Obama’s magic wand and Wykeham’s Cuba
I am not one who readily suggests writing off of debts, for anyone. I was not brought up that way. But I can see that circumstances can dictate that, in a few instances, this is a measure of last resort. That is why there are bankruptcy laws. This applies to nations as well as for companies and individuals.
That is why there is such a programme as the Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative (https://www.imf.org/external/np/exr/facts/hipc.htm).
Started in 1996, "the joint IMF-World Bank comprehensive approach to debt reduction is designed to ensure that no poor country faces a debt burden it cannot manage. To date, debt-reduction packages under the HIPC Initiative have been approved for 36 countries, 30 of them in Africa, providing US$75 billion in debt-service relief over time."
I raise this as a way out of Jamaica's and the creditor cartel's (IMF/IDB/World Bank) dilemma.
Now, I am not an expert by any stretch of the imagination. But, when a country is expected to produce annual primary budget surpluses - revenue minus spending, excluding interest payments - of 7.5%, that is draconian. The Greek target is 3% in the first year and 4.5% thereafter. This is causing catastrophic hardships on the Greeks.
Moreover, Jamaica is now paying back annually more than it receives in loans. This, plus the fact that Jamaica's standard of living has declined by approximately 6% over the last 20 years, makes it a totally untenable situation - and almost tyrannical.
In fact, the only 'success' that has resulted is that Jamaica now has the unenviable title of the worst-performing economy in this hemisphere over this period.
The Government is currently paying more than 8% of GDP in interest - about twice the level of the most indebted countries in Europe, and one of the worst interest burdens in the world.
Meanwhile, the IMF has recently said, "Notwithstanding the authorities' demonstrated resolve in implementing the programme, more tangible signs of improvements in growth will be important to sustain the social consensus needed to continue on the reform trajectory."
And co-chair of the Economic Programme Oversight Committee (EPOC), Richard Byles, recently reported that tax revenues and grants for the period April 2014 to February 2015 were budgeted for J$331 billion but came in J$12 billion short.
Bank of Jamaica data show that for the 11 months of the fiscal year to February 2015, credit to the private sector grew by 5.1% versus 9.5% average for the previous five years.
"Credit to the private sector is an indicator of the investment activity of businesses and therefore helps to explain the overall slow growth in GDP for this fiscal year," said Byles.
Where is the growth to come from?
It isn't surprising, therefore, that STATIN also announced that GDP for the fourth quarter of 2014 recorded a decline of 0.4% when compared to the similar quarter of 2013.
In 2007, the IDB granted billions of dollars of debt cancellation to five countries in this hemisphere: Bolivia, Haiti, Honduras, Guyana, and Nicaragua.
The problem is that Jamaica is not considered a 'poor' country and doesn't qualify for the HIPC programme. That is just a matter of time for given these measures, Jamaica is certain to become poor in a matter of years.
Here is where President Obama could wave his magic wand, if he wanted, to allow Jamaica to have a chance at growth, since the US Treasury Department decides what the IMF does in the Western Hemisphere. The US could help arrange something, similar to the HIPC Initiative, for Jamaica with the creditor's cartel.
By this action, Obama could also bolster the US influence in Jamaica as other nations, particularly China, which has been seeking to exert its influence here and in the region.
Jamaica has never defaulted on its debt. We are too proud (or whatever). We will continue to pay our debts until it kills us.
In 'Warnings on TIA, strokes and Cuba' published July 18, 2010 (almost five years ago), I wrote about my wife Margaret's visit to Havana where our daughter, Ivana, was representing Jamaica in the Caribbean Island Swimming Championships.
"The trip proved an eye-opener vis-a-vis the negative propaganda disseminated on Cuba. While Jamaica has a little time to get its tourism house in order, this time cannot be much more than three years."
"Jamaica, be warned! Cuba will once again become the playground of America's elite."
And even though President Obama, over the years, had been taking small steps towards opening Cuba leading up to the announcement in December last year that he intended to reopen the US Embassy in Cuba on the way to fully normalising relations, our tourism minister seems to have been sleeping at the wheel.
Dr Wykeham McNeill just said that the Jamaica Tourist Board is currently doing a study on the effects the opening up of Cuba could have on Jamaica's tourism market, particularly on visitors from the United States.
He said the study will be ready later this year.
His response to the Cuban 'threat' only comes after President Obama, last Tuesday, submitted to Congress a "report and certifications" indicating that the US plans to remove Cuba from the list of state sponsors of terrorism, a key step to normalising relations between the two nations.
What do we do until that report is ready "later this year"?
Problems of Surging $
And if that doesn't spell enough bad news for Jamaica, think about what the surging dollar is doing to shifting tourist spending and patterns.
In 'Ways a Surging Dollar Rattles World Economies, Markets", The Associated Press (April 15, 2015) reported, "Since June 30, the greenback is up 28% against the euro, 18% against the Japanese yen, and 40% against the Brazilian real. Not since 1981 has the dollar been so strong."
"The strong dollar makes European vacations cheaper for American tourists. Booking.com estimates that the average price for a four-star hotel room in Paris, Rome, Barcelona, Amsterdam, and Berlin is down 21%from March 2014 because of the dollar's rise against the euro. The company calculates that an American could spend 14 days in Barcelona for the price of seven days in Palm Springs, California."
Greece has seen a 15% to 20% increase in reservations from the United States, Europe's biggest long-haul market, compared to the same time last year. Spain saw a 12% increase in January and almost 19% in February.
Wake up, Wykeham!