Jamaica Gleaner

Com­mon sense not so com­mon

- Daniel Th­waites is an at­tor­neyat-law. Email feed­back to col­umns@glean­erjm.com.

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.”


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?

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