Jamaica and the English-speaking Caribbean will continue to lag behind Latin America if they rely solely on North America for trade and other linkages, says a lead economist with the World Bank.
World Bank sector leader for Poverty Reduction and Economic Management for the Caribbean, Dr Auguste Kouame, made the observation during a presentation last week at the Mona School of Business, University of the West Indies.
In his presentation, Kouame examined Jamaica and the World Bank’s partnership in transitioning the country from global recession and high debt to economic growth. He also explored the areas of support that were covered under the last two Development Policy Loans (DPL) granted by the mulilateral to Jamaica for budgetary support: A US$100 million loan in January 2009 and one valued at US$200 million approved in February 2010.
However, Kouame said non-Anglo Saxon areas of Latin America and the Caribbean (LAC) has continued to outpace Jamaica and the English speaking Caribbean in post recession growth because, among other factors, those economies made important linkages with the countries that are leading the recovery.
“I’ve been looking at some data and I’m struck by the fact that it’s not just Jamaica, the whole English speaking Caribbean is not benefiting from the global recovery. The recession finished in Asia more than a year ago. Latin America is catching on, the Caribbean is sitting on the fence and one needs to be able to explain why,” said Kouame.
The LAC on average has growth rates of six to seven per cent while some English-speaking countries of the Caribbean have growth rates of only one per cent or, as in the case of Jamaica, negative growth.
Not surprisingly, Jamaica’s major trade partner, the United States is still in the throes of the recession. Just last week, unemployment claims in the US rose by 12,000 from a week earlier and it is estimated that more than 43 million Americans are now living below the poverty line, the largest number in the recorded 51 year history of the country’s poverty estimates.
“Global recovery is being driven by a number of countries to which some Latin American countries have useful trade relations and investment relations — China, India, Brazil,” said Kouame.
“So if your trade relations and your investment relations are limited to the US, the UK and Canada, you are not in a very good position because those countries are not growing,” he noted, adding that “They might grow in the future but they are not the growth homes of today. And that’s the serious thing that the Caribbean is suffering from.”
Other issues which have affected Jamaica’s recovery include the huge debt levels, the cost of crime and low productivity, all areas which Kouame said Latin America had addressed before the recession hit and which Jamaica should also address.
He said the debt levels have constrained the government in providing the social structures that could minimise the impact of the recession and automatically stabilise the economy. These include the social services and infrastructure necessary for productive growth.
“How did LAC do it? LAC entered the crisis having dealt with most of the macro issues. Many of them faced very, very high inflation rates as Jamaica probably had before …They have fixed their macro framework, their debt to GDP has come down and they were able to recover quickly,” Kouame said.
“The third thing is productivity. Latin America is leading most developing regions in terms of productivity because they have fixed a number of things before. There was a lot of inequity in their system, they fixed some of that, they have on the job training, many of them adopted new technologies. So they have been able to increase their productivity level and that’s what allowed them to grow,” he noted.
Asked whether the World Bank could assist in the economic growth of Jamaica in ways that are in addition to providing loans, Kouame said the organisation could do so in a number of ways but hinted that these alone cannot guarantee growth.
“We can share technologies from around the world, we can crowd in foreign investors through the IFC (International Finance Corporation) to come in to Jamaica,” he said. “We would, we certainly strongly encourage them but we can’t force them to invest where they don’t want to invest. So there is something also to be said about the domestic environment.”