Jamaica’s Surly Celebration Chant
Jamaican shares stayed at a loss on a EUR 200 million bond maturity due in July as the island marked its 50th independence anniversary with subdued events. GDP growth is barely positive while inflation could touch double digits by year-end, according to the central bank. The fiscal deficit has not budged at 6 percent of GDP as the new Simpson administration tries to revive a lapsed IMF standby arrangement through introduction of food and other taxes. Tourism inflows and remittances were up 5 percent in the first half but the trade deficit ballooned for a 20 percent drop in international reserves to $1.5 billion. Officials went on a road show to test appetite for potential global debt rollover, but the July payment will instead be aided by local banks that have just organized a central credit bureau to shift toward consumer activity. Foreign investors in the region fear another restructuring round for government obligations that may impose outright haircuts across-the-board in view of the 140 percent of output public debt ratio and neighbor reopening as in Belize. There the high-yield $550 million “superbond” plunged as re-elected prime minister Barrow began renegotiations, reflecting a campaign promise even as the August installment at the step-up 8.5 percent coupon will be honored. Greylock Capital, which was active in the recent Greek exchange steered by the IIF heads the creditor committee, and talks so far have not included formal interest or principal reduction requests. A key element will be the disposition of liabilities assumed under recent utility company nationalizations for alleged contract performance failures. With additional electricity capacity banana and sugar production have jumped by a third to join steady visitor revenue on a 2.5 percent growth and inflation forecast for 2012. The sovereign rating remains near default status as debt-GDP is 85 percent, as an even greater load claimed Barbados’ investment grade at the opposite end of the spectrum after a harsh IMF report.
Fund relations are an overriding consideration in the Dominican Republic where bonds have firmed on political continuity which may revive a program. FDI covers the current account gap but budget and power deficiencies linger. Oil price decline should lighten the import bill, as metal exports rise with additional finds. However cross-border funding conditions have deteriorated in the past quarter according to the IIF’s survey of Latin America-Caribbean banks despite increased demand. The overall emerging market index was unchanged at 48.5 for the fourth negative period in a row. Stricter credit standards have been accompanied by higher NPLs and regional tightening may soon affect trade finance as its independence is muffled by deleveraging and regulatory screams.
