KINGSTON POL/ECON ROUNDUP: July 25 - August 21, 2006

UNCLAS SECTION 01 OF 03 KINGSTON 001645

SIPDIS

STATE FOR WHA/CAR (BUDDEN),AND WHA/PDA
STATE ALSO FOR, INL/LP (BOZZOLO),EB/TPP, AND EB/IFD
STATE ALSO DOE CA/OCS/ACS/WHA (RUTH BRANSON)
STATE PASS OPIC FOR TABERNAKI
CUSTOMS MIAMI FOR LOWEN AND MAHABIR
SANTO DOMINGO FOR FCS, FAS, AND LEGATT
STATE PASS USTR FOR A. GASH-DURKIN
DOJ FOR OPDAT/R LIPMAN
TREASURY FOR LAMONICA

SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL EFIN ECON EINV PHUM ELAB KHIV JM
SUBJECT: KINGSTON POL/ECON ROUNDUP: July 25 - August 21, 2006

Ref: KINGSTON 1592

KINGSTON 1579

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1. This month's topics:

-- Chavez Visit
-- Jamaican Delegation in Venezuela
-- National Elections in 2006 Unlikely
-- Telecom Company Cuts Staff
-- Prices Inching Up
-- Bankers Submit Credit Bureau Proposal
-- Several Apply for Commercial Bank Licenses
-- Jamaica Files Debt Shelf with US Securities Commission
-- Bahamas Seeking Caribbean Graduates
-- Russian Company Eyeing Stake in Bauxite Industry
-- Consumer Electronics Show

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Chavez Visit
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2. On August 14, Venezuelan President Hugo Chavez Frias met with
Prime Minister Portia Simpson Miller during a one day visit to
Montego Bay (ref A). During this meeting, they initiated a number
of agreements:
- A Memorandum Of Understanding for financing a leg of the "Highway
2000" project between Spanish Town and Ocho Rios;
- A Joint Venture Agreement between the Petroleum Corporation of
Jamaica (PCJ) and Petrsleos de Venezuela Sociedad Ansnima (PDVSA)
that gives PDVSA a 49 percent share in the PetroJam oil refinery in
Kingston.
- An amendment Protocol to the energy agreement PetroCaribe,
increasing the quota to 23,500 bpd from 21,000 bpd.
- Financing Agreements to execute three construction projects:
Montego Bay Sports Complex; Port Maria Civic Center; and, affordable
housing under a line of credit to the Jamaica Mortgage Bank.

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Jamaican Delegation to Visit Venezuela
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3. A Jamaican delegation, including Foreign Minister Anthony
Hylton, met on August 18, in Venezuela to build on the momentum of
the meetings between Chavez and Simpson Miller on August 14th (ref
A). Negotiations on some of the agreements initiated at the August
14th meeting are likely to have continued during the meetings in
Venezuela.

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National Elections in 2006 Unlikely
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4. Simpson Miller is likely to wait until 2007 to call national
elections. Jamaica entered into an informal agreement with CARICOM
countries not to hold national elections within six months of
Cricket World Cup, which is schedule to begin in March 2007. Since
her popularity is on the wane and her window of opportunity is
quickly closing, it seems probable Simpson Miller will wait until
after CWC in 2007 to call elections (ref B).

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Telecom Company Cuts Staff
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5. Facing growing competition from a number of upstarts following
liberalization of the telecoms sector, Cable and Wireless Jamaica
has continued to contain costs by cutting staff. On August 15, the
former monopoly will begin transferring a segment of its call center
business to Accent, a US firm specializing in customer relationship
management. As a result, another 200 workers will lose their jobs,
although some will be absorbed by Accent. Accent operates call
centers in the US, the Philippines and Trinidad and Tobago.


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Prices Inching Up

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6. Headline inflation as measured by the consumer price index rose
by 1.4 percent in July, bringing calendar year to date inflation to
4.4 percent compared to 8.9 percent for the corresponding period in

2005. This represents a marked slowdown in the rate of inflation
due largely to the moderation of agricultural prices following
increased supplies. However, a spike in energy, food and drink
prices has affected the index since April, with inflation for the
four month period to July amounting to 4.1 percent. Cost push
factors could influence inflation in upcoming periods due to the
expected rise in the prices of back to school and Christmas goods.


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Bankers Submit Credit Bureau Proposal
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7. The Jamaica Bankers Association (JBA) has submitted a proposal
to the GOJ for the establishment of a credit bureau. A bill will be
drafted based on the proposal for submission to parliament. The
credit bureau would allow Jamaicans with a "good" credit history to
access loans at lower interest rates. Bank of Nova Scotia CEO,
William Clarke, who has long complained about the absence of a
credit bureau, has made the implementation of the bureau his main
focus as JBA president. Clarke thinks the establishment of a credit
bureau will benefit Jamaica by stimulating entrepreneurship.

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Seven Apply for Commercial Bank Licenses
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8. The central bank has received applications for seven commercial
bank licenses. However, the central bank has been slow to issue new
licenses following the collapse of the financial system during the
mid 1990s. There are currently five commercial banks in Jamaica,
with an additional bank expected next year following the issue of a
sixth license this year. The central bank Governor, Derrick
Latibeaudiere, suggested that there could be further interest rate
cuts by the central bank this year. While interest rates have been
cut twelve times in the last three years, the central bank has been
forced to slow the decline in 2006 due to rising prices and jitters
in the foreign exchange market.

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Jamaica Files Debt Shelf with US Securities Commission
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9. Jamaica has filed documents with the US Securities and Exchange
Commission to periodically sell up to USD 428.5 million in debt
securities. According to the registration statement, the GOJ plans
to use the proceeds for budgetary purposes. The registration allows
the GOJ to easily sell securities without going through the
bureaucracy each time. The filing is not an indication that the GOJ
is pressed for avenues to raise financing. In fact, the Head of the
Fiscal Policy Management Unit at the Ministry of Finance, Courtney
Williams, told emboff that the GOJ has no plans to source financing
externally due to the high liquidity in the domestic market.
Williams said domestic conditions are so favorable that rates could
decline just months after financial analysts expected them rise.
Williams also said that the external market was not a viable
short-term option due to rising international rates.

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Bahamas Seeking Caribbean Graduates
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10. Jamaica could lose even more of its skilled workers following
an announcement by the Prime Minister of Bahamas, Perry Christie,
that his country is looking for qualified persons to fill nursing
and information technology positions. Christie was addressing a
university graduating class in Jamaica. Ironically, Opposition
Leader Bruce Golding told an earlier group of graduates from the
same university that he was worried Jamaica had not been able to
retain many of its brightest minds. Golding argued that the persons
charged with public policy must change this situation, although

KINGSTON 00001645 003.2 OF 003


there must be a fundamental shift in development strategy, he
continued. Golding added "we are 90 minutes from the richest market
in the world, yet we remain largely isolated from the benefits of
that market."

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Russian Company Eyeing Stake in Bauxite Industry
-------------- ---


11. Russian aluminum company, RUSAL, the world's third largest
producer, is again eyeing a stake in Jamaica's bauxite industry.
RUSAL is apparently interested in Glencore's shares held in Alumina
Partners of Jamaica and West Indies Aluminum Company. It is still
unclear whether the USD 600 million-deal involves the sale of
assets, a merger or a take-over, but things should become clearer
once the 35-member contingent of officials from RUSAL completes its
due diligence this week.

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Consumer Electronics Show
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12. The sixth staging of the Jamaica Consumer Electronics Show took
place on August 12 and 13 at the Hilton Kingston Hotel. The show has
grown considerably since it first started and this year it attracted
a range of major sponsors. This year, there were over 35 booths
covering the following areas/sectors: residential, industrial and
commercial security/alarm systems, home and musical entertainment
systems, lighting, energy and automation products,
telecommunications, information technology, video games, standard
control, e-commerce, digital imaging and wireless/mobile
communications.

JOHNSON