Donovan Perkins, Guest Commentator

The Bank of Jamaica periodically publishes an analysis of the country's balance of payments (BOP).

It recently released Jamaica's performance for the nine-month period January to September 2007.

As a financial person, I tend to look on our BOP a little differently from how an economist would analyse these economic data.

Here's a look on Jamaica as if it were an operating business.

On the revenue side, exports grew 9.0 per cent. Tourism receipts, not surprisingly, fell 3.0 per cent as data on tourist arrivals for the full year indicate that arrivals fell 4.0 per cent in 2007.

Our other major export activity, that is our export of people business - and this is reflected in remittance receipts - grew 12 per cent. So our fastest-growing foreign exchange revenues are coming from remittances, not from tourism or traditional exports.

Fuel imports

On the expense side, fuel imports were up one per cent to $1,409 million in 2007, and represents 34 per cent of total imports year-to-date.

Other non-fuel imports were up 14 per cent, while services, et cetera, rose 10 per cent. On the surface, these are not good signs for an emerging economy.

In summary, the table indicates that Jamaica had a 'net loss' of US$607 million for this period, up 36 per cent versus 2006.

Now, as I said earlier, if we think of Jamaica as a business, as a consolidated group of companies, we must recognise that this group has significant foreign share owners that operate a number of profitable divisions within the group.

These divisions paid out total dividends of US$662 million during 2007, up 31 per cent.

As a result, Jamaica recorded a current account deficit of $1.225 billion through September 2007.

To finance this shortfall, we borrowed a net amount of US$460 million from the capital markets, after paying out US$225 million to meet a maturing global bond issue last September.

New investors

On a positive note, we were able to attract new investors to Jamaica, who ploughed US$363 million in new investments in a number of industries, primarily tourism.

So, we had financing flows of US$823 million, but these receipts were not sufficient to meet the substantial shortfall, and necessitated a drawdown of US$402 million from our net international reserves, or NIR, during this period.

In summary, we have a company that has its expenses growing faster than its income; it has some appeal to investors, but depends heavily on external financing to fund its losses. Obviously, we cannot continue to run a current account deficit at this level for a protracted period, especially if the international capital markets remain unsettled, which has been a key source of financing this gap in recent years.

Donovan H. Perkins is president and chief executive officer of Pan Caribbean Financial Services Limited. Email: dperkins@gopancaribbean.com