Common sense not so common
BORROWING MORE money is ordinarily, at best, a mixed blessing. Generally, it ought not to be celebrated. Let’s grant that at the outset. However, once you fully appreciate Jamaica’s profound ‘brokeness’, you accept that we will be a debtor nation for some time to come. In that circumstance, how we structure our debts is critical.
As it is, Jamaica has raised US$2 billion on the international capital markets, the highest amount ever, at the lowest rates anyone can remember. Government has decided to use most of this to buy back the US$3 billion PetroCaribe debt at a steep discount that will save Jamaica about US$250 million and drastically reduce the ratio of debt to GDP.
This is possible because of our growing international credibility, but also because our friends in Venezuela are going through some rough times. What else could induce them to accept a mere 50 per cent of the money owed them? Low oil prices are hammering them hard and it’s no secret they’re cash-hungry. There was speculation for some time that the PetroCaribe debt could be sold to the likes of Goldman Sachs. Instead, we’ve bought it.
Luckily, the PetroCaribe arrangement is still in place and, believe me, we need it. Perhaps it’s that international sensitivity that has inhibited the Government’s response and muted jubilation over this deal. Jamaica has been able to derive a large benefit, but only because we have a close friend that’s in trouble. Truly is it said that the markets have a remorseless logic.
But so, it seems, does our politics, where, apparently, it is impossible to have consensus on anything at all. The logic here seems to be: “If the Government does it, it must be wrong, and the Opposition MUST oppose it.” But is that really necessary?
So today, I’m not so interested in the PetroCaribe buy-back deal so much as the reactions to it. I say that because I don’t consider it particularly debatable that it was a good deal.
In what would already have been accounted as a tremendous innings, this particular stroke by Phillips will be recalled as especially beautiful. Just now he’s seeing the ball big, and he’s stepped forward with the club and yanked it so far outa Sabina that it still hasn’t touched ground. That’s just a fact.
Plus, the math of this transaction is relatively simple and easy to appreciate. That, I imagine, is what accounts for the prodigious efforts, intellectual contortions, and financial doublespeak undertaken to discredit it.
The country representative of the Inter-American Development Bank, Therese Turner-Jones, has hailed it as “a game-changer”, saying: “Overall, I think this is a fantastic opportunity for Jamaica and a very smart move on behalf of the policymakers.”
NOT ROCKET SCIENCE
Bert van Selm, the IMF guy, patiently spelled out on Nationwide’s Tuesday morning programme that if Jamaica’s approximately US$15-billion economy gets a US$1.5-billion savings on one transaction, that’s a 10 per cent reduction of the debt-to-GDP ratio. C’mon, Fayval, this is not rocket science. Van Selm went on to say: “So the immediate consequence of the transaction ... is indeed the reduction of debt to GDP of about 10 percentage points. And I cannot underline enough how big a deal that is because that, for everybody, is the first number people look at when considering whether your debts are sustainable over the medium term or not.
“So if you can bring that down in one fell swoop by 10 percentage points, that is a great achievement. And that really helps to keep ... debt to GDP on a downward trajectory. So that’s the key reason why we think this is an excellent deal for Jamaica ... . I think there is consensus in the international community that this is very good for Jamaica’s debt sustainability.”
It’s not that what these people say is necessarily gospel. And I’m not saying we shouldn’t scrutinise the deal and take note of its provisions. Still, how to account for the superlatives from international observers on the one hand, but rabid and panicked denunciation from these local observers on the other? Don’t they read the same economic textbooks?
Personally, I have a sneaking suspicion that when the IDB, IMF, ratings agencies, EPOC, PSOJ, the newspapers, and Wall Street financiers are all singing the same Sankey, they are likely more objective about the true merits and demerits of the deal than, say, Audley or Aubyn. Maybe that’s just me, but I don’t think so.
I’m realising Mr Holness’ history mightn’t be as strong as I previously imagined. But he will know what I mean when I say that from waaayyyy back in the 1830s when Bogle and Gordon were fighting for Emancipation, people have been longing for at least slightly maverick leaders. It’s not good when you can predict exactly where a man is going to fall on a particular issue, and then they proceed to follow suit.
Incidentally, the prime minister has spoken up for international debt relief for countries like Jamaica. Honestly, I thought everyone groaning under Jamaica’s debt servicing would agree with that. But Mr Holness, who is, for now (you never know if the next caucus will axe him), leader of the Opposition, also opposed that call.
Is it possible to conceive that instead of the two-week-long gala of hot air about the PetroCaribe buy-back deal, we could have had, instead, some reasoned acknowledgement that it isn’t economic Armageddon? Even that it’s actually a damn good deal? I don’t expect them to stand up and applaud the way the international community is doing. But if it’s completely against your principles to praise anything done by your opponent, then maybe keep quiet?