Caribbean Property & Investment Review — Edition 175 | January 2012

Publication Date: 3 January 2012  |  Coverage Period: 3 December 2011 – 2 January 2012

Morning Briefing

• Portia Simpson Miller and the People’s National Party win Jamaica’s general election on 29 December 2011, defeating the Andrew Holness-led Jamaica Labour Party and bringing the PNP back to government after nearly a decade in opposition.
• Caribbean tourism operators report a broadly successful Christmas and New Year period, with high occupancy rates at premium properties across the region despite the ongoing Eurozone anxiety affecting European visitor sentiment.
• The International Monetary Fund publishes its latest regional economic outlook, noting that Caribbean economies face external headwinds from the Eurozone crisis but benefit from resilient North American demand.
• Trinidad and Tobago’s energy sector ends 2011 in strong shape, with natural gas and petrochemical exports performing well and government revenues comfortably ahead of budget projections.
• New citizenship by investment applications across the Eastern Caribbean are reported to be at their highest level in several years, with Asian and Middle Eastern enquiries driving growth in the St Kitts and Dominica programmes.
• The Dominican Republic confirms record tourism arrivals for 2011, cementing its position as the Caribbean’s single largest destination by visitor volume for the second consecutive year.

Jamaica: The PNP Returns — Portia Takes the Helm

The people of Jamaica delivered a decisive verdict at the polls on 29 December 2011. Portia Simpson Miller, leading the People’s National Party, secured a clear parliamentary majority, ending Andrew Holness’s brief premiership and returning the PNP to government after nearly a decade on the opposition benches. The election result was met with jubilation by PNP supporters and with dignified acceptance by Holness, who conceded promptly and pledged his party’s constructive engagement as the official opposition.

For the Caribbean property and investment community, the change of government in Kingston raises a familiar set of questions about continuity of economic policy. Portia Simpson Miller is a seasoned political figure who previously served as Prime Minister between 2006 and 2007, so the investment community has a reasonable basis for assessing her likely approach. Her PNP government is expected to engage seriously with the International Monetary Fund on a new agreement to address Jamaica’s substantial public debt burden, a priority that was shared with the outgoing administration and that reflects the fiscal reality that transcends party politics on the island.

In the immediate aftermath of the election, Jamaica’s commercial community is taking a measured view. The fundamental drivers of the tourism and real estate sectors — location, natural assets, established brand recognition, and a large diaspora with emotional and financial ties to the island — are not affected by election outcomes. Investors who had been waiting for political clarity before proceeding with transactions are expected to re-engage the market in the coming weeks, providing a modest boost to activity in the north coast property corridor and in Kingston’s commercial sector.

2012 Caribbean Outlook: Cautious Optimism

As the Caribbean enters 2012, the mood among regional investors and tourism operators is one of guarded but genuine optimism. The worst of the fears about a sudden collapse in North American visitor demand — which loomed large in late 2008 and into 2009 — have not materialised, and the region has demonstrated a degree of resilience that was not universally anticipated. The key variable for 2012 will be the Eurozone situation: if the crisis is contained and European consumer confidence begins to stabilise, the Caribbean’s diversified source market base will serve it well. If the European situation deteriorates further, the impact on destinations with high European dependency will need to be carefully managed.

On the investment side, the citizenship by investment programmes offered by St Kitts and Nevis and Dominica are entering 2012 with considerable momentum. The global demand for second passports and alternative residency options has grown substantially among high-net-worth individuals from Asia, the Middle East, and Russia, and the Eastern Caribbean programmes — with their British Commonwealth linkages and established reputational track record — are among the leading choices. This demand is translating into tangible property development activity, with approved hotel and residential developments creating construction employment and long-term hospitality assets for the host islands.

The Dominican Republic’s property market enters 2012 with considerable confidence, underpinned by the country’s strong 2011 tourism performance and a pipeline of new resort and residential projects in various stages of planning and development. The north coast corridor and the Samaná Peninsula are attracting growing developer interest, offering price points and settings that appeal to a different buyer profile than the Punta Cana all-inclusive market. Buyers seeking more authentic Caribbean experiences and boutique-scale developments are finding the DR’s north coast an increasingly compelling proposition.

Eurozone: Persistent Uncertainty, Caribbean Adaptation

The Eurozone crisis has not resolved itself over the holiday period. The Italian government under Mario Monti is pursuing an aggressive austerity programme, and Spain is grappling with a new administration’s inheritance of a worse-than-declared fiscal position. Greece remains in an extraordinarily difficult situation, with ongoing negotiations with international creditors about the terms of debt restructuring. The European Central Bank’s long-term refinancing operations have reduced the immediate risk of a banking sector liquidity crisis, but the underlying solvency questions in peripheral Europe remain unresolved.

For the Caribbean, the practical implication of sustained Eurozone distress is a continued moderation in European visitor and investor flows. Destinations and developers that had built significant business plans around European demand are recalibrating toward North American and emerging market source markets. This pivot is not without its challenges — marketing infrastructure, airlift relationships, and product positioning all take time and investment to redirect — but the region’s most forward-thinking operators began this adaptation in 2010 and are now seeing the results.

Caribbean Leaders This Month

Portia Simpson Miller, Prime Minister-elect of Jamaica: Having led the PNP to victory on 29 December, Simpson Miller is preparing to assume office and assemble her Cabinet. Her early public statements have emphasised economic priorities, youth employment, and continued engagement with international financial institutions — signals that will be closely read by the investment community.

Andrew Holness, Leader of the Opposition, Jamaica: Having led the JLP into an election he chose to call early, Holness now transitions to the role of Leader of the Opposition. At 39, he retains his position as one of the Caribbean’s most prominent young political leaders and is widely expected to remain a significant force in Jamaican public life.

Kamla Persad-Bissessar, Prime Minister of Trinidad and Tobago: Persad-Bissessar enters 2012 leading one of the Caribbean’s most economically robust nations. T&T’s energy revenues provide a buffer against global uncertainties that most other Caribbean governments would envy, and the prime minister is channelling these resources into social investment and infrastructure development.

Leonel Fernández, President of the Dominican Republic: Fernández closes out 2011 with a strong economic legacy, having overseen record tourism growth and significant infrastructure investment during his tenure. With a presidential election due in 2012, the political landscape in Santo Domingo will become increasingly lively in the months ahead.

Freundel Stuart, Prime Minister of Barbados: Stuart begins 2012 facing the dual challenge of a slowing economy and the need to demonstrate fiscal responsibility. Barbados’s AAA credit rating — long a source of national pride — requires maintenance through disciplined public finances, and the government is walking a careful line between austerity and growth support.

Denzil Douglas, Prime Minister of St Kitts and Nevis: St Kitts enters 2012 as the pioneer and benchmark of Caribbean citizenship by investment, with its programme drawing applicants from across the globe. Douglas’s government is managing the programme’s growth while ensuring that the island’s international reputation for due diligence and programme integrity is maintained.

Dean Barrow, Prime Minister of Belize: Belize rounds out 2011 with a general election that has returned Barrow’s United Democratic Party to office. The result provides political continuity at a time when Belize is seeking to expand its tourism and eco-investment profile.

Looking Ahead

The inaugural weeks of 2012 will see Portia Simpson Miller establish her Cabinet and set out the early priorities of her government. The most consequential early decision will be the approach taken toward the International Monetary Fund, as Jamaica’s debt trajectory cannot be addressed without external financial support. The property and investment community will be watching these signals carefully, as fiscal credibility is the foundation on which longer-term investment confidence must be built.

The Caribbean tourism industry enters its peak winter months with generally solid occupancy data and reasonable forward booking indicators. The industry’s challenge will be to maintain pricing discipline while competing aggressively for the North American market in the context of some European softness. Revenue management will be a critical skill set for hoteliers across the region in the months ahead.

The Caribbean property investment calendar for 2012 is shaping up to be active, with a number of significant project launches and CBI-linked real estate offerings expected to come to market in the first half of the year. The next edition of the Caribbean Property and Investment Review will track how the new Jamaican government’s early moves are being received and will provide a comprehensive assessment of investment conditions across the region as the winter season reaches its midpoint.

The Caribbean Property & Investment Review is published monthly for property professionals, investors, and stakeholders across the Caribbean basin. Edition 175 covers the period 3 December 2011 to 2 January 2012.