Debt Free Jamaica?

Chinese companies, often state run, have been active buyers during the past few years in the Caribbean and Africa. In the following comments from Omar Davies, a ranking PNP politician and former cabinet minister, Davis promotes further ties with the BRIC countries. From recent Chinese activities in Jamaica, I take his comments to have a slant towards China.
The article says that according to Bank Of Jamaica statistics, China and Japan are not listed as "principal trading partners". I do not know the BoJ's criterea for listing but Chinese and Japanese products are ubiquitous in Jamaica. To begin with, Japanese used cars and trucks have transformed Jamaica's roads, adding thousand of new to Jamaica vehicles in the past 15 years.

BRICs needed to build debt-free Jamaica — Davies

BY STEVEN JACKSON Business writer jacksons@jamaicaobserver.com

Wednesday, March 02, 2011

JAMAICA's debt worsened nearly 50 per cent under the present administration and it won't grow its way out unless aligned with the prosperous BRIC nations (Brazil, Russia, India, China), according to Dr Omar Davies, opposition spokesperson on finance.

"(Finance minister Audley Shaw's) major achievement is the extent to which he has borrowed more and made us more indebted. When I left in 2007, the debt was $950 billion, we have now moved to $1,400 billion ($1.4 trillion) and he says, 'look how great I am'," Davies told an audience at a People's National Party Youth Organisation (PNP YO) meeting on the Univeristy of West Indies (UWI), last Thursday. "I can't help scoring this but that is his major achievement, and it doesn't matter what price you are borrowing at if the principal is growing. So we are a highly indebted country."

Davies' comments are corroborated by International Monetary Fund statistics which indicate that in only three years the island's nominal public debt jumped 30 per cent to $1.7 trillion or 139 per cent of gross domestic product (GDP) versus $1.3 trillion in the fiscal year 2008/9 at the start of the global economic downturn. Davies was however finance minister for much of the 18-year administration of the PNP under which the debt ballooned to record figures up to 2007.

Jamaica's best growth prospect according to Davies is to trade heavily with Latin America and Asia, the fastest growing economies in the world.

"The future cannot be simply appending yourself more to the countries which have low growth prospects. Regardless of how much the US recovers, the US economy won't grow by more than 1.5 per cent per annum. Therefore if all of our aspirations of attachments are to the US then you are by definition reducing your own prospects for growth. There is a need to diversify our economic linkages," he stated.

Davies comments on the island's lack of diversity in its trading partners is underscored by the fact that China and Japan the second and third largest economies are not listed as 'principal trading partners' with Jamaica based on Bank of Jamaica statistics. Countries listed include the US, Canada, UK, Norway, the European Union, the Caribbean Community and Latin America (as a single group).

"You will not abandon your old friends but expand your circle of friends. Whilst keeping the UK, Canada and US (for obvious reasons) but realising that our future chances of growing our economy cannot be aligned with countries which can't grow by over 1.5 per cent. Therefore we need to seek to identify countries with similar challenges," he said.

Jamaica — characterised by high debt and slow growth — is projected to grow the seventh slowest in the world up to 2015 according to IMF statistics previously anlaysed by the Observer. Jamaica is projected to grow about 1.3 per cent annually over the next five years, or three times slower than the world economy, according to charts within the World Economic Outlook (WEO) published this month by the IMF. The only territories -- amongst 150 -- projected to grow at a slower pace on average than Jamaica over five years are St Kitts & Nevis at 0.3 per cent, oil-rich Venezuela at 0.33 per cent, Brunei Darussalam at 1.03 per cent, Croatia at 1.03 per cent, Antigua at 1.13 per cent and Equatorial Guinea at 1.23 per cent.

Interestingly, three of the six territories trailing Jamaica are in the Latin America and Caribbean region. However, generally, the region is projected to outperform the world economy at 4.5 per cent on average over the period due to stellar performances expected from Brazil, Argentina, the Dominican Republic, Peru, Chile and Colombia.

"The US is still the dominant country, but its dominance is in decline. China has become the number two economy and the only question is when will they intersect. When one is growing by 1.0 to 1.5 per cent and the other is growing at seven and 10 per cent the graphs will intersect sooner than later," stated Davies.