Thursday, November 01, 2007

Jamaica’s global challenge

Jamaica, like Iraq, is under attack from the US. But in our case this is not because the US is dropping bombs on us. In our case the attack is coming from the weakness, and possible recession, of the US economy. Most economic data coming out of the US is shows signs of weakness, and the sub prime mortgage problem may be spilling over into the broader economy. In fact, the worse of this crisis is not upon us, as many financial institutions are yet to write down the related instruments to market value.

Already companies such as Merrill Lynch and Bear Sterns have wrote down US$ billions, and CEOs are taking the rap, and who has not yet stepped down is under pressure. In the case of the giant, Merrill Lynch, the CEO stepped down after writing down some US$8.4 Billion, with another US$4 Billion write off expected.

Spiraling oil prices
At the same time oil prices topped US$96 per barrel, and at the time of writing is expected to go to US$100 per barrel, and could very well get there by publication. The truth is there is no fundamental basis for a US$100 price, but because of the ongoing tension in the Middle East and lower production out of the Gulf, traders are speculating that supplies will be threatened. And this is going into the US Winter season when demand for oil will increase.

The result is that US consumer confidence and spending have fallen, and the likelihood of a recession next year has increased. In fact some sectors are already deemed to be in a recession. This has resulted in the Federal Reserve (Fed) reducing interest rates within the past six weeks by 75 basis points from 5.75% to 4.50%, which normally would lead to an increase in consumer spending and benefit our 25% of export earnings and 75% tourism earnings that emanate from North America.

This would also have been good news for interest rates also but within the context of investors seeking high quality paper (US Treasuries), the positive impact has been minimal. There is some benefit for us though, as the variable rate instruments will re-price lower, saving us on interest costs, and any new debt instruments we issue can be accommodated at lower rates once we maintain confidence in our fiscal targets especially.

At present fuel consumption levels, in Jamaica, it will also mean that our fuel import bill will increase by approximately US$300 to US$400 Million. No doubt this is the greatest threat that we face to our Balance of Payments (BOP).

The question one would ask then is, doesn’t this mean that Jamaica will suffer under the current global conditions. And the answer is, if we do nothing about it then certainly. However, I believe that we are in a position to determine how much the global conditions impact us and what we need to do is face the challenges and do what is necessary to lessen the impact, or even benefit from the global imbalances.

The greatest threat to Jamaica is not from the global front but comes from within. In other words it is how we manage our affairs, and seek to deal with the challenges, that will determine how we fare. And this has always been the case, as even with recent peaks in global growth we still only managed to eke out less than 2%. In fact, the projections from the World Bank and IMF are that global growth reached a peak in 2006 and is expected to decrease in this and coming years. In short we were unable to take advantage of the peaks in growth, primarily because we lack the capacity to grow beyond a certain level.

Implement not study
What we need to do is break the habit of just recognizing problems and talking and studying them to death. As an example the rise in oil prices is upon us, and while US$100 may not be sustainable, oil may not fall below a price in the US$80s per barrel. This is still a big threat to our BOP. But we do have the capacity to change that expected impact, as we presently consume approximately 40% of our fuel in transportation.

This in turn impacts the fiscal accounts, as the bus fares for children and the elderly are subsidized by the government. So it is essential that we do something about this now, which does not need any reduction of subsidies, as we have the ability to deal with it otherwise. My own opinion is that the JUTC can be a catalyst for this change, as if it can be made into an efficient, reliable, and secure transportation system then we can transition to where Jamaicans feel comfortable taking the bus rather than driving everywhere they want to go. This will also ease the traffic congestion, saving not only fuel but the need to repair roads sooner rather than later. In addition, less traffic congestion means more productive time spent at the office rather than on the roads.

The downturn in the US economy also is countered by stronger economies globally, such as China, India, Russia, Canada, Europe etc. The first three accounting for half global growth in 2006 and expected to do so in 2007. Certainly the strategy for Jamaica should be to see how much of our products we can diversify to these growing markets, and how much tourists we can lure from these strong markets. After all their currencies are at highs against the US$, and means stronger spending power. Especially going into the tourism winter season we need to start the wooing of these markets now, which may pay more dividends than focusing on the US market where consumers are careful about how they spend their dollar.

These options can begin to pay dividends within a few months but it is essential that we act now, and set timelines for action plans. We cannot remain in the mode of studying the problem and getting the widest possible consultation. By the time we are finished with all of that we will have suffered the full impact, as global markets today change rapidly and will not await our studies and consultations. We must measure the risks to the country between implementation and research. After all governments are put there to govern in the interest of the people, not consult on everything when it is apparent that the risks of delay are high.

It is within this light that I believe that the move by Audley Shaw to request that the multilaterals reconsider their policy on lending to middle income countries be applauded. Many have questioned how successful this move will be, as the multilaterals have maintained the policy for a while that countries like Jamaica do not qualify for this lower cost funding.

But my own view is that if they say no then we remain in the same position. If on the other hand they say yes then Jamaica could benefit from lower interest costs. In other words the upside is greater than the downside risks, so what is the big deal about the request being made. This as far as I am concerned is not only thinking outside of the box but a plea by the Finance Minister on behalf of all Jamaicans, as our fiscal accounts would be positively affected.

29 comments:

Anonymous said...

I needed to thank you for this very good read!! I definitely enjoyed every bit
of it. I have got you book marked to check
out new things you post…

Feel free to surf to my webpage - resting metabolic rate calculator

Anonymous said...

Thanks for sharing your info. I really appreciate
your efforts and I am waiting for your further write ups thank you once again.


Look at my webpage ... what should i weigh

Anonymous said...

What i do not understood is in fact how you're now not really a lot more smartly-liked than you might be right now. You're so
intelligent. You already know thus considerably in terms of
this subject, made me personally imagine it from numerous numerous angles.
Its like women and men aren't interested unless it's one thing to accomplish with Girl gaga!
Your personal stuffs great. Always handle it up!

My homepage how to lose weight

Anonymous said...

Everything is very open with a very clear clarification of the issues.
It was definitely informative. Your website is useful. Thanks for sharing!


My blog; healthy waist to height ratio

Anonymous said...

Thanks for every other magnificent post. The place else could
anyone get that kind of info in such an ideal approach of writing?
I've a presentation subsequent week, and I am on the look for such information.

Review my web page :: flying airplane games

Anonymous said...

Greetings! Very helpful advice in this particular article!
It is the little changes which will make the greatest changes.
Many thanks for sharing!

Feel free to surf to my blog post; airplane games

Anonymous said...

You actually make it seem so easy with your presentation but I find this topic
to be actually something that I think I would never understand.
It seems too complex and very broad for me.
I am looking forward for your next post, I will try to get the hang
of it!

my site :: http://whatiscommunitycollege.com/groups/diet-Dieting-fat-loss-and-healthier-eating-when-youre-about-forty/

Anonymous said...

Spot on with this write-up, I truly believe this site needs far more
attention. I'll probably be back again to read more, thanks for the information!

Feel free to visit my web-site www.lomoapolinario.org

Anonymous said...

Hello friends, fastidious piece of writing and fastidious urging commented here, I am
truly enjoying by these.

my web blog; rmr calculator

Anonymous said...

I don't know if it's just me or if perhaps everyone else experiencing issues with your blog.
It appears like some of the text on your content are running off the screen.

Can somebody else please comment and let me know if this is happening to
them as well? This may be a issue with my web browser
because I've had this happen before. Appreciate it

Here is my web-site diet plan for women

Anonymous said...

Your mode of explaining all in this paragraph is really nice, all be able to effortlessly understand it, Thanks a lot.


Look at my web site; diets that work

Anonymous said...

Thank you for the auspicious writeup. It in fact was a amusement
account it. Look advanced to far added agreeable from you!

However, how could we communicate?

My blog post - bankruptcy attorney florida

Anonymous said...

It's amazing to visit this site and reading the views of all mates on the topic of this paragraph, while I am also zealous of getting knowledge.

Here is my web site; diets that work fast for women

Anonymous said...

Thank you for the good writeup. It in fact was a amusement account it.

Look advanced to more added agreeable from you!
However, how can we communicate?

my web site crash diets that work

Anonymous said...

Woah! I'm really loving the template/theme of this site. It's simple, yet effective.
A lot of times it's very difficult to get that "perfect balance" between superb usability and visual appearance. I must say that you've done a awesome job with this.
In addition, the blog loads super fast for me on Internet
explorer. Excellent Blog!

Also visit my site healthy diet plans

Anonymous said...

I must thank you for the efforts you've put in penning this blog. I really hope to see the same high-grade content from you in the future as well. In truth, your creative writing abilities has encouraged me to get my own site now ;)

My blog; bmi chart for men

Anonymous said...

I loved as much as you will receive carried out right
here. The sketch is tasteful, your authored material
stylish. nonetheless, you command get bought an nervousness over that you wish
be delivering the following. unwell unquestionably come more formerly again as exactly
the same nearly very often inside case you shield this increase.



My blog - diets that work fast

Anonymous said...

Great article. I'm facing a few of these issues as well..

My website: diets that work fast for women

Anonymous said...

Hi, its good article on the topic of media print, we all understand media is a fantastic
source of facts.

My blog :: acai ultra reviews

Anonymous said...

Hey exceptional website! Does running a blog like this take a lot of work?
I've no understanding of programming but I had been hoping to start my own blog in the near future. Anyways, should you have any ideas or techniques for new blog owners please share. I know this is off topic however I simply wanted to ask. Many thanks!

Also visit my blog; how much should i weigh

Anonymous said...

When I initially commented I seem to have clicked on the
-Notify me when new comments are added- checkbox and from now on each time a comment is added I get four emails with the exact same comment.
There has to be a way you can remove me from that service?

Cheers!

Look at my web blog - crash diets that work

Anonymous said...

This information is priceless. How can I find out
more?

My blog post - Pure GCE Diet

Anonymous said...

It's very simple to find out any topic on web as compared to books, as I found this piece of writing at this site.

Here is my blog what should i weigh

Anonymous said...

Greetings! I know this is kind of off topic but I was wondering which blog
platform are you using for this website? I'm getting fed up of Wordpress because I've had issues with hackers and I'm looking at alternatives for another platform. I would be great if you could point me in the direction of a good platform.

Feel free to surf to my web page ... laser cellulite treatment

柯云 said...

2016-06-16keyun
nike blazers uk
ray ban outlet
ralph lauren polo shirts
hollister clothing store
louis vuitton outlet
nike running shoes for men
nike free uk
insanity workout
coach outlet store online
louis vuitton outlet
oakley vault
coach outlet online
red bottom shoes
beats by dr dre
cheap basketball shoes
oakley sunglasses wholesale
michael kors outlet
cheap ray ban sunglasses
toms outlet
michael kors outlet online sale
tory burch flats
louis vuitton
coach outlet
nike roshe run mens
adidas originals
adidas superstar
louis vuitton outlet
ray bans
michael kors bags
the north face jackets
hollister clothing
adidas running shoes
coach outlet
timberland boots
burberry handbags
louis vuitton handbags
beats by dre outlet
ray ban sunglasses
coach outlet

raybanoutlet001 said...

hugo boss sale
michael kors outlet
kate spade outlet
nhl jerseys
ugg boots
replica watches
jordan 4
kobe 9
cheap oakley sunglasses
yeezy shoes
2017.7.26

aaa kitty20101122 said...

lacoste polo
adidas outlet online
adidas yeezy boost
links of london outlet store
brady jersey
michael kors handbags
Kanye West shoes
yeezy shoes
nike polo shirts
adidas superstar

郑佳颖 said...

yeezy shoes
nike mercurial vapor
longchamp handbags
air jordans
air jordan
michael kors purses
jordan retro 13
adidas tubular
michael kors factory outlet
air jordan shoes

jeje said...

yeezy boost 350 v2
jordan retro
hermes belt
longchamp bags
fitflops sale clearance
pandora charms
kobe 11
adidas tubular x
kevin durant shoes
yeezy