The downward spiral that the Jamaican economy has been locked in for the last two decades appears to be deepening and time may quickly be approaching for the T&T Government to do more than sit on the sidelines mouthing expressions of concern.

In the space of a few days, Jamaica has been faced with the gut-wrenching, and obviously less than amicable, resignation of its Central Bank Governor, Derick Latibeaudiere, which was quickly followed by the downgrade of the country’s long-term foreign and domestic currency rating by Standard & Poor’s, the ratings agency. The fact that Mr Latibeaudiere chose to resign in the middle of the negotiations for a new International Monetary Fund stand-by agreement—negotiations for which he was the designated lead negotiator—surely reflects the deep and irreconcilable policy differences between himself and Jamaica’s Minister of Finance Audley Shaw. Given the obvious consequences of such a resignation at such a delicate time, the fact that Mr Shaw was not able to persuade the Governor to stay until the end of the negotiations for the stand-by agreement does not reflect well on the Government of Jamaica. The Government there should have been able to predict that Standard & Poor’s would have taken a dim view of the resignation. The rating agency did, opting to lower its credit rating on Jamaica from CCC+ to CCC, making it clear in the accompanying statement that the downgrade was directly linked to the resignation and raising the possibility that the resignation could impact the timeframe for reaching the standby agreement with the IMF.

What was more disturbing in the rating agency’s statement was the possibility that Jamaica’s dire economic straits could lead it to renegotiate its huge debt with its creditors in an effort to reduce its debt service burden, which now accounts for about 60 per cent of general government revenue. The truth is that the global economic turmoil has lashed Jamaica harder than anywhere else in the Caribbean. Recessions in most of the developed world have meant a sharp decline in Jamaica’s three main sources of foreign currency—its exports of alumina, the earnings from tourists, and remittances from Jamaicans living in England, Canada and the US. This decline has been coupled in Jamaica’s case with the country’s long-standing tendency to live beyond its means by reverting to borrowed money from the international and domestic capital markets instead of swallowing the bitter medicine of reducing expenditure. Clearly, then, Jamaica needs to engage in some serious adjustment for which the country will have to undertake fundamental soul searching. Jamaica’s economic woes present an opportunity for Prime Minister Patrick Manning to demonstrate real Caribbean leadership. In June, Mr Manning announced that exporting liquefied natural gas to Jamaica to stimulate investments in that country’s alumina sector was considered a matter of “national priority” for T&T. Since then, very little has been heard from the Prime Minister about this proposal, which would lower the cost of producing alumina.

Given the fact that T&T is in the process of building an aluminium smelter, which uses alumina as its feedstock, Mr Manning should have followed his announcement by holding talks with the Jamaica Government on the possibility of swapping T&T’s LNG for Jamaica’s alumina or the possibility of the T&T Government taking over ownership of the Jamaica Government’s 45 per cent stake in Jamalco, an alumina company which is 55 per cent owned by aluminium giant Alcoa. It could be that the talks between T&T and Jamaica await the outcome of the local Court of Appeal decision in the case brought by Alutrint and the EMA against the judgment of a High Court judge. If so, the negotiations could be contingent on the outcome of the judicial process. At this time and given the state of Jamaica’s economy, it would be appropriate for Mr Manning to follow up on June’s overture with some concrete discussions aimed at stimulating Jamaica’s productive sector. Those discussions should include a possible role for T&T companies in Air Jamaica and the three sugar companies that Jamaica is seeking to divest.