AT HIS SWEARING-IN CEREMONY IN NOVEM-
ber, U.S. Ambassador to Jamaica William Holden
made his intentions clear. His stated mission was, for once
and for all, “to silence the trumpets of socialism” in
Jamaica and the Caribbean. In the 1970s, such a declara-
tion by the chief emissary of the United States or any
foreign country would have been met with strong protest,
if not an expulsion order, by the People’s National Party
government, led by the once-charismatic social democrat,
Michael Manley. But the government of the “new Mi-
chael Manley” had little reason to object. The trumpets
had long been laid aside.
For three months after Manley’s re-election on Febru-
ary 9 of last year, he was locked in intense negotiations
with the International Monetary Fund for a stand-by loan
to replace one for $106 million that his predecessor,
Edward Seaga, had agreed to the previous September. That agreement called for, among other things, a 10%
limit on wage increases (despite anticipated 15% infla-
tion), interest rate hikes, credit constriction, and further
government spending cuts. These and other measures
were intended to improve the country’s balance sheet,
reduce its ability to purchase imports, and ensure contin-
ued payments on the foreign debt.
The negotiations resulted in May in a new IMF stand-
by loan agreement for $65 million, though Jamaica was
only able to withdraw one-fourth of that before it nearly
failed an IMF “test” in September.’ Although the gov-
ernment pleaded for a continuation of the original agree-
ment on easier terms, the Fund was not in a lenient mood.
During October, Bank of Jamaica officials scrambled to
plan further economic sacrifices to placate the Fund;
without an IMF agreement, World Bank loan funds would
not be released and other sources of credit would be hard
to obtain. The result, in the words of a government
spokesperson, would be “severe social dislocation.”
In the first week of November, the government deval-
ued the Jamaica dollar and reduced food price subsidies
designed to protect the poor. New price ceilings raised the
legal maximum for bread, cooking oil, milk, flour, corn-
JAMAICA:
LEVERAGED SELLOUT
Soldiers patrol Kingston during last year’s election campaign: Michael Manley inherited a $2 billion foreign debt
VOLUME XXIII. NO.5 (FEBRUARY 1990) 2!
JAMAICA:
LEVERAGED SELLOUT
Soldiers patrol Kingston during last year’s election campaign: Michael Manley inherited a $2 billion foreign debt
A T HIS SWEARING-IN CEREMONY IN NOVEM-
ber, U.S. Ambassador to Jamaica William Holden
made his intentions clear. His stated mission was, for once
and for all, “to silence the trumpets of socialism” in
Jamaica and the Caribbean. In the 1970s, such a declara-
tion by the chief emissary of the United States or any
foreign country would have been met with strong protest,
if not an expulsion order, by the People’s National Party
government, led by the once-charismatic social democrat,
Michael Manley. But the government of the “new Mi-
chael Manley” had little reason to object. The trumpets
had long been laid aside.
For three months after Manley’s re-election on Febru-
ary 9 of last year, he was locked in intense negotiations
with the International Monetary Fund for a stand-by loan
to replace one for $106 million that his predecessor,
Edward Seaga, had agreed to the previous September.
That agreement called for, among other things, a 10%
limit on wage increases (despite anticipated 15% infla-
tion), interest rate hikes, credit constriction, and further
government spending cuts. These and other measures
were intended to improve the country’s balance sheet,
reduce its ability to purchase imports, and ensure contin-
ued payments on the foreign debt.
The negotiations resulted in May in a new IMF stand-
by loan agreement for $65 million, though Jamaica was
only able to withdraw one-fourth of that before it nearly
failed an IMF “test” in September.’ Although the gov-
ernment pleaded for a continuation of the original agree-
ment on easier terms, the Fund was not in a lenient mood.
During October, Bank of Jamaica officials scrambled to
plan further economic sacrifices to placate the Fund;
without an IMF agreement, World Bank loan funds would
not be released and other sources of credit would be hard
to obtain. The result, in the words of a government
spokesperson, would be “severe social dislocation.”
In the first week of November, the government deval-
ued the Jamaica dollar and reduced food price subsidies
designed to protect the poor. New price ceilings raised the
legal maximum for bread, cooking oil, milk, flour, corn-
VOLUME XXIII, NO. 5 (FEBRUARY 1990) 21The Caribbean
meal, rice, and other staples by amounts averaging 13%. The government’s importing agency announced that it
would stop buying salted codfish, an important protein source and essential ingredient in Jamaica’s most famous national dish, sal’fish and ackee. The conservative
newspaper The Daily Gleaner calculated that a worker
earning the standard minimum weekly wage of $18, after
buying a minimal food basket for a family of four barely
enough to last a few days would be left with only $5 to
cover school costs, transportation, rent, utility bills, and
all other expenses.2
The devaluation and price hikes created immediate
outcries of anger and despair, not just from the right-
leaning press but from the public. Even Jamaica Labour
Party (JLP) leader Edward Seaga had resisted foreign
creditors’ demands for subsidy cuts and price increases,
holding real food prices at or below their 1985 level. Other
Seaga policies, worked out in cooperation with the IMF
and World Bank, hurt Jamaicans badly among all but the
highest social strata. But by the end of 1989, the desperate
PNP efforts to meet lenders’ terms left many with the
impression that Seaga, despite his highly unpopular aus- terity policies, at least “knew better how to manage.”
Public confidence in the PNP as well as Manley’s per-
sonal popularity plunged.3 Easy to forget were the means by which Seaga, whose
party governed the country for most of the 1 980s, had
achieved this apparent miracle. One was massive U.S.
assistance. In an attempt to make Seaga’s Jamaica a free
enterprise showcase in the Caribbean, AID spent more on
its Jamaica program an average of $135 million yearly
from 1981 through 1986 than on any other Caribbean
country.4 Another Seaga tactic encouraged by the Bank, the Fund, and AID, was the slashing of essential social
services, resulting in increases in unemployment, infant
mortality and hunger.5 In line with structural adjustment policies and U.S.
pressures, Seaga reduced government protection of Ja- maican producers and opened the country to more imports
from abroad. He promoted the rapid expansion of the
country’s Free Trade Zones foreign-run, Jamaican-
subsidized, state-of-the-art sweatshops where women with
no union representation earn as little as $15 a week,
producing garments and toys mainly for foreign markets. Seaga downplayed the loss of jobs resulting from the
closure of Jamaican-owned factories due to competition
with foreign manufacturers for markets and foreign ex-
change; an estimated 10,000 such jobs were lost under
Seaga. Jamaica did experience some real GDP growth during
Seaga’s term, mainly as a result of laundered “ganja” dollars from the marijuana trade, increased tourism
earnings, lower fuel import costs, and higher prices for bauxite and alumina. Critics say Seaga manipulated the
growth figures to create the illusion of structural adjust-
ment success andjustify further foreign and domestic bor-
rowing.
To reduce demand for legal foreign exchange, channel dollars to favored interests and supporters, and resist
pressure for devaluation of the Jamaica dollar, Seaga
allegedly condoned some say he organized the illegal but systematic import and re-sale of dollars from the
profits of the ganja trade, estimated to be the country’s
second highest source of foreign exchange earnings. By another sleight-of-hand, Seaga allowed the government
itself to become Jamaica’s biggest bad debtor. He failed
to pay bills to cover maintenance of hospitals, the univer-
sity, and other public institutions, and looked the other
way while the government importing agency, Jamaica
Commodity Trading Corporation, accrued huge deficits. Most important was Seaga’s massive accumulation of
debt. More than half of the country’s current $3.95 billion
external debt one of the highest per capita foreign debts
in the world was accrued by Seaga’s government. By
AID’s own accounting, Jamaica by March of 1988 was a
country with “a crippling debt burden,” where economic
output was “far below the production level of 1972,” where “distribution of wealth and income is highly
unequal,.. .shortages of key medical and technical person- nel plague the health system,… [with] severe deficits in
infrastructure and housing,… [and where] physical decay and social violence deter investment.” This dismal as-
sessment was made six months before hurricane Gilbert
dealt Jamaica its devastating blow.6
By early 1988, World Bank officials apparently felt
they had achieved their goals for Jamaica, and that it was
safe, if not preferable, to acquiesce to Manley’s return to
office. Interviewed in June 1988, Roger Robinson, then
Bank senior economist for Jamaica, said “Five years ago,
people were still thinking about ‘meeting local needs,’ but
not any more. Now the lawyers and others with access to
resources are interested in external export investment.
Once you have that ingrained in a population, you can’t go
back easily, even if the PNP and Michael Manley come in
again. Now there’s an understanding among individuals
who save, invest, and develop their careers that capital will start leaving again if the PNP, or even the JLP,
intervenes too much.”
Michael Manley, Robinson added with an obvious
sense of satisfaction, “is making all the right noises” to
reassure the bank and potential foreign investors, and to
spurn what Robinson called the “irrational” self-reliance
strategies and programs to support farming that it had
pursued in the 1970s. “The PNP even gave support to
Jamaican potato farmers, when it’s well known that
potatoes coming in from Miami make better French
Fries!” he exclaimed.
P RIME MINISTER MICHAEL MANLEY TOLD A
U.S. Congressional delegation in November, that his country would have to pay half of its export earnings
and 40% of all government revenues just to cover its debt
service in the coming year. “That means we’re running a
50-cent dollar country,” he said. With 41% of the debt
22 REPORT ON THE AMERICAS
The Caribbean
meal, rice, and other staples by amounts averaging 13%.
The government’s importing agency announced that it
would stop buying salted codfish, an important protein
source and essential ingredient in Jamaica’s most famous
national dish, sal’fish and ackee. The conservative
newspaper The Daily Gleaner calculated that a worker
earning the standard minimum weekly wage of $18, after
buying a minimal food basket for a family of four-barely
enough to last a few days-would be left with only $5 to
cover school costs, transportation, rent, utility bills, and
all other expenses. 2
The devaluation and price hikes created immediate
outcries of anger and despair, not just from the right-
leaning press but from the public. Even Jamaica Labour
Party (JLP) leader Edward Seaga had resisted foreign
creditors’ demands for subsidy cuts and price increases,
holding real food prices at or below their 1985 level. Other
Seaga policies, worked out in cooperation with the IMF
and World Bank, hurt Jamaicans badly among all but the
highest social strata. But by the end of 1989, the desperate
PNP efforts to meet lenders’ terms left many with the
impression that Seaga, despite his highly unpopular aus-
terity policies, at least “knew better how to manage.”
Public confidence in the PNP as well as Manley’s per-
sonal popularity plunged. 3
Easy to forget were the means by which Seaga, whose
party governed the country for most of the 1980s, had
achieved this apparent miracle. One was massive U.S.
assistance. In an attempt to make Seaga’s Jamaica a free
enterprise showcase in the Caribbean, AID spent more on
its Jamaica program-an average of $135 million yearly
from 1981 through 1986-than on any other Caribbean
country. 4 Another Seaga tactic encouraged by the Bank,
the Fund, and AID, was the slashing of essential social
services, resulting in increases in unemployment, infant
mortality and hunger.’
In line with structural adjustment policies and U.S.
pressures, Seaga reduced government protection of Ja-
maican producers and opened the country to more imports
from abroad. He promoted the rapid expansion of the
country’s Free Trade Zones-foreign-run, Jamaican-
subsidized, state-of-the-art sweatshops where women with
no union representation earn as little as $15 a week,
producing garments and toys mainly for foreign markets.
Seaga downplayed the loss of jobs resulting from the
closure of Jamaican-owned factories due to competition
with foreign manufacturers for markets and foreign ex-
change; an estimated 10,000 such jobs were lost under
Seaga.
Jamaica did experience some real GDP growth during
Seaga’s term, mainly as a result of laundered “ganja”
dollars from the marijuana trade, increased tourism
earnings, lower fuel import costs, and higher prices for
bauxite and alumina. Critics say Seaga manipulated the
growth figures to create the illusion of structural adjust-
ment success andjustify further foreign and domestic bor-
rowing.
To reduce demand for legal foreign exchange, channel
dollars to favored interests and supporters, and resist
pressure for devaluation of the Jamaica dollar, Seaga
allegedly condoned-some say he organized-the illegal
but systematic import and re-sale of dollars from the
profits of the ganja trade, estimated to be the country’s
second highest source of foreign exchange earnings. By
another sleight-of-hand, Seaga allowed the government
itself to become Jamaica’s biggest bad debtor. He failed
to pay bills to cover maintenance of hospitals, the univer-
sity, and other public institutions, and looked the other
way while the government importing agency, Jamaica
Commodity Trading Corporation, accrued huge deficits.
Most important was Seaga’s massive accumulation of
debt. More than half of the country’s current $3.95 billion
external debt–one of the highest per capita foreign debts
in the world-was accrued by Seaga’s government. By
AID’s own accounting, Jamaica by March of 1988 was a
country with “a crippling debt burden,” where economic
output was “far below the production level of 1972,”
where “distribution of wealth and income is highly
unequal,.. .shortages of key medical and technical person-
nel plague the health system,…[with] severe deficits in
infrastructure and housing,…[and where] physical decay
and social violence deter investment.” This dismal as-
sessment was made six months before hurricane Gilbert
dealt Jamaica its devastating blow. 6
By early 1988, World Bank officials apparently felt
they had achieved their goals for Jamaica, and that it was
safe, if not preferable, to acquiesce to Manley’s return to
office. Interviewed in June 1988, Roger Robinson, then
Bank senior economist for Jamaica, said “Five years ago,
people were still thinking about ‘meeting local needs,’ but
not any more. Now the lawyers and others with access to
resources are interested in external export investment.
Once you have that ingrained in a population, you can’t go
back easily, even if the PNP and Michael Manley come in
again. Now there’s an understanding among individuals
who save, invest, and develop their careers that capital
will start leaving again if the PNP, or even the JLP,
intervenes too much.”
Michael Manley, Robinson added with an obvious
sense of satisfaction, “is making all the right noises” to
reassure the bank and potential foreign investors, and to
spurn what Robinson called the “irrational” self-reliance
strategies and programs to support farming that it had
pursued in the 1970s. “The PNP even gave support to
Jamaican potato farmers, when it’s well known that
potatoes coming in from Miami make better French
Fries!” he exclaimed.
P RIME MINISTER MICHAEL MANLEY TOLD A
U.S. Congressional delegation in November, that
his country would have to pay half of its export earnings
and 40% of all government revenues just to cover its debt
service in the coming year. “That means we’re running a
50-cent dollar country,” he said. With 41% of the debt
owed to the IMF, World Bank, and other international
agencies, Manley said, “Jamaica will pay $80 million to
the IMF alone this year, while they will not pay us one
dollar.” The prime minister begged the congressmen to
persuade multilateral lenders to bend their rules against
debt rescheduling, not just forJamaica but for.other debtor
nations. He reminded them that the U.S.-sponsored “Brady
plan,” even if it were to offer substantial relief on the
debts poor countries owe to commercial banks, it would
be of little help to Jamaica, whose external commercial
debt is only 10% of its total foreign debt bill.7
Manley reassured the U.S. representatives that, drastic
as the crisis might be, he had no intention of approaching
it “in a confrontationist way.” “We had enough of that
in the l970s,” he said, dismissing the massive popular
mobilizations and protests against IMF pressure during
1974-1980 as an impolite “hiccup” that would not be
repeated. Manley then switched abruptly to describe in
detail his “Seven-Point Plan” for a war against drugs.
The congressional audience praised his anti-drug stance,
but with the exception of the delegation’s leader, Rep.
George Crockett, said almost nothing in response to
Manley’s pleas for debt relief.8
Faced with the debt crisis, credit cuts and intensified
U.S., IMF, and World Bank pressure, the strategy of the
PNP has been to try to “ride out the storm” by postponing
more drastic currency devaluations for as long as possible,
while grasping every possible source of foreign exchange.
The most infamous example thus far has been the
sale of $80 million worth of bauxite and alumina in
advance to the Alcan corporation and to U.S. speculator
and tax fugitive Mark Rich. Jamaica got quick cash from
the deal, but the futures buyers will reap the profits of
expected increases in alumina prices, perhaps as far into
the future as 1995. The sale of the country’s 20% block of
shares in the national telephone company to British Cable
and Wireless Ltd. brought in more funds, but has yet to
result in better service from the supposedly “more efficient”
private sector.
Other public land, rights, and property are on the
auction block. The apparent conversion of Manley to a
pro-capitalist privatizer led The Enterprise, voice of the
Private Sector of Jamaica association, to gloat: “Schools
can’t find teachers. The entire system seems to be on the
verge of collapse. Nurses are fleeing….Everyone knows
about the pressure on the dollar and the foreign exchange
shortage. But underneath the bad news there is some
movement like a tide beneath the waves that should give
us some hope. The government has quietly dropped the
nonsensical rhetoric of the recent past and is divesting
state enterprises even faster than its predecessor….The old
gospel that government should be operated in the interests
of the poor is being modified, even if not expressly
rejected, by the dawning realization that the only way to
help the poor is to operate the government in the interest
of the productive!”
There is scant evidence that the private sector is either
efficient or inclined to invest substantially in productive
activity in Jamaica. But as long as the government seeks
accommodation with the IMF, it has little choice but to
shift resources toward business and away from social
needs.
T HE FUND’S RULES ARE SO STRINGENTLY
dogmatic that they require even profitable public
enterprises to be sold and efficient services cut back. In
determining the credit-worthiness of a government, the
IMF lumps together the net surplus or deficit of all public
and “parastatal” (state-owned company) budgets. This
includes not only the nation’s operating budget, but also
its capital budget, which under structural adjustment is
virtually dictated by the World Bank in order to ensure
that expenditures support the priorities of the private
sector.
In Jamaica’s case, after major spending cuts, the central
government was running no deficit at the time of the
IMF negotiations in September. Some state-owned companies,
such as Air Jamaica, were in the red, but the
country’s total recurrent budget showed a surplus. However,
because that surplus was not sufficient to cover the
total capital budget as well, the IMF insisted that further
cuts be made in expenditures of both the central government
and prospering parastatals, making inevitable even
more reductions in basic social programs, already cut to
the marrow.
The government was forced to swallow other onerous,
even absurd conditions in order to obtain new foreign
loans from other sources. In November, the government
concluded a $62 million agreement with the World Bank
for “Agricultural Sector Adjustment.”‘ The most bizarre
aspect of the “agriculture” loan agreement is that not one
penny will go to aid Jamaica’s farmers. Instead, the funds
will go directly into Bank of Jamaica certificates of
deposit, to shore up the government’s credit reserves and
satisfy the IMF. “The Bank is fully aware that Jamaica
will have to use the money for other foreign exchange
needs and not to add anything to its agriculture budget,”
said an official close to the negotiations. “But down the
road, when more farmers go out of business, they’ll tell
the world that it’s because the country didn’t use its loan
money wisely.” Moreover, he said, “The conditionalities
of the loan are terrible, but there’s no way Jamaica can
afford to turn down $90 million.”
Among the required conditionalities are the nearelimination
of tariffs and quantitative restrictions on
livestock imports, a move certain, said the official, to
destroy local industries. U.S. producers were already in
the country proffering U.S. beef to hotel managers before
the ink on the agreement was dry. Another condition of
the World Bank loan is the further reduction of government
participation in commodity marketing boards. “The
Bank believes the government should have no say at all in
what is bought and sold to whom and for how much,” said
a Jamaican economist, “but the alternative of total privatization
means one or a few big producers will monopolize
every sector and manipulate it for their own benefit;
this has already happened to our coffee [most of which
now goes to Japan].”
The Bank is also calling for the disbanding of the
Jamaica Commodity Trading Corporation, a step not even
Seaga was willing to take because of its importance in
stabilizing food prices and capturing some revenue from
the sale of foreien-donated sumllius food. In addition, the
Bank wants the Jamaica Agricultural Credit Bank to
charge interest rates close to or at market levels, even
though the World Bank is not the source of the Credit
Bank’s funds. “We told the World Bank team that farmers
can hardly afford credit now, and that higher rates
would put them out of business,”explained a government
official concerned with agriculture. “The Bank told us
‘The market is telling you that agriculture is not the way
to go for Jamaica.”
Similar criteria are likely to be applied when the Bank
and Jamaica negotiate a “trade and finance sector adjustment”
loan in the spring. In negotiations for a housing
project loan, the Bank is insisting on further increases in
mortgage interest rates, even though the rates are already
so far out of the range of most Jamaicans that the National
Housing Trust paid for mainly by a tax on all Jamaican
wage-earners, and responsible for 80% of the country’s
housing financing is banking its money instead of building
homes. Higher interest rates, the World Bank reportedly
acknowledged, might mean even less housing will be
built. More important in the Bank’s view is the fact that
the Trust’s operations “would become more profitable,”
a party to the negotiations reported.
“The Bank’s logic is that the less that goes into
government, the more there will be for the private sector,
and that the private sector, not government, should determine
how resources are used,” the official said. “They
tell us we should let the market determine the exchange
rate, even if it means the Jamaica dollar falls to 15 to I. If
that happens, they say, wages will drop further and we’ll
be flooded with free-zone-type manufacturing. We’ll
reach the limit of our ability to import, so that way, our
foreign exchange ‘problem’ will be ‘solved!’ (Only 13
years ago, the Jamaica dollar was worth more than the
U.S. dollar.’
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