Identifier
Created
Classification
Origin
09KINGSTON517
2009-07-01 14:47:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Kingston
Cable title:  

JAMAICA: JUNE ECONOMIC REVIEW AND A RETURN TO THE IMF

Tags:  ECON ENRG SENV EFIN EAIR EMIN ASEC SOCI ETRD TRSY 
pdf how-to read a cable
VZCZCXRO3836
RR RUEHGR
DE RUEHKG #0517/01 1821447
ZNR UUUUU ZZH
R 011447Z JUL 09
FM AMEMBASSY KINGSTON
TO RUEHC/SECSTATE WASHDC 7806
RUEHLO/AMEMBASSY LONDON 0587
RUEHOT/AMEMBASSY OTTAWA 2397
RUEHGV/USMISSION GENEVA 0294
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 02 KINGSTON 000517 

SIPDIS
SENSITIVE

STATE FOR WHA/CAR (DHOFFMANN) (VDEPIRRO) (WSMITH)
WHA/EPSC (MROONEY)(FCORNEILLE)
EEB/IFD/OMA
WHA/PPC (JGONZALEZ)
INR/RES (RWARNER)
INR/I (SMCCORMICK
SANTO DOMINGO FOR FCS AND FAS
TREASURY FOR ERIN NEPHEW
EXPORT IMPORT BANK FOR ANNETTE MARESH
USTDA FOR NATHAN YOUNG AND PATRICIA ARRIAGADA
OPIC FOR ALISON GERMAK

E.O. 12958: N/A
TAGS: ECON ENRG SENV EFIN EAIR EMIN ASEC SOCI ETRD TRSY
OPIC, AID, OAS, IBRD, WTRO, XL, JM
SUBJECT: JAMAICA: JUNE ECONOMIC REVIEW AND A RETURN TO THE IMF

REF: A) KINGSTON 445
B) KINGSTON 422
C) KINGSTON 315
D) KINGSTON 269
E) KINGSTON 245
F) KINGSTON 123

UNCLAS SECTION 01 OF 02 KINGSTON 000517

SIPDIS
SENSITIVE

STATE FOR WHA/CAR (DHOFFMANN) (VDEPIRRO) (WSMITH)
WHA/EPSC (MROONEY)(FCORNEILLE)
EEB/IFD/OMA
WHA/PPC (JGONZALEZ)
INR/RES (RWARNER)
INR/I (SMCCORMICK
SANTO DOMINGO FOR FCS AND FAS
TREASURY FOR ERIN NEPHEW
EXPORT IMPORT BANK FOR ANNETTE MARESH
USTDA FOR NATHAN YOUNG AND PATRICIA ARRIAGADA
OPIC FOR ALISON GERMAK

E.O. 12958: N/A
TAGS: ECON ENRG SENV EFIN EAIR EMIN ASEC SOCI ETRD TRSY
OPIC, AID, OAS, IBRD, WTRO, XL, JM
SUBJECT: JAMAICA: JUNE ECONOMIC REVIEW AND A RETURN TO THE IMF

REF: A) KINGSTON 445
B) KINGSTON 422
C) KINGSTON 315
D) KINGSTON 269
E) KINGSTON 245
F) KINGSTON 123


1. (SBU) SUMMARY:
-- The international rating agency Standard and Poor's (S and P)
maintained Jamaica's long-term foreign and local currency debt
rating at B- and its short-term debt rating at C.
-- The Falmouth Port tourism and cruise facility redevelopment
project has been delayed several months and will not be completed
until late 2010.
-- The global economic downturn has reduced Jamaica's trade deficit
by 32 percent for the first two months of the year.
-- The Cabinet initiated discussions on International Monetary Fund
(IMF) assistance, as the Government of Jamaica (GOJ) inches closer
to a new borrowing relationship with the IMF.
-- Prime Minister (PM) Bruce Golding met with Pascal Lamy, Director
General of the World Trade Organization (WTO),seeking to ensure
that trade preferences for developing countries in the Doha Round
are not eroded when negotiations resume later this year.
-- David Smith, former head of the Olint investment scheme, faces a
new round of charges in Turks and Caicos; and Carlos Hill, former
boss of the Cash Plus investment scheme, was evicted from his home.
END SUMMARY.


International Credit Rating
--------------


2. (U) In a report dated June 11, the S and P has maintained its
rating of Jamaica's long-term foreign and local currency debt at B-
and its short-term debt rating at C. However, it also maintained a
negative outlook on Jamaica's sovereign debt to reflect "the
likelihood of a downgrade if policy actions fail to contain the
ongoing fiscal and external deterioration." The S and P anticipates
that Jamaica's economy will worsen, projecting an economic
contraction of 3.5 percent in 2009, with another fall in real GDP of
one percent in 2010. A recovery of one percent of GDP is predicted
in 2011.

Falmouth Port Redevelopment Delayed
--------------


3. (SBU) The redevelopment of the historic Falmouth port is behind
schedule. The project, which when completed will accommodate two
Genesis-class cruise ships, was scheduled to commence in October

2008. However, seven months later major construction has not begun.
The Port Authority of Jamaica has been in talks with the U.S.
Export Import Bank (Ex-Im) for financing, but now indicates it
intends to secure financing from Europe. NOTE: The GOJ says it
intends to return to Ex-IM soon to seek assistance in financing
U.S.-made security equipment. End Note). The major project was to
be completed by May 2010, but now will not be ready before December,

2010. The cruise ships that were to arrive in Jamaica are being
rerouted for cruises in Mexico.
Trade Deficit Shrinks
--------------


4. (U) A decline in demand for goods and services has helped reduce
Jamaica's trade deficit. Preliminary data for the period of January
to February indicate the gap between imports and exports was USD 625
million compared to USD 918 million in 2008. This would indicate
that the global economic downturn has caused a reduction of USD 292
million in imports, a 32 percent decrease. (NOTE: The reduction in
world oil prices since last year, and to a lesser extent, the
depreciation of the local currency which made imports more expensive
and exports cheaper, have been fueling this decline. End Note).

Return to the IMF
--------------


5. (SBU) The Cabinet initiated discussions on June 22 regarding
possible resumption of a borrowing relationship with the IMF (reftel

KINGSTON 00000517 002 OF 002


B). Finance Minister Audley Shaw will present findings on recent
exploratory discussions with the IMF, and is traveling with a team
from the Ministry of Finance and Public Service to Washington this
week to meet with IMF officials. The trip will be followed by an
IMF delegation visit to the island in early July. PM Golding has
said, "the IMF will not solve our problems", saying "the solution is
to produce more and import less."


6. (SBU) COMMENT: The GOJ has been publicly telegraphing its intent
to return to the IMF, as concerns mount about the country's balance
of payments and continued pressure on the Net International Reserves
(NIR). Many Jamaicans still resent the austerity measures imposed
on the country by the IMF during the late 1970s and 1980s. The
local press has featured editorials weighing the pros and cons of a
return to the IMF, and this process has allowed the GOJ to manage
public apprehension of the impending decision. In reality, the GOJ
has little choice but to return to the IMF, and appears to be close
to working out the terms. GOJ officials tell Emboffs that a final
decision likely will be announced soon. End Comment.

WTO Preferences for Developing Countries
--------------


7. (U) PM Golding stated in a press release that he had urged
Director General Lamy of the WTO Organization to ensure that trade
preferences agreed upon for developing countries during the last
Doha Round of trade negotiations are not eroded when negotiations
resume later this year. Golding met Lamy at the WTO headquarters in
Geneva on June 15.


8. (U) Golding said he urged Lamy to arrange a series of
mini-Ministerial meetings to work toward narrowing the differences
on outstanding issues prior to the next Ministerial Meeting in
November 2009. Golding said he was assured by Lamy that the WTO
would continue to assist Jamaica in training and capacity building
to strengthen the country's ability to take advantage of
opportunities within the Economic Partnership Agreement and the WTO
framework.

Ponzi Schemes - Olint and Cash Plus
--------------


9. (U) According to the Gleaner newspaper, David Smith, the former
head of the Olint alternative investment scheme, has been arrested
on new charges in the Turks and Caicos. Smith was arrested in
February on multiple charges including use of forged documents and
theft (reftel F). The four new charges include additional counts of
theft, obtaining money by deception, and two counts of money
laundering. He was released on USD 2 million in bail and will
appear in court on August 5. The court appointed a liquidator to
wind down the investment scheme, but it appears there are
insufficient funds to repay investors who had given Smith millions
of dollars.


10. (U) On June 17, Carlos Hill, the former head of the failed
alternative investment scheme Cash Plus, was evicted from his
upscale home in suburban Kingston. A moving company hired by the
Office of the Trustee for Bankruptcy removed Hill's possessions and
furniture. The eviction had been scheduled to take place two weeks
ago, but the court granted an extension. Hill's fraud trial begins
on July 28; his former financial officer and brother also are
charged.
MOSS