Boom’s End: Q4 2008 and the Financial Crisis That Stopped Jamaica’s Resort Surge

Briefing

• Global financial crisis in September–October 2008 ended new resort financing availability.
• Multiple north coast projects suspended mid-construction as credit lines were withdrawn.
• Tourism arrivals began year-over-year decline from October 2008 as bookings fell.
• Environmental monitoring of recently opened resorts began documenting near-shore impacts.
• Advocates filed formal objections to several outstanding development applications.

The Lehman Brothers collapse in September 2008 and the credit market seizure that followed had specific consequences for Jamaica’s coastal development sector that played out over the final quarter of the year. The international financing structures that had funded the major resort projects of the boom years — combinations of development bank lending, commercial bank construction finance, and pre-sale income from condo components — depended on credit markets that, after September 2008, were no longer functioning normally. Projects that had been fully financed before the crisis continued; projects that were partway through their financing arrangements found those arrangements disrupted; projects that had been approved but had not yet secured financing found that financing now unavailable at any viable cost.

The visible consequence on the north coast was a series of suspended construction sites. The physical signs of the boom — the construction fences, the earth-moving equipment, the concrete foundations — remained in place, but the activity that had surrounded them stopped. Some sites were abandoned completely; others were put in a maintenance state, with security and weather protection, while their developers attempted to restructure financing or find new investors. The coastal landscape that resulted was neither the natural coast that had existed before the boom nor the resort coast that the boom had been producing; it was a liminal landscape of partially built structures, disturbed vegetation, and altered drainage patterns, waiting for a resolution that would take years to arrive.

What the Boom Had Made

The resort developments that had been completed and opened before the crisis hit were, by the end of 2008, Jamaica’s permanent north coast legacy. They were in place, they were operating, and their environmental and access impacts were accumulating. The near-shore water quality monitoring that was beginning to document those impacts in late 2008 was establishing the before-and-after record that would inform assessments of the boom’s environmental cost for years. The resort properties that had been built without providing the access corridors their approvals required were now established facts on the ground, and the leverage that regulators had over them during the approval and construction process had been lost. The window for prevention had closed; only remediation remained, and remediation was harder, more expensive, and politically more difficult than prevention would have been.

The Advocacy Inventory

The formal objections that environmental and access advocates filed in late 2008 to several outstanding development applications that had not yet been finally determined were partly a response to the specific merits of those applications and partly a strategic effort to establish a documented record of advocacy that would be relevant when enforcement questions arose in the post-boom period. The financial crisis had, in a sense, given the advocates a temporary advantage: the political pressure to approve applications quickly, which had been intense during the boom, was reduced by the absence of the development finance that would have been needed to act on those approvals. The applications that were still in process were applications for projects that could not currently be built. The assessment of their merits could, therefore, be conducted with more care than the boom-era pressure had allowed.

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