KINGSTON POL/ECON ROUNDUP: FEBRUARY 18, 2006 -

UNCLAS SECTION 01 OF 02 KINGSTON 000475

SIPDIS

STATE FOR WHA/CAR (BENT) 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: FEBRUARY 18, 2006 -
MARCH 6, 2006

Ref: Kingston 00402

KINGSTON 00000475 001.2 OF 002



1. This week's topics:

-- New Prime Minister Chosen
-- Rating Agency Maintains Jamaica's Rating
-- Expansion of Oil Refinery Underway
-- GOJ Seeking Consultation on Explosive Tax Proposal
-- Crime Rates Down

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New Prime Minister Chosen
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2. On February 25, Portia Simpson Miller, currently the
Minister of Local Government, Community and Sport, won an
internal Peoples National Party election to succeed P.J.
Patterson as party president and Prime Minister. Simpson
Miller will be the seventh Prime Minister of Jamaica since
its independence and the first woman to hold the office.
Patterson is due to retire and be replaced by Simpson Miller
by month-end. Further details reported Reftel.

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Rating Agency Maintains Jamaica's Rating
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3. International rating agency, Moody's, has reaffirmed
Jamaica's 'B' (stable) rating, in its update on February 23,
a week after Standard and Poor's (S&P) maintained its `B'
rating of the country. Moody's, like S&P, pointed to the
GOJ'S commitment to fiscal discipline. Moody's stated that
"[t]hey remain supported by the government's commitment to
return to a balanced budget position and by a constitutional
provision mandating debt-service payments as the first
expenditure priority." Moody's also cited Jamaica's ability
to face severe shocks and the comparatively low external
government debt ratios as contributory factors for its
stance. However, Moody's stated that the country's exchange
rate remained susceptible to recurrent pressures and the
large public sector debt faced growing exposure to
international capital markets. The rating agency also noted
that the macro-economy remained sensitive to external and
domestic shocks.

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Expansion of Oil Refinery Underway
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4. The much-publicized USD 200 million modernization and
expansion of Jamaica's Petrojam oil refinery, began last
month with the engineering design. The project evolved out
of a memorandum signed in August 2005 between Prime Minister
Patterson, and Venezuelan President Hugo Chavez. The front-
end engineering design (FEED),which will be undertaken by
the Canadian firm SNC Lavalin, is projected to cost USD 4.7
million and will last for ten months. Once the FEED is
completed, PDVSA, the Venezuelan state oil company, and
Petrojam will carry forward the upgrade and expansion of the
local refinery. The project will expand the capacity of
Petrojam from 35,000 barrels to 50,000 barrels per day.
Additionally, the facilities will be modified to accommodate
increased production of cleaner products and reduce the
proportion of capacity dedicated to heavier fuel, thereby
improving plant efficiency.

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GOJ Seeking Consultation on Explosive Tax Proposal
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5. Despite clear signs of vigorous resistance from the
public and the opposition Jamaica Labor Party (JLP),the
government has signaled its intention to commence
consultations with stakeholders in the petroleum sector to
determine the level of taxation to be applied to petroleum

KINGSTON 00000475 002.2 OF 002


products. Prime Minister Patterson tabled the green paper
in Parliament and said the tax regime was primarily geared
at driving efficiency and conservation and to a lesser
extent generating revenues to maintain roads and encourage
energy conservation. However, the proposal is already
facing intense opposition from the JLP. JLP leader Bruce
Golding is arguing that Jamaican taxpayers are already
overburdened and the plan will unnecessarily increase the
burden. Given the explosive public reaction to previous
attempts to increase the tax on petroleum products, the JLP
expects to gain much-needed political capital during this
process. The highly popular Prime Minister-elect, Portia
Simpson Miller could burn social and political capital if
she decides to support this proposal.

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Crime Rates Down
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6. As of March 5, Jamaica's homicide rate stood at 226, a
24% reduction over the same time period in 2005. The JCF
reported a decline of 18% for overall crime.