After a decade of anemic growth, the Jamaican economy moved into recession towards the end of 2007 on the back of the global economic meltdown. The crisis was particularly felt in Jamaica due to the existence of structural impediments such as declining productivity, high debt, and crime. Between late-2007 and 2010, Jamaica experienced thirteen quarters of continuous economic declines.
In early 2010, the Government of Jamaica signed a US$1.27 billion Stand-By Arrangement (SBA) with the International Monetary Fund (IMF), and restructured high interest government debt at lower rates and longer maturities through the Jamaica Debt Exchange (JDX). Only three of the eight formal reviews envisioned for the SBA were completed, and the program is set to expire during the first-half of 2012.
Jamaican exports began to increase in 2010, largely due to the reopening of an alumina refinery and an upswing in international commodity prices. Proceeds from coffee exports, which rose as Jamaican Blue Mountain coffee gained near-iconic status in Japan, substantially dropped and highlighted the danger of concentrating on single market sales of a low volume premium product. The demand shock forced coffee players to seek and develop new markets in the United States and China. Nontraditional exports did not fare as badly during the crisis, suggesting these products are not as vulnerable to external demand shocks
As of February 2012, the Bank of Jamaica is forecasting that during FY 2011-2012 (i.e., April 2011-March 2012), Jamaica will experience GDP growth of 1%-2% and inflation of 6%-8%.
he United States remains Jamaica’s main trading partner, generally accounting for about 40% of the nation’s total trade. Jamaica’s other major trading partners include Canada, China, Trinidad and Tobago, Japan and the United Kingdom. Jamaica purchases significant amounts of petroleum from Venezuela.
Bilateral relations between Jamaica and the United States are good, although the two countries disagree on a few specific issues, such as relations with Cuba, and at times vote differently on issues before the United Nations.
As of February 2012, Jamaica lacks credit reporting agencies. The nation’s courts lack resources and have a backlog of cases. Businesses that seek redress from the courts on matters pertaining to business disputes often complain about the high financial costs of litigation and the slow pace of relief. The Embassy is aware of at least one business entity with a Jamaican court order in its favor, which still experienced great difficulties in collecting on an unpaid debt that it was found to be legally due. Under these circumstances, it is particularly important to conduct thorough due diligence on potential business partners in Jamaica.
Corruption remains a major concern among Jamaicans, many of whom believe it contributes to the nation’s high crime rate. Despite numerous allegations of public corruption and at times arrests, there have been essentially no convictions of high ranking government or public officials, although in November 2011, Mike Henry, the former Minister of Transportation resigned in the midst of question about spending by his ministry. This received notable press attention in Jamaica. According to Transparency International’s Perception Index for 2011, Jamaica was tied in 86th place with Bulgaria, Panama, Serbia, and Sri Lanka.
Serious crime declined in Jamaica following the 2010 extradition of drug lord Christopher “Dudus” Coke, who pleaded guilty to racketeering and conspiracy to commit assault charges before a U.S. court in August 2011. There are concerns that the rate of serious crime in Jamaica could rise, as in the first seven weeks of 2012, Jamaica’s murder rate was over 20% higher than in the same period in 2011. On February 21, 2012, Jamaica’s Minister of National Security announced that the Government of Jamaica was launching a five-year crime plan with a focus on pursuing the proceeds of crime and increasing social intervention in communities dominated by criminals. Although the goal of the five-year program is to reduce Jamaica’s crime rate to first world levels by 2017, crime remains a significant concern and additional security measures add considerably to the cost of doing business in Jamaica.
Since the early 1990’s, Jamaica has embarked on a program of gradual duty reduction (trade liberalization). Permits and import licenses are now mostly limited to meat, produce, drugs, firearms, used tires, and two-way radios. While trade liberalization has made it easier to import into Jamaica, some technical (including phyto-sanitary) barriers still exist.
Jamaica is a member of the Caribbean Common Market (CARICOM) and as such, goods imported from outside of CARICOM are subject to a common external tariff (CET). Goods certified to be of CARICOM origin tend to enjoy duty-free status, and are therefore not subject to customs duty. However, these and other goods may be subject to a 16.5% General Consumption Tax (GCT) at the time of purchase by consumers in Jamaica. For information on CARICOM, please visit www.caricom.org
Imports attract a Customs User Fee and a Standards Compliance Fee (SCF). The SCF is 0.3% of the CIF value of the import and is collected on behalf of the Jamaica Bureau of Standards. Many items (such as motor vehicles) are subject to additional special taxes. The General Consumption Tax (GCT) is also usually payable upon entry. The GCT is a sales tax, which is recoverable from the final consumer.
Electricity costs that have averaged about US$.35 per kilowatt hour, discourage investment and make the running of existing businesses expensive. The Government of Jamaica has embarked on some efforts to increase energy efficiency and diversify electricity generation beyond thermal diesel generators (which provide about 92% of Jamaica’s electricity needs). Jamaica has yet to adopt a strategic, long term energy strategy. There has been discussion and some steps have been taken to possibly use Liquid Natural Gas (LNG) as the primary fuel for generating electricity, but no credible commitments have been made and discussion of using alternative sources like coal also continues.
The United States is Jamaica’s primary trading partner. Proximity, quality and service have encouraged Jamaican businessmen and consumers to purchase from the United States. Logistically, Jamaica has excellent air, sea, and underwater communications cable links with the United States and the rest of the world.
While economic growth in Jamaica continues to be sluggish, some sectors provide good prospects for exporters in the United States, including in agriculture, pharmaceuticals/chemicals, and machinery/ transportation equipment. Jamaica’s tourism sector also offers opportunities for investment.
In late 2011, a major U.S. firm engaged in business process outsourcing (BPO) announced its intent to enter Jamaica. Given the push by the Government of Jamaica to expand the island’s BPO sector, those U.S. exporters that service the BPO sector, may find other sales opportunities in Jamaica.
Market Entry Strategy
Agents and distributors are commonly used as the conduit to enter the Jamaican market, but the U.S. Commercial Service also assists U.S. firms in their search. The Foreign Commercial Service of the U.S. Department of Commerce no longer has a presence in Jamaica, but serves the region out of its office in Santo Domingo, in the Dominican Republic.
Much of the trade between Jamaica and the United States is the result of longstanding business relationships. In this context, person-to-person networking is particularly important.
While business can be conducted through telephone conversations, most Jamaican businessmen are more comfortable with face-to-face meetings when negotiating business arrangements. Relationship marketing is also prevalent, with distributors generally interested in visiting their suppliers to conduct due diligence. Exclusive arrangements, 30-day credit, and franchising arrangements are common business practices.
SOURCE: State.gov (USA)