Living in the Caribbean it is quite possible to imagine that the world sees the region and its economic fortunes in an unchanging light. As a consequence it is sometimes hard to understand how rapidly external sentiment can change. Nothing demonstrates this better than two Caribbean events in London in the past ten days at which engaged groups of individuals from the business community participated at levels not seen for some years by the countries concerned.
The first was a seminar on Cuba’s new investment law and the opportunities being made available in sectors from biotechnology to tourism and the Special Economic Development Zone at Mariel. The second, a week later, was a series of meetings around a visit by Jamaica’s Minister of Transport, works and Housing, Omar Davies, at which large financial institutions and major European companies were able to discuss the countries’ infrastructural plans for ports, roads and railways. In both cases there was a genuine engagement after years of scepticism and a sense of new found change and opportunity.
In the case of Cuba, the interest was sparked not just by the new foreign investment law, but also by an awareness that the US Chamber of Commerce and significant US and EU figures had begun to visit and speak positively about change and new business opportunity in that country.
When it came to Jamaica, again the story was of new opportunity and the feeling that, against the odds, the country was successfully delivering its IMF economic adjustment programme. Again a visit played a role.
In a demonstration of confidence, the IMF’s Managing Director, Christine Lagarde, visited Jamaica on 27-28 June. During her visit, her commendation of government, opposition and civil society for their commitment to reform Jamaica’s economy and for the actions they had taken was particularly well received externally in relation to a country that is perceived to have a history of failing to stay the course politically on delivering IMF programmes.
In so publicly praising Jamaica she sought to make clear that both the IMF and the country were light years away from the negative press that both the institution and Jamaica received in 1980s when the body was widely criticised for not taking the social or political impact of its policies into consideration when designing economic reform packages for recipient nations, and for this and other reasons a period when Jamaica came close to the edge of political instability.
During her visit Ms Lagarde also sought to demonstrate that in the Caribbean, where the Fund has programmes in Grenada, St Kitts, and Antigua, and is closely monitoring economic developments in Barbados, the Dominican Republic, the Bahamas, Belize, Dominica and St Lucia, that it can help achieve success in small island states, especially if there is a consensus on the need for a changed approach to economic management.
Implicit in her remarks and presence in Jamaica was the message that, despite criticism and doubts in the region, the Fund and its members were sensitive and sought to find socially responsible ways of helping governments manage programmes, especially in small economies where the dynamics are different.
In Jamaica’s case there was an additional but just as important message. Her visit and words of support were intended to bolster the national consensus between Jamaica’s government and opposition and within civil society and to encourage all parties to remain solidly behind delivering a socially difficult programme if the island is to become globally competitive and experience long term growth.
During her visit she had the opportunity to meet with representatives from the private sector, trade unions and the opposition, telling them that she had been impressed by the high degree of consensus on the need to reform the Jamaican economy. Referring to the island’s Economic Programme Oversight Committee she said: “This broad support for the reforms has been essential and will need to be maintained to ensure continued progress and confidence build-up in the economy.”
Her visit came as Jamaica moved into the second year of a four-year programme of accessing US$948.1M under an IMF Extended Fund Facility agreement. This runs through to 2016-17 and seeks to create the conditions for sustained growth through a significant improvement in the fiscal and debt positions and competitiveness.
Ms Lagarde said that the IMF’s overall objective in the region and elsewhere is to bring about sustainable and inclusive growth and that it is paying special attention to the needs and concerns of small states. The Fund, she said, saw its role as a partnership, and was engaged in capacity building and providing technical assistance and training in order to create stronger financial management systems.
Her visit to Jamaica was not of course without criticism. A number of individuals in academia and the opposition expressed concern that not enough account was being taken of local disquiet about the IMF programme’s effective devaluation of the Jamaican dollar; the social impact of the wage freeze for public-sector workers; the introduction of new taxes; or the difficulties associated with encouraging the local private sector to invest at home. Other suggested that the whole process could fall apart as the future of the PetroCaribe arrangement whereby Venezuela provides oil on hugely subsidised terms remains uncertain.
Despite this, Jamaica’s ability to meet the terms of its programme has dumfounded its critics, with the country meeting successive IMF targets and introducing fiscal measures and regulations that are likely to significantly help the country in encouraging future investment and its ability to compete.
While often painful and difficult, change based on consensus, allied to what amounts to an international vote of confidence by high level visitors, can quite rapidly turn around perception and generate internationally a degree of optimism amongst those who form investment opinion.
Previous columns can be found at www.caribbean-council.org
