in early June. Used during the 1970s and 1980s to secure votes for the two major political parties, these gangs maintain some political ties, the Denham Town squad’s to the JLP and Hannah Town to the PNP.

June 2002: In a newspaper column, political pollster Mark Wignall claimed that a senior PNP official had fraudulently collected more than $100,000 through his law firm ostensibly on behalf of the postal services, that he had received substantial payments from a failed housing project, and that he used the property of the Roman Catholic Church to secure a personal loan.

July 2002: Parliament approved five reform bills designed to ensure free and fair elections by requiring workers at polling stations to vote along with security forces the day before election day, limiting the number of people that may accompany a candidate to a polling station and requiring five clear days between the nomination of candidates and the election.


Page 14 • 1-Aug-2009 Background

October 16, 2002: The PNP became the first Jamaican party to achieve four straight electoral wins, despite the return of Bruce Golding to the JLP before the elections.

October 23, 2002: Prime Minister Patterson became the first prime minister to be sworn in three times.

February 2003: Controversy erupted over alleged statement by Finance Minister Davies that the PNP government continued financing public works projects that it knew it could not afford throughout 2002 because it was an election year, which amounts to an admission that he intentionally inflicted serious harm on the economy for partisan political gain. The JLP withdrew cooperation with the government, because of its defense of Davies.

June 2003: The JLP won captured most of the island’s 13 parish councils, as well as the country’s capital district, the Kingston and St. Andrew Corporation (KSAC), while the PNP retained but a single parish council and won the newly created municipality of Portmore, in St. Catherine parish. The government authorized the disbanding of the Crime Management Unit (CMU) of the Jamaica Constabulary Force due to its ineffectiveness and allegations of killings at the hands of the unit.

September 2003: Patterson pledged to lay the ground for the establishment of a republic before he leaves office, with a target date of March 2005 for completing the process.

November 2003: JLP delegates elected Horace Chang and James Robertson, aligned with the reform faction, to fill two deputy leadership positions. In the JLP’s internal elections, Bruce Golding and Percival Broderick (both reformers) were elected chairman and deputy chairman, Karl Samuda (a member of the old guard) was elected general chairman, and Seaga easily won re-election to another one-year term as party leader.

August-September 2004: After Industry and Tourism Minister Aloun Assamba announced that concerns about criminal activities had led one group of foreign investors to abandon business plans in Jamaica, the prime minister outlined a plan for fighting crime, primarily by strengthening the police and security forces. Two hurricanes, Charley and Ivan, hit Jamaica, causing damage estimated at more than $200 million.

October 2004: An explosion and fire forced a shutdown of the state-owned Petrojam oil refinery, which supplies 70% of the country’s finished fuel products.

December 2004: The Parliament approved four bills that will permit Jamaica to join Barbados and Trinidad and Tobago in officially launching the CSME in February 2005.

April 2005: Sen. Bruce Golding replaced JLP leader Seaga as the representative for the party stronghold of West Kingston and also took over opposition leadership in Parliament.

June 2005: Jamaica, along with 14 other countries signed a PetroCaribe agreement with Venezuela to obtain access to Venezuelan oil supplies on concessionary terms. The EU confirmed its plan to reduce the price it pays for imported sugar by 39% in two stages over a two-year period beginning in mid-2006.

March 30, 2006: P. J. Patterson stepped down as prime minister after 14 years in the post, turning over the reins of government to Portia Simpson Miller of the PNP.

October 10, 2006: Bruce Golding of the JLP introduced a no-confidence motion directed at the government, but the motion was defeated by a vote on strictly partisan lines.



September 3, 2007: The JLP won a close victory over the PNP in general elections, with a margin of fewer than 3,000; Bruce Golding became prime minister with a three-seat majority in the lower house.

Social Conditions Ethnic and Racial Divisions. The vast majority of people, more than 90% are of African origin, descended from slaves who were brought to the island to work the sugar plantations. The remainder consists of East Indians, Chinese, and a few whites from Europe and the Middle East. The major political conflicts stem from party and class differences rather than ethnic issues.

Regional and Class Divisions. Class and color are closely associated. Poverty is widespread, affecting about one-third of the population. Impoverished Jamaicans have been hard hit by efforts to reform the economy and lower subsidies on basic goods. The growth of armed rival gangs in low-income areas of the capital has aggravated the poor living conditions of many Jamaicans. Reportedly financed by the two major political parties, the gangs control territories in Kingston that are demarcated by political affiliation. Their activities, including extensive illegal drug trade, contribute to the social disorder that has threatened the tourist industry and inhibited both foreign and domestic investment. The large volume of illegal drugs has intensified social ills. While the drugs, especially marijuana and cocaine, are mainly transshipped to the US, increasing amounts are being used locally, contributing to the rise in crime. Involvement with drugs has eroded traditional family and social ties, especially in urban Kingston.

Despite extensive emigration, mainly to North and Central America, Cuba, and the UK, population density is high, more than 240 people per square kilometer of land as of 2006, and about 1,000 people per arable square kilometer. Although valuable skills have been lost, the exodus has reduced population pressures. Rural migration to urban areas has been substantial, especially to Kingston, near which about one-third of the population live and where comfortable middle-class suburbs in the hills surrounding the city contrast dramatically with the growing slums of West Kingston. The gap between rich and poor causes periodic political disturbances in the slums that spill over into surrounding areas.

Education. Although publicly funded education is nominally universal, only about two-thirds of students attend primary and secondary schools. About 10% of eligible young people receive some form of tertiary education. The reach of public education has been consistently shrinking since the 1980s, during which time the funding for all public services has declined. One result has been a serious increase in illiteracy; the functional literacy rate stood at only 80% in 2008.

Health. The average life expectancy in 2006 was 65 years, and the infant mortality rate stood at 16 deaths per 1,000 live births in 2008. Health care is generally provided from public funds, although wealthier individuals also rely on private health insurance. The government has also instituted modest fees for public health services. Trying to meet health care needs while controlling the costs of delivery seriously challenges the government, but the quality of health care has not deteriorated as much as other public services.

The following sections are extracts from the publication: Background Note: Jamaica, June 2009 Published by Bureau of Western Hemisphere Affairs, US Department of State

Government The 1962 constitution established a parliamentary system based on the U.K. model. As chief of state, Queen Elizabeth II appoints a governor general, on the advice of the prime minister, as her representative in



Jamaica. The governor general’s role is largely ceremonial. Executive power is vested in the cabinet, led by the prime minister.

Parliament is composed of an appointed Senate and an elected House of Representatives. Thirteen Senators are nominated on the advice of the prime minister and eight on the advice of the leader of the opposition. General elections must be held within 5 years of the forming of a new government. The prime minister may ask the governor general to call elections sooner, however. The Senate may submit bills, and it also reviews legislation submitted by the House.

It may not delay budget bills for more than 1 month or other bills for more than 7 months. The prime minister and the cabinet are selected from the Parliament. No fewer than two or more than four members of the cabinet must be selected from the Senate.

The judiciary also is modeled on the U.K. system. The Court of Appeals is the highest appellate court in Jamaica. Under certain circumstances, cases may be appealed to the Privy Council of the United Kingdom. Jamaica’s parishes have elected councils that exercise limited powers of local government.

Political Conditions Jamaica’s political system is stable. However, the country’s serious economic problems have exacerbated social problems and have become the subject of political debate. High unemployment--averaging 12.5%--rampant underemployment, growing debt, and high interest rates are the most serious economic problems. Violent crime is a serious problem, particularly in Kingston.

The two major political parties have historical links with the two largest trade unions--the Jamaica Labour Party (JLP) with the Bustamante Industrial Trade Union (BITU), and the People’s National Party (PNP) with the National Workers Union (NWU). The center-right National Democratic Movement (NDM) was established in 1995, and the populist United Peoples Party (UPP) in 2001; neither has links with any particular trade union, and both are marginal movements.

For health reasons, Michael Manley stepped down as Prime Minister in March 1992 and was replaced by P.J. Patterson. Patterson subsequently led the PNP to victory in general elections in 1993, 1997, and in October of 2002. The 2002 victory marked the first time any Jamaican political party has won four consecutive general elections since the introduction of universal suffrage in 1944.

Upon Patterson’s retirement on March 30, 2006, Portia Simpson Miller became the first female prime minister in Jamaica’s history. She left office after her party (PNP) lost to now-Prime Minister Bruce Golding’s JLP in general elections held in September 2007. The current composition of the lower house of Jamaica’s Parliament is 32 JLP and 28 PNP.

Since the 1993 elections, the Jamaican Government, political parties, and Electoral Advisory Committee have worked to enact electoral reform. In the 2002 general elections, grassroots Jamaican efforts from groups like CAFFE (Citizens Action for Free and Fair Elections), supplemented by international observers and organizations such as The Carter Center, helped reduce the violence that has tended to mar Jamaican elections. Former U.S. President Carter also observed the 2002 elections and declared them free and fair.

Foreign Relations Jamaica has diplomatic relations with most nations and is a member of the United Nations and the Organization of American States. It was an active participant in the April 2001 Quebec Summit of the



Americas. Jamaica is an active member of the British Commonwealth, the Non-Aligned Movement, the G-15, and the G-77. Jamaica is a beneficiary of the Cotonou Conventions, through which the European Union (EU) grants trade preferences to selected states in Asia, the Caribbean, and the Pacific.

Historically, Jamaica has had close ties with the U.K., but trade, financial, and cultural relations with the United States are now predominant. Jamaica is linked with the other countries of the English-speaking Caribbean through the Caribbean Community (CARICOM), and more broadly through the Association of Caribbean States (ACS). In December 2001, Jamaica completed its 2-year term on the United Nations Security Council.

U.S.-JAMAICAN RELATIONS. The United States maintains close and productive relations with the Government of Jamaica. Former Prime Minister Patterson visited Washington, DC, several times after assuming office in 1992. In April 2001, Prime Minister Patterson and other Caribbean leaders met with President George W. Bush during the Summit of the Americas in Quebec, Canada, at which a “Third Border Initiative” was launched to deepen U.S. cooperation with Caribbean nations and enhance economic development and integration of the Caribbean nations. Then-Prime Minister Portia Simpson Miller attended the “Conference on the Caribbean--A 20/20 Vision” in Washington in June 2007.

The United States is Jamaica’s most important trading partner: bilateral trade in goods in 2007 was over $2 billion. Jamaica is a popular destination for American tourists; more than 1.2 million Americans visited in 2006. In addition, some 10,000 American citizens, including many dual-nationals born on the island, permanently reside in Jamaica.

The Government of Jamaica also seeks to attract U.S. investment and supports efforts to create a Free Trade Area of the Americans (FTAA). More than 80 U.S. firms have operations in Jamaica, and total U.S. investment is estimated at more than $3 billion. The Political/Economic section assists American businesses seeking trade opportunities in Jamaica. The country is a beneficiary of the Caribbean Basin Trade Partner Act (CBTPA). The American Chamber of Commerce, which also is available to assist U.S. business in Jamaica, has offices in Kingston.

U.S. Agency for International Development (USAID) assistance to Jamaica since its independence in 1962 has contributed to reducing the population growth rate, the attainment of higher standards in a number of critical health indicators, and the diversification and expansion of Jamaica’s export base. USAID’s primary objective is promoting sustainable economic growth. Other key objectives are improved environmental quality and natural resource protection, strengthening democratic institutions and respect for the rule of law, as well as family planning. In fiscal year 2006, the USAID mission in Jamaica operated a program totaling more than $21 million in development assistance.

The Peace Corps has been in Jamaica continuously since 1962. Since then, more than 3,300 volunteers have served in the country. Today, the Peace Corps works in the following projects: Youth-at-Risk, which includes adolescent reproductive health, HIV/AIDS education, and the needs of marginalized males; water sanitation, which includes rural waste water solutions and municipal waste water treatment; and environmental education, which helps address low levels of awareness and strengthens environmental nongovernmental organizations. The Peace Corps in Jamaica fields about 70 volunteers who work in every parish on the island, including some inner-city communities in Kingston.

Jamaica is a major transit point for cocaine en route to the United States and is also a key source of marijuana and marijuana derivative products for the Americas. During 2006, the Government of Jamaica seized narcotics destined for the United States, arrested key traffickers and criminal gang leaders, and



dismantled their organizations. Jamaica remains the Caribbean’s largest producer and exporter of marijuana. The efforts of the Jamaica Constabulary Force (JCF) and Jamaica Defense Force (JDF) enabled cannabis seizures to increase by over 200% in 2006. In 2006, the JCF arrested 5,409 persons on drug related charges, including 269 foreigners. Additionally, more than 20,000 kilograms of marijuana were seized, and 6,300,000 marijuana plants eradicated in 2006. In August 2006, two priority targets associated with major cocaine trafficking organizations were arrested in Jamaica and await extradition to the United States where they are charged with conspiracy to import illegal drugs. Jeffrey and Gareth Lewis (father and son) allegedly transported cocaine shipments from Colombia to the United States. Operation Kingfish is a multinational task force (Jamaica, U.S., United Kingdom, and Canada) for coordinating investigations leading to the arrest of major criminals. From its October 2004 inception through December 2006, Operation Kingfish launched 1,378 operations resulting in the seizure of 56 vehicles, 57 boats, one aircraft, 206 firearms, and two containers conveying drugs. Kingfish was also responsible for the seizure of over 13 metric tons of cocaine (mostly outside of Jamaica) and over 27,390 pounds of compressed marijuana. In 2006 Operation Kingfish mounted 870 operations, compared to 607 in 2005. In 2006, through cargo scanning, the Jamaican Customs Contraband Enforcement Team seized over 3,000 pounds of marijuana, ten kilograms of cocaine, and approximately $500,000 at Jamaican air and seaports.

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