Street violence in Jamaica over the planned extradition of an alleged gang leader to the U.S. could keep tourists away and damage the country’s recovering economy, the head of Jamaica’s Chamber of Commerce said.
Milton Samuda, president of Jamaica’s Chamber of Commerce, said the situation in Kingston is “still tense” after Prime Minister Bruce Golding declared a one-month state of emergency yesterday in response to the violence.
“I think the obvious first implication is for tourism,” Samuda said in a telephone interview from the capital. “This obviously doesn’t help the business climate and it could affect potential investors.”
Two police officers were killed yesterday after supporters of Christopher “Dudus” Coke set up roadblocks in Kingston to prevent his arrest. Police and soldiers came under heavy fire again today in Coke’s stronghold in the capital as plumes of black smoke engulfed the impoverished area, The Associated Press reported.
Coke is accused by the U.S. government of leading an international criminal group known as the “Shower Posse,” with members in Jamaica and the U.S. Golding in a speech yesterday called the attacks “a calculated assault on the authority of the state,” according to a transcript on the government-run Jamaica Information Service’s website.
Jamaica’s borrowing costs held near a three-month high today. Dollar bonds yielded 5.36 percentage points more than U.S. Treasuries at 5:58 p.m. in New York, according to JPMorgan Chase & Co. The spread last reached 5.36 percentage points on May 21, which was the biggest spread since Feb. 16.
The U.S. State Department on May 21 warned travelers civil unrest in Kingston could block access to the international airport.
Year-to-date hotel occupancy through April was 71 percent, up from 67 percent during the same period last year and down from 77 percent during the comparable period in 2008, according to Smith Travel Research Inc.
Smith tracks eight hotels in Jamaica, including ones operated by Marriott International Inc.’s Ritz-Carlton luxury brand and by Hilton Worldwide.
“I think a reduction in bookings would be a very fair statement,” said Patrick Scholes, a New York City-based analyst at FBR Capital Markets & Co. Inc.
Air Jamaica Ltd. will cancel its three remaining flights today between the Caribbean island and the U.S. “to protect our customers and staff who would arrive at night,” company spokeswoman Joy Schaaffe said in a phone interview from Miami. Jamaica’s largest carrier will resume flights tomorrow after daybreak, she said.
The International Monetary Fund in February approved a 27-month, $1.27 billion stand-by credit agreement to help the Caribbean economy of 2.8 million people recover from the global financial crisis, which depressed prices for bauxite and aluminum exports as well as reduced inflows from tourism and remittances sent by Jamaicans living abroad.
An IMF mission to Jamaica on May 18 recommended the board disburse $93.5 million after the government met its fiscal targets by controlling spending and improving tax collection. Jamaica’s debt is equal to about 130 percent of gross domestic product, according to the IMF.
The IMF expects Jamaica’s economy to shrink 0.3 percent this year, after contracting 2.8 percent last year, according to a May report.
Coke’s extradition could prove damaging to the country’s political class, said Carl Ross managing director of investments at Oppenheimer & Co Inc., which is a trader of Jamaican bonds.
“That could be very damaging to the political system, it could unveil a lot of underlying corruption,” Ross said in a phone interview from Atlanta.
Jamaican bond prices are likely to fall tomorrow when the markets reopen following today’s Labor Day holiday in Jamaica, Ross said.
“If this remains geographically contained and is short-lived, it shouldn’t affect bond prices,” said Boris Segura, an economist at RBS Securities Inc. in Stamford, Connecticut. “If it spreads over time, I’d start worrying.”