The Multinational Monitor

MAY 31, 1985 - VOLUME 6 - NUMBER 6

S E A G A   U N D E R   S I E G E

Seaga Under Siege

by William Stief

KINGSTON, Jamaica - When General Motors Corp. introduces plastic parts in automobiles, a Connecticut-sized Caribbean island 550 miles due south of Miami is hurt.

The island is Jamaica, independent since 1962 and the destination of hundreds of thousands of U.S. tourists annually. Jamaica boasts that it is the largest English-speaking nation in the Caribbean, that it is a parliamentary democracy only 90 miles away from Cuba and Haiti, and that it has made a phenomenal recovery in luring U.S. tourists to its beaches and mountains.

But not one tourist in 1,000- and 831,000 visited the island in 1984 - understands the relationship between the auto industry's new, plastic parts and Jamaica's declining economy.

There is no question that the island is in deep trouble economically, despite the tourist boom. The trouble was reflected in two days of demonstrations in mid-January, occasioned by a 21.2 percent gasoline price increase. Ten people died in the demonstrations, three of them shot as looters. Fifteen people were wounded. Behind the gas price increase was Prime Minister Edward Seaga's accelerating devaluation of the Jamaican dollar; today one U.S. dollar buys 5.05 Jamaican dollars.

But behind this devaluation, forced on Seaga by the U.S. controlled International Monetary Fund, is a change in the market for Jamaica's chief export, bauxite. That change is reflected in the U.S. automobile industry's shift to plastic in place of aluminum - the end product of refining the oxides in the red earth of bauxite.

One result of this shift, which applies not only to the automobile industry but to industrial products across-the-board, has been to lower the standard of living for Jamaica's 2.4 million people. The situation is a classic example of First World impact on a Third World nation.

In 1981 Jamaica's gross domestic product (GDP), sum of the value of all its products and services, was $3 billion in U.S. dollars and per capita income was $1,340. By 1984, Seaga's government acknowledges, GDP had dropped to $2.05 billion and per capita income was $923.

This occurred despite the fact that the Reagan administration has made special efforts to prop up the Seaga regime. Seaga, whose Jamaica Labor Party (JLP) came to power in 1980 only a few days before Ronald Reagan was elected U.S. president, was the first foreign leader to visit Reagan at the White House, and Reagan was the first U.S. president to visit Jamaica. Seaga is a true believer in Reagan's "magic of the marketplace" and is a major beneficiary of U.S. aid - $ 100 million in the fiscal year that ended last Sept. 30, $145 million in the current fiscal year. And the White House has gone out of its way to help Seaga by buying 3.6 million tons of bauxite for the U.S. "strategic stockpile" in the last couple of years.

But the marketplace's magic has done in Seaga. In recent years, industrialists have discovered that plastics are cheaper and better than aluminum in many applications. The result has been a terrible blow to what in essence was the one commodity economy of Jamaica.

Third World nations cartelized bauxite output in the 1970s, following the example of Exporting Countries. In 1974 the People's National Party (PNP) government of Jamaican Prime Minister Michael Manley increased taxes on the U.S. and Canadian companies producing bauxite on the island and in 1976 cut in the Jamaican Government for halfinterests in the companies. Output of bauxite and alumina, the first step in the refining process, continued to increase, and in the late 1970s represented 40 percent of the island's GDP.

By 1980 about 12 million tons of bauxite and alumina were being shipped from Jamaica's mines by three U.S.-based multinationals, Aluminum Company of America (Alcoa), Reynolds Metals and Kaiser Steel Corp., the equally large Canadian multinational, Alcan, and a local consortium, Aluminum Partners of Jamaica (Alpart).

Since then, production has dropped precipitously and is expected to slide further as a result of a mid- February decision by Alcoa. Last year's output was around 8.5 million tons, and with that drop has come a decline in revenues to the Jamaican Government. In 1984 bauxite- alumina output represented a quarter of GDP, about $500 million.

Reynolds closed its mining operation in February, 1984, shipping its last bauxite last summer. This winter Alcoa closed its Jamaica operation Feb. 20, with 900 of its 1,000 workers to be laid off by July 1. Alcoa, which first began shipping Jamaican bauxite in 1959, said the closing was only "temporary," until world market conditions improve.

One reason for the depression in the bauxite market is that Australian producers, who are not cartel members, have cheap coal near their bauxite mines to convert the ore to low-cost alumina - and the Australian producers are virtually untaxed. A U.S. economist in Jamaica says "prospects for bauxite over the long term are not bright." He says "the Australians are unbeatable, there's an alumina glut and aluminum is not as popular as it used to be."

Seaga, a 54-year-old Harvard-trained sociologist, knows he's in a tight spot, and last January's demonstrations, at the height of the tourist season, compounded his problems.

In 1984 tourism brought Jamaica about $430 million, second only to bauxite in the GDP. Tourism has increased about 50 percent since Seaga became prime minister, due in part to a smart U.S. television campaign ("Come back to Jamaica") and the devalued Jamaican dollar. The devalued currency allows tour operators - who bring nine out of every 10 tourists to the island - to sell inexpensive "packages" in the United States.

Until the mid-January demonstrations, Seaga and Mining, Energy and Tourism Minister Hugh Hart were expecting to top a million tourists in 1985 (about a quarter of the tourists are day visitors off cruise ships). Immediately after the demonstrations, both Seaga and Hart sought to play down the effects of the unrest, pointing out that most of the problems: roadblocks, burning tires and deaths took place in the capital, Kingston, a metro area of about 800,000 people far from the north and west coast tourist areas.

But a fortnight later Seaga conceded the island's daily earnings from the tourist industry had been cut by more than half. He said "consumer resistance to Jamaica is widespread" and admitted that if there is any more unrest like that of mid-January "we can write off the tourist industry." Convention and corporate groups booked for later in 1985 and 1986 were cancelling out, and nearly 3,000 bookings for hotel rooms were scratched by early February.

At the same time, Seaga faces:

  • Urgent IMF demands to sweat down his governmental budget, which represents about a third of the island's GDP, and to squeeze his budget deficit, which was 17 percent of GDP in the early 1980s, to four percent of GDP. He claims he's halfway to the four percent target, and that he's fired 4,000 government workers, but there are still more than 100,000 employees on his government payroll. Short-term IMF loans keep Jamaica's government solvent.

  • Steady pressure to develop jobs. There are about 985,000 people in Jamaica's workforce. The unemployment rate remains above 26 percent, down only about one percent since Seaga took office.

  • A growing foreign debt. That debt, now nearly $2.8 billion, has increased dramatically under Seaga.

  • Increasing political opposition from Manley's resurgent PNP. Seaga called a "snap election" for parliament in late 1983, shortly after the Grenada invasion. He was a major supporter of the Reagan administration's intervention in Grenada and figured, correctly, that an election would turn out well for his JLP. Manley's party made the tactical error of boycotting the election, because new electoral lists were incomplete. Seaga wound up with a parliament that has no opposition. But the PNP is now campaigning for a new election (the electoral rolls are finished) and Seaga is stubbornly insisting there won't be a vote until his five-year term ends in January, 1989. That made points for Manley's moderately socialist party.

The embattled prime minister continues to pursue what he calls the "structural adjustment" of the Jamaican economy. He recognized the island has been far too dependent on bauxite - in 1984 bauxite represented 62 percent of exports. He wants to move Jamaica's economy from a "one-legged stool to a four--legged stool," the latter consisting of agriculture and industry, as well as bauxite and tourism.

Seaga's government has grandiose ideas for agricultural development in the non-traditional sector, such as growing winter vegetables for U.S. and British markets. But so far these are mostly just plans: Jamaican agriculture, dependent on subsistence farmers with one to five acres, has declined markedly. Bananas are the outstanding example: only 12,000 tons were exported in 1984, compared with 205,000 tons in 1966. Depressed prices have hurt sugar production. Cocoa and coffee are minor earners.

In fact, the Jamaican farmers' biggest cash crop almost certainly is marijuana, brought to the island by indentured East Indians in the 19th Century and known locally as ganja. Small farmers grow it all over the island, usually bankrolled by U. S. drug dealers who send in light planes from the U.S. mainland or the Bahamas for the crop. Seaga, when asked, says that the value of the ganja crop to Jamaican farmers is "under S 100 million," but island police experts put its worth at S200 million to $300 million. It is, of course, worth far more by the time it reaches the streets of U.S. cities, and may satisfy as much as 10 percent of U.S. marijuana consumption.

The United States has been pressing Jamaica's government to spray large areas of public land with the defoliant, paraquat, to destroy the ganja crop. The Jamaicans are resisting this pressure, saying they'll stick to slash-and-burn methods. They fear the defoliants unknown long-term effects.

Food imports are a significant drain on the island's foreign exchange. For example, 79 percent of the rice consumed is imported, 78.7 percent of the fish, 24 percent of the meat and more than 90 percent of the milk. Seaga's government has cranked up programs aimed toward "self-sufficiency" but so far the results, with one or two exceptions, are meager.

Seaga also has lured about 250 industries to Jamaica, many of them so-called "assembly industries." That means bringing materials from somewhere else and putting them together in Jamaica, so that the output can take advantage of a no-tariff loophole in U.S. law. Seaga says the value of these industries' production jumped from $13 million in 1983 to $31 million in 1984. Many of these industries are in the textile and garment field, using cheap Jamaican labor in much the same way that nine of 10 U.S. baseballs are stitched together by cheap labor in Haiti and shipped back to the U.S. as no-tariff Haitian products.

Seaga's four-legged economic stool remains very unstable. But he has a couple of things going for him, and they probably account for a decrease in living standards not quite so drastic as the drop in GDP suggests:

  • No one knows the extent of the ganja money in Jamaica, but it is arguably substantial. In addition, Jamaica has become a major transit point for cocaine smuggling because of its geographic position midway between Colombia and the United States. This spins off some money to Jamaicans, too.

  • About 750,000 Jamaicans live abroad, mainly in the United States and England, and each year send home remittances amounting to a couple of hundred million dollars.

Jamaicans living abroad also account for one of the island's biggest losses. Nearly half of the best-educated, best-trained Jamaicans decamp for the First World each year. This is a "brain-drain" the island can ill afford.

Jamaica's political future is unclear. Michael Manley's PNP seeks a "mixed economy," a phrase that is anathema to Seaga and the JLP, though in practice Jamaica already has a mixed economy with government subsidies to the new industries, government planning for the farmers, rent controls and even a new food stamp and food "security" program aimed at providing the basics to a million people (primarily using U.S. money and surpluses).

If the IMF eases up on some of its demands, Seaga might pull through the current crises. He needs time, but he may not have it. Carl Stone, a Jamaican sociology professor at the University of the West Indies who has done polling for the government, says the island's problems are a lot more than "structural." He sums them up this way:

"Low production, a lethargic private sector, an over-dependent economy, unpatriotic citizens who spirit foreign exchange to Miami and New York banks, a power structure that stifles many small business people, a low work ethic and low levels of productivity encouraged by weak, sloppy managers who fail to provide strong leadership at the workplace."

Stone adds: "The stigma of failure is increasingly being associated with the economic performance of the Seaga regime by all but his party faithful."

William Steif is a freelance writer currently based in the Virgin Islands.

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