Jamaica has no known oil reserves; as a consequence, the island was about 90 percent dependent on imported oil for energy generation in the late 1980s. Most of Jamaica's oil imports came from Mexico, Venezuela, Trinidad and Tobago, and the Netherlands Antilles. Over 30 percent of imported petroleum imports were destined for the oil-intensive alumina subsector. Oil resources and imports were managed by the state-owned Petroleum Corporation of Jamaica (PCJ). In 1985 the PCJ accounted for 73 percent of the imported petroleum, with private bauxite companies directly importing the other 27 percent. Total oil consumption averaged nearly 13 million barrels a year in the 1980s.
The island's only oil refinery, located in Kingston, had a refining capacity of 36,000 barrels per day. Formerly owned by Exxon, the refinery was purchased by the government of Jamaica in 1982 for US$55 million. Subsequent to the refinery's sale to the government, PetroJam, a subsidiary of the PCJ, managed the plant's operations. The Kingston refinery was considered strategically important to Jamaica because of the country's great dependence on foreign oil and the high oil intensivity of the economy. For example, the per capita energy consumption of Jamaica in the early 1980s exceeded that of Brazil or the Republic of Korea (South Korea), mostly as a result of the bauxite industry.
Ethanol, an octane enhancer, was produced for export for the first time in 1985. The first ethanol plant was established in the early 1980s by Tropicana, a subsidiary of a California-based firm. Representing an investment of about US$23 million, the plant was easily the largest investment that had entered Jamaica or the Caribbean under the CBI by 1987. Even though the plant had not completed a full year of production in 1985, output still reached approximately 75 million liters of anhydrous ethanol. The ethanol was exported solely to the United States market. In addition, in 1987 the Jamaican government arranged with Belize to process ethanol from sugarcane there.
Demand for electricity grew with the country's aggregate growth. In the mid-1980s, roughly 90 percent of all energy generated was oil based. Hydroelectric power and bagasse (sugarcane residue) fuels made up most of the balance of energy generation. Government energy policy in the 1970s focused on increasing rural access to electricity. Before 1975 only about 10 percent of rural areas had electricity. In 1975 the government of Jamaica, in conjunction with the Inter-American Development Bank (IDB), launched the Rural Electrification Program, which improved rural access to electricity. By 1987 general access to electricity was greater than in most developing countries, about 54 percent, with access in urban areas reaching close to 100 percent.
Power outages were very common until the mid-1980s, when the sector was upgraded and expanded as part of physical infrastructure improvements in the new industrial strategy. The island's installed capacity increased from 680 megawatts in 1980 to over 700 megawatts by 1983. Government electric policy, implemented by the Ministry of Public Utilities and Transport, focused on efficiency, conservation, and alternative energy sources in the 1980s. Work on developing alternative energy sources focused on hydropower, peat, coal, bagasse, and others.
In 1983 approximately 70 percent of total electricity was generated by the government-owned Jamaica Public Service Company whereas the remaining 30 percent was produced by private industry in alumina, sugar, and cement factories. Electricity was produced primarily by steam plants (83 percent), although hydroelectric systems (11 percent) and gas/diesel plants (6 percent) were increasingly being used. At least 60 percent of electricity was consumed in the major urban areas of Kingston and Montego Bay. Total commercial energy consumption was equivalent to 11.2 million barrels of oil in 1985. The electrical transmission system included 864 kilometers of 138-kilovolts and 69-kilovolt lines in addition to some 8,000 kilometers of primary distribution lines at a voltage of 24 kilovolts and below. Oil prices and electricity rates became political issues in the 1980s, as oil prices remained above market prices and electricity rates increased very sharply.
In the 1980s, Jamaica had a well-established financial system that was expanding. Since 1962, the number of financial institutions had more than doubled to over forty, including the country's central bank, development finance banks, commercial banks, trust companies, merchant banks, building societies, insurance companies, peoples cooperative banks, finance houses, and credit unions. The government's economic policies in the 1980s favored greater use of monetary factors to influence the economy and tighter credit policies than previously used so as to restrain inflation.
The Bank of Jamaica was established in 1960 as the country's central bank. It was formed to replace the Currency Board, whose lack of authority to control the money supply had prevented the use of monetary policies. The bank issued currency, regulated the banking system, set minimum reserve ratios, adjusted liquid reserve ratios, established discount rates, and generally controlled credit. As part of the government's economic policies in the 1980s, the bank pursued a restrictive credit policy to lower aggregate demand in the economy. The tight credit policy was accomplished through higher reserve and liquidity ratios, which in 1985 required commercial banks to retain 50 percent of their assets in a liquid form. Likewise, the prime lending rate was maintained at high levels, reaching 23 percent in December 1985, or more than 10 percentage points higher than the prime rate in the United States. Another monetary policy of the bank was the devaluation of the Jamaican dollar to adjust the real rate of exchange to more realistic levels. The bank devalued the Jamaican dollar numerous times in the 1980s, lowering the exchange rate several times over its value in the 1970s. These policies were designed to help reduce the balance-of-payments deficit by making exports more competitive.
As a result of the historical reluctance of many commercial banks to make medium- to long-term loans, several government banks were created to finance economic development. The most important such government-sponsored bank was the National Development Bank of Jamaica. Other government banks supplying credit to specific sectors of the economy included the Jamaica Mortgage Bank, the Agriculture Credit Bank, the Jamaican Industrial Development Corporation, the Small Business Loan Board, and the Workers Savings and Loan Bank. These banks generally offered favorable interest rates and some technical assistance where appropriate.
There were eight commercial banks in Jamaica in 1985, all of which were originally or remained foreign owned. The British Barclay's Bank was the first commercial bank on the island, established in 1836 to finance the sugar industry. It was followed by three large Canadian Banks, which eventually came under local ownership and were renamed the Bank of Nova Scotia Jamaica, the Royal Bank of Jamaica, and the Bank of Commerce Jamaica. In the 1960s, American banks such as Citibank and Chase Manhattan Bank also entered the island. Barclay's Bank, later named the National Commercial Bank, was bought by the government in the 1970s; the government returned the bank to private hands in 1987, however. In 1985, 63 percent of all private-sector assets in major financial institutions were found in the commercial banks. Throughout the 1980s, commercial banks made three to four times more loans to the private sector than to the public sector. Loans were distributed approximately as follows: 25 percent to manufacturing, 20 percent to construction and land development, 16 percent to agriculture, 12 percent to transport, storage, and communications, and the balance to various other sectors.
Life insurance companies, building societies, trust companies, and merchant banks were other prominent financial institutions in Jamaica. Their share of private-sector assets ranked 19 percent, 7.4 percent, 7 percent, and 4 percent, respectively. In 1985 there were over twenty insurance companies in Jamaica, most of which held assets in large foreign firms. Insurance companies played an important role in building savings for investment in the economy. Building societies, all locally owned, were less numerous than insurance companies and generally attracted smaller savings to finance mortgages. Trust companies lent to commercial banks, provided trustee services, and held time deposits. Merchant banks functioned to underwrite securities, finance external trade, and offer managerial advice to industry. Several new merchant banks were established in the 1980s, including the Falcon Fund and the Export-Import Bank.
The Jamaican Stock Exchange, the oldest in the Caribbean, was established in 1969 under the direction of the Bank of Jamaica. Only a small percentage of the country's capital assets were traded on the original exchange, as most companies were either foreignowned or purely family-run businesses. The number of shares traded grew rapidly in the mid-1980s; these included the shares of some new publicly owned companies. As of early 1987, only thirty-nine companies were listed on the exchange. The exchange's performance in 1985 quadrupled the performance of 1984. In 1985, 37.6 million shares were traded for US$21.3 million compared with 9.7 million shares for US$7 million in the preceding year. From 1981 to 1986, the exchange's composite index increased 129 percent, standing at 1,499.87 by the end of 1986. A major cause of the rise was the increasing number of companies that issued public equity shares, rather than relying on commercial banks, to raise capital.
The Jamaican dollar became legal tender when it superseded the Jamaican pound in 1969. Because of tourism, United States, Canadian, and British currencies also circulated, and illegal black markets were common. Many of the tourist hotels listed prices only in United States dollars because of the greater stability of that currency. Eastern Caribbean dollars (EC$ (the joint currency used by members of the Organization of Eastern Caribbean States (OELS-- see Glossary) and pegged to the United States dollar at ES$270 equals US$1.00) were also visible. The value of the Jamaican dollar was tied to the British pound sterling until 1973, when it became pegged to the United States dollar. In the process, the Jamaican dollar moved from being the strongest currency in the Commonwealth Caribbean to being one of the weakest. After experiments with various types of exchange rates in the 1970s, exchange rates were unified in November 1983. Beginning in 1984, foreign exchange was allocated through a twice weekly foreign exchange auction system.
Data as of November 1987
NOTE: The information regarding Jamaica on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Jamaica Section information contained here. All suggestions for corrections of any errors about Jamaica Section should be addressed to the Library of Congress and the CIA.
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