The fourth quarter of 2017 saw Jamaica reap an unexpected and not unambiguous tourism dividend from the catastrophic regional hurricane season: visitors who might otherwise have chosen the British Virgin Islands, St Martin or Puerto Rico were directing winter-season bookings toward Jamaica at rates that pointed to record winter arrival figures. Alongside this fortuitous opportunity, the government reported meaningful progress toward concluding the long-delayed LNG commercial framework, KFTL received its first new ship-to-shore cranes at the Kingston Container Terminal, and the fiscal management framework continued to perform as designed in its first post-EFF year.
Key Highlights
- Winter 2017-18 tourism season opens with record advance bookings; displaced visitors from hurricane-damaged Caribbean destinations boost Jamaican occupancy commitments to five-year highs.
- LNG project: government announces significant progress toward commercial conclusion; preferred gas-to-power structure agreed in principle with prospective developer by end of quarter.
- KFTL receives first new ship-to-shore cranes at Kingston Container Terminal; equipment installation represents first major capital investment milestone under the thirty-year concession.
- IMF Precautionary SBA second review completed satisfactorily; Jamaica’s fiscal performance continues to meet statutory Fiscal Responsibility Act targets.
- Additional solar PV capacity commissions; Jamaica’s total utility-scale renewable generation capacity reaches approximately 80 MW by year-end 2017.
- National Works Agency commences new road rehabilitation programme targeting central parish road network with World Bank financing.
Tourism: Record Winter on the Horizon
The Jamaica Tourist Board’s advance booking data for the 2017-18 winter season was, by the close of October 2017, pointing to occupancy commitments across the major resort zones that exceeded anything recorded in the comparable period of previous years. The driver was the redirected demand from travellers who had planned vacations to hurricane-damaged destinations: the British Virgin Islands, where the recovery from Irma would take at least two to three years to restore full resort capacity; Barbuda, which had been entirely evacuated; St Martin, where resort properties on both the French and Dutch sides of the island had suffered extensive structural damage; and Puerto Rico, where the lack of electricity and water weeks after Maria’s landfall made resort operations impossible.
Jamaica’s tourism infrastructure, having been spared major storm damage, was fully operational and in a position to absorb the displaced demand. Hotel operators reported that rooms which historically would have seen more modest advance booking rates in the pre-Christmas period were instead being committed months in advance by travellers whose alternative Caribbean plans had been disrupted. The JTB’s marketing team worked with the Jamaica Hotel and Tourist Association to ensure that the island’s positioning — safe, open and delivering the full Caribbean resort experience — was being communicated effectively in the North American source markets where the displacement effect was most concentrated.
The structural implications of the displacement were complex. Some of the travellers redirecting to Jamaica in 2017-18 would become repeat visitors regardless of whether the damaged islands recovered — Jamaica’s product had a strong track record of converting first-timers into repeat guests — while others would return to their original preferred destinations when those were restored. The net long-term benefit to Jamaica’s market share depended on the quality of the experience delivered during the influx period and the success of the JTB’s retention marketing in the years that followed. The tourism ministry and the private sector were conscious that the opportunity was real but time-limited, and that sustained investment in product quality and infrastructure access would be required to capitalise on it.
LNG: Commercial Framework Agreed in Principle
The government announced in the fourth quarter that it had reached agreement in principle with a prospective developer on the commercial structure for Jamaica’s long-delayed gas-to-power project. The announcement, while carefully worded to leave room for finalisation of legal and financial details, represented the most concrete progress on the LNG initiative since the process had begun with the 2014 request for proposals. The preferred structure involved a floating storage and regasification unit at the existing Old Harbour Bay site, with gas supply from international LNG markets contracted separately, and new gas-fired generation capacity to be built and operated by the private sector under a power purchase agreement with JPS.
The energy minister acknowledged that the path to commercial close would require additional work on regulatory approvals, financing arrangements and the detailed legal documentation of the agreements, and that the timeline for gas actually flowing into the generation system remained subject to those downstream processes. The history of delays in the project counselled caution about projected timelines, but the principle-level agreement was a genuine milestone that moved the project from negotiation into the structuring and documentation phase. For electricity consumers, who had been waiting since the early 2010s for the fuel cost reduction that gas-fired generation would deliver, the announcement provided some grounds for optimism that the transition was now within a definable timeframe rather than an open-ended prospect.
KFTL: New Cranes Arrive at Kingston
Kingston Freeport Terminal Limited received the first of its new ship-to-shore gantry cranes at the Kingston Container Terminal during the fourth quarter, with the cranes arriving by heavy-lift vessel and requiring specialised unloading and positioning operations that in themselves demonstrated the operational capability of the upgraded terminal team. The new cranes — post-Panamax capable and significantly larger than the terminal’s existing crane fleet — were designed to handle the larger container vessels that had been deployed to Caribbean trade lanes following the expansion of the Panama Canal in 2016, which had allowed post-Panamax vessels to transit and was reshaping shipping line vessel deployment strategies across the Caribbean basin.
The Panama Canal expansion had direct implications for Kingston’s competitive position as a transshipment hub. The ability to handle larger vessels at KCT — vessels that could not call at many smaller Caribbean ports even after the Canal expansion — was a key element of KFTL’s commercial strategy for growing transshipment volumes through the concession period. Larger vessels delivered lower per-container shipping costs on the trunk routes they served, and transshipment hubs that could accommodate these vessels efficiently would capture a greater share of the traffic. The new cranes were a material capital investment in KCT’s competitive infrastructure that the Port Authority’s constrained capital budget would not have been able to fund at the pace the market required.
Container throughput at KCT through 2017 had broadly maintained pre-concession levels, with the transshipment segment performing consistently with the overall direction of Caribbean trade flows. KFTL’s commercial team was in active discussions with shipping lines other than CMA CGM about the use of KCT as a transshipment hub, aiming to diversify the terminal’s customer base and reduce dependence on the single major carrier. The new cranes would support that diversification by enabling KFTL to offer productive and efficient service to the larger vessels that major carriers were increasingly deploying.
Renewable Energy: Approaching 80 MW of Installed Capacity
The commissioning of additional solar PV capacity during the fourth quarter brought Jamaica’s total utility-scale renewable generation to approximately eighty megawatts by year-end 2017, representing approximately eight percent of the island’s total installed generation capacity. The pace of commissioning reflected the construction timelines of the projects awarded in the 2016 procurement round, with the last of the solar projects having mobilised to site in early to mid-2017 and completing construction within the anticipated development schedule.
The operational data from the commissioned solar fleet was providing the Jamaican grid operator with a growing body of performance information: output profiles across different locations and orientations, degradation rates, maintenance requirements and the correlation between solar generation and grid demand patterns. This data was informing the next phase of renewable energy planning, which was expected to be advanced through 2018 with a second procurement round targeting additional capacity. The government’s energy policy had set a target of achieving thirty percent of electricity generation from renewable sources by 2030 — a target that the current installed base of approximately eighty megawatts was still far from meeting but toward which the commissioning trajectory was making measurable progress.
Road Infrastructure and Fiscal Performance
The National Works Agency commenced a new World Bank-financed road rehabilitation programme targeting the central parish road network during the fourth quarter, with contract awards in October and November 2017 covering sections of the main arterials in Manchester, Clarendon and St Catherine parishes. The programme, which complemented the IDB-financed works that had addressed the western and eastern corridors, was designed to fill in the coverage gaps in the multilateral road investment programme and improve connectivity between the agricultural interior and the urban and coastal markets it served. Construction was expected to run through 2019 given the scope and the typical construction season constraints in the central parishes.
The IMF Precautionary SBA second review, concluding in November 2017, confirmed Jamaica’s continued compliance with the fiscal targets specified in the arrangement. The Fiscal Council’s quarterly monitoring report, published in December, similarly confirmed that the government was meeting its Fiscal Responsibility Act obligations for the first half of FY2017-18. Debt-to-GDP continued to track downward in line with projections, international reserves remained comfortable, and the exchange rate was stable. The post-EFF macro-credibility story was holding, providing the market signal that the government’s financial team needed to maintain access to international capital markets at the sovereign spread levels the programme’s completion had established.
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