Bernal sees scope for remittances, hospitality investment but bearish on exports
Published: Friday | April 29, 2022
Huntley Medley - Associate Business Editor
The future of Jamaica’s economic ties with the United States, the world’s largest economy and Jamaica’s largest trading partner, rests on the pillars of entertainment, tourism and remittances, noted economist, Caribbean trade negotiator, academic and diplomat Dr Richard Bernal is forecasting.
Bernal notes that the economic relationship has transformed over the years, from US investment having been an early stimulus for the development of Jamaica’s bauxite-alumina and tourism industries, to being largely a one-way flow of imported American goods with important, though relatively small, US investments in the global services sector, liquefied natural gas and renewable energy.
Bernal has also made the observation that there is scope for a greater build-out of entertainment, global services and tourism business between Jamaica and the US, despite the vulnerabilities of face-to-face entertainment and the vagaries of travel, as exposed by the COVID-19 pandemic.
The area of remittance, with inflows to Jamaica from around the globe totalling a record US$3.5 billion in 2021, has been identified as a perennial bright spot of economic activity that can always be counted on to help support the Jamaican economy and the receiving families in the country.
The remittance business has been identified as a growth area and was a major determinant for financial conglomerate Sagicor Jamaica’s recent multimillion-dollar acquisition of Alliance Financial Services Limited, the remittance and cambio business that it has resuscitated.
“What is remarkable is that the flow continues to increase, no matter what is happening in the US economy; and it increases particularly when Jamaica has some kind of distress, maybe a natural disaster, etc,” Bernal said in an interview with the Financial Gleaner.
“It means that people in the US are sending not only from their current income, but when things are very difficult, they will draw on their savings to maintain the flow,” the economist noted.
“These remittances are critical because they go into investment, businesses, home construction. They provide resources for churches, schools and almost any institution in Jamaica. Of course, they help families with the normal expenses of living, including food, transport, school fees, etc.”
The Bank of Jamaica only reports monthly snapshots of the main source markets, the US being persistently dominant. In the latest remittance bulletin for February 2022, it accounted for 70 per cent of the flows to Jamaica, amounting to US$154.9 million.
Although economies were in decline globally during the heights of the pandemic, Jamaica’s remittance market soared. Monthly remittances from the US reached an all-time high of US$201.9 million during the health crisis in March 2021.
Unlike the remittances picture, the trade practitioner is not hopeful about any change in the fortunes and future of the production of Jamaican goods for export to the US market, opining that that activity will remain limited as a result of inherent production constraints in the island.
“The Caribbean Basin Economic Recovery Act, the successor to the Caribbean Basin Initiative, provides access for most Jamaican goods entering the US. The problem is not so much access, the problem is production: production on a sufficiently large scale, production at a competitive price, and a supply which is reliable. The problem is not in the trade agreement or in the administration of market access, but in production, and this is not confined to Jamaica. It is something that all the small island developing states of the Caribbean face,” the former diplomat said.
Bernal, also a former pro-vice-chancellor for global affairs at the University of the West Indies, UWI, is now professor of practice at the UWI’s Sir Arthur Lewis Institute of Social and Economic Studies and research fellow at the UWI Mona-based P.J. Patterson Centre for Africa-Caribbean Advocacy. He is also a senior associate for the Americas programme at the Washington-based Centre for Strategic and International Studies in the United States.
The former diplomat, who spent more than 10 years as Jamaica’s ambassador to the US, and eight years as chief negotiator for Caribbean Community member states and for the Caribbean Forum, Cariforum, that includes the Dominican Republic, was speaking in the aftermath of a briefing of the new US ambassador to Jamaica, Nick Perry, on the state of US-Jamaica relations.
“It is an honour to be asked to take part in the confidential briefing of a US ambassador destined for a foreign country. I have been doing this since 1979, when I took part in briefing the then incoming US ambassador, Loren Lawrence, and I have done it for several ambassadors since,” Bernal said.
The briefing, according to Bernal, covered the areas of security, measures to promote the economic development of Jamaica through US-Jamaica ties, and overall relations between the two countries.
He recounted that although Jamaica has been undergoing a difficult period of economic transition, the country and succeeding political administrations have been committed in a sustained way to a stabilisation process and was now looking to move into a phase of accelerated and sustained growth.
“My overall impressions of the relations with the US are that they are good. We have had differences, but remain close, we cooperate on many issues, there are many areas of collaboration and the relationship is characterised by open dialogue. We share democratic values, private-enterprise economies and a network of economic relations. In addition, many Jamaicans live in the US and many Americans visit Jamaica for holidays. There are, established beyond government relations, strong people-to-people connections,” Bernal summed up the relationship between the two countries.
He remarked that as a Jamaican, the new US ambassador comes with the advantage of already knowing the country, people and culture.
On the matter of crime and security in Jamaica, Bernal’s advice to the American diplomat, a former local government politician in the New York State Assembly, is that the murder rate is the worst manifestation of the phenomenon. He believes, he said, that crime must be solved fundamentally through accelerated and substantial economic development that touches the lives of the Jamaican people, especially the youth, in real ways at the community level.