May 2006 Financial News

Comment on Waiving of Cement Tariff in Jamaica

May 19, 2006

This week the Government of Jamaica came to a decision to waive the remaining 15 per cent tariff (for a three-month period) that remained imposed on imported cement after the tariff was reduced from 40 per cent to 15 per cent in March. The reduction was as a result of a cut in production at Caribbean Cement Limited (CCC) due to a quality control problem that arose at the plant.

The scarcity of cement that stemmed from this problem has impacted the construction sector which last year contributed approximately 10 per cent to the country’s gross domestic product. In addition to large construction projects being affected, smaller clients were faced with the fact that the cement that was actually available on the market was being sold wholesale making it difficult to purchase. In a country with a population of approximately 2.6 million, the crisis has also affected more than 100,000 persons within the sector who are suffering from reduced disposable income.

The Chief Technical Director of the Ministry of Information and Development (Jamaica) has confirmed that 72,000 tonnes will be delivered over the period. The current shortfall is approximately 100,000 tonnes. The imported cement is expected to arrive from June and though it may not completely satisfy outstanding demand, it would definitely cast some relief on the current lethargic conditions existing in the sector and other various sectors of the economy.

This should not create any downward pressure on Trinidad Cement Limited’s (TCL) earnings as this suggestion was initially welcomed in order to aid in the satisfaction of demand in that country. Also, given that the waiving of the tariff is only for a three month period, there should be no long term effect on Trinidad Cement Limited especially as CCC should have resolved the quality control issues.

Sreshtha Tewari
WISE Research Team