Jamaica seeks to diversify battered economy

On one side of the dirt road, 400 acres of banana fields stand abandoned, a victim of four hurricanes in five years and the collapse of the Caribbean banana export market.

On the other side, 150 acres of banana trees with tons of plump bunches grow in the shadow of a sprawling pack house where an assembly line of workers wash, pick and box the pretty ones for the local market, and bag the others for the chip-making fryer.

The global financial crisis, which has battered Caribbean economies, is forcing Jamaica and other countries in the region to rethink how they do business. Although most Caribbean nations continue to wrestle with how to avert financial meltdown, Jamaica is mounting an aggressive campaign to help diversify its economy.

The banana plantation in Annotto Bay, about 22 miles north of Kingston, is at the forefront of how Jamaica is reinventing itself from a country that once shipped fresh bananas and other produce to one that now processes and packages them.

“This year we have an export business that we didn’t have last year,” said Rolf Simmonds, commercial director for Jamaica Producers Tropical Foods, a division of Jamaica Producers Group, which revamped its business model in November. “We were exporting bananas. This year we are exporting banana chips and doing well at it. We are building a business slowly but surely.”

No longer should shipping ackee, cocoa, Scotch Bonnet peppers or banana in its raw form be good enough, farmers are being told. Can it, box it ? add value to it, government officials are demanding.

“We are having to deal with two significant challenges at the same time,” Prime Minister Bruce Golding said in a recent interview with The Miami Herald. “One is how to charter our way out of this global storm, but secondly how to address long-standing structural deficiencies in our economy … and how to do that in the midst of the global storm.”

For Golding’s two-year-old government, it means shifting focus.

“The Jamaican economy has relied too much on too narrow a range of industries over the years,” Finance Minister Audley Shaw said. “We’ve relied on bauxite, we’ve relied on tourism and we’ve had limited manufacturing that has gotten worse and it got worse not just because of the implosion. Jamaica had its own implosion long before the world implosion.”

Even before the recession blew a $1.3 billion, or 20 percent, hole through Jamaica’s budget, the country’s economy was already on shaky ground: external debt of almost $6.2 billion, years of anemic economic growth, the removal of guaranteed markets and prices for sugar and bananas, and the 1995 collapse of more than 40 banks.

Now, Jamaica finds itself in even more dire straits after believing it would be insulated from the recession. In the past year, remittances have fallen by 16 percent or $300 million; tourism is up, but earnings are down by $100 million; and the closing of three out of the country’s four bauxite plants that produce aluminum ore at a loss of $900 million.

Add to that increasing interest rates and the devaluation of the local currency.

“By any measurement, it is significant,” Shaw said. “By what I refer to as the economic Richter scale, this would probably be an eight in terms of the impact it has had on the economy.”

Given the threat to the government’s ability to meet its debt obligations, and keep the country of 2.7 million running, Jamaica has frozen wages for public employees, significantly reduced government travel and called on the International Monetary Fund for help.

The decision to bring back the IMF comes 14 years after the country said “ta-ta” to the Washington-based lending institution, and on the heels of similar requests from several other Caribbean nations ? St. Vincent and the Grenadines, Dominica, St. Kitts and Nevis and St. Lucia.

“People must understand the support we get from the IMF into the Bank of Jamaica may not be a dollar directly sent to them and their pockets, but it is important to the welfare of the country,” said Shaw, whose request to the IMF has divided the country, with critics demanding his resignation and supporters lauding the move.

Meanwhile, as the government attempts to put the brakes on spending ? without massive layoffs ? it is also pushing another strategy.

Enter agro-processing, one of several areas that is getting another look here and that has become the poster child for diversification.

Betting on the Jamaican Diaspora’s “insatiable desire” for ethnic foods, government number crunchers estimate that Jamaica can easily export 10 times more than the $250 million it currently exports in processed foods.

Shaw sees processed foods as a key to stimulating the country’s economy.

“We have to use the opportunity of this crisis to begin to right-size the economy,” he said. “It is something we should have done long ago.”

To get there, Jamaica is transforming its ministry of agriculture, adding marketing and promotions to its portfolio, and doubling the number of extension officers to provide technical advice to farmers and market locally grown, hurricane-resistant crops. Ripening houses for bananas, refrigeration for farmers and processing plants to produce liquid eggs and pork products are also being installed across the countryside.

“There’s no doubt we have in Jamaica an opportunity for much greater levels for agro-processing,” said Agricultural Minister Christopher Tufton. “The challenges are many but the opportunities are equally many.”

Tufton said the program is being financed with grants and low-interest loans from organizations like the European Union, Food and Agriculture Organization of the United Nations, and the Caribbean Development Bank. The U.S. Agency for International Development has provided some money for greenhouses.

The increased focus on agriculture and niche markets does not mean Jamaica has completely abandoned bauxite ? a stable revenue earner, and source of worldwide recognition for the Caribbean nation until the market virtually collapsed earlier this year.

“There are some signs of uptick in the market that the consumers are coming back,” said Howard Mitchell, chairman of the Bauxite Mining Company and Bauxite Alumina Trading, referring to the recent reopening of a bauxite mine.

“But these are early days, and we are not sure what those signs are saying. We are not even cautiously optimistic.”

But even with the challenges, Mitchell doesn’t believe the industry is dead, or that even the new agro-processing push will surpass it.

“I think it’s good for the nation,” he said of the agro campaign. “I don’t think the bauxite industry is feeling threatened. These will always be niche products compared to bauxite and alumina.”

(c) 2009, The Miami Herald. Source: McClatchy-Tribune Information Services.