The headline screamed today Big, Really Big Mexican hotel company to invest US$900M in developing 9 hotels in Jamaica.
http://www.jamaicaobserver.com/news/Big–Really-big-_19233429
When one reads the article, it becomes very clear and the bulk of the money will not be coming from Mexico into Jamaica, but instead the money will be borrowed locally, with a little equity from the hotel group.
What we were not told is who is going to be guaranteeing this loan, will that be the government of Jamaica?
What is most likely to occur here is the bulk of the building materials will be imported from Mexico, which means the funds borrowed locally will be sent back to Mexico to pay for goods and services provided by Mexico. In addition the site manager and other project management team will be Mexicans and mainly manual labour and basic services from Jamaica.
So before this hotel is in the ground, the bulk of the money to supply materials and services will be going back into Mexico.
Once the hotel is built, the bulk of the management positions will go to Mexicans and waiter, housekeeping and gardening jobs reserved for locals.
All profits earned from locally borrowed funds, will then be repatriated to Mexico.
These Mega deals are really that big when you really dig deep and while they will provide some amount of jobs for locals, the wages to be left in Jamaica is way too local to contribute to any real economic growth in the country.
I am not knocking the deal, but what we really need is money coming into the economy and not the setup that we are currently seeing.
This is the reason why the Jamaican economy does not appear to grow despite what we see as huge investments being made into the country and therein lies the problem.
The fact is these investments are NOT structured properly and hence the Jamaican economy see very little benefits.
Filed under: Uncategorized | Tagged: economics, finance |
Warren's Blog 
LOL! Bad mind ago kill unnu. You are knocking the deal and it stands to reason that you only do so because of the latest JLP talking points memo. If you scrutinize the comments and various blogs, facebook, etc you will see that because this is good news they are attacking it to cloud the matter and muddy the waters on the premise that: 1. its using local money/banks to finance the project 2. another hotel was supposed to be built on this location before 3. there will be very little local jobs created 4. because the owners are foreign, all profits will be repatriated 5. the managers will be Mexican. There you have it, xenophobia, racism, classicism & just plain ism all wrapped up neatly. Whats actually sad is that the people they hire to disperse the propaganda are so lame and dumb, that they are transparent. Anybody with a minimum of comprehension skills would clearly see that They count the temporary construction jobs as well as the permanent jobs and the article speaks to two different projects; the expansion of their Negril property and the construction of the new property.
Every now and again you write something that is on point but my gosh the instances that you display any kind of common sense and clarity of though are way too few and far in between. Grow up kid.
I am not knocking the deal per se, I am saying these deals are NOT what they are made to be. We need more people with a level of critical thinking to look at these deals and ask valid questions.
eg. Why despite all the so called big investment in hotels by foreign entities, we are not seeing the spin off in the local economy.
Can you demonstrate some critical thinking and analyse this phenomena and provide us with an answer.
I await your response
Oh please Jay! Multiple studies have been done and the answers are somewhat obvious. First off, there is presently spin off in terms of jobs, short & long term. These jobs are extremely important because they pull more Jamaicans out of the underground economy, which has a multiplier effect in terms of making the official or above ground economy appear stronger. Also, the major suppliers of the hotel industry are local in origin.
However, because agriculture is fractured and our farmers are unorganized, unable to broker deals or keep them because of they are unable to consistently produce product of similar size, quality & quantity; the Jamaican economy is unable to see a LARGER direct spin off other than local jobs and taxes. In other words, we have to import everything including food, so the money goes out the country. Couple that with the lack of safety, which results in all-inclusive concept, the inability of any tourist, even those of Jamaican descent or birth, to traverse markets like the craft market without being impolitely harassed/hustled to death, etc and you have a trickle down effect rather than a flood. Successive governments have tried to remedy all the above issues but the Jamaican people are their worst enemy hence we are where we are. Improvement will occur in a flood when the industry reaches critical mass and when the farmers can consistently deliver product. The former is a function of FDI investments like these whereby one entity will build TEN hotels and total 12 hotels in 2 locations. We need and can accommodate 20,000 more hotel rooms over the next 10 years. Then, by function of basic greed, large business will buy out small farmers and more efficiently deliver product. Until then we will limp along with the latter, with peaks and valleys, unless of course the more recent agricultural park idea can germinate. That would at least give the small farmer more clout in negotiations as well as deliver consistency. Of course with a major drought, all bets are off.