JAMAICA: SCENE-SETTER FOR CODEL ENGEL

UNCLAS KINGSTON 000113

SIPDIS, SENSITIVE

WHA/CAR FOR CODEL ENGEL

E.O. 12958: N/A
TAGS: OVIP PREL PGOV ETRD ECON ASEC JM XL
SUBJECT: JAMAICA: SCENE-SETTER FOR CODEL ENGEL

Summary
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1. (SBU) Post welcomes the visit of CODEL Engel at a time when
Jamaica is at a crucial "tipping point." Jamaica faces challenges
to its resource-strapped public services sector, crumbling
infrastructure, environmental degradation, the spread of HIV/AIDS,
an exorbitant debt burden, and high violent crime. There is concern
that unchecked levels of crime and corruption, coupled with rising
prices and the global economic crisis, could seriously endanger
Jamaica's stability.


2. (SBU) Prime Minister Bruce Golding's Jamaica Labour Party (JLP)
retains a grip on a razor-thin 32-28 parliamentary majority. The
charismatic, populist, former Prime Minister, Portia Simpson-Miller,
leads the opposition People's National Party (PNP). After eighteen
years in power, the PNP finally was ousted by a frustrated public in
the September 2007 general election. Nevertheless, the JLP has had
a difficult time delivering on campaign promises, having inherited a
bloated, inefficient bureaucracy and massive debt burden.


3. (SBU) As one of the largest Caribbean nations forming part of the
"third border" of the U.S., Jamaica is a key partner on security
issues. Trade and migration issues account for much of the solid
bilateral relationship with the United States, with environmental
and energy issues taking a greater role in recent years. The U.S.
remains Jamaica's primary trading partner, and tourism,
bauxite/alumina, and remittances account for much of the country's
foreign exchange earnings. Remittances have fallen as a result of
the global economic crisis, and many worry that tourism will see a
sharp decline as well.
End Summary.

Overview
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4. (SBU) Jamaica, roughly the size of Connecticut, has a population
of 2.7 million and a GDP of approximately USD 11.21 million (2007
estimate). It gained independence from the United Kingdom in 1962,
and remains a member of the Commonwealth. With its British
political and cultural heritage, a relatively educated and
entrepreneurial population, and uncommon natural beauty, Jamaica
nevertheless has weaknesses in key institutions, a bloated
bureaucracy, financial resource constraints, and lackluster (now
negative) economic growth. A high crime rate results in
considerable security costs that must be borne in doing business,
particularly in Kingston.


5. (SBU) United States interests in Jamaica largely relate to
security, as broadly defined: combating the flow of illegal drugs,
strengthening democratic institutions, fostering sustainable
economic development, and protecting the environment. An estimated
one million or more Jamaicans live in the United States, with over
400,000 in South Florida. Virtually every Jamaican has a family
member in New York, Connecticut, New Jersey, or Florida. In
addition, over one million U.S. citizens visit Jamaica annually, and
assisting them is a primary U.S. Embassy concern. Resources also
are directed to encourage U.S. exports and support U.S. investors
and businesses.

Political Background
--------------


6. (SBU) Jamaica has a "Westminster model" parliament consisting of
a lower house, the House of Representatives, comprised of 60
directly elected members, and an upper house, a Senate made up of 21
appointees. Power rests largely in the hands of the head of
government, the Prime Minister. He and his cabinet (Ministers drawn
from Members of Parliament and the Senate) decide government policy.
The British monarch, represented locally by an appointed Governor
General, is the largely ceremonial head of state. The two major
political parties have historical links with two large trade
unions--the Jamaica Labour Party (JLP) with the Bustamante
Industrial Trade Union (BITU) and the People's National Party (PNP)
with the National Workers Union (NWU).


7. (U) The PNP won four consecutive general elections up through
2002, retaining control of the government for an unprecedented
eighteen years. In March 2006, PNP leader Portia Simpson-Miller
became the nation's first female Prime Minister. She remained in
office only until September 2007, when the JLP finally regained a
majority, albeit a slim one; it was the closest national election in
Jamaican history, with only 100 votes separating the contestants in
ten of the sixty parliamentary constituencies. Despite some
election-related violence and minor irregularities, the vote was
largely free and fair, and declared as such by observers from the
Organization of American States.

Current Political Landscape
--------------


8. (SBU) The JLP currently maintains 32 out of the 60 parliamentary
seats. However, the West Portland seat and 3 others are in a
precarious position pending court decisions on the status of dual
citizens elected to office. The controversy began immediately
following the September 2007 election, when a PNP challenger filed a
suit against an elected JLP member of parliament (MP). The JLP MP
held dual citizenship (Jamaican and U.S.) at the time he sought
office, ostensibly violating a Jamaican constitutional clause
barring from office any who "hold allegiance to a foreign entity."
In the wake of the lawsuit, the JLP MP renounced his U.S.
citizenship, but a court ruled that a by-election for the seat must
be held. The PNP challenger appealed the ruling, seeking to be
directly appointed to the seat. A determination on the case was
delayed from November 2008 to "early 2009," though there has been no
ruling as yet. In the interim, all elected MPs retain their seats.
The pending court ruling may affect the outcomes of similar legal
challenges filed against three other JLP MPs. If the JLP's thin
parliamentary majority is imperiled, PM Golding may be forced to
call a snap general election.



9. (SBU) Jamaica traditionally has sought to leverage its
small-nation influence through multilateralism via CARICOM, the G77,
and the Non-Aligned Movement. The country maintains cordial
relations with Cuba. Jamaica sees itself as a spokesman for smaller
economies, particularly island states, and pushes for special and
differential treatment for small economies in the FTAA and the WTO.
As the most populous English-speaking CARICOM member (only Haiti is
larger),Jamaica also views itself as a CARICOM leader, though
Trinidad and Tobago's growing economic power has eroded Jamaica's
influence within the organization. Nonetheless, this relatively
small country wields significant international influence and
prestige, and enjoys a status beyond its size in many international
fora.

Economic Background
--------------


10. (SBU) Jamaica's gross domestic product (GDP) is valued at USD
12.77 billion and the economy is considered to be in the
lower-middle income status. It relies heavily on the services
sector, which accounts for about 60 percent of GDP. The largest
foreign exchange earners are tourism and remittances, at USD 2
billion. Tourism numbers for 2007 reached 3 million visitors, an
increase from 2 million in 1998. The country benefited from USD 779
million in direct foreign investment in 2007 (down - from USD 882
million in 2006),including several major investments in the tourism
sector by Spanish firms.


11. (SBU) The country benefits from ample water supplies and a
climate conducive to agriculture and tourism. Jamaica has been able
to develop niche markets in value added agri-business such as Blue
Mountain coffee and high quality rums. However, periodic hurricanes
have damaged tourism revenue as well as agriculture outputs.
Although Jamaica recovered from the devastation of Hurricane Ivan in
2004, it suffered close to USD 300 million in damages, mostly to
crops and infrastructure, when Hurricane Dean hit the island in

2007. Tropical Storm Gustav in August 2008 damaged agriculture as
well, especially export agriculture sectors. The shock to banana
exports was so bad that the sole exporter, Jamaica Producers Group,
decided to exit the banana export business. Gustav also caused
significant infrastructure damage to roads and bridges, including
completely washing out a bridge just outside of Kingston.
Total damage caused by Gustav is estimated at USD 214 million.


12. (SBU) Overall, the economy faces several long-term challenges
which have caused years of anemic economic growth averaging about 1
percent. Large-scale unemployment, especially among the unskilled
population, serious crime problems, including gang violence related
to the drug trade, lack of available credit and an extremely high
debt burden hinder growth and erode investor confidence. The
government debt is 110 percent of GDP, making Jamaica the fourth
most indebted country in the world. Almost 55 cents on every dollar
of revenue earned by the Government of Jamaica (GOJ) goes to debt
servicing, which limits the government's ability to invest in
infrastructure improvement or pay for public services such as
security, education, and health care. Low tax compliance rates,
hovering at about 45 percent, worsen the problem of limited
revenue.

Trade and International Investment
--------------


13. (SBU) Prime Minister Golding generally welcomes direct foreign
investment and maintains that Jamaica will only resolve its debt
problems if it can grow its economy. He has called for cutting
corporate tax rates and reducing bureaucratic red tape that hinders
investment. Overall, GOJ economic policies encourage foreign
investment in areas that earn or save foreign exchange, generate
employment, and use local raw materials. The government provides a
wide range of incentives to investors, including remittance
facilities to assist them in repatriating funds to the country of
origin; tax holidays which defer taxes; and duty-free access for
machinery and raw materials imported for approved enterprises.


14. (SBU) The United States is Jamaica's primary trading partner. In
2007, U.S. exports to Jamaica were an estimated USD 2.7 billion,
representing almost 40 percent of Jamaica's total imports. U.S.
imports from Jamaica were an estimated USD 797 million. Some of the
major import categories were petroleum, grains, machinery and
transport equipment. The United States has been Jamaica's principal
export market over the last two decades. Jamaica exports mostly
crude materials, chemicals, and food to the United States. Tourism,
bauxite/alumina, and remittances account for most of the country's
foreign exchange earnings. Uncompetitive traditional agricultural
exports - bananas and sugar - face the impending end of preferential
regimes. The once flourishing apparel industry also virtually has
collapsed.


Social Repercussions of
Economic Downturn
--------------


15. (SBU) The spiraling cost of living is undermining social and
economic stability in Jamaica. Inflation hit 17 percent in 2008 and
shows little sign of abating. There is a confluence of factors
underlying the upward movement in prices, chief among them the steep
decline in the Jamaican currency. The Jamaican dollar has
depreciated by almost 10 percent since the beginning of 2009, adding
to the 6 percent between September and December last year. This
foreign exchange market instability has significant implications for
this import-dependent country. The current exchange rate is over JD
89 to USD 1



Environment
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17. (SBU) Jamaica's economy is heavily dependent on the island's
fragile natural resources, given that tourism, bauxite and alumina
production, and agriculture provide the bulk of foreign exchange
earnings. Large-scale hotel and resort developments under
construction along the north coast will severely strain the island's
natural resources and infrastructure. Environmental degradation and
resource depletion are serious threats to sustainable economic
growth in Jamaica. The most pressing environmental challenges
affecting the island are coastal water quality (some estimate 80
percent of coral reefs have perished),deforestation, and lack of
biodiversity protection. Jamaica needs to develop a long-term
environmental protection scheme that works with the private sector.

Transnational Crime and Narcotics
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18. (SBU) Jamaica is a transit point for South American cocaine en
route to the United States. It is also the largest Caribbean
producer and exporter of cannabis. The Government of Jamaica (GOJ)
has a National Drug Control Strategy in place that covers both
supply and demand reduction. The murder rate in Jamaica has
increased steadily since 2002 with well over 1600 killings annually,
while the justice system has been unable to keep up, with only 45
trials per year on average. Based on their past experiences, most
civilians fear that at best, the authorities can't protect them, and
at worst, are colluding with criminals, leading citizens to avoid
giving evidence or witness testimonies. The police are only able to
resolve (make arrests) in thirty-four percent of homicides annually,
and they only convict perpetrators in five percent of the homicide
cases. This leads both the public and police to doubt the
effectiveness of the criminal justice system leading to vigilantism,
which only exacerbates the cycle of violence.


19. (SBU) The GOJ has intensified and focused its law enforcement
efforts on more effectively disrupting the trafficking of large
amounts of cocaine in Jamaica and throughout its territorial waters.
The GOJ also has fully cooperated in several major international
narcotics law enforcement initiatives, which have resulted in the
arrest and extradition to the United States of high-profile
Jamaican, Colombian, Bahamian, and Panamanian narcotics traffickers
responsible for the manufacture, trans-shipment, and distribution of
vast amounts of cocaine throughout the Central Caribbean region.


20. (SBU) The Port Authority of Jamaica (PAJ)has procured and
installed non-intrusive inspection equipment, including mobile gamma
imaging machines, x-ray machines for high-density cargo, and pallet
machine and closed-circuit television surveillance systems for the
Kingston and Montego Bay ports. While the Container Terminal is
relatively well protected, and is now a beneficiary of the U.S.
Container Security Initiative, its neighbor Kingston Wharf, a break
bulk facility, is plagued with security problems that facilitate
contraband smuggling. The Jamaican Constabulary Force (JCF)
Narcotics Vetted Unit (NVU) has taken steps to increase its evidence
and intelligence gathering capabilities to better investigate major
narcotics dealers and crime-lords. In addition, the GOJ has agreed
to the establishment of an International Airport Interdiction Task
Force comprised of Jamaican, U.S., UK, and Canadian law enforcement
elements which will focus on narcotics trafficking and illegal
migration at the country's two major international airports.


21. (SBU) The military, or Jamaica Defence Force (JDF),devotes
considerable resources to the internal security mission in Jamaica
and conducts operations with/in support of the JCF. One such
ongoing operation is "Operation Kingfish," which targets high level
criminals in Jamaica. Other important missions are Counter-Drug
(marijuana eradication and maritime interdiction) and humanitarian
assistance in times of natural disaster (primarily hurricanes and
flooding). The U.S. conducts joint exercises and provides training
opportunities for JDF officials.

Travel and Migration
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22. (SBU) Facilitating legal migration and deterring illegal
movement are key missions for Embassy Kingston. Despite its small
size, Jamaica is a major source of legal and illegal immigrants to
the United States. Embassy Kingston is one of the busiest consular
posts in the Western Hemisphere: the consular section issues
approximately 7,000 immigrant visas, and receives an average of
100,000 applications for nonimmigrant visas per year. Travel is not
one-way. Well over 1.5 million Americans visit Jamaica each year,
most as tourists. In addition, over twenty thousand U.S. citizens
are permanent residents on the island.

HIV/AIDS
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23. (SBU) The Caribbean region's HIV prevalence rate of
approximately 2.4 percent is second only to sub-Saharan Africa. In
Jamaica, about 3 percent of antenatal clinic and 1.5 percent of the
general population test positive for HIV, according to GOJ
statistics. The early average age of first sexual encounter,
multiple partners among adolescents, and the stigma of homosexuality
in Jamaican culture, all contribute to the potential risks for an
accelerating epidemic in the Jamaican population. There is a high
degree of discrimination against those living with HIV/AIDS,
regardless of whether they are men, women or children. Even if the
disease is successfully contained, HIV will continue to have serious
economic consequences. According to the University of the West
Indies Health Economics Unit, if the escalation continues at its
present rate, the estimated economic cost in five years will equal
6.5 percent of GDP.

Wehrli