Prime Minister Bruce Golding speaking at a town hall meeting in Mandeville last week. - File
The never-ending drama of daily life in Jamaica is such that it is easy to become distracted and to forget about what really matters. The current nine-day wonder concerns the Supreme Court's decision to void the general election results in Northeast St Catherine and to declare the seat vacant. But Northeast St Catherine will come, go and soon be forgotten. What will not be so easily forgotten are our dire long-term economic prospects.
We all know by now what the bad news is: remittances have collapsed by about 14 per cent; bauxite-alumina has been cut in half and is more likely to fall by about 60 per cent; tourism, which had been holding up in February, seems to have dipped sharply in March, with Dennis Morrison reporting last week in this newspaper that there has been a double-digit drop in arrivals from the US. On the whole, the PIOJ reports that the economy declined 2.8 per cent in the first quarter of this year. The one ray of hope is domestic agriculture - and, given the crisis in our countryside, it is an important ray. Domestic agriculture bucked the general trend and increased by 10 per cent in the first quarter of 2009.
All of this poses a grave immediate challenge to living standards in Jamaica. What this means in the short term is that a return to the International Monetary Fund (IMF) seems inescapable. Where we must concentrate our efforts is on the terms of any IMF assistance - to ensure that draconian conditionalities which are not being imposed on developed or Sub-Saharan African countries, are also not imposed on us.
REPOSITIONING BAUXITE-ALUMINA
Tourists at the Spanish-owned Riu Hotel in Ocho Rios, St Ann, October 21, 2007. The new trade agreement with the European Union stresses fair competition between Europe and the Caribbean in the lucrative hospitality sector. - File
But the really huge issue before us is not the short but the long term. In this area, the handwriting is on the wall and we must face up to it now. We are facing a future in which remittances will be drastically reduced, three of our four bauxite-alumina plants are uncompetitive and in which the US tourism market is likely to be a declining component of our tourist arrivals. If we do not act now to address these challenges then a severe collapse of our overall economy like what happened in the 19th century will be unavoidable.
To his credit, Prime Minister Golding seems to be turning his mind to precisely these long term challenges. In his first town hall meeting in Mandeville, he presented a sobering vision of the crisis ahead. What was more important, however, was this intriguing statement reported in a story in the Observer newspaper written by Garfield Myers.
In the course of discussing the crisis which UC Rusal faced in its business operations and the fact that this company owned 55 per cent of the Jamaican bauxite-alumina industry, Golding made the following intriguing statement: "We are going to have to reposition our bauxite alumina operations not only in terms of the technology and investment which have to be made, but also in terms of control and ownership because what is there now does not offer us any assurance or security for the future." Michael Manley must be smiling in his grave!
The fact is, whatever our ideological outlook - whether we prefer to quote Adam Smith or Karl Marx - we cannot simply stand idly by while UC Rusal collapses and 60 per cent of the foreign exchange earnings from our largest merchandise export vanishes forever. Three of the four plants, as Golding and others have pointed out, suffer from grave energy inefficiencies. In contrast to Alcoa, which is producing at about US$170 per tonne, the other older plants are producing at over US$300 per tonne. They would have to cut their costs of production by at least US$50-US$70 per tonne to even have a hope of re-opening.
There is not the slightest chance of UC Rusal or Glencore putting up the kind of investment needed to retrofit these plants. So, like it or not, we have to look elsewhere. If we are to have a vibrant bauxite-alumina industry in the future, therefore, the state has got to play a central role and, hopefully persuade the Chinese (possibly with some Norwegian input) to assist us in this area along the lines of their investments in Africa and Latin America.
Serious repositioning
The second area in which some serious repositioning is needed is the tourism sector. At present, what is saving us here is huge growth in the Canadian market which, as Dennis Morrison has pointed out, surged by as much as 27.7 per cent between January and March on top of the 23.9 per cent increase in 2008. Two important things to note here are the following: largely because of its strong raw materials base and the prudence of its banks, the Canadian economy is holding up relatively well so far. The second thing to note is that this increase represents a tapping into a largely new segment of the market in western Canada and is not just due to a surge in the Ontario area. As many others have pointed out, a continuation of this surge, for which we have largely to thank the Spanish hotels, is absolutely critical for our long term economic future.
Nonetheless, the US market is still 60 per cent of our total arrivals market and there is no doubt that US travel to Jamaica will continue to remain in the doldrums and even decline much further. This is the real challenge we face: if the US market continues to decline we will need more than the surge in the Canadian market to replace it. Where will these new arrivals come from?
One real possible source is Brazil. The Brazilian economy is the ninth largest in the world with a population of 196 million people. It grew by about five per cent in 2008 but this is expected to decline to about 0.5 per cent projected for 2009. Nonetheless, Brazil, with an even stronger resource base than Canada, is expected to weather the global financial crisis well and to emerge on the other side even stronger than before. There is a large and relatively wealthy upper, upper-middle class, middle class and working class in Brazil who can afford to travel to places such as Jamaica for vacations. Thanks to persons such as Jimmy Cliff, the Jamaican brand is already fairly well known in Brazil. Moreover, if my memory serves me right, there are key Jamaican tourist interests who also have significant investment in the Brazilian tourist industry.
This is, therefore, clearly an area for some significant repositioning. Again, this thrust can only be led by the Jamaican state, via the Ministry of Tourism because it would require a real cultural makeover of our existing tourism product - with exciting possibilities all round.
But the task of repositioning tourism is a still larger one. Here the very real question is whether we can expand tourism substantially in the long term and double our current level of arrivals from 2.5 million to about five million per year. The point of this would be to find a source of additional foreign exchange which could replace the fallout in remittances and bauxite-alumina. Moreover, such an enormous increase in our visitor arrivals would also help us to resolve the continued problem of a lack of linkages between tourism and domestic agriculture.
TOURISM OF THE HILLS
What this kind of massive tourism expansion would mean is developing a tourism of the hills rather than the existing one of a tourism of the beaches. One is thinking here of tourists in the hills of Portland, St Thomas, Clarendon, Manchester, Trelawny, St James, Westmoreland and Hanover. One is also thinking of developing an industry in Kingston. All this is an extremely steep hill to climb, to put it mildly. Such a vision also has the most severe implications for our natural environment, our social life and for Jamaica's culture. Nonetheless, the seriousness of our crisis is such that no options can be left off the table.
After we get over the Northeast St Catherine hullabaloo, it would be a good idea for all of us to focus our minds on some of these critical issues which Golding raised at his Mandeville town hall meeting.
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