Commentary Jamaica Magazine

So Close, yet So Far away

Written by Greg Evans

As a Jamaican living in Central America I have heard many perceptions from Jamaicans about the Isthmus.  The truth is that many Jamaicans look down on these countries as backward and Civil War stricken nations. This is so far from the present day reality as those periods of war are long gone and most of these countries are today more developed than Jamaica. My main purpose is to try to convince Jamaican entrepreneurs and Government of the many business opportunities in Central America and to show why the snobbery toward that region is unfounded and not in Jamaica´s best interest.
 

Rapid Development and Future Potential

Comparing  Gross Domestic Product (GDP) per capita (a universally accepted economic indicator of a nation´s Productivity and Standard of Living), Jamaica lags behind 4 of the 6 countries in that region surpassing only Honduras and Nicaragua. But for how long? Both countries are enjoying much faster growth than Jamaica. Honduras has a growth rate of 6% and Nicaragua 2.9%, compared to Jamaica´s sluggish 1.5%. To illustrate the competitive effects of these figures, let´s look ahead. If growth rates remain as they are today, Honduras (whose GDP per capita is currently 33% lower than Jamaica´s) will pass Jamaica in 2014 and just 4 years after that, its GDP per capita will be 21% higher than Jamaica´s.
 

There is still room for more growth in all these nations and here are just a few reasons why. El Salvador, a well-known surfing destination is underdeveloped in tourism terms and is now seriously building a tourism culture.  Its capital San Salvador as well as Guatemala City are considered among the most modern cities in Latin America and are favourites for International Conferences such as the International Olympic Committee´s 119th General Assembly in 2007 hosted by Guatemala City. The idea of a “Dry Canal” in Nicaragua if ever realised is expected to quickly convert the region´s poorest country into another Panamá. The solid growth seen in Honduras can be expected to continue as it is attracting large quantities of foreign investment in companies and properties. As a Costa Rican colleague of mine said: “wherever you see Arabs and Jews investing as partners something huge is about to happen.” On a regional level they have taken the humble approach unlike us and look to learn from us where we are more developed.  In a recent interview, Guatemala´s Foreign Minister highlighted Jamaica´s Stock Market as very developed and an inspiration to call for one modernized and unified Central American Stock Market which would dramatically increase the capital of many of the already large local companies.

Factors leading to the higher GDP

First of all let´s remember the components of GDP.  It is comprised of the total dollar value of Local Consumption, Investment, Government Spending and the Balance of Payments (the difference between the value of its Exports and the value of its imports).  These countries are highly productive and highly consuming markets. This is a point that illustrates the high consumption level relative to Jamaica. Consumption is not measured by units bought but by the value paid and when you consider that the cost of living in Jamaica is much higher than it is in most of Central America it shows that people have more buying power there.  In production terms the countries are largely self sufficient as there is no need to import very many mass consumption items. The level of retail development is very high and the malls are First Class throughout the region.

We must also remember the balance of payments as a big factor. The region exports many local products but also avoids importing by producing goods from foreign brands under license, keeping local prices down. At the same time they export these goods to other markets as well. A recent study of Foreign Direct Investment (FDI) into the region comprising Mexico, Central America and the Caribbean revealed that three of the top six countries are Central American (Costa Rica which topped the region, Honduras and Guatemala). Though Guatemala isn´t top of the list it attracts large companies such as Kellogg´s, Campbell´s Nestlé, Bayer, Novartis and many others who have set up shop using the country as their Latin America and Caribbean manufacturing and distribution base. In fact many medicines, soaps, detergents and food products you buy in Jamaica are made in Central America.
 

These countries do not let Cultural Barriers and language prevent them from doing business overseas. For example, Guatemala´s Pollo Campero, a fried chicken chain is not only in the Spanish-speaking World.  In addition to all of Central America, Mexico, Spain and Ecuador, it has also 40 US locations and has recently expanded to China and Indonesia. Meanwhile in Central America the only Jamaican product found is Appleton rum and this is not because stores don´t want to stock them, it is because the Jamaican companies have shied away from these markets.  Comparing supermarket shelves in Jamaica and Central America you can see a lot of local product in Central America and in Jamaica you see an excess of imported goods which also helps to explain the difference in Balance of Payments and therefore the disparity in growth between Jamaica and these countries.

 

Direct Contact

With Central America´s population of 40.7 million in close proximity, Jamaica must seize the opportunity to be the bridge between Central America and the Caribbean. This should begin with the direct communication between the regions. In other words direct flights, direct banking and low phone rates.  Why do we need to involve the USA in travel between the regions if direct travel is so close?  Why should we be depending on banks in New York City to get funds from say Costa Rica to Jamaica? Low phone rates should not be reserved only for the mighty US, UK and Canada to ensure that business can be conducted at a lower cost between the regions.
 

With Jamaica´s strategic location it could very well serve as the hub between the two regions.  A direct flight between Kingston and El Salvador (the hub for Central American carrier TACA Airlines) would connect both regions efficiently and an alliance between Air Jamaica and TACA would help to keep fares down and make travel easier for the Central Americans who in general feel a strong affinity with Jamaica and would love to visit.  But with the necessary stop in the USA or Panamá in the way, the cost becomes prohibitive for many. Why spend so much to go to Jamaica if you can spend less than half and go to Miami or Panamá? It´s a very fundamental business mistake that we are making – letting your tourism competition get the first look at your potential client.

In closing this is not a region at which we can look down our noses but rather a region from which we can learn. It is a larger and  more developed region that we should look at as an opportunity for our growth.  In both regions, but particularly in Jamaica a lot can be done by Governments to reduce the mountain of red-tape which makes it harder for foreign companies to establish businesses and bank accounts as well as sell their products. There is plenty of potential for various Jamaican products and services in this nearby, stable, highly populated, highly productive and high spending region.

About the author

Greg Evans