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 KINGSTON 00001645 001.2 OF 003 ¶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 -------------- Chavez Visit -------------- ¶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. -------------- Jamaican Delegation to Visit Venezuela -------------- ¶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. -------------- National Elections in 2006 Unlikely -------------- ¶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). -------------- Telecom Company Cuts Staff -------------- ¶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. -------------- Prices Inching Up KINGSTON 00001645 002.2 OF 003 -------------- ¶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. -------------- Bankers Submit Credit Bureau Proposal -------------- ¶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. -------------- Seven Apply for Commercial Bank Licenses -------------- ¶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. -------------- -------------- Jamaica Files Debt Shelf with US Securities Commission -------------- -------------- ¶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. -------------- Bahamas Seeking Caribbean Graduates -------------- ¶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." -------------- --- 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. -------------- Consumer Electronics Show -------------- ¶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