America’s capital market told Jamaica wants investments, not loans

Industry and Investment Minister Aubyn Hill delivering remarks at the Micro Small and Medium-sized Enterprises (MSME) Business Roadshow at the Golf View Hotel in Mandeville on Thursday, August 10, 2023. 

The capital market in America is getting a nudge that Jamaica wants investments, not loans with the acknowledgement that markets are rewarding Jamaica after years of painful adjustments.

Industry, Investment and Commerce Minister, Senator Aubyn Hill, who is now in New York marketing the island as investment ready highlighted that Jamaica, which was viewed as an emerging markets “basket case” has now transformed into a standout case. “We had to go through very tough and bitter doses of medicine, fiscal medicine, to get our house back in order,” explained Minster Hill, speaking during in an interview in New York.

Continuing, Yahoo Finance quoted him as saying now “everything seems to be going well and it’s not because we do believe in providence, but it’s also because of a great deal of good and serious management.”

The island of 2.8 million people recently posted one of its lowest unemployment rates in history, slashed its debt levels by nearly half and recorded economic growth in the first half of 2.9 per cent.

This month, Jamaica won a rare sovereign credit upgrade from S&P Global Ratings, which is already reaping dividends whereby bonds from high-yield rated Jamaica — which was upped to BB- by S&P — trade more like investment-grade BBB debt, according to its spreads over US Treasuries.

Jamaican notes due in 2039 fetch the highest premium among emerging-market bonds, according to a Bloomberg index. This marks a significant turnaround for a country that defaulted on local debt a decade ago and was later forced to take on an International Monetary Fund (IMF) programme.

Back then, its debt-to-GDP ratio was nearly 150 per cent. That’s come down to around 77 per cent and the government is committed to lowering it to 60 per cent, Hill stated, noting, “we want to be in that position where the market is looking for new paper from Jamaica with anticipation. It’s a very good place to be. We’ve worked hard at it.”

Market analysts giving their take

Katrina Butt, a senior economist at AllianceBernstein singled out Jamaica as one of the best fiscal outlooks among all emerging markets, as it has run a primary fiscal surplus for the last several years. There’s limited upside for the bonds as they already “trade very rich” and are a favorite among local, buy-and-hold investors, she posited.

“The sound macro-economic backdrop and strong policy track record from authorities” have also contributed to the tight spreads,” declared Thomas Jackson, analyst at Oppenheimer & Co. “We don’t anticipate a notable shift in terms of bond performance moving forward as spreads still remain quite tight even relative to its now higher credit rating,” he added.

Minister Hill made the point that as Jamaica weans itself off of producing sugar — which was once one of its largest exports, the nation has pushed forward on tourism and the tech fronts. This will be done by the addition of some 20,000 new hotel rooms over the next five years with the Cabinet Minister arguing that education is second only to spending on finance in Jamaica’s national budget.

Chinese economic push

Jamaica is also seeing the promise in US and Canadian nearshoring efforts. While the US is by far Jamaica’s largest trading partner, the country has been a conduit for China’s push into the region. Jamaica is the Caribbean’s biggest beneficiary of Chinese investment at US$3.16 billion, according to the US House Foreign Affairs Committee.

Hill said those loans came at a time “when, frankly, the United Sates was busy doing other stuff.” The last of those loans dates back to about 2017 and China holds around four per cent of the nation’s total debt stock.

At the time they were used to build industrial parks, highways and finance economic development projects. “Now, what the island wants is investments,” declared the Industry, Investment and Commerce Minister.

“We’re not looking for loans. We are at a place where we have moved our balance sheet to a position where it can stand on its own,” Hill said in conclusion.

Source: Our Today 

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