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CaPRI

CaPRI Analyzes the Jamaica Debt Exchange

The Jamaica Debt Exchange (JDX) has and will make a significant positive impact on the country’s debt situation, and has the potential to turn Jamaica back from the path of increasing indebtedness that it has been on for the past 14 years. However, the JDX alone is insufficient. The government must pursue a programme of disciplined management of liabilities accrued outside of central government, must see through its stated intention to aggressively rationalize the public sector, and embark on comprehensive fundamental tax reforms, if Jamaica is to see real reductions in the country’s debt burden.

So says the Caribbean Policy Research Institute (CaPRI), in the first comprehensive independent analysis of the Jamaica Debt Exchange programme.

Dr. Damien King, CaPRI’s Research Director, presented these findings and recommendations at the Terra Nova All Suite Hotel this morning to a group of private and public sector leaders, with wide representation from the country’s financial institutions.

The study “Achieving Fiscal Sustainability: The JDX and Beyond”, by Dr. King and CaPRI Research Officer Anika Kiddoe, compared the JDX to similar recent debt restructuring programmes in other countries, and found that, contrary to expectations, capital markets do not tend to punish borrowers who restructure their debt, particularly if, as Jamaica has done, they do so pre-emptively. In fact, the pre-emptive nature of Jamaica’s debt restructuring signals to creditors that the government is not unwilling to pay, but is unable to pay, which is a key positive difference for creditors.

Dr. King also pointed out that, contrary to popular belief, it is not excessive government expenditure, nor continued borrowing, that has contributed to Jamaica’s debt burden. But rather, it is the assumption of debts and expenditures outside the central government that has led to the country’s high debt : GDP ratio. In particular the assumption of the debts of collapsed private banks into what became FINSAC, Air Jamaica, and the sugar industry, have been some of the key contributors to Jamaica’s debt burden.

While the study’s findings suggest that Jamaica stands to benefit from the structure, design and timing of the Jamaica Debt Exchange, Dr. King cautioned that there are many other difficult policy measures that government decision makers must take, if the JDX is to fulfil its potential as a turning point in Jamaica’s dismal economic trajectory of the past decade and a half.
 

CaPRI Blazing the Trail in Significant Research

FOR IMMEDIATE RELEASE: The Caribbean Policy Research Institute (CaPRI) continues to blaze the trail of relevant, policy research as it seeks to provide Caribbean policymakers and decision leaders with timely, empirically based research on issues that are critical to the region’s economic and social development.Its report, on the Jamaica Debt Exchange, was the first clear examination of Jamaica’s debt dynamics that showed definitively that it was the state’s assumption of the debts and liabilities of non-state and parastatal entities that had mired Jamaica in its debt burden, rather than the conventional notion that the debt had accumulated due to fiscal imprudence.Within the next few months, three new reports will be released and launched at public forums, as is CaPRI’s tradition, addressing the most important social and economic issues in Jamaica today. Tax reform is one of the most critical areas to be addressed if Jamaica is to overcome its decades-long economic stagnation and move to an economic growth path. The restructuring of the public sector is another crucial linchpin in the country’s economic recovery efforts. And the issue of crime and its causes, perhaps the issue of greatest concern for the country, will be tackled with a quantitative assessment of the various socioeconomic factors that led to the evolution and rise of crime in Jamaica over the last 20 years.Later on in 2010, CaPRI will share its findings on its research on gangs and Jamaican politics. At present, research is being conducted in gang territory to find out the level of support for extant gangs, what if any services the gangs provide, and how secure their hold is on the communities. The research aims to answer the question: 'Will removing one gang leader just create the opening for another and if so, what can be done to alter the situation'. A particularly rich opportunity has recently presented itself in Kingston, Jamaica to test this theory; with the extradition of the alleged gang-leader Christopher “Dudus” Coke to face gun and drug related criminal charges in the US. The Jamaican government’s initial reluctance to comply with the request set off a dramatic and far-reaching debate in Jamaica about the role played in the political system generally by “area-leaders” within specific communities and their popularity on the street. To properly inform the debate, CaPRI decided to conduct a survey of attitudes towards both the dons and the state (including the police) across the country, with enhanced sampling in some well-known gang-controlled communities.Based in Kingston, and with a newly opened branch in Bridgetown, Barbados, CaPRI endeavours to bring Caribbean scholars, together with policy makers, civil society leaders, business people and intellectuals from all over the world, in a collaborative effort to better understand and address the multiple reasons undergirding Jamaica’s socio-economic tribulations and impeding development.As it moves forward, CaPRI seeks to build on its groundbreaking work, such as its 2008 report on Jamaica’s informal investment schemes which was the key document informing the Jamaican government’s response to the fallout that followed their collapse, and was cited by the Inter-American Development Bank, the International Monetary Fund and the World Bank as the most reliable source of information regarding the schemes, their dynamics and the most appropriate policy responses.Capping the year 2010 off with a report addressing sustainable water management, CaPRI remains fully engaged in ongoing research projects that utilize the best of the region and its diasporas’ intellect and expertise, as it heads into the fourth year of its commitment to contribute research and opinion of the highest academic integrity to the contemporary policy debate regarding Caribbean development.

The Economic Partnership Agreement (EPA): Towards a New Era for Caribbean Trade

The first research published on the Economic Partnership Agreement (EPA) that comprises an objective empirical analysis of the controversial trade agreement that was signed in 2008 has recently been released. The paper, by The Caribbean Policy Research Institute (CaPRI) together with the Centre for International Governance Innovation (CIGI) is entitled, “The Economic Partnership Agreement (EPA): Towards a New Era for Caribbean Trade.”

The EPA paper, authored by UWI Mona lecturer Diana Thorburn, CaPRI Founder and President John Rapley, Head of the UWI Mona Department of Economics  and CaPRI Senior Research Fellow Damien King and CaPRI Research Officer Collette Campbell, sought to determine the impact that the EPA would have on signatory CARIFORUM (CARICOM plus the Dominican Republic) countries, with specific regard to the effect on production patterns and trade balances with Europe, and the fiscal effects that the agreement would have considering that a key part of the agreement is the lowering of taxes and duties on European imports.  The paper also explored the political economy dimensions of the virulent debate that surrounded the signing of the agreement in the latter half of 2008.

The signing of the EPA signalled a new era of trade relations between the European Union (EU) and the Caribbean, after decades of agreements guaranteeing markets and preferential prices for Caribbean exports. The new agreement is reciprocal, meaning that Caribbean countries must also now open their markets to EU exports, and is compliant with the rules and precepts of the World Trade Organization (WTO), the governing body of international trade.  After years of negotiations, however, just as the agreement was about to be signed, a current of criticism emanating from some of the Caribbean region’s most esteemed economists and public policy makers arose and quickly gathered strength as church leaders, UWI academics, and some civil society non-governmental organizations joined the chorus for the Caribbean to not sign.

This paper found that, contrary to the vociferous dissent that argued that the agreement would prove disastrous for Caribbean economies, the economic effects on the four countries studied—Jamaica, Guyana, Trinidad and Tobago and St. Lucia—would likely be minimal. Jamaica, for instance, stands to improve its trade balance with Europe, but only marginally. Customs revenues will decline as a result of the lowering of import taxes on European goods, but again only marginally.

The political economy dimensions of the agreement, however, and especially the debate over the agreement, are more profound. The paper suggests that the agreement, which was entered into by every CARIFORUM member state, despite the debate and despite the open criticism even by some CARIFORUM heads of state, signals the end not only of a trading era, but of a school of thought that undergirded decades of Caribbean public policy making.

CaPRI, a highly regarded independent, regional think tank, has partnered with CIGI on several research projects, including CaPRI’s Beyond Tourism and Social Partnership papers. CIGI strives to identify and generate ideas for global change by studying, advising and networking with scholars, practitioners and governments and aims to raise capacity to effect change in public policy in Canada, where CIGI is based, and around the world. The document will form a part of CIGI’s Caribbean Economic Governance Project. 

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