Jamaica Infrastructure Report — Q2 2020: Near-Zero Tourism as Borders Close, Resilient Corridors Strategy Launches in June

The second quarter of 2020 will enter Jamaica’s economic records as the quarter of the near-complete disappearance of tourism — an industry that had delivered a record season just months earlier reduced to a fraction of a fraction of its normal scale as international air travel all but ceased and borders remained controlled. The infrastructure built over the preceding decade continued to function: gas flowed, power was generated, roads were maintained. But the economy that those systems existed to serve had contracted sharply, and the fiscal space that years of discipline had created was being rapidly consumed by the emergency expenditure required to prevent a recession from becoming a humanitarian crisis. At the end of June, a carefully designed plan to reopen the island to visitors on a controlled, spatially bounded basis offered a fragile but real beginning of what will be a long road back.

April and May 2020 passed over Jamaica’s resort towns like a long, eerie silence. The Sangster International Airport in Montego Bay, which in normal years handles more than four million passengers annually and whose departure halls are animated by the controlled chaos of families checking in for a week in the sun, processed only repatriation and essential travel. The craft markets and jerk stands and taxi ranks around the resort districts of the north coast stood empty. The hotels that had closed in mid-March remained shuttered, their pools drained, their restaurants dark, their furloughed employees drawing the partial support that the government’s emergency packages could provide while waiting for the signal that it was safe to return.

The economic toll was visible in the aggregates before the statisticians had assembled the formal numbers. Tax Administration Jamaica’s revenue collections for April and May fell sharply against prior year, as the consumption taxes, payroll deductions, and corporate income flows generated by a functioning economy contracted in lockstep with the economic activity that generates them. The Bank of Jamaica was managing an extraordinary combination of pressures: a collapsing current account as tourism earnings disappeared, exchange rate pressures as demand for US dollars persisted while supply diminished, and a domestic banking system whose credit quality was deteriorating as borrowers who had been servicing loans from tourism-related income found themselves unable to do so.

Resilient Corridors: An Innovative Response to an Unprecedented Problem

The Resilient Corridors framework, announced by the tourism ministry and operational from June 15th, represents Jamaica’s distinctive answer to the challenge that confronts every tourism-dependent small island state: how to begin earning the foreign exchange that the economy desperately needs while managing the public health risk that international travellers represent in a period of active global pandemic. The concept, developed in consultation with the Jamaica Tourist Board, the Ministry of Health, and major resort operators, creates a spatial and operational boundary around the resort areas within which international visitors can stay, move, and receive services — a defined tourism bubble that limits the interface between arriving visitors and the general Jamaican population.

Under the framework, visitors arriving at designated airports are tested for COVID-19 on arrival and must await a negative result before being transported directly to their resort. Movement outside the designated resort areas is restricted; visitors who wish to take excursions to attractions outside the resort zone must do so through approved operators who have been certified under the framework’s health and safety standards. The resort properties themselves have been required to implement comprehensive health protocols — physical distancing, enhanced sanitation, contact tracing systems, isolation facilities for symptomatic guests — to receive the certification that allows them to participate in the corridor system.

The response from resort operators has been broadly positive. The Resilient Corridors approach gives properties a framework for reopening that addresses the understandable concerns of international guests about the health safety of their holiday experience, provides a commercially viable model for partial-occupancy operation, and creates the visible evidence of a managed, responsible resumption of tourism that major source markets’ governments and airlines require before they will restore flight services. Several major all-inclusive operators had their properties certified under the framework within weeks of its announcement, and flights to Montego Bay from the United States began resuming in late June, initially at modest frequencies but with airlines indicating their intention to scale up service as bookings materialise.

The JTB has been working intensively with source market partners — tour operators, online travel agencies, airline commercial teams — to communicate the Resilient Corridors framework to consumers and to rebuild the confidence that will eventually translate into bookings. The marketing message necessarily differs from Jamaica’s traditional sun-and-beach proposition: it now includes the evidence of safety protocols, testing regimes, and the controlled environment of the corridor system. Whether consumers will find this reassuring or constraining will only become apparent as the booking season unfolds through the third quarter.

Emergency Financing: Rebuilding the Fiscal Buffer

The scale of the fiscal shock confronting Jamaica was brought into focus during the second quarter as the revenue collapse and emergency expenditure requirements became fully visible in the government’s monthly fiscal data. The combination of suspended tax collections, emergency cash transfers to households, loan support programmes for businesses, and additional healthcare expenditure has driven the government’s fiscal position from the primary surplus that had been maintained for six consecutive years into deficit. The Fiscal Responsibility Act, whose primary surplus requirement had been the cornerstone of Jamaica’s decade-long debt reduction, was formally suspended under the emergency provisions that the legislation itself incorporated for exactly such circumstances.

Jamaica accessed the IMF’s Rapid Financing Instrument during the quarter, drawing on the emergency facilities that the Fund made available to member countries facing pandemic-related balance of payments pressures. The terms of the RFI access — concessional rates, minimal conditionality beyond commitment to the Fund’s standard policies — represented a different type of IMF engagement from the programme conditionality that had governed Jamaica’s relationship with the institution through 2013–2019. The World Bank’s Caribbean operation and the Caribbean Development Bank also made emergency resources available, providing the foreign exchange buffer that allowed the Bank of Jamaica to manage exchange rate pressures without drawing down the reserve levels that had been painstakingly rebuilt through the programme years.

Finance Minister Clarke has been explicit that the government intends to return to the fiscal responsibility framework as quickly as economic conditions permit — that the emergency suspension of the primary surplus target is a temporary response to a temporary crisis, not a permanent revision of the fiscal strategy. The institutional credibility that the framework has built, reflected in the credit ratings and borrowing terms that Jamaica now accesses, depends on that commitment being demonstrably maintained. The markets have so far accepted this framing, with Jamaica’s sovereign credit spreads widening less than those of some peers with less established fiscal track records.

Energy: Oil Price Collapse Brings Unexpected Relief

One unexpected consequence of the pandemic’s destruction of global economic activity has been the collapse in international oil prices — prices fell so sharply in April that US crude oil futures briefly traded at negative values for the first time in history as storage capacity ran out and producers could not shut in wells fast enough to match the demand collapse. For Jamaica, whose electricity tariff incorporates a fuel charge component that tracks international fuel prices, the oil price crash delivered a modest but real benefit to consumers at a time when many households were under severe financial pressure. The Jamaica Public Service’s tariff adjustment mechanism passed through fuel cost savings that partially offset the income losses that furloughed workers were experiencing.

The LNG supply to Old Harbour Bay continued to operate normally through the quarter. Natural gas is indexed to different price benchmarks than crude oil, and the LNG contract’s pricing does not directly track the oil price movements that dominated financial news, but the broader fall in energy commodity prices has been broadly favourable for the cost structure of the electricity system. The renewable energy portfolio continued to generate without significant disruption — wind and sun do not respect pandemic restrictions — and the combination of gas and renewable generation continued to spare Jamaica the oil price exposure that would have been more severe under the pre-2019 fuel mix.

Roads: Works Restart After Protocol Finalisation

Road construction and maintenance works that had been paused or operating at reduced capacity during the strictest phase of the emergency restrictions resumed more fully during the second quarter as the NWA and its contractor partners finalised the health protocol frameworks that govern safe site operation. The most critical suspended works — bridge rehabilitation projects on several roads in the central and eastern parishes that carry significant agricultural traffic — were prioritised for early restart as the construction industry’s health and safety guidelines were agreed with the Ministry of Health.

The reduced traffic volumes on Jamaica’s roads during the period of movement restrictions have in one respect been beneficial to road pavement performance — the reduced loading has slowed the rate of pavement deterioration on those sections where heavy vehicle traffic is the primary cause of structural damage. The NWA has been using the lower-traffic environment to accelerate patching and minor rehabilitation works that are more disruptive to complete under normal traffic conditions, making productive use of the reduced vehicular activity that the pandemic has imposed. When the economy returns to normal levels of activity, the roads will have benefited from maintenance interventions that would have been more costly and disruptive to undertake in normal conditions.

Ports and Logistics: Navigating the New Normal

Kingston Freeport Terminal’s second-quarter performance has reflected the deeply disrupted state of global container shipping. The collapse in consumer demand across North American and European economies in April and May reduced the volume of goods moving from Asian factories on the schedules that had been booked months in advance; shipping lines cancelled sailings and blanked voyages to match capacity to the reduced cargo volumes, producing an unusual pattern of port calls and berth utilisation that required KFTL’s planning teams to manage their equipment and labour schedules with unusual flexibility.

The supply chain disruptions have also affected the import side of Jamaica’s trade: essential goods, medical supplies, and the food commodities that the island imports in significant quantities from North America and elsewhere have maintained priority handling at both KFTL and the Kingston Container Terminal, ensuring that the consumer goods shortages that some island economies experienced in the early weeks of the pandemic have been avoided. The Port Authority of Jamaica’s coordination with customs, food safety, and regulatory authorities has been effective in maintaining the throughput of essential imports through a period when port operations were under health protocol constraints.

As the second quarter of 2020 closes, Jamaica is in a position that is simultaneously better and worse than the worst fears of March. Better, because the public health situation has been managed — case numbers have been controlled, the health system has not been overwhelmed, and the Resilient Corridors framework has created the beginning of a path back to economic normality for the tourism sector. Worse, because the depth of the economic contraction is becoming apparent in ways that will require years rather than months to fully repair — the jobs that have been lost, the businesses that have closed, the household savings that have been depleted to cover a crisis that no one planned for. The infrastructure endures. The economy that runs through it has been shaken to its foundations.

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