VZCZCXRO2063
RR RUEHGR
DE RUEHKG #0936/01 3082019
ZNR UUUUU ZZH
R 032019Z NOV 08
FM AMEMBASSY KINGSTON
TO RUEHC/SECSTATE WASHDC 6911
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 KINGSTON 000936 
 
SIPDIS 
SENSITIVE 
 
STATE FOR WHA/CAR (ACADIEUX) (VDEPIRRO) (WSMITH) 
WHA/EPSC (MROONEY)(FCORNEILLE) 
SANTO DOMINGO FOR FCS AND FAS 
TREASURY FOR ERIN NEPHEW 
 
E.O. 12958:  N/A 
TAGS: ENRG EAIR EINV ECON ETRD IADB IBRD IMF TRSY XL JM
SUBJECT: JAMAICA: OCTOBER ECONOMIC REVIEW 
 
REF: A) KINGSTON 993 
B) KINGSTON 755 
C) KINGSTON 286 
D) KINGSTON 279 
 
¶1. (SBU) SUMMARY: 
 
-- The Government of Jamaica (GOJ) signed the Open Skies Agreement 
with the United States on October 30. 
 
-- Ministry of Energy rolls out E-10 at gas stations and considers 
investment in a castor bean biodiesel project. 
 
-- Energy Ministry also announces plans to invest in coal technology 
for future energy needs, switching away from earlier plans to use 
natural gas.  Chinese investors may be interested in the project. 
 
-- Investors in the multi-billion dollar Harmony Cove real estate 
project say the global credit crisis will not delay their efforts. 
 
-- The Standard and Poor's Ratings Direct reaffirmed Jamaica's "B" 
rating, but the outlook was revised to "Negative" from Stable. 
 
-- The GOJ has secured up to USD 600 million in loans from 
multilaterals helping to repair damage to roads and bridge the 
budget financing gap.  END SUMMARY. 
 
Aviation 
---------- 
 
¶1. (U) The United States and Jamaica signed the Open Skies agreement 
on Thursday October 30.  Foreign Affairs Minister Ken Baugh signed 
on behalf of the Government of Jamaica.  Ambassador Brenda Johnson 
was joined at the signing by Director of the Office of Caribbean 
Affairs, Velia De Pirro (reftel A). 
 
Energy/Renewable Energy 
----------------------- 
 
¶2. (U) Minister of Energy Clive Mullings launched the roll- out of 
E10 fuel starting November 1, calling it "a breakthrough for Jamaica 
as a developing country."  E10 comprises 10 percent ethanol and 90 
percent gasoline.  In a press interview with the Gleaner newspaper 
on October 31, he said "there are great advantages in buying 
vehicles that are E10 friendly...it is cheaper...and gives off 
cleaner emissions."  He also announced a 60 percent duty concession 
on importation of flexi fuel vehicles that run on ethanol blends. 
 
¶3. (U) The Petcom gas stations are the first to offer E10. The GOJ 
hopes to have E10 available across the island by May.  In a press 
conference on October 23, Mullings said he was keen to remind his 
audience of the objectives of the energy policy, in particular 
employing renewable energy, such as ethanol, and in promoting energy 
conservation to reduce Jamaica's dependence on imported fuel. 
Jamaica's imported oil bill totaled close to USD 2 billion for 2007. 
 Mullings has been a strong advocate of blended fuels and has said 
his goal is to eventually offer E85 (85 percent ethanol) in Jamaica 
(reftels B and C).  The GOJ expects that by 2010, E10 will save the 
country USD 52 million per year by reducing the need for imported 
fuel. 
 
¶4. (U) Petroleum Corporation of Jamaica (PCJ) is also in the process 
of looking into a possible castor bean biodiesel project.  PCJ has 
said it is seeking farmers and suitable land for a potential 
project.  Although still in early stages, PCJ hopes the project will 
produce 400,000 barrels of biodiesel by 2010. 
 
Energy/ Coal Trumps LNG 
----------------------- 
 
¶5. (SBU) On October 29, Mullings announced that liquefied natural 
gas (LNG) is no longer an option for Jamaica after the country 
failed to secure long-term supplies from either Trinidad and Tobago 
or Venezuela.  Instead the GOJ will seek to build coal-fired power 
plants to support Jamaica's bauxite/aluminum industry.  Mullings 
expressed concerns that the GOJ could not afford an LNG import 
facility and associated infrastructure due to its high cost, which 
could be up to USD 600 million. He also said the GOJ did not want 
the country to have to rely on one fuel type.  Currently relies on 
imported heavy fuel oil and diesel for thermal generators for 90 
percent of its energy needs, when world oil prices spiked the cost 
of energy skyrocketed.  Mullings told the Gleaner newspaper that the 
move to coal is contingent on the island's bauxite/aluminum sector 
agreeing to coal-fired plants, which would require USD 300-million 
investment to build out the infrastructure.  He said the GOJ was 
prepared to facilitate the construction of the facility by private 
 
KINGSTON 00000936  002 OF 002 
 
 
investors. 
 
Chinese Interest in Bauxite and Coal 
------------------------------------ 
 
¶6. (SBU) In a meeting with Velia De Pirro, Director of Caribbean 
Affairs, on October 29, Michael Stern, Minister of State in the 
Ministry of Industry Investment and Commerce, said China is looking 
at reviving an old bauxite plant in the St. Ann parish, but warned 
that the GOJ wanted to ensure that most of the construction jobs 
would go to Jamaican workers.  Mullings also told reporters from the 
Gleaner newspaper on October 29 that Chinese investors are 
potentially interested in coal powered co-generation facilities for 
the bauxite sector.  Mullings said an expression of interest was 
given by Mincenco Limited a subsidiary of U.S. company Century 
Aluminum which as has a stake in the St. Anne Bauxite business. 
 
Real Estate 
----------- 
 
¶7. (U) Leadership in the multi-billon dollar Harmony Cove real 
estate project believe they will secure the funding needed for the 
project despite the current global credit crunch.  Harmony Cove is a 
joint venture between private equity group Tavistock (51 percent) 
and Jamaican state-owned Harmonization Limited (49 percent). 
Harmony Cove is a ten-year project that will cover 2,000 acres 
(Jamaica's contribution to the project) and will consist of luxuary 
hotels and villas surrounded by a yacht club, multiple golf courses, 
and retail complexes. (reftels D).  Construction is to begin in 2009 
and with 2,000 hotel rooms and a casino. 
 
¶8. (SBU) In response to the credit crisis, National Commercial 
Bank's (NCB) Managing Director and Chairman of the Harmonization 
board Patrick Hylton, Chairman, told reporters on October 31 that 
his partners have "really deep pockets."  He stated, "We can't be in 
a crisis that long...once the capital markets are freed up, then 
lending will start again, persons will be comfortable again with 
asset acquisition."  United Kingdom citizen Joe Lewis the owner of 
Tavistock lost more than USD 800 million by investing in Bear 
Sterns, just weeks before it collapsed and was bought out by J.P. 
Morgan at a fraction of it former value. 
 
Rating 
------ 
 
¶9. On October 21 the Standard and Poor's Ratings Direct reaffirmed 
Jamaica's "B" rating, but the outlook was revised to Negative from 
stable. The outlook reflects concerns that external pressures are 
expected to dampen economic growth, strain high government borrowing 
needs, and weaken the country's external liquidity profile. 
 
Multilaterals 
------------- 
 
¶10. (U) Minister Without Portfolio in the Ministry of Finance, Don 
Wehby, told the Observer newspaper on October 26 that during his 
recent trip to Washington D.C., he had received commitments from 
multilateral agencies to meet the balance of Jamaica's external USD 
600 million financing for this fiscal year.  Wehby said the interest 
rates, which would be near 5 percent, are "much cheaper" than 
borrowing on the international capital market.  Jamaica has 200 
million Euros due on Eurobond in February 2009.  There are no other 
bond issues maturing in the next two years.  Jamaica has already has 
raised USD 250 million in the capital markets earlier in the year. 
Jamaica also has secured a loan of USD 50 million from the 
Inter-American Development Bank (IADB) for road repair in the wake 
of tropical storm Gustav. 
JOHNSON