Jamaica must look to the soil for salvation
Dennie Quill, Columnist
I HAVE been keeping a nervous eye on currency movements in recent weeks. Bets are on right now that the United States (US) dollar, which is trading at J$96.07, could reach J$100 by mid-year. The Canadian and British currencies are also climbing.
Currency movements are influenced by economic factors, such as demand and supply, growth, interest rates and trade deficits. Jamaica's debt to GDP has been calculated at 140 per cent, and growth has been anaemic and productivity low. That, in a nutshell, is the profile of the Jamaican economy.
When one examines all these factors as they relate to Jamaica's ability to get out from under this mountain of debt in the foreseeable future, one can be forgiven for feeling a sense of despair. After Haiti, Jamaica and Guyana have the weakest currencies in the Caribbean Community and one cannot help feeling envy of The Bahamas, which has maintained a stable currency over the years with its dollar being pegged to the US on a one-to-one basis. How have they managed to do this for so long?
EVERYONE ADVERSELY AFFECTED
These days, there are no announcements of a price increase, but the prices seem to change almost daily. Take a visit to your local supermarket and you are bound to notice these changes. So in addition to the huge tax measures that are part of the Government's deficit-reduction plan, the people's hardship is compounded by the effects of a weakening dollar.
Everyone is affected by currency fluctuations. At the individual level, goods and services are more expensive, and at the corporate level, companies that are dependent on imports will be heavily impacted by these currency movements.
Dependency on imports has grown with the gradual decline in local manufacturing activities, so goods that we once produced efficiently here at home are now imported. And items such as tamarind and jackfruit, which literally grow wild here, are being imported with scarce and expensive foreign exchange.
Motor vehicle inventories are growing, and it would be an interesting exercise to do a rough calculation of the amount of foreign exchange that has been poured into motor vehicles which are wasting away in various car lots across the country.
Royalty for foreign music and payments for cable programmes also eat out a good chunk of foreign exchange.
BACK TO 'EARTHY' BASICS
Some business people I know have been trying to figure out ways to protect themselves against this adverse currency market. The question is, what are the factors that could possibly reverse or halt the fall of the Jamaican dollar?
If interest rates were to climb, savvy investors would see Jamaica as a place to move their money in order to cash in. Although this would hurt locals, it may mean healthy net international reserves. Since I have found myself in the imaginary land of 'What If', imagine if we found oil in commercial quantities and were able to mine it to our use. Then we would be able to slash the horrendous oil bill that has been like a millstone around the country's neck.
And what if, by some magic, Jamaica were to experience strong domestic growth which resulted in increased employment and thriving commerce? It is hard to see any of this happening in our lifetime.
So, where can we look for salvation? Why, the land, stupid! I again submit my well-worn argument that only when the economy meets the soil will Jamaica be able to restore its economy to a place of glory.
The gospel of self-reliance was strongly delivered in the 1970s, and we were better off for it. Now is the time to start thinking about how we can feed ourselves and produce our way out of the current dilemma.