Jamaica - Economy
The structure of the Jamaican economy has undergone extensive changes since 1945, when it was primarily dependent on tropical agricultural products such as sugar, bananas, coffee and cocoa. The island has since become of the world's largest producers of bauxite, though the industry suffered severely in the 1980s from high local costs and low world prices. It has also developed into a major tourist center for North Americans. Since 1983, tourism has been Jamaica's primary foreign exchange earner.
The underlying weaknesses of Jamaica's economy (including unemployment, underemployment, and unequal distribution of income) have revealed themselves as the market for bauxite has weakened. During 1972–80, production and foreign sales of bauxite, sugar and bananas declined; tourism dropped because of rising social unrest; investor confidence waned; and consumer prices (1975–81) increased by 325%. With the change of administration in both Jamaica and the United States during 1980–81, more than $1 billion in IMF and other credits became available. This was enough to extricate the country from its immediate payments crisis, but weak growth continued through 1986, when per capita income was 5.6% less than in 1981.
This trend of declining growth performance continued in the 1990s as the country experienced negative growth, for the first time in nearly a decade, declining by 1.5% in 1996. Underlying this performance was a marked deterioration in manufacturing and construction which declined by 2% and 3%, respectively, and the surfacing of severe problems in the financial sector. Significant among industries showing decline was the apparel industry, second only to bauxite and aluminum in terms of export earnings, resulting in a 5% drop in apparel exports in January–October 1996, compared to the same period of 1995. This marked a reversal of the progress for this sector, which experienced 22% growth during the same period of 1995. Competition from NAFTA caused many garment manufacturers to close, and thousands of workers to go jobless.
Following the financial crisis of 1995/96, the Jamaican government adopted tight money policies to bring down inflation, which had peaked at 80% in 1992. At 15.8% in 1995/96, inflation fell to 8.8% in 1997/98, and has remained in single digits since. However, 1997/98 was also the first of three consecutive years of contraction in part attributable to the government's financial stabilization policies. Real GDP decreased0.4% in 1998/99 and 0.1% in 1999/00, while inflation averaged7.7% a year. In June 2000, the government agreed to a staff-monitored program (SMP) with the IMF for 2001/02 designed to reduce Jamaica's heavy debt servicing burden and increase the country's attractiveness for foreign investment. In 2000/01 growth returned at a weak level of 1.1%, and continued at the same low level in 2001/02 as export demand weakened and tourism declined in the global economic slowdown in 2001 and in the aftermath of the 11 September 2001 terrorist attacks in the United States. Remittances to Jamaica from expatriats accounted for 13.6% of GDP in 2001. In 2002 and 2003 Jamaica was one of 23 countries on the US government's "Majors" list for being certified as a major illicit drug producer and/or drug transit country.