Jamaica Infrastructure Report — Q3 2019: Hurricane Dorian Spares Jamaica, Summer Tourism Peaks, LNG Ramp-Up Continues

The third quarter of 2019 delivered a familiar Caribbean combination: a strong summer tourism season and a hurricane that tested the limits of regional infrastructure. Hurricane Dorian, which made catastrophic landfall in the Bahamas on September 1st as a sustained Category 5 storm — one of the most powerful Atlantic hurricanes ever recorded at landfall — caused devastation in Abaco and Grand Bahama that will take years to address. Jamaica was spared direct impact, its tourism summer season reaching a strong close, while the natural gas transition initiated earlier in the year continued its steady ramp toward full operating volumes.

When Hurricane Dorian formed in the central Atlantic in late August and began intensifying with alarming speed, emergency managers across the Caribbean tracked its trajectory with the acute attention that any serious Atlantic storm demands. The Bahamas, lying directly in Dorian’s projected path, began its own preparations, but the storm’s unprecedented stall over the northern islands of the archipelago — barely moving for almost two days while sustaining Category 5 winds and generating storm surge that inundated entire communities — produced destruction on a scale that exceeded even the most pessimistic pre-landfall assessments. Images from Abaco and Grand Bahama in the days after the storm described a landscape so thoroughly altered by wind and water that the rebuilding challenge approached that of reconstruction from scratch.

Jamaica’s Office of Disaster Preparedness and Emergency Management activated its monitoring and coordination protocols as Dorian moved across the Atlantic, but the storm’s track kept it well to the north of the island and the direct impact proved negligible — some enhanced swells and localised rainfall, but no structural damage and no interruption to normal operations at either the airports or the ports. The Regional Security System and the Caribbean Disaster Emergency Management Agency coordinated the wider Caribbean response, and Jamaica contributed to the regional humanitarian effort with personnel and supplies channelled through the CARICOM mechanisms established for exactly such contingencies.

The Bahamas’ devastating experience with Dorian added renewed urgency to the conversations about Caribbean infrastructure resilience that had been underway since Maria and Irma struck in 2017. For Jamaica, whose own infrastructure vulnerabilities are well documented, the lesson was not abstract: the difference between the Bahamas’ experience and a potential Jamaica experience with a comparable storm was partly geographic and partly the result of investment choices made over years in drainage, building standards, and emergency response capacity. Those choices are never final; the next storm will test whatever has been built.

Energy: Gas Ramps, Western Expansion Crystallises

The natural gas supply to the Old Harbour Bay power station has been advancing through the staged ramp-up process that characterises the commissioning of any large new fuel delivery infrastructure. Additional generating units at the station have been progressively converted to gas operation as the supply chain — the FSRU, the subsea pipeline, the metering and compression equipment onshore — has demonstrated its reliability across a range of operating conditions. The electricity tariff implications of this ramp have been building commensurately, with each additional unit of gas-displaced fuel oil delivering further fuel charge reductions that the OUR’s tariff mechanism passes through to consumers.

The more consequential development during the quarter has been the crystallisation of plans to extend natural gas supply to the western Jamaica generating complex. New Fortress Energy, which listed its shares on the NASDAQ exchange in February 2019 and has since been communicating its Caribbean strategy to a broader investor audience, has been in advanced discussions with the government and Jamaica Public Service regarding the development of an LNG receiving facility to serve the Bogue power station in St James. The Bogue plant, which supplies a substantial portion of the western grid’s baseload and peaking capacity, currently runs on heavy fuel oil and diesel — the same fuel mix that Old Harbour Bay has been displacing. Converting Bogue to gas would extend to the tourism-intensive western parishes the electricity cost improvements that the central and southern parishes have been experiencing since early 2019.

The infrastructure model for a western LNG supply requires its own receiving terminal, as the distance from Old Harbour Bay to Bogue makes a direct pipeline impractical at reasonable cost. NFE has been developing a concept for an LNG receiving facility in the Montego Bay harbour area, which would receive LNG from the same supply chain serving Old Harbour Bay — likely by LNG truck transport or small-scale LNG vessel — and regasify it for delivery to the Bogue plant. The regulatory and environmental approvals for such a facility require careful navigation, particularly given the proximity of the Montego Bay harbour to the cruise terminal and the heritage-sensitive town centre. These complexities have not derailed the discussions, but they have shaped the timeline.

The renewable energy sector is operating its full complement of commissioned capacity without major incident. The combination of first-round and second-round projects now delivers renewable electricity that displaces thermal generation across a meaningful share of the daily operating cycle, particularly during the daylight hours when solar irradiance is strongest. Grid operators at JPS have been developing the dispatch management capabilities that renewable integration requires, learning the patterns of solar and wind variability across the island’s different microclimates and calibrating backup plant dispatch to maintain supply reliability as renewable penetration grows.

Tourism: The Summer Season Delivers

The summer of 2019 — July and August, the peak of Jamaica’s domestic Caribbean summer season when North American families dominate the visitor mix — delivered arrivals and occupancy data consistent with the sustained growth trajectory that the Jamaica Tourist Board has been managing. Stopover arrivals for the third quarter continued to run ahead of the comparable period in 2018, itself a record year, extending the sequence of outperformance that has now characterised five consecutive years of Jamaica’s tourism statistics.

The accommodation sector has been absorbing the growth with the benefit of new room supply coming on stream from the hotel projects that received planning approval and began construction in the 2015–2018 period. Several new properties opened or began operating their first full summer seasons in 2019, adding room capacity in Montego Bay, Negril, and the south coast markets that have been growing as the north coast approaches effective capacity limits at peak periods. The new rooms represent a mix of all-inclusive, boutique, and branded chain properties that broadens the product offering available to different visitor segments.

The Jamaica Tourist Board has been expanding its focus on the sports tourism segment, which has proven an effective complement to the leisure and cultural tourism that has traditionally dominated. The island’s track and field heritage — rooted in the extraordinary success of Jamaican athletes at successive Olympic and World Championship competitions — has generated a passionate global following that the JTB has been working to convert into visitor arrivals. Training camps, competitions, and heritage experiences centred on Jamaica’s athletic culture have been attracting visitors from markets that do not traditionally prioritise Caribbean beach holidays.

Hurricane Dorian’s devastation of parts of the Bahamas raised, as in 2017, the question of market diversion — whether visitors who would have travelled to affected destinations might reroute to Jamaica. The experience of 2017, when Irma and Maria damage to competing Caribbean destinations produced a measurable boost to Jamaica’s visitor numbers, has made resort operators and the JTB alert to this possibility. The timing of Dorian’s impact, in the final weeks of the summer season rather than the peak winter period, limited the scale of any diversion effect in the near term, but the recovery timeline for the most severely affected Bahamian tourism infrastructure is measured in years rather than months, suggesting that the impact on competitive dynamics may be sustained.

Roads: Eastern Progress and the Perennial Maintenance Challenge

The road rehabilitation programme in the eastern parishes that began in earnest in the 2019–20 budget cycle has been delivering tangible improvements in St Thomas, where the combination of post-Matthew repair works and new maintenance contracts has restored accessibility to a number of communities in the interior and along the coast. The engineering challenges of St Thomas — its rivers, which flow swiftly from the Blue Mountain range to the coast and can rise rapidly in heavy rainfall, are responsible for repeated damage to bridges and low-level crossings — have required solutions that go beyond simple resurfacing to include bridge strengthening and improved riparian drainage.

Portland’s road programme has been advancing more slowly, partly because the parish’s rainfall intensity makes dry-season construction windows narrower than in the drier parishes and partly because the engineering design process for some of the more complex sections has required additional time for geotechnical investigation. The NWA has been working with its contractor partners to identify construction sequences that maximise progress within the available weather windows, and the expectation is that the most critical sections will be completed before the end of the current budget year.

Across the island, the recurrent challenge of maintaining a road network whose total rehabilitation cost — were all deteriorated surfaces to be brought to standard simultaneously — substantially exceeds the available annual maintenance budget remains the fundamental constraint on road quality. The NWA’s network condition survey data, updated on a rolling basis, shows that the sustained investment of recent years has arrested the deterioration of the primary network and achieved modest improvement in average pavement condition scores, but the secondary and tertiary network — the roads that connect farms to markets and communities to services — remains in aggregate below the standard that the government’s own road policy targets specify.

Port: Volumes and the Long Game

Kingston Freeport Terminal Limited recorded its third consecutive quarterly improvement in transhipment volumes during the third quarter, a performance that the terminal’s management team has attributed to a combination of improved productivity metrics, expanded service agreements with shipping lines, and the underlying growth of trade volumes on the Asia-Americas corridors that the terminal primarily serves. The fourth quarter traditionally shows further volume growth as pre-holiday consumer goods shipments build up from Asian manufacturing centres, and the KFTL team has been managing berth schedules and equipment availability to capture this seasonal peak.

The Port Authority of Jamaica’s broader planning for Kingston harbour development has been progressing through the environmental and planning assessment stages. The vision for a logistics hub that integrates container transhipment, cruise passenger services, Free Zone manufacturing, and waterfront commercial development requires a level of infrastructure investment and institutional coordination that extends well beyond any single budget cycle — but the groundwork of planning, assessment, and stakeholder engagement is the necessary precondition for the larger investments that the vision ultimately requires.

Fiscal: Growth Continues, Debt Ratio Falls Further

Jamaica’s macroeconomic performance through the third quarter of 2019 continued the positive trajectory of recent years. GDP growth, while not spectacular in absolute terms, has been sustained above the long-run historical average for a period that now spans several years, generating employment in construction, tourism, and the growing business process outsourcing sector that has established Jamaica as a significant English-language BPO location for North American corporate clients. The debt-to-GDP ratio, which had peaked above 140 per cent in the years following the FINSAC restructuring, has been declining steadily as the combination of primary surpluses, economic growth, and improved borrowing terms reduces both the numerator and the denominator of the equation in the right directions.

The IMF Precautionary Stand-By Arrangement continued through the quarter in good standing, with the quantitative performance criteria being met and the structural benchmarks — the legislative and regulatory reforms that accompany the financial targets — being implemented on the agreed schedule. The SBA is approaching the later stages of its original programme horizon, and discussions between the Ministry of Finance and the Fund about the post-programme framework — whether Jamaica will seek a successor arrangement or graduate to a fully market-based financing relationship — are beginning to take shape. Jamaica’s successful track record under successive IMF programmes, which contrasts sharply with the programme breakdown that preceded the 2013 EFF, has transformed the government’s relationship with its principal fiscal monitor from one of constraint and conditionality to something closer to a productive policy dialogue.

As the third quarter of 2019 draws to a close, Jamaica’s infrastructure and economic landscape is more favourable than at any point in the preceding two decades. The electricity grid is transitioning to cleaner and cheaper fuels. Roads are being rebuilt with international financing. The port is growing its transhipment business. Tourism is delivering record results for the fifth consecutive year. The question that economic planners are beginning to ask is not whether the reform programme has worked — the evidence is accumulating that it has — but how to extend and sustain the gains through a period of external uncertainty that, at the global level, is beginning to darken somewhat as trade tensions and slowing growth in the major economies cast shadows over the Caribbean’s main trading partners.

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