Jan 2015 Financial News

Profit repatriation up by more than 75 per cent (Jamaica)

Jan 21, 2015

FOREIGN-OWNED companies repatriated a large portion of the US$104 million ($12B) that left the island as investment income or dividends in the September 2014 quarter.

It represents the highest rise in outflows for the period up more than 75 per cent year-on-year, according to the balance of payments accounts released by the Bank of Jamaica (BOJ) this week with an accompanying statement.

"There was an increase of US$51.3 million in the deficit on the income sub-account mainly reflecting higher imputed profit repatriation by direct investment companies," stated the BOJ in its statement about investment income at US$104 million from US$58.8 million a year earlier.

However, increased visitor arrivals grew by 4.9 per cent in the period and the Government Eurobond balanced those outflows. It led to an overall current account deficit of US$324.3 million or an improvement of US$1.9 million year-on-year.

A troubling element, however, relates to the resurgence of imports. Over the review period, the island's imports grew by US$20 million or nearly twice the pace of the growth in exports. This resulted in the goods balance worsening to record a deficit of US$931 million.

"The increase in payments for imports mainly reflected higher expenditure for fuel in the mining sector as well as growth in raw materials and capital goods imports, the impact of which was partly offset by lower expenditure for consumer goods. With respect to the rise in exports, this reflected higher earnings from alumina and sugar," said the BOJ.

The September quarter experienced one of the lowest levels of currency depreciation over 12 months. In previous quarters imports actually declined with the increased pace of currency depreciation. Since signing the International Monetary Fund (IMF) agreement in May 2013, the local currency lost 15 per cent of its value against its US counterpart from $99.30 to more than $115. The IMF described the local currency depreciation as painful, but necessary to achieve competitiveness.

Under the current IMF arrangement the island will get nearly US$2 billion in loans over four years, with half from the IMF and the remainder from the World Bank and the Inter-American Development Bank.

Regarding financing for the review period, net private and official capital inflows were more than sufficient to finance the deficits on the current and capital accounts.

"This primarily reflected the Government of Jamaica's successful US$800-million Eurobond issuance on 01 July 2014. In this context, the net international reserves of the Bank of Jamaica increased by US$824.4 million for the quarter," stated the bank, adding that its gross reserves at end-September 2014 amounted to US$2.7 billion representing 20.2 weeks of projected imports of goods and services.

This is Jamaica's second IMF programme since 2007 when many Western economies experienced an economic downturn, which started in the US when the housing market plunged. It resulted in significant losses in large amounts of mortgage-backed securities and derivatives.

Source:
BY STEVEN JACKSON Business reporter jacksons@jamaicaobserver
Jamaica Observer
Wednesday January 21, 2015    

http://www.jamaicaobserver.com/business/Profit-repatriation-up-by-more-than-75-per-cent_18251452