This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 KINGSTON 001062 
 
SIPDIS 
 
STATE FOR WHA/CAR/ (WBENT), WHA/EPSC (JSLATTERY) 
 
SANTO DOMINGO FOR FCS AND FAS 
 
TREASURY FOR L LAMONICA 
 
E.O. 12958:  NA 
TAGS: ECON EFIN JM
SUBJECT: REMITANCES REMAIN A STABLE SOURCE OF FUNDING FOR 
JAMAICA 
 
REF: 04 KINGSTON 000050 
 
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SUMMARY 
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¶1. (U) A steadily increasing number of Jamaican 
breadwinners no longer live in Jamaica, choosing instead 
to work overseas and support extended families through 
payments wired home from abroad.  Remittances sent by 
overseas Jamaican workers remained the most prominent 
source of external funding for Jamaica in 2004.  At the 
end of the year, remittances stood at USD 1.5 billion, up 
15.5 percent.  The buoyant remittances continued to be 
underpinned by increased labor migration and the entry of 
more players into the remittance business.  Traditionally, 
remittances have been used to satisfy basic needs, but 
technological advances and other initiatives have 
increased the amount going toward growth and development. 
Despite the obvious immediate benefit to the recipients, 
some fear that remittances can foster idleness and provide 
an avenue for money laundering and terrorist financing. 
This has prompted the GOJ to initiate legislation to 
regulate the industry.  Notwithstanding, remittances are 
set to expand as a new wave of emigration intensifies due 
to difficult economic and social conditions in Jamaica. 
End Summary. 
 
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REMITTANCES CONTINUE TO GROW 
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¶2. (U) A steadily increasing number of Jamaican families 
are dependent on the supplemental money sent home by 
family members who work overseas.  Total remittances to 
Jamaica increased by 15.5 percent in 2004 to reach USD 1.5 
billion or 16.7 percent of GDP.  At this level, 
remittances remained the country's largest source of 
foreign exchange earnings, eclipsing tourism receipts for 
a second consecutive year.  Remittances for 2004 were 
about 110 percent of merchandise exports and 200 percent 
of Foreign Direct Investment (FDI).  Remittances have also 
remained one of the most robust sources of foreign 
exchange for Jamaica, averaging USD 1.1 billion and 
increasing by 85.7 percent between 2000 and 2004.  Indeed, 
a Jamaica Chamber of Commerce (JCC) survey conducted in 
the first quarter of 2005 found that almost 40 percent of 
all Jamaicans receive remittances, with 51 percent of 
these recipients reporting an inflation-adjusted increase 
in funds relative to three years ago.  This performance is 
not surprising given that Jamaicans continue to emigrate 
in response to economic opportunities abroad and economic 
and social ills at home.  Jamaica's Ministry of Foreign 
Affairs and Foreign Trade estimates that over two million 
Jamaicans now live overseas, with over 750,000 in the US, 
500,000 in the UK and 400,000 in Canada.  These estimates 
include Jamaicans living abroad both legally and 
illegally. 
 
¶3.  (SBU) Jamaica remains the highest per capita recipient 
of remittances in the Western Hemisphere and possibly the 
world.  At the end of 2004, per capita remittances were 
about USD 550.  Executive Director Joan-Marie Powell and 
Marketing Manager Noel Greenland of Western Union (WU) in 
Jamaica told emboffs that working-class Jamaicans remit, 
on average, about USD 187 per transmission to family 
members for expenses such as food, school fees and 
clothing.  This is consistent with the findings of the 
JCC's survey, which showed that 21 percent of recipients 
use the money for school fees, 37 percent of recipients 
use it for utility bills, 39 percent for general household 
expenses and 42 percent for other personal expenses.  The 
study also found that at least 28 percent of recipients 
receive remittances every month, with older people most 
likely to receive these monthly sums.  Remittances also 
make up a significant portion of the incomes of many local 
households and serve as a social safety net, helping to 
alleviate poverty.  According to Senior Manager of Jamaica 
National Building Society (JNBS), Leesa Kow, over 80 
percent of remittances handled by her company go to women, 
who account for the majority of the country's unemployed 
and poverty stricken. 
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NEW CHANNELS OPENING UP 
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¶4.  (SBU) The remittance business in Jamaica was 
traditionally dominated by Jamaican commercial banks, but 
in recent years transfer companies and building societies 
have captured most of the market by intensifying their 
promotional efforts and widening their network to 
facilitate the smooth and expeditious transfer and 
collection of funds by clients.  When asked about the size 
of the market commanded by WU, Powell and Greenland, in an 
obvious attempt to downplay their dominant position, said 
they strongly suspected WU was the largest player, but 
were not certain due to the lack of data.  After some 
prompting, Powell admitted that WU was indeed the largest 
player, accounting for about 65 percent of the business. 
She hastened to add, though, that they did not want to be 
accused of monopolizing the market and driving up costs. 
Greenland then stated that no single entity could 
monopolize the business, since barriers to entry were so 
low.  When asked the same question, Kow proudly told 
emboffs that JNBS controlled about 25 percent of the 
business, much of which it captured from WU due to lower 
costs and technological advantages. 
 
¶5. (SBU) Almost 60 percent of Jamaica's remittances come 
from the US, mostly from Florida, Connecticut, New Jersey 
and New York, home for most US-resident Jamaicans.  The 
United Kingdom, Canada and the Cayman Islands are also 
major sources of remittances.  Collectively, these four 
diaspora communities account for over 95 percent of the 
total remittances to Jamaica.  Greenland told emboffs that 
remittances from the US have been leveling off in recent 
years and the UK had become the new growth market, a 
situation he attributes to a new wave of emigration to 
that country. 
 
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COSTS AND COMPETITION 
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¶6.  (SBU) Despite the buoyancy in remittances, the cost 
for sending money to Jamaica remains one of the highest in 
the region.  When the WU representatives were told the USG 
was concerned about the high cost for remitting money to 
the region, they said they were aware of the concerns. 
They then opined that the USG interest was actually coming 
from lobbyists for American commercial banks, which wanted 
a share of the lucrative business, despite neglecting it 
years ago.  Powell said American-based banks had 
traditionally shied away from the business because of the 
low returns relative to paperwork.  She pointed to 
Citibank Jamaica, the previous agent for WU, which 
subsequently shed the business in an overhaul of its 
operations.  Powell then told emboffs that their costs had 
declined by six percentage points to nine percent since 
discussions on cost cutting measures began.  Greenland 
added that high interest and telecoms costs remained two 
of the biggest obstacles to reducing prices even further. 
In a clear swipe at the perceived rivalry with banks, 
Greenland stated that banks were not the most convenient 
outlets for remittances in Jamaica, anyway, due to their 
limited reach, short opening hours, and burdensome 
paperwork. 
 
¶7. (SBU) Notwithstanding the decline in the cost for 
sending money through the dominant player, WU, other 
actors remain far more competitive.  National Commercial 
Bank offers a low cost option through Senvia Money 
Services for prices ranging from 0.25 percent from the 
Cayman Islands for up to CD 2,500 (USD 3,050) to one 
percent from the UK for up to 500 pounds (USD 937).  Kow, 
who is also a former employee of WU, told emboffs that 
JNBS has always been at least 15 percent cheaper than the 
competition, although the high cost of new technology 
investment has slowed the pace of price reductions.  USAID 
and JNBS have also initiated a project to further reduce 
the cost of sending money to Jamaica.  The company has 
introduced a swipe card technology that will improve 
efficiency and increase convenience for customers.  Over 
21,000 people have signed up to use this facility, of 
which about 60 percent are women.  The introduction of 
cards has already reduced costs by five to ten percent. 
These savings will be channeled into an educational fund 
to purchase computers for schools in rural communities 
during the project. 
 
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THE EFFECTS OF REMITTANCES 
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¶8. (SBU) Remittances impact significantly on Jamaica's 
economy, as they represent a stable source of foreign 
exchange, which contributes to the country's reserves.  In 
addition, the practice creates a business that adds to GDP 
and provides a source of employment.  Remittances also 
augment some individuals' incomes, which increases 
disposable income and, by extension, the amount of funds 
available for savings and investment.  While the vast 
majority of remittances are used for consumption, this 
money still generates a positive multiplier effect for the 
rest of the economy.  The recently released JCC report 
also showed that at least 63 percent of Jamaicans 
sometimes save some of their remittances, while the 
remaining 37 percent never save any of their remittances. 
However, the economy could benefit even further if a 
larger portion of the flow could be leveraged for savings 
and development.  Recognizing this fact, a remittances 
program was formulated in 2004 as part of former 
Ambassador Cobb's Building Bridges, IPLEDGE Initiative 
(REFTEL).  Projects under IPLEDGE were designed to enable 
corporate sponsors to provide educational supplies to 
needy schools.  The first project was launched by WU, in 
partnership with USAID. These types of initiatives are 
apparently set to continue, as Greenland told emboffs that 
plans are far advanced for WU to pump another USD 200,000 
into primary education.  The company has also started to 
offer electronic options and will soon allow recipients to 
access their funds from savings accounts.  This, combined 
with the JN/USAID initiative, should increase the pool of 
savings available for investment. 
 
¶9. (SBU) Despite many virtues, remittances also carry 
their fair share of disadvantages.  Most of the returns 
from remittances are the end result of the emigration that 
took place in the 1970s and again from the late 1990s to 
the present.  Executive Director of the University of the 
West Indies' Development and Endowment Fund (UWIDEF), 
Nicole Sharpe, told emboffs that a large number of the 
UWI's almost 80,000 graduates now reside overseas.  When 
asked about the impact of this brain drain on Jamaica, 
Sharpe said, "it is a Catch 22 situation because there are 
just not enough opportunities here".  "There is a definite 
need for more entrepreneurs and that is why we are looking 
forward to developing a leadership institute to develop 
entrepreneurs", Sharpe continued.  Sharpe said that the 
"remittance culture" in Jamaica also encourages idleness, 
thereby providing a disincentive for some people to work. 
The JCC study found that 46 percent of Jamaicans in the 18 
to 24 age group, the most in any age cohort, receive 
remittances.  This age cohort also accounts for almost 30 
percent of Jamaica's unemployed. The effects can already 
be seen in the corporate sector, as aluminum processor 
Jamalcoa has expressed concerns about the availability of 
skilled labor to carry out its expansion plans. 
 
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NEW REGULATIONS ANTICIPATED 
--------------------------- 
 
¶10.  (SBU) The possibility of money laundering and 
terrorist financing has also prompted the GOJ to pass 
legislation to regulate the operations of money transfer 
and remittance agents and agencies.  This is welcome news 
for Greenland, who thinks regulation will make information 
more accessible.  "Regulation of the business will also 
rid the discussions of innuendos which can jeopardize 
reputations", Greenland continued.  When asked for her 
opinion on the pending regulation of the business, Kow was 
not as upbeat.  She said that, if done properly, it could 
help, but from all indications enough research was not 
being done by the GOJ.  "If the first draft of the Act was 
implemented, it would have killed the business", Kow told 
emboffs.  "Some of the regulations would even put workers 
at risk", she continued.  She said this has pushed the 
sector to form an association, which is now working with 
the GOJ.  Kow anticipates heavy investment in technology 
to comply with the new reporting regulations, which will 
result in increased cost of doing business.  This, she 
opined, could stymie ongoing cost reduction measures. 
 
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COMMENT 
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¶11.  (U) Remittances are expected to remain strong over 
the short to medium term, given the need for lower cost 
skilled and unskilled workers in the US, Canada, the UK 
and the Cayman Islands.  The slow-growing and aging 
population in developed countries will also increase the 
need for migrant labor.  Continued economic stagnation and 
crime at home will also push Jamaicans to countries where 
greater opportunities abound.  However, serious concerns 
remain about the impact of emigration on Jamaica's 
development. 
 
¶12.  (U) Despite attempts to reduce expenses, Jamaica 
remains a high cost destination.  However, the renewed 
interest being shown by banks and other low cost players, 
combined with improved technology by companies like JNBS, 
should help to drive costs lower in subsequent years. 
While Jamaica lags behind countries in Latin America in 
terms of leveraging remittances for development, much 
progress has been made in recent years.  This should 
continue as lobbying efforts intensify at the 
international level.  JNBS, in addition to its education 
project with USAID, has submitted a micro-business and a 
rural development project to the Canadian International 
Development Agency (CIDA) for joint funding.  However, in 
order for Jamaica to be able to use remittances as a true 
development tool, it must shape a saving and long-term 
investment culture.  Recipients have to be encouraged to 
view remittances not as an end in itself, but the means to 
economic independence.  End Comment. 
 
TIGHE#