Jamaica Government Of 18-K Annual report (foreign governments)

EXHIBIT D

Government of Jamaica

This description of the Government of Jamaica is dated as of December 19, 2013 and appears as Exhibit (D) to the Government of Jamaica’s Annual Report on Form 18-K to the US Securities and Exchange Commission for the fiscal year ended March 31, 2013.

D-1

EXCHANGE RATES

The following table shows exchange rate information for the selling of US dollars for the periods indicated. The Federal Reserve Bank of New York does not report a noon buying rate for the JA dollar. The official exchange rate published by the Bank of Jamaica for US dollars on December 18, 2013 was J$106.19 per US$1.00.

Foreign Exchange Rates

Year	Month	Average  for Period(1)		End of Period		Percentage  Change(2) (End of Period)
	(spot weighted average ask in J$ for US$)
2005			62.60		64.58		4.79
2006			65.98		67.15		3.98
2007			69.16		70.62		5.17
2008			73.36		80.47		13.95
2009			88.82		89.60		11.35
2010			87.34		85.86		(4.17	)
2011			86.08		86.60		0.86
2012			88.99		92.98		7.37
2013	January		93.45		94.14		1.25
	February		95.66		97.11		3.15
	March		97.76		98.89		1.83
	April		99.55		99.35		0.47
	May		99.12		99.45		0.10
	June		100.82		101.38		1.94
	July		101.76		101.86		0.47
	August		101.94		102.08		0.22
	September		102.64		103.60		1.48
	October		104.67		105.05		1.40
	November		105.59		105.80		0.71

(1) The weighted average of the exchange rates for annual periods is calculated as the simple average of end of month rates.

(2) As compared to the prior month.

Source: Bank of Jamaica.

PRESENTATION OF CERTAIN INFORMATION

All references in this annual report on Form 18-K to “Jamaica” and the “Government” are to the Government of Jamaica, unless otherwise indicated. All references to “JA dollars” and “J$” are to Jamaica dollars, all references to “US dollars” and “US$” are to the lawful currency of the United States of America, or US, and all references to “€” are to Euro. Historical amounts translated into JA dollars or US dollars have been converted at historical rates of exchange. References to annual periods (e.g., “2012”) refer to the calendar year ended December 31, and references to fiscal year or FY (e.g., “FY 2011/12” or “FY 2012/13”) refer to Jamaica’s fiscal year ended March 31. All references to “tonnes” are to metric tonnes. Jamaica publishes external economy information, such as external debt and goods and services exported, in US dollars. All international currencies, such as external debt denominated in Euro, are translated into US dollars. Domestic economy information is published by Jamaica in JA dollars. Components contained in tabular information in this annual report on Form 18-K may not add to totals due to rounding. The term “N/A” is used to identify economic or financial data that is not presented for a particular period because it is not applicable to such period and “n.a.” for economic or financial data that is not available.

Statistical information included in this report is the latest official data publicly available. Financial data provided may be subsequently revised in accordance with Jamaica’s ongoing maintenance of its economic data.

D-2

D-3

JAMAICA

History

Originally settled by the Arawak Indians, Jamaica was first visited by Christopher Columbus in 1494 on his second voyage to the New World. Jamaica’s name derives from the Arawak word “Xaymaca,” which means “Land of Wood and Water.” In 1655 Admiral William Penn and General Robert Venables led a British force that conquered the island, ousting the Spaniards. Over the next 40 years, Jamaica became the stronghold of the Caribbean buccaneers who transformed Port Royal, then the island’s commercial center, into the richest city in the New World. The sugar industry, supported to a great extent by slaves transported from Africa until the abolition of slavery in 1834, formed the basis of the island’s economy. During its three centuries as a British colony, Jamaica was variously administered by a governor and a planter-controlled legislature, by British Crown Colony rule from London, England, and by limited representative government in the late 19th and early 20th centuries. The Government granted universal adult suffrage in 1944. From 1958 to 1961, Jamaica was a member of the now-defunct West Indies Federation, which encompassed all of Britain’s Caribbean colonies. Although plans for independence first appeared in the 1940s, internal self-government did not begin until 1959. On August 6, 1962, Jamaica became an independent country within the British Commonwealth.

The historical development of the island has influenced Jamaican national symbols. Jamaica’s flag, a diagonal cross of gold on a green and black background, represents the statement, “The sun shineth, the land is green and the people are strong and creative.” The national crest incorporates the original Arawak inhabitants with the legend “Out of Many, One People,” which reflects the country’s multiracial heritage. Jamaica’s reggae music enjoys international renown.

Territory and Population

Jamaica, the third largest island in the Caribbean Sea, is located 558 miles (898 kilometers) southeast of Miami, Florida, 90 miles (144.8 kilometers) south of Cuba and 100 miles (160.9 kilometers) southwest of Haiti. The island has an area of 4,411 square miles (11,420 square kilometers), and its highest point is the Blue Mountain Peak, which rises 7,402 feet (2,256 meters) above sea level. The capital city, Kingston, located on the island’s southeast coast, also serves as Jamaica’s major commercial center. The natural harbor in Kingston is the seventh largest in the world. The country’s second-largest city, Montego Bay, located on the island’s northwest coast, is Jamaica’s main center for tourism. See “The Jamaican Economy—Principal Sectors of the Economy—Tourism.”

From 2008 to 2012, Jamaica’s population grew at an average rate of approximately 0.2% per year. At December 31, 2012, Jamaica’s population was estimated at 2,711,500, a 0.3% increase over the December 31, 2011 population of 2,704,100. This low rate of population growth is primarily due to declining birth rates, a trend which we believe will continue. The last official census completed in 2011 indicated that 46% of Jamaica’s population lives in rural areas while 54% lives in urban areas. Jamaica’s official language is English, and a majority of the population speaks a dialect.

Society

Diverse religious beliefs are represented in Jamaica, although Christian denominations predominate. Other major religious groups include adherents to the Rastafari, Bahai, Islamic and Jewish faiths.

Jamaica’s educational system is based on the British system. The school system consists of a pre-primary cycle of two years, followed by a primary cycle of six years and a secondary cycle of five years. In some instances students pursue two years of additional secondary education. The Government of Jamaica has a policy designed to support the mandatory engagement of all children between the ages of 3 to 18 years in a meaningful learning process and in a structured and regulated setting. It addresses regular attendance at learning institutions for all children as well as exposure to both academic and vocational program at the secondary level. The HEART Trust/NTA is the facilitating and coordinating body for technical and vocational workforce development in Jamaica. The Trust provides access to training, development of competence, assessment and certification to working age Jamaicans. It also facilitates career development and employment services island-wide. Training is provided both in the workplace (Enterprise-based), as well as through 28 formal Technical, Vocational and Educational Training (TVET) institutions and over 120 TVET special programs.

D-4

The educational system accommodates a variety of public and private schools. Post-secondary education is available to qualified candidates at community colleges, the University of Technology, University College of the Caribbean, Northern Caribbean University, International University of the Caribbean, the Jamaican campus of the University of the West Indies and several private off shore universities.

In addition to the formal school system, Jamaica has an adult literacy program, which contributed to reducing the illiteracy rate from 32.2% in 1987 to 19.1% in 1999, according to a 1999 survey. No comparable survey has been undertaken since 1999. Data provided by UNESCO using the 1999 data estimates the 2009 adult literacy rate at 86.8%. Data provided by the Planning Institute of Jamaica also indicates that the adult literacy rate increased from an estimated 86.8% in 2009 to an estimated 91.7% in 2012.

In 2012, the average number of unemployed persons was 178,600, an increase of 12.8% from 158,300 in 2011. The average unemployment rate was 13.9% in 2012, an increase from 12.7% in 2010. See “The Jamaican Economy—Employment and Labor.” The unemployment rate in Jamaica during the past six years has been relatively stable, ranging from a high of 12.7% in 2011 to a low of 9.7% in 2007. Recent macro- and micro-economic developments have caused the unemployment rate to increase in 2013. Unemployment as of June 30, 2013, was 15.4%.

The following table shows selected social indicators applicable to Jamaica for the five years ended December 31, 2011:

Social Indicators

	2008		2009		2010		2011		2012
Real GDP per capita(1)	J$	328,987	J$	313,366	J$	307,645	J$	311,840	J$	309,519
Perinatal Mortality Rate (per thousand)(2)		29.7		29.7		27.4		30.3		30.2

(1) In constant 2007 prices.

(2) Defined as deaths in government hospitals occurring anytime from 28 weeks of pregnancy until seven days after birth.

Please note that the statistics for Perinatal Mortality Rate are only reflective of the public secondary and tertiary health care facilities; no inference should be made of the primary health care facilities or Jamaica as a whole.

Source: Statistical Institute of Jamaica, Planning Institute of Jamaica and Ministry of Health—Planning and Evaluation Branch.

Governmental Structure and Political Parties

The Jamaica Order in Council 1962 (the Constitution) is the supreme law of Jamaica and sets forth the basic framework and legal underpinnings for governmental activity in Jamaica. The Constitution came into effect when Jamaica became an independent country on August 6, 1962, and includes provisions that safeguard the fundamental freedoms of the individual. While a simple majority of Parliament can enact amendments to the Constitution, certain amendments require ratification by a two-thirds majority in both houses of Parliament, and amendments altering fundamental rights and freedoms require the additional approval of a national referendum.

Jamaica is a parliamentary democracy based upon the British Westminster model and is a member of the British Commonwealth. The Head of State is the British Monarch, who is represented locally by the Governor-General of Jamaica. Traditionally, the British Monarch appoints the Governor-General upon the recommendation of Jamaica’s Prime Minister. The actions of the Governor-General are, in most cases, of a purely formal and ceremonial nature. General elections are constitutionally due every five years, at which time all seats in the House of Representatives will be up for election. The Constitution permits the Prime Minister to call elections at any time within or shortly beyond the five-year period, consistent with the Westminster model.

National legislative power is vested in a bicameral Parliament composed of a House of Representatives and a Senate. The House of Representatives comprises 63 members elected by the people in the general elections. The Senate comprises 21 members appointed by the Governor-General, 13 of whom are appointed on the advice of the

D-5

Prime Minister and eight of whom are appointed on the advice of the Leader of the Opposition. The President of the Senate is elected by its members. The members of the House of Representatives select their own chairman, known as the Speaker. The Prime Minister, usually the member most likely to command the support of the majority of the members of the House of Representatives, is appointed by the Governor-General.

In addition to the national governing bodies, local government is administered through 12 parish councils and a statutory corporation that administers the Kingston and St. Andrew (KSAC) areas and the Municipality of Portmore. The results of the last local government election, which took place in March 2012, accorded the ruling People’s National Party (PNP), 12 of the 13 parish councils and the KSAC. The PNP and Jamaica Labour Party (JLP) shared the Trelawny Council, with one elected independent candidate. The PNP won the Municipality of Portmore.

The principal policy-making body of the Government is the Cabinet, which is responsible for the general direction and control of Jamaica and whose members are collectively accountable to Parliament. The Cabinet consists of the Prime Minister and no fewer than 11 other members of the two Houses of Parliament. No fewer than two, and no more than four members must be selected from the Senate. The Governor-General appoints members of the Cabinet upon the recommendation of the Prime Minister.

The Jamaican judicial system is based on English common law and practice and consists of a Supreme Court, a Court of Appeal and local courts. Final appeals are made to the Judicial Committee of the Privy Council in the United Kingdom (UK). A number of Caribbean nations, including Jamaica, are currently discussing the establishment of a Caribbean Court of Justice to replace the Judicial Committee of the Privy Council for those nations. Jamaica has signed an agreement to establish the Caribbean Court of Justice. In April 2005, Jamaica passed the Caribbean Court of Justice (Original Jurisdiction) Act 2005. The Act provides for the implementation of the provisions of the Agreement establishing the Caribbean Court of Justice in its original jurisdiction. The Caribbean Court of Justice, in its original jurisdiction, will hear and determine matters relating to the interpretation and application of the Revised Treaty of Chaguaramas establishing the Caribbean Community and Common Market.

Two major political parties dominate Jamaica’s political system. From Jamaica’s independence on August 6, 1962, until 1972, the JLP formed the government; then the PNP assumed power in 1972. In late 1980, the JLP returned to power until February 1989, when Michael Manley led the PNP to victory and became Prime Minister. In 1992, Prime Minister Manley resigned as Prime Minister and leader of the PNP and was succeeded by Percival James (P. J.) Patterson. The PNP won the 1993 general election and Mr. Patterson was returned as Prime Minister. In 1995, a former Chairman of the JLP formed a third political party, the National Democratic Movement. In the 1997 general election, the PNP won 51.7% of the votes cast, and P. J. Patterson returned to the office of Prime Minister. In March 2006, Prime Minister Patterson resigned as Prime Minister and leader of the PNP and was succeeded by Portia Simpson-Miller.

In the September 3, 2007 general elections, the JLP won 49.98% of the votes cast, and Bruce Golding became Prime Minister. The changes in the leadership of the country had no material effect on the economy of Jamaica. On September 25, 2011, Mr. Golding announced that he would not be seeking re-election, and Andrew Holness succeeded Mr. Golding as Prime Minister and leader of the JLP on October 23, 2011.

Jamaica held its most recent general election on December 29, 2011. As a result of that election, the PNP won 53.0% of the votes cast, and Portia Simpson-Miller became Prime Minister. The Jamaican Constitution requires that a general election be held every five years, at which time all seats in the House of Representatives will be up for election. Given that the last general election was December 29, 2011, an election is to be constitutionally held by December 2016. However, the Prime Minister is constitutionally permitted to call an election at any time before this date.

D-6

The following table shows the parliamentary electoral results for the past six general elections:

Parliamentary Electoral Results

	1989		1993		1997		2002		2007		2011(1)
	(number of representatives)
People’s National Party		45		52		51		34		28		42
Jamaica Labour Party		15		8		9		26		32		21

(1) Following a Boundaries Revision exercise conducted between April 2008 and March 2010, the number of constituencies (parliamentary seats) was increased from sixty to sixty-three.

Source: Office of the Prime Minister.

In recognition of the jubilee year of Jamaican independence, the Administration of Prime Minister Simpson-Miller has proposed to begin the process of detaching Jamaica from the British Monarchy and to have Jamaica become a republic with an indigenous president as its Head of State. An important agenda item for the Administration in this respect is to establish the Caribbean Court of Justice as its final appellate jurisdiction, replacing the Judicial Committee of the Privy Council. The Administration also intends to broaden and deepen Jamaican input into the regional integration movement. See “—International Relationships—Caribbean Community and Common Market (CARICOM).”

International Relationships

Jamaica maintains diplomatic relations with almost every nation in the world. Jamaica is a member of the United Nations and its affiliated institutions, including the Food and Agriculture Organization, the International Monetary Fund, the World Bank Group, the World Health Organization, the World Tourism Organization, the World Intellectual Property Organization (WIPO), the International Seabed Authority, and the United Nations Environment Program. It is also a member of several other regional and international bodies, including the World Trade Organization (WTO), the African, Caribbean and Pacific Group of States (ACP), the Association of Caribbean States (ACS), the Caribbean Community (CARICOM), the Commonwealth; the Latin American and Caribbean Economic System (SELA), the Organization of American States (OAS), and the Community of Latin American and Caribbean States (CELAC).

Jamaica is a signatory to the Cotonou Partnership Agreement and party to the CARIFORUM-EU Economic Partnership Agreement. It is also a beneficiary of the Caribbean Basin Economic Recovery Act and the Caribbean-Canada Trade Agreement (CARIBCAN). In addition, as a member of the United Nations bloc of developing countries known as the Group of 77, Jamaica is eligible for the Generalized System of Preferences. Jamaica is also a member of the Group of 15, a group of 17 states focused on cooperation among developing countries in the areas of trade, investment and technology.

Jamaica receives preferential tariff treatment on most of its products pursuant to, among others, the trade agreements described below.

WTO—Doha Development Round

Jamaica has been participating in the WTO’s Doha Development Round, aimed at further liberalizing trade at the global level, since it was launched in Doha, Qatar in 2001. These negotiations were scheduled to be concluded in 2005 but are currently at an impasse due to various unresolved issues. The Eighth WTO Ministerial Conference (MC8) was held in Geneva, Switzerland from December 15–17, 2011. The Conference addressed issues under its existing mandate relating to: (1) the Importance of the Multilateral Trading System (MTS); (2) Trade and Development; and (3) the Doha Development Agenda (DDA). Among the decisions adopted that were of particular interest to Jamaica were those on the Work Programme on Small Economies and the Trade Policy Review Mechanism. The WTO is to continue with its regular work program and also continue efforts to advance the Doha Development Agenda negotiations to the extent possible. Work is now underway in preparation for the Ninth Ministerial Meeting which is to be held in Bali, Indonesia, in December 2013.

D-7

Caribbean Community (CARICOM)

The Treaty of Chaguaramas (the Treaty) establishing CARICOM was signed in 1973 by four English-speaking Caribbean countries. These countries are: Barbados, Guyana, Jamaica, and Trinidad and Tobago. Other countries subsequently signed on to the Treaty as Member States, including Antigua, The Bahamas, Dominica, Grenada, Montserrat, St. Kitts Nevis Anguilla, St. Lucia, and St. Vincent. The main focus of the Treaty has been to deepen economic integration and increase trade among CARICOM Member States. In pursuing these objectives, the Treaty made provisions for, inter alia:

• the promotion of economic integration among CARICOM Member States, including the establishment of a common market regime and the integration of economic activities;

• the coordination of CARICOM Member States’ foreign policies; and

• the engagement of CARICOM Member States in functional cooperation activities aimed at improving the effectiveness and efficiency of certain common services, as well as the advancement of social, cultural and technological development.

The Treaty also created “Community Organs” to monitor the activities and initiatives mandated. Additionally, in fulfilling the provisions of the Treaty, CARICOM Member States established common institutions for the purposes of policy formulation and cooperation aimed at improving the provision of services such as education and health care. As well, CARICOM Member States have cooperated in other important areas such as labor, agriculture, transportation, communication, tourism and disaster preparedness.

Between 1997 and 2001, Member States negotiated a revision of the Treaty, based on recommendations made by the West Indian Commission in 1992, to expand the scope of the Common Market by establishing a single market and economy. Consequently, the Revised Treaty of Chaguaramas establishing the Caribbean Community including the CARICOM Single Market and Economy (CSME) was signed by the following Caribbean countries in July 2001: Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago. Haiti later signed the Revised Treaty of Chaguaramas (the Revised Treaty) on July 2, 2002.

The Revised Treaty seeks to establish a common economic region among CARICOM Member States that would provide for the free movement of goods, services, people and capital, and would give CSME nationals the right to establish businesses and acquire property in any CARICOM Member State participating in the CSME. Additionally, the Revised Treaty provides for the establishment of the Single Economy, which would include the harmonization of fiscal and monetary policies and the establishment of a common currency. In January 2006, the implementation of the provisions of the CARICOM Single Market (CSM) was initiated by Jamaica, Barbados, Belize, Guyana, Suriname and Trinidad and Tobago, that is, the provisions enabling the free movement of goods, services, people and capital. Other Member States started the CSM implementation process in July 2006. The Bahamas, and Montserrat are members of the Caribbean Community but are not yet participating in the CSME. A 2009 audit conducted by the CARICOM Secretariat indicates that Jamaica is far advanced in implementing its obligations under the Revised Treaty.

It was agreed by CARICOM heads of government in May 2011 that CARICOM should consolidate the gains of the Single Market before moving to the Single Economy. In the meantime, negotiations are underway for a CARICOM Financial Services Agreement to remove all regulations, the existence of which negatively affects intra-CARICOM trade in financial services. Negotiations are also underway to complete a CARICOM Investment Code, which will help to facilitate the establishment of a Community Investment Policy and create a framework for the designation of CARICOM as a single investment location. In this context, the CARICOM Investment Code is to establish common standards of treatment for extra-CARICOM investors.

Jamaica remains committed to the mandate of the Revised Treaty of Chaguaramas.

D-8

Caribbean-Canada Trade Agreement (CARIBCAN)

The CARIBCAN is an agreement entered into by Canada and the CARICOM countries in 1986. This agreement establishes a program for trade, investment and industrial cooperation, and features the unilateral extension by Canada of preferential duty-free access to the Canadian market for many imports from CARICOM countries. CARIBCAN’s basic objectives are to enhance the Caribbean region’s existing trade and export earnings, improve its trade and economic development prospects, promote new investment opportunities, and encourage enhanced economic integration and cooperation within the region. This program, after running its course for more than twenty years, has been slated to be replaced by the CARICOM-Canada Trade and Development Agreement, with reciprocal equal access for Canadian companies to the Caribbean market. The negotiations, which commenced in 2009, are still underway. A fourth round of negotiations was convened in July 2012, and CARICOM and Canada are currently engaged in preparations for future rounds of negotiations in order to finalize the agreement.

The Caribbean Basin Initiative

The Caribbean Basin Initiative (CBI), which was initially launched in 1983 with the enactment of the Caribbean Basin Economic Recovery Act, was amended in 1990 to increase market access to the United States. The benefits under the CBERA are of indefinite duration. In 2000, the United States further expanded the CBI with the enactment of the Caribbean Basin Trade Partnership Act (CBTPA). The CBTPA provides preferential access for a number of products previously excluded from the CBI. The CBTPA will expire on September 30, 2020.

Generalized System of Preferences

Under the aegis of the United Nations Conference on Trade and Development (UNCTAD), the Generalized System of Preferences was designed to afford developing countries preferential access for a wide range of their exports to the markets of developed countries. The Generalized System of Preferences is an export-promotion tool with the objectives of increasing the export earnings of developing countries, promoting industrialization in developing countries and accelerating the rate of economic growth in developing countries.

Cotonou Partnership Agreement

In February 2000, the European Union and the African Caribbean Pacific group of countries (ACP), concluded negotiations for a new 20-year trade, industrial, financial and technical cooperation agreement. Jamaica ratified the new agreement, known as the Cotonou Partnership Agreement, in February 2001 and, following ratification by 75% of ACP Member States and all EU members, the agreement formally entered into force on April 1, 2003. The agreement was reviewed in 2005 and 2010. The trade provisions of the Cotonou Partnership Agreement have been replaced by the CARIFORUM-EU Economic Partnership Agreement, as described below.

The revision in 2005 was the first one as provided for under the Cotonou Partnership Agreement (CPA). The revised Agreement was signed in Luxembourg on June 25, 2005 and entered into force on July 1, 2008. The first revision prepared the ground for the 2007-2013 financial framework of development assistance or 10th European Development Fund (EDF).

Negotiation of the second revision of the CPA was launched on May 29, 2009 and was concluded in Brussels on March 19, 2010. The revised Agreement was signed in Burkina Faso on June 22, 2010 and is being provisionally applied from October 31, 2010. The second revision has been adapted to include current global challenges such as climate change, food security, regional integration, State fragility and aid effectiveness.

A third revision of the CPA should take place in 2015. This would be the final review prior to the expiration of the Agreement in 2020.

The CARIFORUM-EU Economic Partnership Agreement

The CARIFORUM-EU Economic Partnership Agreement (EPA) was signed by Jamaica and other CARIFORUM Countries, that is, other CARICOM countries and the Dominican Republic, in October of 2008. The

D-9

duration of the EPA is indefinite, and provides exporters of most CARIFORUM-originated goods with duty-free and quota-free access to the EU market. The coverage of the agreement extends to include traditional exports, such as sugar, bananas, rum and rice, which will ultimately enter the EU duty-free and quota-free.

The EU’s preferential system for bananas ended on January 1, 2006, and the sugar regime which existed under the Cotonou Partnership Agreement ended on September 30, 2009. However, under the EPA, bananas from CARIFORUM countries enter the EU quota-free and duty-free, and since October 1, 2009, CARIFORUM sugar exporters have duty-free and quota-free access to the EU market under a managed system which will last until 2015, when the conditions will be removed. The agreement also requires the EU to remove restrictions on CARIFORUM’s services exports, beginning with the liberalization of 29 sectors and sub-sectors.

At the same time, the EPA requires Jamaica and other CARIFORUM countries to remove all tariffs/duties on 86.9% of the value of imports from the EU (90.2% of tariff lines) on a phased basis over a 25-year period.

The EPA establishes provisions to administer trade related issues between the parties. These trade-related issues are primarily in relation to agriculture and fisheries, sanitary and phyto-sanitary standards, customs and trade facilitation, investment facilitation, intellectual property rights, competition, electronic commerce and personal data protection. The agreement goes further to provide for parties to undertake development cooperation in a number of areas, ranging from the development of supply-side capacity, including the development of trade-related infrastructure, to the enhancement of the tourism sector and culture cooperation. The agreement is being provisionally applied by Jamaica. Jamaica has commenced the first phase of its tariff reductions, performing its obligations under the EPA. The tariff reductions are being applied administratively, pending the amendment to the Customs Act. These reductions took effect in September 2012.

D-10

THE JAMAICAN ECONOMY

General

Jamaica operates as a mixed, free market economy with state enterprises as well as private sector businesses. Major sectors of the Jamaican economy include agriculture, mining, manufacturing, tourism, and financial and insurance services. As an open economy, Jamaica is well integrated into the global economy with intraregional trade contributing prominently to overall economic activity.

Since the early 1980s, successive governments have implemented structural reforms aimed at fostering private sector activity and increasing the role of market forces in resource allocation. During this period, a large share of the economy has been returned to private sector ownership through divestment and privatization programs in areas such as agriculture, tourism, transportation, banking, manufacturing and communications. See “—Privatization.” Deregulation of markets, the elimination of price subsidies and price controls and the reduction and removal of trade barriers have reduced or eliminated production disincentives and anti-export biases.

In the early 1990s, the reform process in Jamaica gained momentum with, among other developments, the liberalization of the foreign exchange market and the overhaul and simplification of the tax system. In addition to changes in personal income tax and corporate tax regimes, a number of indirect taxes were removed and replaced with a value-added tax. The Tax Administration Reform Project implemented in 1994 was aimed at broadening the tax base, facilitating voluntary compliance with the tax laws, improving the effectiveness of tax administration and tax collection and controlling tax evasion. To enhance compliance, Jamaica implemented a Tax Registration Number system aimed at broadening the tax base through the assignment of identification numbers to individuals and businesses. See “Public Finance—Tax Reform.”

In 2009, Jamaica introduced a new strategic plan to achieve developed country status by 2030 called Vision 2030 Jamaica. The plan is based on the following seven guiding principles: transformational leadership, partnership, transparency and accountability, social cohesion, equity, sustainability, and urban and rural development. Vision 2030 Jamaica seeks to redefine the strategic direction of Jamaica by moving from dependence on lower forms of capital, such as tourism and basic agricultural commodities, to higher forms of capital, such as cultural, human, knowledge and institutional capital stocks. Jamaican business owners face challenges that primarily stem from global factors that include the price of oil, high energy prices, and, in some sectors, high commodity prices. See “—Principal Sectors of the Economy.”

During 2012/13, the Government embarked on a comprehensive Economic Reform Program (ERP) while continuing to tighten fiscal policy. The main pillars of the ERP are:

• structural reforms to boost economic growth and employment;

• actions to improve price and non-price competitiveness;

• upfront fiscal adjustment, supported by extensive fiscal reforms;

• debt reduction, including active debt management, to place public debt on a sustainable path, while protecting financial system stability; and

• improved social protection programs.

The program includes a heavy and front-loaded reform agenda to support a prompt economic recovery, maintain social cohesion, build labor capacity and improve productivity. Accordingly, measures are being implemented to improve access to credit, reduce bureaucracy and other limiting factors in the business environment, and improve labor market flexibility. This reform agenda is focused on actions to strengthen public financial management, introduce a fiscal rule, reform the tax system, improve the business climate, move towards inflation targeting and reform of the securities dealers sector. See “The Monetary System—Legislation and Regulation” and “Public Finance—Tax Reform.” The fiscal reforms are essential for a sustained fiscal consolidation effort to promote debt reduction. Structural reforms to achieve higher and sustained growth are pivotal to long-term economic stability and increased welfare of the population.

D-11

To alleviate the possible adverse impact of fiscal adjustment on the most vulnerable, the program includes a floor on social spending for the most vulnerable in the population. The Government also recognized that safeguarding the financial sector is also critical, and consequently has established a Financial Sector Support Fund to offer assistance, if needed, to financial institutions that participated in the recent debt exchange. See “The Monetary System—Legislation and Regulation.”

A key part of the ERP is also a growth strategy that would focus on investment in:

• the consolidation of Jamaica as a logistics hub for shipment;

• information technology;

• agriculture;

• infrastructure development;

• diversification of the tourism product;

• sustainable energy; and

• the promotion of a more business-friendly environment with respect to government agency administration, workforce and access to credit for smaller to medium-sized businesses.

The Memorandum of Understanding (MOU), which was submitted to the IMF on April 17, 2013, embodied the tenets of the ERP. Coupled with other measures and prior actions, the board of the IMF approved a four-year Extended Fund Facility (EFF) on May 1, 2013 for FY2013/14 through to FY2016/17.

GDP Outlook

The economic turmoil in the global markets in the last five years has had a significant adverse impact on the international economic environment, including the global credit, commodities and financial markets as a whole. Although Jamaica had limited exposure to the asset classes and institutions impacted by this volatility, such as subprime assets and financially distressed international financial institutions, the country has been affected by the contraction of liquidity in the international financial markets, the volatility in commodity prices, and the contraction in growth in some of Jamaica’s most important tourism clientele and export markets. The Jamaican economy declined by 0.5% in 2012 when compared with 2011, but had grown by 1.7% in 2011 compared to 2010 and contracted in 2010 and 2009. The decline in 2012 was mainly the result of challenges in the macroeconomic environment as well as unfavorable weather conditions during the latter part of the year. GDP declined by 0.7% for the first six months of 2013 when compared to the same period in 2012. See “—Gross Domestic Product.”

IMF Arrangements

Standby Arrangement and Extended Fund Facility

In February 2010, the Government entered into a 27-month Standby Arrangement (SBA), with the International Monetary Fund (IMF) in the amount of 820.5 million (approximately US$1.27 billion) special drawing rights (SDR). Prior to the execution of the SBA, the Government had to take several actions, including adopting a tax policy package yielding approximately 2% of GDP; completing the Jamaica Debt Exchange (JDX); and reaching an agreement regarding the divestment of Air Jamaica, all of which the Government completed. The SBA supported the Government’s economic program aimed at restoring macroeconomic stability and creating conditions for improved growth. This program included critical steps and policy reforms to tackle fiscal and debt imbalances and other underlying vulnerabilities. The program was designed to assist the country in the establishment of fiscal and

D-12

debt sustainability over the medium term. As such, the program focused on facilitating tax reform, rationalization of the public sector and reform of public financial systems. See “—Public Sector Indebtedness—The Jamaica Debt Exchange,” “—Public Finance—Tax Reform” and “—The Jamaican Economy—Privatization.”

To achieve these goals, the program focused on a three-pronged strategy:

• fiscal consolidation;

• comprehensive debt management; and

• reforms to further strengthen the financial system.

As part of the SBA, the Government undertook a structural reform agenda, which included reforms to fiscal institutions, public entities, debt management, and the financial sector. As part of these reforms the Government passed the Fiscal Responsibility Framework, launched its strategic and comprehensive domestic liability management program, and implemented a variety of reforms impacting the financial system. See “—IMF Standby Agreement—Fiscal Consolidation,” “—IMF Standby Agreement—Comprehensive Debt Management,” and “—IMF Standby Agreement—Legal Reforms to Financial System.” The SBA approved by the IMF Board in February 2010 went off-track, which eroded confidence, lowered economic growth, and resulted in acute balance of payments pressures. In the absence of the scheduled reviews under the SBA, no further performance targets were established to form the basis of further drawdowns. This also resulted in the Government not receiving SDR 285.7 million (US$420 million) from the IMF as well as not receiving multilateral funding of approximately US$550 million and grants of approximately $59.19 million. See“Public Sector Indebtedness—External Debt.”

On May 1, 2013, the Executive Board of the IMF approved a request by the Government for a four-year extended arrangement (Extended Fund Facility or EFF) in an amount of SDR 615.38 million (approximately US$932.3 million) based on exchange rates published by the IMF on January 31, 2013, the equivalent of 225% of the Government’s quota in the IMF. This EFF is the successor to and supersedes the SBA. The purpose of the EFF is to support the Government’s comprehensive ERP described above. The first disbursement in the amount of J$20,554.0 million (approximately US$207.2 million) was made in May 2013. Of these funds, US$117.2 million was used for balance of payment support and US$90 million was used for budgetary support. Subject to performance under the EFF, the Government may receive additional funding from multilateral partners, including the World Bank and the Inter-American Development Bank, of over $1 billion, along with the release of previously allocated amounts.

Pursuant to the terms of the EFF, its implementation and progress will be monitored through the quarterly review quantitative performance criteria, indicative targets and structural benchmarks. See “—General”. The quantitative performance criteria establishes targets relating to, among other things: the primary balance of the central government; tax revenues; the overall balance of the public sector; the aggregate amount of Government direct debt; the aggregate amount of Government guaranteed debt; the aggregate amount of Government accumulation of domestic arrears; the aggregate amount of Government accumulation of tax refund arrears; the consolidated Government accumulation of external debt payment arrears; the amount of Government social spending; the cumulative change in the Government’s net international reserves; and the cumulative change in the Government’s net domestic assets. The first review of June 2013 performance criteria was completed by the end of September 2013, and focused on the achievement of specific quantitative performance criteria and structural benchmarks for fiscal reforms. The Government met all required criteria, targets and benchmarks, and the IMF made a second disbursement in the amount of approximately 19.97 million SDR on October 2, 2013.

Progress under the Extended Fund Facility

Following the successful completion of the first review of the EFF by the IMF Management and Executive Board in September 2013, an IMF mission visited Jamaica in November 2013 to conduct the second review of Jamaica’s economic program under the EFF. The IMF Mission concluded that Jamaica’s overall policy implementation under the EFF remains strong and structural reforms were progressing. All quantitative and indicative targets for end-September 2013 were met, including the target floor on social spending.

D-13

The IMF staff-level understandings for the second review of the program are subject to approval by the IMF’s Management and Executive Board. An updated Letter of Intent and a second supplement to the Memorandum of Economic and Financial Policies, which details the elements of the policy strategies and targets noted above, has been prepared for submission to the IMF. On December 18, 2013, the IMF Board completed the second review of Jamaica’s economic performance under the EFF arrangement, which enabled the disbursement of SDR 19.97 million (approximately US$30.8 million). This brought the total disbursements, as of that date, under the arrangement to SDR 176.69 million (approximately US$272.2 million).

Fiscal Responsibility Framework

As part of the ERP, Jamaica is committed to strengthening its fiscal discipline by adopting a number of programs, the main one being the Fiscal Responsibility Framework (FRF). The FRF requires the Government to adopt a number of initiatives including the following:

• preparing medium-term goals and explaining deviations, should there be any;

• more comprehensive reporting in several areas and empowering the Financial Secretary to obtain fiscal information of all public sector entities;

• strengthening accountability to Parliament in areas such as corporate plans and budgets of public bodies and increasing oversight of overall fiscal policy;

• establishing quantitative ceilings on debt stock, fiscal balance and wages within a specific time frame; and,

• requiring the Ministry of Finance and Planning to present to Parliament, at the time of the annual budget, a medium-term fiscal policy framework paper with plans and policies for developing the country.

The FRF is the centerpiece to a number of other initiatives aimed at achieving fiscal consolidation. These other initiatives include a medium-term expenditure framework, the establishment of a centralized treasury management system and the enhancement and consolidation of legislation governing debt management generally.

Comprehensive Debt Management

On January 14, 2010, the Government of Jamaica launched its strategic and comprehensive domestic liability management program, marketed as the JDX for domestic securities only. The results of the JDX revealed a participation rate of approximately 99.2% with a 100% participation rate from financial institutions. This level of success represented an exchange of approximately J$695.6 billion in eligible bonds.

In addition to implementing the JDX, the Government has an on-going debt management strategy that includes the following:

• increasing the transparency and predictability of debt issuance and operations;

• increasing the fixed-rate proportion of the domestic debt stock;

• focusing on benchmark bonds to enhance liquidity; and

• continuing to engage multilateral institutions and bilateral creditors.

In November 2012, the House of Parliament approved the Public Debt Management Act, 2012, to make provision for the better management of the public debt. See “Public Sector Indebtedness—General.”

In February 2013, the Government of Jamaica executed a second liability management programme marketed as the National Debt Exchange (NDX). The NDX had a participation rate of approximately 99%, which translated to a nominal amount of J$845.5 billion tendered for exchange. See “Public Sector Indebtedness—Comprehensive Debt Management.”

D-14

Legal Reforms to Financial System

As part of the MOU with the ERP and EFF, the Government plans to implement a variety of reforms impacting the financial system. These include the following:

• enacting an omnibus banking law that will allow for more effective supervision of financial conglomerates, including harmonization of the prudential standards that apply to commercial banks, merchant banks and building societies;

• amending the Bank of Jamaica Act to provide the Bank of Jamaica with the responsibility for overall financial stability;

• reforming of the securities dealers rules to strengthen their ability to withstand shocks going forward;

• continuing to strengthen the regulatory and supervisory framework of securities dealers to enhance capitalization and margin requirements; and

• enacting qualifications of auditors regulations, which will be promulgated after the omnibus banking law.

For further details on certain laws and regulations governing the financial sector, see “Monetary System— Legislation and Regulation.”

Energy Policy

Jamaica is actively pursuing an alternative energy policy to reduce energy costs, develop additional generating capacity and invest in renewable and alternative resources as a strategy to diversify its source of energy and decrease its reliance on crude oil,. Renewable sources of energy and natural gas are more financially viable and sustainable. Additionally, alternative sources, such as natural gas, burn cleaner than crude oil. While the exact scale of investment in infrastructure is still being calculated, the Government has made the energy policy an essential component of its conscious growth agenda.

Gross Domestic Product

The Jamaican economy declined by 0.5% in 2012 when compared with 2011, but had grown by 1.7% in 2011 when compared to 2010. The decline in 2012 was mainly the result of challenges in the macroeconomic environment and unfavorable weather conditions during the latter part of the year. Among the factors that constrained aggregate demand within the economy were: the uncertainties surrounding the IMF agreement, exchange rate depreciation, government initiated wage restraints and increased fuel prices. Hurricane Sandy also significantly affected the Jamaican economy, causing damage to infrastructure, crops, and livestock. Production in most industries was affected and damage totaled approximately J$9.7 billion, representing a loss of approximately 0.8% of GDP.

GDP declined by 0.7% during the first six months of 2013 when compared to the first six months of 2012. This was primarily the result of a 2.7% decline in the goods-producing sector, whereas the services industries remained relatively unchanged. The decrease in the goods-producing sector was primarily due to lower output levels in agriculture, forestry and fishing, mining and quarrying and manufacturing, which decreased by 9.1%, 1.0 and 0.2% respectively in the first half of 2013. The major factors influencing the decline in agriculture, forestry and fishing were unfavorable weather conditions and the lingering effects of Hurricane Sandy. The decrease in mining and quarrying was primarily due to power generation and machinery problems at the alumina plants. However, construction grew by 1.2% in the first six months of 2013. The performance of the construction industry was influenced mainly by the construction and expansion of hotels as well as the continued construction and rehabilitation of works associated with the Jamaica Water Supply Improvement Project, which is a rural water

D-15

supply project that was designed to improve Jamaica’s problem of access to potable water. Within the services industries growth was recorded in the transport, storage and communication, finance and insurance and real estate, renting and business activities of 0.2%, 0.7% and 0.3% respectively.

There has been a declining trend in interest costs, which has created fiscal space for improvements to infrastructure, increased economic efficiencies, and poverty reduction. In FY 2012/2013, interest payments accounted for 37% of total revenues and 9.4% of GDP, which is a marginal improvement over FY 2011/12, when interest payments accounted for 37% of total revenue and 9.5% of GDP, and compares favorably to FY 2010/2011, when interest payments accounted for 41% of total revenue and 11% of GDP. Interest cost as a percentage of total revenues has averaged 38.3% over the last three years. This favorable outturn of declining interest costs to revenue is expected to continue through to FY 2016/17, when interest payments are projected to account for 26% of total revenues and 6.9% of GDP. See “—Public Sector Indebtedness.”

Sectoral Origin of Gross Domestic Product

	2008				2009				2010				2011				2012
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
	(in millions of J$ at constant 2007 prices, except percentages)
Agriculture, Forestry and Fishing:		38,373		5.0		43,972		6.0		43,856		6.1		48,370		6.6		49,595		6.8
Traditional Export Agriculture		6,366		0.8		7,078		1.0		7,640		1.1		7,159		1.0		7,275		1.0
Other Agricultural Crops and Post-Harvest Crop Activities		22,464		3.0		27,033		3.7		26,834		3.7		31,487		4.3		33,060		4.5
Animal Farming, Forestry and Fishing		9,542		1.3		9,861		1.3		9,381		1.3		9,725		1.3		9,259		1.3
Construction		58,992		7.8		53,870		7.3		53,167		7.3		53,609		7.3		51,253		7.0
Manufacture		67,454		8.9		64,241		8.7		61,785		8.5		62,891		8.6		62,276		8.5
Mining and Quarrying:		31,493		4.1		15,627		2.1		14,969		2.1		17,823		2.4		16,273		2.2
Bauxite and Alumina		30,286		4.0		14,485		2.0		13,655		1.9		16,686		2.3		15,087		2.1
Quarrying incl. Gypsum		1,207		0.2		1,142		0.2		1,314		0.2		1,137		0.2		1,186		0.2
Total Goods		196,311		25.8		177,710		24.2		173,777		24.0		182,694		24.9		179,396		24.5
Wholesale & Retail Trade; Repairs; Installation of Machinery and Equipment		141,473		18.6		136,287		18.5		131,075		18.1		131,518		17.9		129,375		17.7
Electricity and Water Supply		24,715		3.2		25,247		3.4		24,165		3.3		24,227		3.3		23,705		3.2
Finance & Insurance Services		81,615		10.7		84,086		11.4		81,228		11.2		81,010		11.0		81,713		11.2
Producers of Government Services		96,288		12.7		96,015		13.1		96,345		13.3		96,868		13.2		96,751		13.2
Hotels & Restaurants		36,842		4.8		37,578		5.1		38,841		5.4		39,619		5.4		40,323		5.5
Real Estate, Renting & Business Activities		80,983		10.6		79,996		10.9		79,185		10.9		78,887		10.7		78,611		10.8
Transport, Storage & Communication		87,323		11.5		84,247		11.5		81,995		11.3		80,449		11.0		80,405		11.0
Other Services		50,276		6.6		50,373		6.9		49,664		6.9		49,857		6.8		50,428		6.9
Total Services		598,514		78.7		593,828		80.8		582,498		80.4		582,435		79.3		581,311		79.5
Less: Financial Intermediation Services Indirectly Measured (FISIM)		35,049		4.6		36,541		5.0		31,915		4.4		30,594		4.2		29,699		4.1
Gross Domestic Product		760,777		100.0		734,997		100.0		724,359		100.0		734,535		100.0		731,007		100.00

(1) The Jamaican System of National Accounts has undergone a comprehensive revision. The revision included: (1) the compilation of the national accounts in line with the United Nations System of National Accounts 1993 (1993 SNA); (2) incorporation of new and revised data into the estimates; (3) revision of the national accounts classification of industries; and (4) rebasing of the constant price estimates from 2003 to 2007.

Source: Statistical Institute of Jamaica.

D-16

The following table shows the rate of growth of real GDP by economic sectors at constant 2007 prices for the five years ended December 31, 2012:

Rate of Growth of Real GDP by Sector⁽¹⁾

	2008			2009			2010			2011			2012
	(%)
Agriculture, Forestry and Fishing:		(6.2	)		14.6			(0.3	)		10.3			2.5
Traditional Export Agriculture		(13.6	)		11.2			8.0			(6.3	)		1.6
Other Agricultural Crops and Post-Harvest Crop Activities		(5.8	)		20.3			(0.7	)		17.3			5.0
Animal Farming, Forestry and Fishing		(1.6	)		3.3			(4.9	)		3.7			(4.8	)
Construction		(7.6	)		(8.7	)		(1.3	)		0.8			(4.4	)
Manufacture		(0.5	)		(4.8	)		(3.8	)		1.8			(1.0	)
Mining and Quarrying:		(2.7	)		(50.4	)		(4.2	)		19.1			(8.7	)
Bauxite and Alumina		(2.2	)		(52.2	)		(5.7	)		22.2			(9.6	)
Quarrying incl. Gypsum		(13.5	)		(5.4	)		15.0			(13.5	)		4.3
Total Goods		(4.2	)		(9.5	)		(2.2	)		5.1			(1.8	)
Wholesale & Retail Trade; Repairs and Installation of Machinery		(0.5	)		(3.7	)		(3.8	)		0.3			(1.6	)
Electricity and Water Supply		0.9			2.2			(4.3	)		0.3			(2.2	)
Finance & Insurance Services		3.0			3.0			(3.4	)		(0.3	)		0.9
Producers of Government Services		0.1			(0.3	)		0.3			0.5			(0.1	)
Hotels & Restaurants		2.1			2.0			3.4			2.0			1.8
Real Estate, Renting & Business Activities		1.4			(1.2	)		(1.0	)		(0.4	)		(0.4	)
Transport, Storage & Communication		(3.1	)		(3.5	)		(2.7	)		(1.9	)��		(0.1	)
Other Services		0.6			0.2			(1.4	)		0.4			1.1
Total Services		0.3			(0.9	)		(1.9	)		(0.0	)		(0.2	)
Less: Financial Intermediation Services Indirectly Measured (FISIM)		(2.3	)		4.3			(12.7	)		(4.1	)		(2.9	)
Gross Domestic Product		(0.8	)		(3.4	)		(1.4	)		1.4			(0.5	)

(1) The Jamaican System of National Accounts has undergone a comprehensive revision. The revision included: (1) the compilation of the national accounts in line with the United Nations System of National Accounts 1993 (1993 SNA); (2) incorporation of new and revised data into the estimates; (3) revision of the national accounts classification of industries; and (4) rebasing of the constant price estimates from 2003 to 2007.

Source: Statistical Institute of Jamaica.

The Petrocaribe Agreement

On August 23, 2005, Jamaica entered into the Petrocaribe Energy Cooperation Agreement (the Petrocaribe Agreement), with the government of the Bolivarian Republic of Venezuela, effective as of June 29, 2005, for an automatically renewable one-year term. The Petrocaribe Agreement has been renewed annually since 2005. Under the arrangement, Venezuela has agreed to make available to Jamaica a portion of the value of Jamaica’s purchases of oil as a concessionary loan facility, the terms of which are determined by the prevailing price per barrel of oil internationally. Currently, with the price of oil averaging more than $100 per barrel, the amount of concessionary financing available is 60% of the value of purchases, which is to be repaid over 25 years, including a two-year grace period, at an interest rate of 1.0%. The terms of the Petrocaribe Agreement limit the concessionary flows to the purchase of a maximum of 23,500 barrels per day (23,500 Bbl/day) of crude oil, refined products and liquefied petroleum gas (LPG) or its energy equivalents, supplied directly to Jamaica for its internal consumption. Prices for products are based on prevailing rates in the international oil market and deliveries to Jamaica are subject to the commercial policies and practices of Petroleos de Venezuela S.A. (PDVSA). Jamaica has the option of providing alternative forms of payments through goods and services. The Petrocaribe Agreement may be modified or terminated by Venezuela upon 30 days’ written notice to Jamaica.

D-17

In 2006, Parliament authorized the establishment of the Petrocaribe Development Fund to undertake the following activities in relation to the Petrocaribe Agreement:

• manage loan proceeds that flow to Jamaica;

• provide financing for approved projects and receive loan repayments from borrowers; and

• meet debt service obligations to Venezuela arising from the Agreement.

At December 31, 2012, the loan proceeds to the Petrocaribe Development Fund totaled US$2.4 billion, and at October 31, 2013, the loan proceeds totaled US$2.8 billion.

Revitalization of Downtown Kingston

The Urban Development Corporation of Jamaica (UDC) is in the process of preparing a redevelopment plan for downtown Kingston and Port Royal. This envisages various projects being implemented on a phased basis in keeping with Vision 2030 Jamaica, which seeks to position Jamaica as a place of choice to live, work, raise families and do business. As part of this plan, the UDC has been actively engaging public and private sector entities to invest in downtown Kingston.

Arising out of these efforts, the telecommunications company Digicel, which is incorporated in Bermuda, moved into its new headquarters in Kingston early in 2013. This move is expected to result in an increased demand for support services such as restaurants and other retail services. Digicel has continued to invest in the market district of downtown Kingston and the UDC has been working collaboratively with them.

In fact, the UDC through collaboration with the Kingston and St. Andrew Corporation (KSAC) has carried out additional improvements works to the market district geared at providing a greater sense of order and space to the vendors and shoppers alike.

The UDC has been spearheading a multi-stakeholder approach to the redevelopment of the capital city and adjoining Port Royal, which is yielding opportunities in the areas of residential, and commercial development. The UDC has realized that one of the main obstacles to be overcome is the issue of addressing the myriad problems of providing suitable housing accommodation with some level of affordability for the inner city community dwellers without causing major dislocation. To date, two pilot housing units have been constructed from which lessons will be learnt leading to its adaption elsewhere.

Several infrastructure investment projects continue through the plan area. The National Work Agency (NWA) has initiated its Traffic Management Plan. The National Water Commission is currently undertaking the construction of the new Darling Street Sewerage Pumping station which will improve the discharge of sewerage to the Soapberry Treatment Plant. The major benefit of this project to the plan area is the gradual improvement that will return to the water quality of the Kingston Harbor, which will encourage more recreational use of this resource.

Private interests are also playing their part by carrying out façade improvement to their properties in the business district. Several of the previously abandoned or derelict buildings are being renovated and returned to use.

The UDC is leading the charge in making the downtown, particularly the Kingston waterfront a lively entertainment space with its support for several activities. One of the many projects proposed seek to reposition the waterfront as a leisure and event space with the festival marketplace proposal being one the important anchors. This development will combine the elements of entertainment, cuisine and other commercial activities. The Jamaica Conference Centre continues to offer premier conferencing facilities.

D-18

The Ministry of Foreign Affairs and Foreign Trade will be relocating to the Kingston Waterfront. When the project is implemented, it will serve as an anchor for development on the eastern side of the plan area, similar to the impact Digicel had on the western side.

Principal Sectors of the Economy

Tourism

The tourism industry is the leading gross earner of foreign exchange for Jamaica and makes a significant contribution to employment. Tourism accounted for 56.1% of gross foreign exchange earnings from the productive sector in 2012, excluding remittance inflows. In 2012, the accommodation sub-sector alone employed approximately 35,197 persons. Visitor arrivals in Jamaica have increased by 55.1% in the last decade, from 2,131,785 million visitors in 2002 to 3,306,168 million visitors in 2012. Total visitors’ accommodation has also grown during the last decade from 24,239 rooms in 2002 to 31,826 rooms in 2012.

During 2012, total visitor arrivals were 3,306,168, an increase of 7.4% from 3,077,233 in 2011. Stopover arrivals totaled 1,986,085 in 2012, an increase of 1.8% from 1,951,752 in 2011, mainly due to a new airlift out of Latin America and the successful staging of signature calendar events. Cruise passengers totaled 1,320,083 in 2012, an increase of 17.3% from 1,125,481 in 2011, mainly due to a new port facility in Falmouth.

For the first nine months of 2013, total visitor arrivals were 2,451,183, a decrease of 3.8% compared to the same period of 2012; stopover arrivals totaled 1,534,887, a 0.6% decrease over the same period in 2012; and cruise passengers totaled 916,296, a decrease of 8.8% compared to the same period in 2012. These decreases were primarily due to: decreased flight operations out of Canada and the United Kingdom; decreased tourism from the Northeast Coast of the United States after Hurricane Sandy; temporary closures and unavailability of rooms in hotels that changed ownership and management; and the negative effects of the Air Passenger Duty on travel out of the United Kingdom. This decreases were was partially offset by new flights out of Latin American and the successful staging of signature calendar events.

In addition, Jamaica continued to secure adequate airlift out of major airport hubs allowing more visitors easy access to the destination. Currently 27 airlines fly into Jamaica either through the airports in Kingston at Norman Manley International Airport or Sangster International Airport in Montego Bay.

The United States, Jamaica’s largest tourist market, accounted for 63.3% of total stopover visitors in 2012, compared to 62.8% in 2011. Canada accounted for 20.3% of total stopover visitors in 2012, compared to 19.4% in 2011. The percentage share of Jamaica’s stopover visitors from Europe decreased to 11.2% in 2012 from 13.0% in 2011. Average hotel room occupancy was 62.3% in 2012, and 60.5% in 2011 and 2010. Approximately 74.1% of hotel rooms in Jamaica are in the all-inclusive hotel category in 2012. In 2012, the average room occupancy rate of all-inclusive hotels was 69.7%.

Investment in visitor accommodation is growing as a number of major hotel projects reached completion, mainly along the North Coast of Jamaica from Negril to Ocho Rios. In 2008, the following properties were opened: Grand Palladium—Fiesta Resort with 1,056 rooms in Lucea, the second Iberostar property—Iberostar Suites Rosehall—with 273 rooms, and the fourth Riu property—Riu Mahoe Bay—with 681 rooms in Montego Bay. The Palmyra Resort & Spa at Rose Hall, which began construction in 2005, opened the first phase with 299 rooms in December 2009. During 2010, the Secrets Wild Orchid and Secrets St. James properties were opened in Montego Bay, each with 350 rooms.

Current investment prospects in the tourism sector should result in an increase in number of hotel rooms and employment. There are several hotels in the process of planning expansions or constructing new properties, with projected capital investment of over US$763 million, which is expected to result in approximately 2,000 additional rooms, and 4,710 additional jobs. Major investors include both international and local parties, including RIU Hotels & Resorts, Blue Diamond Hotels and Resorts, Meliá Hotels International, S.A, Karisma Hotels and Sagicor Jamaica Group.

D-19

Hotel developments currently under way include RIU Palace in Montego Bay and the Courtyard by Marriott in Kingston. The RIU Palace is currently being built at a cost of J$3.94 billion and is expected to generate more than 500 new jobs. The hotel is scheduled to open in December 2013. The Courtyard by Marriott is scheduled to break ground in July 2013, and will be developed at a cost of J$1.75 billion and is expected to generate more than 430 new jobs. The former Grand Lido Braco, Royal Decameron at Paradise Cove, Ritz Carlton, Poncianna and Breezes Runaway Bay are under new management and are currently undergoing major refurbishment. Approximately J$12 billion has been committed to refurbishing these properties.

In September 2006, the Government and the Tavistock Group entered into a joint venture agreement for the development of the Harmony Cove Resort in Trelawny. Construction on the first phase of the project is scheduled to begin in 2014 with a total Phase 1 budget of approximately US$900 million. Phase 1 is expected to take approximately three years to complete. Full build-out of all phases of the project is expected to be completed within the next 10 years, based upon demand. At completion of all planned phases, the resort is expected to include several upscale hotels and residences totaling 5,000 units and a full range of amenities.

The following table shows the new or refurbished hotels that are scheduled to open between 2012 and 2014.

Hotels Scheduled to Open Between 2012 and 2014

Hotel	Developer	Type	New Rooms		Projected Capital Investment		Status
Jewel Runaway Beach & Golf Resort	Sagicor Pooled Investment Funds Ltd	Rebranding of the former Breezes Runaway Bay Hotel		—	J$	7.9 billion	Rebranded and open under new management
Courtyard by Marriot	Carb Hospitality of Jamaica	New City/Business Hotel		130	J$	1.75 billion	Expected to break ground in 2013
RIU Palace Jamaica Hotel	RIU	New/Boutique		232	J$	3.94 billion	Expected opening December 14, 2013
Memories White Sands Hotel	Sunwing/TUI Group	Reconstruction and rebranding of the former Starfish Trelawny Hotel		350	J$	2.8 billion	Expected opening December 7, 2013
Grand Lady Paladium Hotel (Phase II)	Fiesta	Expansion/Integrated Resort Development/ Casino Gaming		800	J$	43.75 billion	Awaiting finalization of approvals
Azul Sensatori Jamaica	Sunwing/TUI Group	Reconstruction and rebranding of the former Beaches Sandy Bay / Seashore Resort Beach Bay		135	J$	1.13 billion	Will fully re-open in May 2014, but 76 rooms have opened as of December 21, 2013
Grand Lido (Negril)	Sunwing / TUI Group	Major refurbishing of 100 rooms and building 100 new suites		100	J$	2.71 billion	Scheduled to begin construction in May 2014
Shanghai Hotel	Zhongda Construction Ltd.	Construction of a Business Hotel in Kingston		46	J$	0.92 million	Scheduled to begin constructions in the second half of 2014
TOTAL				1,793	J$	64.90 billion

D-20

The following table shows the number of visitor arrivals for the first nine month period ended September 30, 2012 and 2013:

	2012		2013		% Change
Foreign Nationals		1,431,008		1,427,846		(0.2	)
Non-resident Jamaicans		113,271		107,041		(5.5	)
Total Stopover Visitors		1,544,279		1,534,887		(0.6	)
Cruise Passengers		1,004,212		916,296		(8.8	)
Total Visitors		2,548,491		2,451,183		(3.8	)
Average Length of Stay (nights)		8.6		8.5		(1.2	)

Source: Jamaica Tourist Board.

The following table shows the number of visitor arrivals for the five years ended December 31, 2012:

Visitor Arrivals

	2008		2009		2010		2011		2012		% Change 2012 vs. 2011
Foreign Nationals		1,623,675		1,683,846		1,768,810		1,800,280		1,832,329		1.8
Non-resident Jamaicans		143,596		147,251		152,868		151,472		153,756		1.5
Total Stopover Visitors		1,767,271		1,831,097		1,921,678		1,951,752		1,986,085		1.8
Cruise Passengers		1,092,263		922,349		909,619		1,125,481		1,320,083		17.3
Total Visitors		2,859,534		2,753,446		2,831,297		3,077,233		3,306,168		7.4
Average Length of Stay (nights)		9.3		9.2		9.0		8.9		8.8		(0.1	)

Source: Jamaica Tourist Board.

The following table shows the number of stopover visitors by country of origin for the five years ended December 31, 2012:

Stopover Visitors by Country of Origin

	2008		2009		2010		2011		2012		% Change 2012 vs.  2011
United States		1,150,942		1,172,844		1,242,943		1,225,565		1,257,669		2.6
United Kingdom and Ireland		191,867		187,350		187,092		175,966		147,302		(16.3	)
Other European		92,833		89,449		84,223		77,439		75,126		(2.5	)
Canada		236,193		290,307		325,191		378,938		403,200		6.4
Caribbean		67,231		65,333		58,299		66,216		64,984		(1.9	)
Latin America		16,122		14,492		13,442		16,589		25,037		50.9
Japan		2,846		2,511		1,950		2,027		2,092		3.2
Other		9,237		8,811		8,538		9,372		10,675		13.9
Total		1,767,271		1,831,097		1,921,678		1,951,752		1,986,085		1.8

Source: Jamaica Tourist Board.

D-21

The following table shows the percentage hotel room occupancy for the five years ended December 31, 2012:

Hotel Room Occupancy

	2008		2009		2010		2011		2012
	(%)
Kingston and St. Andrew		56.9		46.2		41.8		45.2		49.8
Montego Bay		59.7		60.2		61.2		63.2		63.7
Ocho Rios		68.0		64.9		66.0		63.9		66.2
Port Antonio		12.5		21.1		10.0		14.1		10.1
Mandeville		58.2		45.4		49.8		58.7		55.2
Negril		54.9		57.3		61.7		58.5		61.3
Total		60.4		59.0		60.5		60.5		62.3

Source: Jamaica Tourist Board.

The following table shows estimated visitor expenditure for the five years ended December 31, 2012:

Estimated Visitor Expenditure

	Stopover US$ per person per day		Cruise US$ per passenger per day		Total Visitor Expenditure US$ Million		Visitor Expenditure % Change From Prior Year
2008		119.5		94.2		1,975.5		3.4
2009		114.0		83.4		1,925.4		(2.5	)
2010		115.7		87.4		2,001.2		3.9
2011		115.7		87.4		2,008.3		0.4
2012		117.23		75.67		2,069.56		3.0

Source: Jamaica Tourist Board.

In 2012, the total visitor expenditure increased by 3.0% to US$2,069.56 million from US$2,008.3 million in 2011. This increase was primarily attributable to a 17.3% increase in the cruise passenger category of visitors along with an increase in the average expenditure per person per night for stopover arrival visitors. The average expenditure per person per night increased to US$116.3 in 2012 from US$115.7 in 2011.

Infrastructure

Highway 2000

Since 2002, Jamaica has made progress on the Highway 2000 project, a joint public-private sector project. Once completed, this multi-lane motorway will connect the capital of Kingston in the southeast of Jamaica with the tourism centers of Montego Bay in the northwest and Ocho Rios in the center of northern Jamaica, and will cover approximately 144 miles (230 kilometers). The developers, through National Road Operating and Constructing Company Limited (NROCC), are authorized by the Minister of Transport and Works via concession agreements of 35 and 50 years to levy, collect and retain tolls in connection with the project.

The project will be completed in two phases :

Phase 1

Phase 1 is made up of three separate sub-projects:

TransJamaican Highway Limited (TJH), a project company currently owned by Bouygues Travaux Publics S.A., Autoroutes du Sud de la France, International Finance Corporation and Société de Promotion et de Participation pour la Coopération Economique S.A have completed the design, construction, and financing of Phase 1A and Phase 1B of the project.

D-22

Phase 1A, which commenced in 2002, was completed in July 2006 at a cost of approximately US$240 million and included the construction of a four-lane tolled motorway from Mandela Highway to Sandy Bay as well as a six- lane highway connecting Kingston to Portmore. This phase also included the construction of three new toll plazas.

Phase 1B was completed in August 2011 at a cost of approximately US$104 million and involved the construction of an additional 6.5 miles (10.5 kilometers) of roadway from Sandy Bay to May Pen. The project was funded by Inter-American Development Bank the International Finance Corporation, the European Investment Bank (EIB) and Société de Promotion et de Participation pour la Coopération Economique S.A.

Phase 1C, which is designed to extend the Highway from May Pen to Williamsfield, has not yet been awarded to any developer.

Phase 2

The second phase of the project (Phase 2) will include two sub-projects:

Phase 2A was awarded in 2012 to Jamaica North South Highway Company Limited, a project company that is a subsidiary of China Harbour Engineering Company Limited, under a 50-year concession. This phase involves the construction of a tolled highway of approximately 67 kilometers commencing in Caymanas and extending to Ocho Rios. This phase also includes the completion of the Mt. Rosser Bypass section of the roadway, which began in 2007. The concession includes the design, construction, financing, operation and maintenance of the toll road. The full financing for the project, which is estimated at US$600 million, is being provided by a combination of equity from the Developer and loans from China Development Bank.

Phase 2B, which is designed to extend the highway from Williamsfield to Montego Bay, has not yet been awarded to any developer.

Other Infrastructure

Jamaica and the Export-Import Bank of China signed a Preferential Buyer Credit Loan Agreement for the sum of US$58.1 million on February 3, 2010. The loan’s purpose was to repair and secure the degraded shoreline of the Palisadoes Peninsula in Kingston and to protect the Kingston Harbor from potential storm surges. The project commenced in September 2010 and was completed in December 2012. During the execution of the project, the NWC requested implementation of an additional 4km of pipeline and the Government decided to implement the extra amount during the defects liability period; the pipeline installation was completed in November, 2013. Two major outstanding activities that were not part of the major works contract but are stipulated by the NEPA’s regulation—the replanting of the mangroves and the construction of the boardwalk on the harbor side – have yet not commenced but are being negotiated.

Jamaica divested the Sangster International Airport in 2003 and upgrading work was completed in April 2009. In 2011, the Norman Manley International Airport improvement was completed, which included a new departure terminal, a new two-level pier fitted with jet-loading bridges; upgrades to the arrivals terminal, car park and roadway upgrades; IT systems, operations, safety and security equipment upgrades; and electrical distribution systems upgrades. See “—Privatization.” Funding for these projects came from European Investment Bank (EIB) and the Caribbean Development Bank (CDB), government funding from the Petrocaribe Development Fund, the Airport Improvement Fund (AIF), and equity and subordinated debt via the Airports Authority of Jamaica (AAJ).

In 2011, the construction of the Falmouth Cruise Ship Terminal (FCST) was completed. This Terminal was constructed through a collaborative arrangement between the Port Authority of Jamaica (PAJ) and Royal Caribbean Cruises Limited (RCCL). The commercial area was developed by RCCL on lands leased on a long term basis from the PAJ and is operated by Falmouth Jamaica Land Company Limited (FJLCL), a subsidiary of RCCL. FJLCL, on the other hand, manages a number of shops and other commercial buildings on the leased area, integrating part of the FCST.

D-23

The FCST welcomed its first cruise vessel with over 3,000 passengers and more than 1,000 crew members in February 2011 and by the end of 2011 had accommodated the highest number of cruise ship visitors of any of the four cruise ship piers in Jamaica. Falmouth welcomed 597,746 passengers and 135 calls in 2012 and 569,316 passengers and 135 calls between January and November 2013. Financing for the project was secured through a government guaranteed loan of US$121.65 million, made available by HSBC plc, London and supported by the Eksport Kredit Fonden. See “Public Sector Indebtedness—External Debt.”

OPDEM National Disaster Work Program

Given the changing demands of disaster management locally and globally, the Office of Disaster Preparedness and Emergency Management (ODPEM) is integrating a comprehensive disaster risk-management system in the tourism, agriculture and education sectors and has created a response/recovery system, for a greater awareness of the impact of disasters and possible areas for reducing vulnerability and risk. ODPEM has also spearheaded and collaborated with NGOs and other agencies of government to enhance community response mechanisms through its Building Disaster Resilient Communities (BDRC) Programme.

Other Tourism Initiatives

Potential future negative economic and other conditions in the United States and other countries may have an adverse effect on Jamaican tourism. Other factors that may affect the tourist industry include the availability of direct flights to and from the country, potential visitors’ perceptions of Jamaica’s crime rate, travel advisories issued by foreign authorities and development in other competing tourist destinations, including Mexico, the Dominican Republic, Florida, Cuba and other Caribbean destinations.

Jamaica has a Master Plan for Sustainable Tourism, which it adopted in 1998. The plan includes:

• facilitating growth in selected areas;

• enhancing the visitor experience through development of products from Jamaica’s culture;

• creating heritage and diversified natural habitats; and

• developing a model to foster more community involvement in the tourism sector.

Jamaica and the relevant members of the tourism sector have agreed upon the details of the Master Plan and its implementation. Jamaica believes that the implementation of the Master Plan will ensure Jamaica’s competitive position through product diversification and improvement, lead to the adoption of sound environmental practices and create opportunities to allow more Jamaicans to participate directly in the tourism sector. The implementation of the Master Plan will continue on an ongoing basis.

In December 2004, the Tourism Enhancement Act, 2004 was passed. This act, as amended on August 2011, provides for a Tourism Enhancement Fee (TEF) of US$20.00 and US$2.00 to be paid by incoming airlines and cruise ship passengers, respectively. Funds from the TEF are to be placed in a dedicated fund to be used solely for implementing the recommendations emanating from the Master Plan.

The tourism industry’s commitment to sound environmental practices was evidenced in 1998 by the selection of Jamaica as the pilot destination for the launch of the Green Globe Hotel Certification Program. The project was executed by the Environmental Audits for Sustainable Tourism initiative funded through the United States Agency for International Development, in collaboration with the Jamaica Hotels and Tourist Association. Through this program, environmental audits were conducted for twenty hotels and one tourism attraction. Four Jamaican hotels became the first four in the world to attain Green Globe Certification.

D-24

Several tourism entities have implemented environment management systems (EMS) and approximately six entities have been certified as Green Global in Jamaica. Many of these Green Globe certified companies are part of the Sandals Resorts and SuperClubs chains. An effective environmental management system improves operational efficiency and cuts waste. It not only improves the organization’s environmental performance, but also saves money. Participating entities often reduce operating costs, which has lead to increased profitability. Programs such as the Green Globe certification scheme are a useful way for companies to effectively demonstrate their corporate social responsibilities.

Mining and Quarrying

The mining and quarrying sector of the Jamaican economy, dominated by the bauxite and alumina industries, is the country’s largest export sector. Based on 2012 production data, Jamaica is the seventh-largest producer of bauxite in the world. Bauxite and alumina exports accounted for approximately 14.2% of Jamaica’s exports of goods and services in 2012. Bauxite and alumina exports accounted for approximately 4.3% of Jamaica’s GDP in 2012 and recorded an estimated decrease in real growth of 9.6% in 2012 compared to 2011.

The mining and quarrying sector declined by 8.7% in 2012 when compared to 2011, primarily due to decreased production of crude bauxite and alumina. Bauxite and alumina’s contribution to GDP decreased by 9.6% in 2012.

Bauxite production decreased by 7.6% in 2012 to 9,411,919 tonnes and the export of crude bauxite decreased by 7.5% to 4,759,647 tonnes when compared to 2011. The decline in bauxite production and exports was due in large part to a fall in domestic alumina output, for which bauxite is the primary input, as well as a reduction in export volumes of crude bauxite resulting from weakened foreign demand. Bauxite prices are negotiated based on demand as well as on reference to price levels in other bauxite exporting countries.

In 2012, the world aluminum industry continued to experience a recovery in demand and prices when compared to 2011. In 2012, alumina production decreased by 10.3% to 1,757,690 tonnes and exports of alumina fell 10.5% to 1,753,505 tonnes in 2012 when compared to 2011. This was primarily due to the weak global economy, which caused the historically high global aluminium stocks to rise by an additional 500kt tonnes and inventory to build up, which led to a temporary cutback of production at one of the island’s refineries.

Results of operations of the bauxite and alumina industries are sensitive to fluctuations in global commodity prices. The price of aluminum in 2012 reflected the general weakening of commodity prices and contributed to the 12.1% decline of foreign exchange earnings in the sector in 2012 to US$644.8 million, compared to US$732.8 million in 2011. The decrease in foreign exchange earnings in 2012 was mainly due to the decrease in alumina exports. Earnings from crude bauxite exports decreased by 11.0% to US$131.2 million in 2012 from US$147.5 million in 2011, primarily due to the decrease in the volume of bauxite exported.

In the first nine months of 2013, alumina production in Jamaica rose by 2.3%, to 1,353,905 tonnes, as compared to 1,324,077 tonnes in the first nine months of 2012. Crude bauxite production totaled 3,474,016 in the first nine months of 2013, representing a decrease of 3.2% compared to 3,589,954 tonnes in the same period of 2012. In the first nine months of 2013, alumina exports rose by 1.5%, to 1,362,839 tonnes, as compared to 1,342,402 tonnes in the first nine months of 2012. In the first nine months of 2013, crude bauxite exports totaled 3,485,972 tonnes, representing a decrease of 2.5% compared to 3,574,533 tonnes in the same period of 2012.

The global price of aluminium decreased during the nine-month period ended September 30, 2013, to an average of US$1,803 per tonne, which was 14% lower than the comparable period of 2012. The decline was primarily due to the continued impact of the financial and debt crisis in the Eurozone, a slowdown in Chinese economic activity, and investors moving out of high-risk financial assets, including commodities.

In the first nine months of 2013, Caribbean-sourced spot-alumina average prices increased 0.9% to US$313.15 per tonne compared to US$310.29 for the same period in 2012. Alumina prices in 2012 have strengthened as a result of new pricing mechanisms introduced by the major producers such as Alcoa Inc. and UC Rusal. The traditional indexing of alumina to aluminium prices was replaced in favour of linking them to the main driving factors affecting alumina production costs such as the cost of bauxite and energy.

D-25

The Government continues to work on drafting the National Minerals Policy, which is expected to be presented to the Cabinet by the first quarter of 2014. This policy, among other things, is intended to effectively manage mineral resources and mineral-bearing lands from the pre-mining to the post-mining stage. The policy is directed towards expansion, diversification (especially in the area of energy) and modernization of the minerals industry.

Jamaica believes that it has mineable bauxite reserves sufficient to last approximately fifty years under current mining practices and market demand expectations. This estimate of reserves is based on a range of technological and economic factors, and is subject to revision from time to time. The cost of exploiting mineable reserves can vary significantly depending on such factors as the location and mineralogical character of the reserves and technological progress in the industry.

The mining and quarrying sector will require a significant amount of capital investment in the near future as it carries out plans to transform its energy base away from oil and into natural gas and coal in an effort to reduce overall costs and strengthen global competitiveness. Implementation of these plans to transform the energy base, which may involve a potential investment of US$300–350 million, are expected to begin in 2016.

The Government of Jamaica currently wholly owns Clarendon Aluminum Production (CAP), which is in the business of producing and selling metal-grade alumina and holds a 45% undivided interest as a co-tenant in common in the assets of Jamalco (the Jamalco Co-tenancy Assets), a joint venture with Alcoa Minerals of Jamaica, an indirect subsidiary of Alcoa Inc. The business of the joint venture consists of an integrated alumina production and export network composed of bauxite mining operations, and alumina refinery, a power plant, a rail transport system and a port with docking and loading facilities.

On June 17, 2013, CAP and Noble Resources Ltd. (Noble) entered into an alumina sales agreement (the Alumina Sales Agreement), pursuant to which CAP agreed to supply, sell and deliver not less than 3,375,000, and up to 6,075,000 tons, of alumina to Noble over a twelve year period. In consideration for the alumina delivered pursuant to the Alumina Sales Agreement, Noble and CAP entered into a prepayment facility agreement on June 17, 2013, pursuant to which Noble will make available a US$120,000,000 secured prepayment facility (the Prepayment Facility) to CAP. A condition subsequent to this facility was the successful completion of a consent solicitation and an exchange offer of notes issued by CAP and guaranteed by Jamaica for notes issued by Jamaica. This exchange offer was completed successfully in September 2013. See “Public Sector Indebtedness—External Debt.” Additionally, Noble has a security interest in the CAP shares owned by the Government. That security interest will be released when Noble takes a security interest over CAP’s 45% membership interest in the Jamalco joint venture. All funds disbursed under the facility must be repaid in full by June 30, 2025. Until all funds disbursed under the Prepayment Facility are repaid, CAP grants Noble an option to purchase at market value all or part of CAP’s interest in Jamalco, as well as the right to appoint a Noble representative to the executive committee of Jamalco.

In September 2011, UC Rusal acquired the remaining 35% stake in Alumina Partners of Jamaica (Alpart) from Norsk Hydro ASA for US$46 million and the refinery is now wholly owned by UC Rusal. This has extended the company’s reserve base as it seeks to be self-sufficient in raw materials. As such, UC Rusal is actively developing plans to resume production at the complex, which has been closed since 2009.

D-26

The following table shows the production, exports, prices and earnings of the bauxite and alumina sector for the five years ended December 31, 2012:

Bauxite and Alumina Sector

	2008		2009		2010 (1)		2011 (1)		2012
Bauxite
Production (tonnes)		14,636,097		7,815,119		8,539,853		10,188,882		9,411,919
Exports (tonnes)		4,429,313		3,196,331		4,486,263		5,143,463		4,759,647
Prices (US$ per tonne)(2)		26.1		29.0		28.1		28.5		27.5
Earnings (US$ million)(3)		115.5		92.8		121.1		147.5		131.2
Alumina
Production (tonnes)		3,995,358		1,773,567		1,590,659		1,959,925		1,757,690
Exports (tonnes)		4,034,558		1,883,934		1,575,312		1,959,238		1,753,505
Prices (US$ per tonne)(2)		310.8		202.8		256.9		298.8		292.9
Earnings (US$ million)(3)		1,253.8		382.1		404.7		585.4		513.6
Total Earnings (US$ million)		1,369.2		474.9		525.8		732.8		644.8

(1) Revised.

(2) Average price received.

(3) Includes exports of hydrate

Source: Jamaica Bauxite Institute.

Manufacturing

Real GDP for the manufacturing sector declined by 1.0% in 2012, following an increase of 1.8% in 2011. The decrease in real GDP in 2012 was primarily due to a decline in other manufacturing, which was influenced by a decline in non-metallic minerals, petroleum refining, chemicals and chemical products. This decrease in the other manufacturing component was partially offset by a 0.6% increase in the food, beverages and tobacco component in 2012. The sector’s performance accounted for 8.5% of Jamaica’s GDP in 2012. The overall downturn in the performance of the manufacturing industry was primarily the result of a decrease in demand. Production in the industry was also negatively impacted by Hurricane Sandy in October 2012, which caused the stoppage and delays in production.

Vision 2030 Jamaica, the country’s strategic plan, includes a policy framework for the manufacturing sector. This framework focuses on transitioning to higher levels of productivity and value-added production using efficient and clean technologies and environmentally sustainable processes, as part of an enabling regulatory environment. The fundamental goal for the manufacturing industry is to achieve levels of productivity that will enable the manufacturing sector to compete successfully in domestic and export markets.

Agriculture, Forestry and Fishing

Real GDP for the agriculture, forestry and fishing sector grew by 2.5% and this sector accounted for 6.8% of GDP in 2012. During the first half of 2012, real GDP for agriculture, forestry and fishing sector grew by 7.9%, as compared to the same period in 2011, primarily due to favorable weather conditions and the continuation of Government programs that offered assistance to farmers in the areas of marketing, irrigation and extension services. The sector declined during the second half of 2012, primarily due to damage caused by Hurricane Sandy.

The overall improvement in the industry in 2012 was primarily due to increased output in the sub-industries of other agricultural crops (which comprise mainly domestic crops), animal farming and traditional export crops. During 2012, the Government employed a number of strategies to foster growth in the industry. These included Government programs that offered farmers support in the areas of marketing, irrigation and extension services, aimed at improving efficiency in the industry. Despite these initiatives, growth was stymied by drought conditions early in the year and Hurricane Sandy in the second half of the year. Hurricane Sandy resulted in losses of J$1.45 billion to the agriculture sector, the bulk of which was to cash crops and livestock.

D-27

The Agricultural Development Strategy, which began in 2006 and is aimed at transforming the agricultural sector by the year 2020 with the main focus being an increase in productivity, was subsumed under the Agriculture Sector Plan under Vision 2030 Jamaica. That Sector Plan was finalized in 2009 with a strategic framework that builds on Jamaica’s Agricultural Development Strategy. The Agriculture Sector Plan for Jamaica is one of the strategic priority areas of the Vision 2030 Jamaica—National Development Plan.

Since 1997, Jamaica has undertaken several initiatives to improve productivity and product quality while lowering production costs in the sugar and banana industries. In November 1997, Jamaica commenced a program to provide support to the local sugar industry following decades of financial losses in the industry. The critical points of the strategy are:

• promotion of a sustainable private-sector led sugar cane industry;

• promotion of a diversified industry having as its major outputs raw sugar, molasses, ethanol and bagasse, a by-product used in the production of electricity;

• strengthening of the economy and social infrastructure of sugar-dependent areas; and

• divestment of the publicly owned sugar estates, which annually generate over 70% of sugar production.

With respect to the banana industry, Jamaica participates in two externally supported projects that began in 1996: the United Kingdom/Northern Ireland/Jamaica Government project, aimed at reducing rejection due to peel scarring, and a European Union project, aimed at improving the competitiveness of the banana industry. Effective January 1, 2006, the European Union adopted a new “tariff-only” regime for bananas from countries that enjoy most favored nation status. The new regime also retains a duty-free annual quota for bananas originating in ACP countries so there has been no effect yet on Jamaica’s exports of bananas to the European Union. See “Jamaica—International Relationships—Cotonou Partnership Agreement.” Companies in the banana industry in Jamaica are also making efforts to increase competitiveness by diversifying and improving productivity. New products developed include banana-based drinks, banana flour and cereal products. Efforts to improve productivity include eliminating redundant labor and reducing real labor costs through lower wage settlements. See “—Employment and Labor.”

The quantity of bananas produced in Jamaica was estimated at 47,473 tonnes in 2012 compared with 46,660 tonnes in 2011. This improved output occurred despite the damage resulting from Hurricane Sandy and reflected the strong growth in output prior to the Hurricane. Export of bananas was insignificant in 2012 with earnings of J$120,000 million. The effects of Hurricane Dean which occurred in August 2007 are still affecting banana exports, since it destroyed approximately 85.0% of the then-existing crop, leading to a cessation of banana exports. Banana exports resumed in August 2008 but were again halted by Tropical Storm Gustav, which destroyed approximately 80.0% of the then-existing crop. These weather-related shocks led Jamaica’s largest exporter (Jamaica Producers), which accounted for 80.0% of banana exports, to make the decision to cease exports from Jamaica. In the absence of any significant export, the production of bananas continued to be influenced by local demand as well as demand for the value-added processed products.

The Government divested the remaining three publicly owned sugar factories in 2010 and continued the implementation in 2012 of the Jamaica Country Strategy for the “Adaptation of the Sugar Industry: 2006-2015.” The key objective of this policy is the development of a sustainable private-sector led sugar cane industry by 2015. In support of the implementation of the Sugar Adaptation Strategy, the European Union agreed to provide financial assistance to the Government over the 2006 to 2013 period, under the Accompanying Measures for Sugar Protocol Countries. In 2009, the European Union disbursed €6.1 million to the Government and the amounts disbursed in 2010 and 2011 were €11.6 million, and €8.1 million respectively. There was no disbursement in 2012.

D-28

The Government is committed to partnering with the private sector for the establishment of nine Agro Parks to stabilize the agricultural supply chain, deepen inter-industry links, increase competitive import substitution and activate unutilized rural land and labor. The parks, funded partly by the European Union, are to be complemented by improved inputs, including irrigation, transport infrastructure, and technical services. Three of the nine Agro parks (Amity Hall, Ebony Park and Plaintain Garden) have already started productive activity.

The following table shows the production of selected agricultural products for the five years ended December 31, 2012:

Production of Selected Agriculture Products

	2008		2009		2010		2011		2012
	(in tonnes)
Sugar cane		1,652,047		1,334,579		1,390,084		1,518,339		1,475,225
Yams		102,284		124,516		136,785		134,619		145,059
Bananas(1)		36,200		45,334		53,649		46,660		47,473
Potatoes		30,725		42,937		45,734		57,424		57,561
Citrus		122,291		128,241		117,440		106,992		97,072
Coffee		9,035		12,456		9,121		8,099		6,687
Cocoa		1,015		1,108		1,368		498		1,393

(1) Includes only export production data.

Source: Planning Institute of Jamaica.

Construction

Real GDP for the construction sector decreased by 3.8% in 2012, primarily due to contractions in the building construction and other building categories, which, in turn, was due to the general decrease in economic activities locally, including a decrease in overall employment levels, a reduction in funding to the industry and a reduction in the imports of construction materials. Preliminary international merchandise trade statistics for January to December 2012 showed imports of construction materials declining by 13.2% when compared to the similar period in 2011. Average employment levels in the industry declined by 8.8% in 2012.

Transportation, storage and communication

Real GDP of the transport, storage and communication sector decreased by 1.6% in 2012, primarily due to a reduction in supporting and auxiliary transport activities and air transport. Reduced activities at the ports of Kingston and other ports resulted in a 9.2% decline in the overall volume of cargo handled at the ports. Producers of government services fell by 0.5%, primarily as a result of the strategies undertaken by government’s departments and agencies to effect cost cutting measures to reduce the fiscal deficit.

Privatization

Jamaica’s privatization program commenced in the early 1980s with the divestment of public services and small entities such as garbage collection and sanitation services. Larger sales have included interests in the hotel sector, the National Commercial Bank, Telecommunications of Jamaica Limited, Air Jamaica Limited, Petrojam-Belize and the Caribbean Cement Company Limited. Jamaica has continued its program of privatization by divesting 80% of its interest in the power and energy company, Jamaica Public Service Company Limited, in 2001. The Government granted a concession for the management of the transhipment terminal of the Kingston seaport to APM Terminals and Amalgamated Stevedoring Co. Ltd., a consortium of foreign and local entities, in October 2001. The consortium assumed management of the terminal in February 2002. The contract expired in February 2009 and the terminal is now being managed by the Port Authority of Jamaica.

In connection with the privatization of Air Jamaica Limited in 1994, the Government retained ownership for its own account of 25.0% of the airline’s ordinary shares and ownership of an additional 5.0% of its ordinary shares, which the Government was contractually obligated to contribute to an employee share ownership plan. During the

D-29

period of privatization, the Government provided US$169.0 million in loans and assistance to the airline. In December 2004, Jamaica purchased the remaining 75% of the ordinary shares for US$1.00 and converted approximately US$395 million, the total liabilities of Air Jamaica owed to the Government, into ordinary shares.

In the fiscal year 2007/2008, the decision was made to re-privatize the national carrier Air Jamaica Limited. To this end, the Government sought a divestment that achieved certain strategic objectives. On May 1, 2010, the Government entered into an agreement with Caribbean Airlines pursuant to which Caribbean Airlines obtained the routes of Air Jamaica and agreed to provide sustainable airlift to Jamaica. In return the Government acquired a 16% equity interest in Caribbean Airlines valued at US$28.5 million. The Government remains the owner of the remaining assets and liabilities of Air Jamaica. Under an agreement, Caribbean Airlines will lease some of these assets from Air Jamaica. The Government is liquidating the remaining assets of Air Jamaica as appropriate and will continue to service the liabilities.

Jamaica re-privatized the government-owned assets of the sugar cane industry in August 2011. A “Sugar Cane Negotiating Team” was appointed to oversee the divestment process by the Ministry of Agriculture and Cabinet. In July 2009, the team concluded the divestment of three of the six sugar estates—St. Thomas/Duckenfield, Long Pond and Hampden—for an aggregate sale price (for the factories) of US$2 million. The associated sugar cane lands were divested through 50-year leases. In July 2010, the Government signed an agreement with Complant International Sugar Industry Co. Limited, a Chinese firm, for the sale of the Monymusk, Frome and Bernard Lodge sugar factories and associated farmlands of the Sugar Company of Jamaica (SCJ) Holdings for US$9 million. Under the agreement, the firm is committed to invest US$127 million, approximately, from 2011 to 2013, on modernizing the factories. The firm is also investigating the feasibility of constructing a sugar refinery and ethanol plant. At present there are post-divestment matters outstanding as it relates to contractual obligations between the purchasers and the Sugar Company of Jamaica Holding, on the sale of the six sugar estates. Post-closing issues remaining outstanding to be addressed by the Government at September 2012 included remedy of environmental breaches, land transfer, and the facilitation of the approval of all regulatory licences. These matters are being pursued by the respective parties (the Government and Complant International Sugar Industry Co. Limited).

During FY 2010/2011, Jamaica privatizated lands at Montpelier, St. James, and land and buildings at Ariguanabo. In January 2010, the sale of 525 acres of the Montpelier Citrus Company Limited lands was approved by the Cabinet. The land was sold for J$52 million to Ramble Enterprises Limited, a local company engaged in dairy farming.

In March 2010, the Cabinet approved the sale of 14 acres of land (with buildings) of the Ariguanabo property to the existing lessee, New Era Homes Limited for an aggregate sale price of J$163.9 million.

In December 2010, the Government finalized the sale of the National Hotel and Properties interest in the Jamaica Pegasus Hotel Limited. The shares were sold for US$11 million.

The Urban Development Corporation (UDC) completed the sale of its 50% stake in Bloody Bay Hotel Development Limited (BBHDL) to Village Resorts Limited (VRL) in 2013. The Cabinet approved the sale of the shares to VRL in January 2013, and UDC and VRL signed the agreement finalizing the sale on March 27, 2013. Aggregate proceeds from the sale were US$11.2 million, which included US$9.5 million for the real estate and related fixed assets and US$1.7 million representing UDC’s share of cash and other liquid assets of BBHDL at the time of the sale.

Following the decision to divest the Wallenford Coffee Company (WCC), the Cabinet decided on March 18, 2013, to approve the WCC Memorandum of Understanding (MoU). The MoU was executed by all parties as of August 29, 2013. The purchaser assumed early possession of WCC on September 11, 2013.

D-30

The following table shows a summary of certain major entities privatized and the proceeds received by Jamaica since 2000 in relinquishing its majority or residual:

Summary of Certain Major Jamaican Entities Privatized (By Sale) ^{(1) (2)}

Entity	Year(s) of Privatization		Type of Sale	Payment Received in J$Million		Payment Received in US$ Million		Sector
Ashtrom Jamaica Limited		2000	Shares		22.00		N/A	Housing
Jamaica Public Service Co. Ltd		2001	Shares		N/A		201.00	Energy
Aqualapia Limited		2002	Shares		32.35		N/A	Agri-Business
Sangster International Airport		2003	Lease		7.00		N/A	Transportation
Land – Ariguanabo (13.76 hectares)		2003	Sale		23.48		N/A	Housing
Building (Lot 5A) – 60,000 square feet		2003	Lease		7.68		N/A	Warehousing
Building (Lot 5B) – 60,000 square feet		2003	Lease		7.68		N/A	Manufacturing
Cotton Polyester Textile Company Ltd.		2004	Lease		7.55		N/A	Manufacturing
Land – Salt River (51 hectares)		2005	Sale		6.93		N/A	Tourism
Farm Machinery Center		2006	Lease		N/A		0.18	Manufacturing
Hampden & Long Pond Estate		2009	Sale/Lease		N/A		1.5	Agriculture
Duckenfield Estate		2009	Sale/Lease		N/A		0.5	Agriculture
Land – Montpelier Citrus Company Limited – 525 acres		2010	Sale		52.00		N/A	Agriculture
Land and Buildings – Ariguanabo		2010	Lease/Sale		163.90		N/A	Manufacturing
Jamaica Pegasus Hotel of Jamaica Limited(2)		2010	Sale		N/A		11.00	Tourism
Bernard Lodge, Frome & Monymusk		2010	Sale/Lease		N/A		9.00	Agriculture
Bloody Bay Hotel Development Limited (BBHDL)		2013	Sale		N/A		11.2	Tourism

(1) Where payment is received in both JA dollars and US dollars for certain sales, the amounts listed are not equivalencies, but represent the portion of the payment received in each currency. This table does not include entities divested by FINSAC.

(2) This table does not reflect the privatization of Air Jamaica. For information about such privatization please refer to Section “—Privatization”.

(3) The sale of the Government’s 59.81% holding in the hotel was completed in December 2010.

Source: National Investment Bank of Jamaica Limited/Development Bank of Jamaica Limited, Ministry of Finance and Planning.

Inflation

The macroeconomic stabilization program introduced in 1991, which focused on lowering inflation through tight fiscal and monetary policies and stability in the foreign exchange market, has contributed to a consistent reduction in the rate of inflation. Macroeconomic stability continues to be a primary focus of Jamaica under the National Industrial Policy, as Jamaica regards consistent low levels of inflation as the cornerstone of sustained long-term economic growth.

The Consumer Price Index number series, which measures the rate of inflation, has 12 divisions that are based on the United Nations Statistical Division—Classification of Individual Consumption According to Purpose (COICOP). The “basket” of consumer goods and services has approximately 482 commodities.

Inflation was 8.0% in 2012, an increase from 6.0% in 2011, which, in turn, was a decrease from 11.7% in 2010. The increase in inflation in 2012 as compared to 2011 was primarily due to: the tax measures introduced by the Government; adverse domestic (including Hurricane Sandy) and international weather conditions (including the drought in the United States), which negatively impacted the grain prices; and fluctuations in international crude oil prices.

Inflation during the first ten months of 2013 was 8.6%, compared to 6.3% for the same period in 2012. The increase in inflation was primarily due to the depreciation of local currency and fluctuations in international oil prices, which resulted in higher costs of electricity, water and fuels.

D-31

The following table shows the changes in the Consumer Price Index for the five years ended December 31, 2012, and the ten-month period from January through October 2013:

Year/Period	Consumer Price Index Increase Over Previous Year
	(%)
2008		16.8
2009		10.2
2010		11.7
2011		6.0
2012		8.0
Through October 2013		8.6

Source: Statistical Institute of Jamaica.

Employment and Labor

In 2012, the total labor force in Jamaica was 1,281,900 persons, a 2.4% increase compared to 1,251,900 persons in 2011. The service sector employed 67% of the employed labor force in 2012, while the goods-producing sector accounted for 33% of the employed labor force in the same period. The agriculture and manufacturing sub-sectors accounted for 18.2% and 7% of the employed labor force, respectively.

Average employment in 2012 was 1,103,350, compared to 1,093,500 in 2011. The average unemployment rate was 13.9% in 2012, an increase from 12.7% in 2011.

There were 330 industrial disputes and 6 work stoppages in 2012, compared to 247 industrial disputes and 10 work stoppages in 2011, and 203 industrial disputes and 12 work stoppages in 2010, as difficulties were experienced in the negotiation of new wage and fringe benefit packages. A total of 900 man-days were lost to work stoppages in 2012 in comparison to 2,704 man-days lost to work stoppages in 2011. This has resulted in an average of 2 lost man-days per worker in 2012 that were related to work stoppages as compared to 1.9 lost man-days per worker in 2011.

The following table shows certain labor force and employment data for the five years ended December 31, 2012:

Labor Force and Employment⁽¹⁾

	2008		2009		2010		2011		2012
	(in thousands of persons, except percentages)
Total Population		2,692.4		2,698.8		2,705.8		2,711.1		2,711.5
Labor Force		1,299.6		1,269.8		1,249.6		1,251.9		1,281.9
Employed Labor Force		1,162.2		1,125.5		1,094.9		1,093.5		1,103.4
Unemployed Labor Force		137.3		144.3		154.7		158.4		178.6
Unemployment Rate (%)		10.6		11.4		12.4		12.7		13.9
Job-Seeking Rate (%)		6.6		7.2		7.6		8.0		8.9
Labor Force Participation Rate (%)		65.5		63.6		62.4		62.3		61.9

(1) The data above represents the derived annual average.

Source: Statistical Institute of Jamaica, Labour Force Survey.

Legal Proceedings and Processes

NTCS Matter

The Ministry of Transport and Works granted franchises to the National Transport Cooperative Society (NTCS) in March 1995 to operate buses in the Kingston Metropolitan area. The Ministry of Transport and Works terminated the franchises with NTCS in September 1998. NTCS, in arbitration proceedings with the Ministry of Transport and

D-32

Works, claimed damages of approximately J$50 billion, plus interest, alleging breach of contract resulting from the termination of the franchises. On October 2, 2003, an arbitration tribunal awarded to NTCS the sum of J$4.5 billion, plus interest, to be paid by the Government. The Government commenced legal proceedings in the Supreme Court of Jamaica on October 27, 2003, challenging this award. Judgment was delivered on November 29, 2004, in favor of the Government and the arbitral award was set aside. The NTCS appealed the decision of the Supreme Court, which appeal was heard by the Jamaican Court of Appeal in January 2006. The Court of Appeal handed down judgment in favor of the Government on May 9, 2008, confirming the decision of the Supreme Court.

The NTCS appealed the decision of the Jamaican Court of Appeal to the Judicial Committee of the Privy Council in England. The appeal was heard on June 29 and 30, 2009, and on November 26, 2009, and the Judicial Committee of the Privy Council upheld the appeal in favor of the NTCS and remitted the matter to the Jamaican Court of Appeal for damages to be assessed. On September 27, 2010, the Court of Appeal heard a preliminary application by NTCS, challenging the admission of expert evidence tendered by the Government. The Court of Appeal subsequently ruled in favor of NTCS on the preliminary application. The Court of Appeal heard the referral submitted to it by the Privy Council for damages to be assessed in March, April and September 2011.

On September 30, 2011, the Court of Appeal delivered its judgment in the matter, assessing damages to be paid by the Government at approximately J$1.8 billion plus interest. The Court of Appeal reserved its judgment in relation to costs in the matter, pending receipt of further submissions from the parties. Accordingly, the Government filed written submissions in the Court of Appeal in relation to costs in January 2012. On March 9, 2012, the Court of Appeal apportioned costs in the matter. On June 1 and June 11, 2012, the Court of Appeal granted the Government conditional leave to appeal to the Privy Council its decisions of December 20, 2010, September 30, 2011 and March 9, 2012, which includes an appeal in relation to the award of damages and costs.

The Court of Appeal on December 3 and 7, 2012, heard the application of the Government for final leave to appeal to the Privy Council in relation to its decisions of December 20, 2010, September 30, 2011, and March 9, 2012, and also in relation to a stay of execution of said decisions. On December 7, 2012, the Court of Appeal ordered the stay of execution on condition that the Government pays the sum of J$370,434,402.41 to the NTCS’s attorneys-at-law by the February 7, 2013. The Court of Appeal also granted final leave to the Government to appeal to the Privy Council, as aforesaid, on condition that it files the Record of Appeal within seven days of December 7, 2012. The Court of Appeal further ordered that NTCS’s attorneys give a written undertaking by December 10, 2012, not to dispose of the funds until the appeal was heard and determined. On December 7, 2012, the Government of Jamaica received a written undertaking from the attorneys-at-law for NTCS that they would not disburse the funds received pursuant to the Court Order until the determination of the appeal. The Government filed the Record of Appeal on December 11, 2012.

On January 23, 2013, the parties have executed a settlement agreement that releases and discharges the Government and the Attorney General from any and all claims and demands made by NTCS regarding the subject matter of the arbitration and suits on condition that the Government pays to NTCS the sum of J$1,100,000,000.00, which includes the arbitration award, the judgments, costs, interest, attorneys fees totaling J$ J$370,434,402.41 to NTCS’s attorneys, and any other sums flowing from the award and judgements to which NTCS is otherwise entitled. The Attorney General agreed not to pursue the appeal before the Privy Council as part of the settlement agreement.

Cigarette Company of Jamaica

The matter concerned whether certain transfers, reflected on the books of both the Cigarette Company of Jamaica Limited and Carreras Group Ltd. (CCJ), were distributions or loans. If they were distributions, transfers would be subject to income tax deducted at source. The Commissioner of Taxpayer Audit and Assessment (the Commissioner) assessed the CCJ to pay income tax for the years 1997–2002. The total amount assessed was J$5.7 billion, comprised of J$2.17 billion in tax and penalties of J$3.54 billion. The CCJ appealed against the assessments to the Commissioner of Taxpayer Appeals, who dismissed the appeal on November 23, 2004. The CCJ then appealed to the Revenue Court and the appeal was dismissed on October 30, 2007. In November 2007, the CCJ paid approximately J$1.7 billion to the Inland Revenue Department for income tax for the years 1997–2002, and penalties based on the judgment in favor of the Commissioner. The CCJ appealed the decision of the Revenue Court, and on February 12, 2010, the Court of Appeal held that the transfers were loans and not subject to income tax. The Government obtained the order for final leave to appeal to the Judicial Committee of the Privy Council,

D-33

and the matter was heard on February 15, 2012. On March 13, 2012, the Privy Council handed down its judgment dismissing the appeal of the Commissioner, with costs. Full and final settlement of costs in the Privy Council has been agreed between the parties in favor of CCJ in the sum of £142,000.00, and this sum has been paid. All the costs due to CCJ in respect of the proceedings in the Court of Appeal and the Revenue Court have also been paid. The parties are currently amicably discussing matters relating to repayment to CCJ of the taxes paid to the Internal Revenue Department.

Legal Processes

During 2010, the Government continued its program to modernize the country’s law enforcement infrastructure, transforming the culture of the Jamaican Constabulary Forces (JCF) into a modern policing service and restore public confidence by:

• actively targeting corruption within the JCF;

• improving the professionalism of police officers through intense leadership and management training and development;

• implementation of a performance management system with targets and verifiable indicators for the executive leadership of the JCF;

• revising the JCF Use of Force policy with emphasis on ethical policing and protecting the rights of citizens;

• enhancing the use of technology for management and intelligence gathering;

• enacting a major program of legislative reform including restructuring the accountability framework of the JCF; and

• implementing community policing in all policing divisions.

The current policing strategy is working in tandem with the Ministry of National Security’s emphasis on crime and violence prevention strategies and improved community safety through the development of a Crime Prevention and Community Safety Strategy. The strategy is based on the following:

• creating community-based partnerships to enhance local governance structures;

• diversion and reintegration of ex-offenders and deported persons in order to reduce re-offending; and

• establishment of prevention programs that focus on young people at risk of involvement in crime and violence.

• The Ministry’s crime prevention efforts are duly supported by the following international partners:

• the United Nations Development Program, Jamaica Violence Prevention, Peace & Sustainable Development Program (JSPD);

• the United States Agency of International Development;

• the European Union’s Poverty Reduction Program II—Capacity Building and Training for Communities Component;

• the Canadian Improved Governance and Citizen Security and Participation Program/Community Empowerment and Transformation;

D-34

• the United Kingdom Department for International Development (DFID) Rehabilitation and Reintegration of Local Offenders and Deported Persons Programme;

• DFID, which is also supporting policy development and social intervention through the Community Security Initiative; and

• the Citizen Security and Justice Program funded by the IADB which is set to continue for an additional four years in vulnerable communities.

Measures taken by the Government in 1993 to enhance security, particularly in the major resort areas of the north coast where special tourist security personnel were assigned, have been successful in reducing crimes against tourists. The economy and foreign direct investment can be negatively affected by a material increase in violent crimes and drug trafficking. If the recent decreases in crime were not to continue and there were a material increase in violent crimes and drug trafficking, this could have a material negative impact on the Jamaican economy by reducing tourism and the sectors of the economy that benefit from tourism as well as foreign direct investment.

In the period of May 2010 to July 2010, the Government, in an effort to address an outbreak of violence connected with the extradition of an individual to the United States, declared a state of emergency in Kingston and St. Andrew during the period of May 23, 2010 to July 23, 2010, and in St. Catherine during the period of June 23, 2010 to July 23, 2010, and took measures to increase security and restore safety to communities. Although 101 murders occurred in these cities during the period of May 23, 2010 to June 22, 2010, the measures taken by the Government resulted in a 63% drop in murders during the period of June 23, 2010 to July 23, 2010, as compared to the period of May 23, 2010 to June 22, 2010. This strategic policing plan has remained in effect to enhance the overall security of the island and curb the operations of criminal gangs. The JCF has implemented a Street Crimes Unit that targets such activities in major towns and minimize the threats that gangs pose to the safety and security of communities. The Peace Management Initiative has also continued to have significant results at the community level.

In addition, the Government is proceeding assiduously with work to strengthen the legislative tools available to the criminal justice system. The law enforcement apparatus has been enhanced with the promulgation of critical amendments to six pieces of legislation that will assist the police and prosecutors in their crime-fighting efforts. Additionally, the Ministry of National Security has proposed and gained approval for the development of Anti-Gang Legislation, targeting criminal organizations which have been at the heart of the criminal threat facing the country. There are a number of other anti-crime legislative initiatives pending.

Crime Statistics

As reported by the JCF Statistics Unit, the number of reported cases of murder during the month of June 2013 increased by 5% with 91 cases when compared to the corresponding period in 2012 with 87 cases. When compared to the corresponding period of 2011, crime statistics for the period from January 1 to November 23, 2013 revealed that the total number of murders increased by 8%, from 995 cases for the same period in 2012 to 1078 in 2013. Serious violent crimes, which include murders and shootings, showed a 5% increase during the period from January 1 to November 23, 2013, with 2205 cases in 2013 as compared to 2097 cases in the same period in 2012.

Crime prevention measures, particularly those implemented under the Citizen Security and Justice Programme (CSJP), have been successful in tackling individual risk factors for crime and violence. Importantly, the 2012–13 National Crime Victimization Survey (NCVS) found that, consistent with program objectives, respondents who reside in CSJP communities are more likely to report that crime in their local community has declined over the last five years (44.1%) than respondents who reside in non-CSJP communities (27.5%).

D-35

THE EXTERNAL ECONOMY

Balance of Payments

Jamaica’s balance of payments is dependent on international economic developments as well as domestic economic policies and programs. In 2012, the balance of payments recorded an overall deficit of US$1,904.8 million as compared to a deficit of US$2,124.1 million in 2011.

For the period January to June 2013, the balance of payments had a deficit of US$519.5 million relative to a deficit of US$786.9 million for the period January to June 2012. For 2012, the current account deficit improved by 10.3% to US$1,904.8 million from US$2,124.1 million in 2011. The improvement in the current account deficit in 2012 resulted from improvements in all sub-accounts, except services. For the period January to June 2013, there was a current account deficit of US$519.5 million, which represented an improvement of US$267.5 million relative to the corresponding period in 2012. The improved performance in the current account for the period January to June 2013 was a result of improvements in all sub-accounts. The current account measures the trade balance plus the balance on services, income and current transfers.

For the purpose of this section, exports include free-zone exports and goods procured in ports, while imports include free-zone imports and goods procured in ports. Further, imports are recorded at their market value at the customs frontier of the economy from which they are exported.

In 2012, the merchandise trade deficit improved by 2.3%, to US$4,158.0 million as compared to US$4,257.6 million in 2011, primarily due to an improvement in exports and a marginal decline in imports. In 2012, the value of exports increased by US$81.9 million, mainly due to a US$164.0 million increase in chemical exports, which includes ethanol. This was partially offset by a decline of US$86.5 million in bauxite and alumina exports. The value of imports declined by US$17.7 million in 2012, mainly due to decreases of US$51.6 million, US$23.4 million and US$20.3 million in payments for mineral fuels and related products, manufactured goods and machinery and transport goods, respectively. Please note that these values are values presented in the balance of payments, under “f.o.b.” standards.

During the period January to June 2013, the merchandise trade deficit improved by 6.9% to US$1,899.1 million relative to the corresponding period in 2012. The improvement in the merchandise trade deficit primarily reflected a greater decrease in imports than the corresponding reduction in exports. The US$133.3 million reduction in imports was mainly due to declines in chemicals and mineral fuel imports. The value of exports increased by US$7.5 million and was mainly attributable to increases in bauxite, alumina and coffee exports.

In 2012, the surplus on the services sub-account declined by 3.5% to US$638.9 million from US$662.2 million in 2011. The decline of surplus on services was primarily the result of lower gross inflows from transportation and an increase in other services, which was partially offset by the rise in net travel inflows from increased stopover and cruise passengers. Similarly, for January to June 2013, the surplus on the services sub-account improved by 12.4% to US$453.3 million relative to the corresponding period of 2012, which resulted primarily from a decrease in insurance services outflows and an increase in personal, cultural and recreational services inflows.

The net income deficit was US$433.5 million for 2012 represented a decrease of 16.4% from the deficit of US$518.4 million in 2011, which was mainly a result of an increase in the commercial bank investment income earnings as well as a decrease on the Government’s external debt payments. During the period from January to June 2013, there was a net income deficit of US$127.8 million, which represented a decrease of 28.2% from the deficit of US$178.0 million in the corresponding period of 2012, and was primarily the result of an increase in investment income flows from reduced dividends and undistributed earnings paid to non-residents. On the other hand, compensation of employees deteriorated by US$ 32.3 million from January to June 2013, primarily as a result of a contraction in income to residents for work done abroad coupled with an increase in compensation to non-resident workers.

D-36

In 2012, net current transfers increased by 2.9% to US$2,047.9 million from US$1,989.8 million for 2011, primarily due to an increase of US$12.7 million in net remittance inflows. From January to June 2013, net current transfers increased by 2.6% to US$1,054.1 million from US$1,027.6 million in the corresponding period in 2012. The improvement in net current transfers during January to June 2013 was primarily attributable to a 3.5% increase in net remittance inflows to US$891.0 million, from US$860.9 million in the corresponding period of 2012.

The balance of payments results in 2012 were influenced by net capital inflows from official and private sources, which were insufficient to finance the current account deficit. As a result, net international reserves declined by US$840.5 million to US$1,125.6 million as of December 31, 2012.

During the period January to June 2013, net international reserves declined by US$100.0 million to US$1003.2 million, as official and private flows were also insufficient to finance the current account deficit.

The following table shows Jamaica’s balance of payments for the five years ended December 31, 2012 and other periods in 2012 and 2013 as indicated.

Balance of Payments (f.o.b.)

	2008			2009			2010			2011			2012			Jan-June 2012			Jan-June 2013(1)
	(in millions of US$)
Current Account		(2,793.3	)		(1,127.5	)		(934.9	)		(2,124.1	)		(1904.8	)		(786.9	)		(519.5	)
Goods Balance		(4,802.9	)		(3,087.9	)		(3,256.2	)		(4,257.6	)		(4158.0	)		(2039.9	)		(1899.1	)
Exports(2)		2,743.9			1,387.7			1,371.2			1,664.8			1746.7			872.9			880.3
Imports(3)		7,546.8			4,475.6			4,627.4			5,922.4			5904.7			2912.8			2779.4
Services Balance		428.1			769.9			806.0			662.2			638.9			403.4			453.3
Transportation		(644.7	)		(441.2	)		(429.7	)		(576.1	)		(752.5	)		(348.8	)		(357.5	)
Travel		1,707.7			1,709.0			1,804.7			1,845.7			1881.2			1035.6			1042.7
Other Services		(634.9			(497.9			(569.1			(607.4			(489.9	)		(283.3	)		(232.0	)
Goods and Services Balance		(4,374.8			(2,318.0	)		(2,450.3	)		(3,595.4	)		(3519.1	)		(1636.5	)		(1445.8	)
Income		(568.3	)		(667.9	)		(494.6	)		(518.4	)		(433.5	)		(178.0	)		(127.8	)
Compensation of Employees		83.7			67.6			89.1			36.5			65.6			30.2			(2.1	)
Investment Income		(651.9	)		(735.5			(583.7	)		(554.9	)		(499.1	)		(208.3	)		(125.8	)
Current Transfers		2,149.8			1,858.4			2,010.0			1,989.8			2047.9			1027.6			1054.1
General Government		100.7			143.9			194.3			141.3			172.3			83.7			91.9
Other Sectors		2,049.1			1,714.5			1,815.7			1,848.4			1875.5			943.9			962.2
Capital and Financial Account		2793.3			1127.5			934.9			2124.1			1904.8			786.9			519.4
Capital Account		18.1			20.7			(22.1	)		(9.1	)		(26.2	)		(14.0			(7.7	)
Official		48.6			45.3			4.2			29.0			5.9			3.0			16.8
Private		(30.5	)		(24.5	)		(26.3	)		(38.2	)		(32.1	)		(17.0	)		(24.4	)
Financial Account		2,775.2			1,106.7			957.0			2,133.3			1931.0			801.0			527.1
Other Official Investment		518.6			254.7			967.7			497.9			363.7			83.6			(187.6	)
Other Private Investments (including errors and omissions)		2,151.8			808.4			431.3			1,430.1			726.8			281.2			614.7
(Increase)/Decrease in reserves(4)		104.8			43.6			(442.0	)		205.2			840.5			436.2			100.0

(1) Preliminary.

(2) Based on recommendations contained in the IMF’s Balance of Payments Manual, exported goods include free-zone exports and goods procured in ports.

(3) Based on recommendations contained in the IMF’s Balance of Payments Manual, imported goods are recorded at their market value at the customs frontier of the economy from which they are exported and include free-zone imports and goods procured in ports.

(4) Official International Reserves held by Jamaica and the Bank of Jamaica.

Source: Bank of Jamaica.

Foreign Trade

Total merchandise trade (exports plus imports) between Jamaica and its foreign trade partners in 2012, increased by 3.0% to US$8,304.7 million, as compared to US$8,061.8 million in 2011. The merchandise trade deficit increased by 1.4% in 2012, to US$4,885.1 million, compared to US$4,817.0 million in 2011. The increase in the trade deficit in 2012 was primarily a result of a 2.4% increase in the value of imports, principally due to the sharp increase in the price of fuels, higher imports of mineral fuels and related products, machinery and transport equipment, food, chemicals and manufactured goods. The value of exports increased by 5.4% due, primarily, to significantly higher earnings from mineral fuels and related products, food and chemicals. Please note that these values are values presented under “c.i.f.” standards, which include cost, insurance and freight costs.

D-37

The following table shows the performance of merchandise trade for the five years ended December 31, 2012 and other periods in 2012 and 2013 as indicated:

Merchandise Trade (c.i.f)

	Imports(1)		% Change			Exports		% Change			Balance			% Change
	(in millions of US$, except percentages)
2008		8,361.0		21.3			2,682.8		16.4			(5,678.2	)		23.8
2009		5,057.6		(39.5	)		1,319.4		(50.8	)		(3,738.2	)		34.2
2010		5,326.4		5.3			1,335.7		1.2			(3,990.8	)		6.8
2011		6,439.4		20.9			1,622.4		21.5			(4,817.0	)		20.7
2012(2)		6,594.9		2.4			1,709.8		5.4			(4,885.1	)		1.4
Jan – June 2012(2)		3,108.9		(4.0	)		851.8		(0.1	)		(2,257.1	)		(5.4	)
Jan – June 2013(3)		3,238.5					852.4					(2,386.2	)

(1) Merchandise imports are cost, insurance and freight values, which differ in presentation from the import values presented in the balance of payments.

(2) Revised.

(3) Preliminary.

NB: Effective 2010 data on the Jamaica Free Zone (Kingston, Montego Bay along with the Single Entity Free Zone) is being included. Prior to 2010 only data on the Single Entity Free Zone was included. The Single Entity Free Zone fell within the Customs territory.

Source: Statistical Institute of Jamaica.

Exports

For the purposes of this discussion, exports exclude free-zone exports and goods procured in ports.

Total exports, including the Jamaica Free Zone, in 2012, increased by 5.4% to US$1,709.8 million, compared to US$1,622.4 million earned in 2011, primarily due to increases in mineral fuels and related products, food and chemicals.

Traditional exports, including the Jamaica Free Zone, declined by 5.4% in 2012 to US$813.8 million from US$860.5 million in 2011, primarily due to reduced earnings from the mining and quarrying and agriculture sectors. Earnings from the mining and quarrying sector decreased by 11.6% to US$638.8 million in 2012, from US$722.8 million in 2011. Alumina exports totaled US$508.3 million in 2012, a decline of 12.5% from US$580.7 million in 2011. Bauxite exports, which are primarily exported to the United States, decreased by 8.3% to US$130.1 million in 2012, compared to US$141.9 in 2011. Manufacturing increased by 35.6% to US$154.9 million, in 2012, primarily due to increased earnings from sugar and rum. The value of sugar exported in 2012 increased by 51.4% to US$94.1 million from US$62.2 million in 2011, which was primarily due to the beginning sales in Bulgaria, Italy, Poland and the Netherlands in 2012. Rum exports increased by 14.3% to US$55.7 million in 2012 from $48.7 million in 2011.

Non-traditional exports, including the Jamaica Free Zone, increased by 22.8% to US$828.3 million in 2012 from US$674.7 million in 2011, primarily due to increases in mineral fuels and related products, ethanol and food. Exports of non-traditional food increased by 6.8% to US$144.8 million in 2012. Receipts from mineral fuels and related products increased to US$387.7 million from US$371.8 million in 2011, primarily due to higher fuel prices in the world market. Ethanol exports increased by to US$175.9 million in 2012 from US$8.7 million in 2011, primarily due to the fact that ethanol production began in 2011 and significantly expanded in 2012, which substantially increased demand. See “Jamaica—International Relationships—The Trade and Development Act of 2000.”

D-38

The following table shows Jamaica’s exports by sector for the five years ended December 31, 2012, and other periods in 2012 and 2013 as indicated:

Exports

	2008 (1)		2009(1)		2010(1)		2011(1)		2012		Jan –  June 2012(2)		Jan –  June 2013(2)
	(in millions of US$)
Traditional Exports
Agriculture
Banana		0.0		0.0		0.0		0.1		0.1		0.1		0.0
Citrus		1.8		1.7		1.8		2.2		1.9		1.5		3.0
Coffee		26.8		33.8		19.2		18.3		13.8		8.2		10.9
Cocoa		1.0		1.8		1.0		1.1		1.9		1.0		0.2
Pimento		2.1		1.7		2.9		1.8		2.3		0.4		0.3
Total		31.7		39.1		24.9		23.5		20.0		11.2		14.5
Mining and Quarrying
Bauxite		114.5		85.4		128.7		141.9		130.1		63.1		65.5
Alumina		1,230.5		368.0		402.8		580.7		508.3		260.4		267.8
Gypsum		3.1		0.2		0.5		0.1		0.4		0.0		0.0
Total		1,348.1		453.6		532.0		722.7		638.9		323.5		333.3
Manufacturing
Sugar		104.3		72.3		44.2		62.2		94.1		93.7		53.2
Rum		43.7		48.4		47.2		48.7		55.7		27.4		26.2
Citrus Products		0.3		0.5		2.1		0.3		0.0		0.0		0.0
Coffee Products		1.3		1.5		3.1		2.3		4.1		2.5		1.3
Cocoa Products		0.5		0.7		0.8		0.8		1.0		0.4		0.3
Total		150.1		123.4		97.4		114.3		154.9		124.1		80.9
Total Traditional Exports		1,529.9		616.1		654.3		860.5		813.8		458.8		428.7
Non-Traditional Exports
Food and Beverage
Pumpkins		0.4		0.4		0.4		0.6		0.5		0.3		0.3
Dasheens		1.6		1.4		1.6		1.7		1.7		0.7		0.7
Sweet Potatoes		2.5		2.5		3.1		2.6		2.8		1.4		1.7
Yams		20.4		18.7		18.8		19.9		19.6		8.9		11.1
Papayas		2.2		2.9		2.8		2.5		4.5		2.8		1.7
Ackee		8.9		13.6		12.8		12.4		13.9		6.3		5.4
Other Fruits & Fruit Preparations		5.2		6.2		6.1		5.3		7.2		4.0		2.2
Meat & Meat Preparations		3.1		2.8		2.6		3.6		3.9		2.0		2.5
Dairy Products & Birds’ Eggs		7.4		6.5		6.0		7.4		6.9		4.8		3.5
Fish, Crustaceans & Mollusks		8.2		4.7		8.0		8.0		8.9		2.2		2.7
Other Food Exports		58.8		59.9		62.9		71.8		75.0		37.8		40.0
Beverages and Tobacco (excluding rum)		49.6		53.0		56.3		64.6		48.3		30.2		17.3
Total		168.3		172.1		181.3		200.1		193.0		101.5		89.2
Inedible Materials
Limestone		1.2		1.1		0.9		2.1		1.5		1.5		1.3
Waste & Scrap		21.1		12.6		17.6		39.7		22.0		13.0		10.9
Other		2.9		3.0		4.4		3.0		3.0		1.4		1.8
Total		25.2		16.7		22.9		44.8		26.5		15.9		14.0
Mineral Fuels.and related products		434.4		213.6		291.2		371.8		387.7		202.6		176.9
Ethanol		395.4		170.4		48.1		8.7		175.9		17.4		87.3
Apparel		1.5		1.5		1.6		1.5		1.4		0.8		0.6
Furniture		0.9		0.8		1.4		1.1		1.0		0.3		0.2
Other Exports		65.0		51.3		52.6		46.8		42.8		20.6		19.0
Total		897.2		437.5		394.9		429.8		608.9		241.8		283.9
Total Non-Traditional Exports		1,090.7		626.3		599.1		674.7		828.4		359.1		387.1
Re-Exports		62.2		77.0		82.3		87.2		67.7		34.4		36.0
Total Exports		2,682.8		1,319.4		1,335.7		1,622.4		1,709.8		852.3		851.8

(1) Revised.

(2) Preliminary.

Source: Statistical Institute of Jamaica.

D-39

In the past, the Jamaican sugar and banana industries and, less significantly, traditional rum and rice suppliers, enjoyed preferential trade arrangements with respect to exports to the European Union pursuant to the Cotonou Partnership Agreement. The CARIFORUM-EU Economic Partnership Agreement, which replaces the trade provisions of the Cotonou Partnership Agreement, was signed in October 2008. This free trade agreement provides for duty-free, quota-free access to the EU market for most goods, as of January 1, 2009. The CARIFORUM-EU Economic Partnership Agreement is currently being applied provisionally, and Jamaica is in the process of implementing this agreement. This agreement has a strong development component.

The CARIFORUM-EU Economic Partnership Agreement is reciprocal and asymmetrical in nature, and covers trade in traditional export products, such as sugar, bananas, rum and rice, which will ultimately enter the EU duty-free and quota-free. The EU’s preferential system for bananas ended on January 1, 2006, and the sugar regime that existed under the Cotonou Partnership Agreement ended on September 30, 2009. As of October 1, 2009, ACP sugar exporters have duty-free, quota-free access to the EU market under a managed system lasting until 2015. Thereafter, sugar will enter the EU market duty-free and quota-free under the CARIFORUM-EU Economic Partnership Agreement. See “Jamaica-International Relationships—The CARIFORUM-EU Economic Partnership Agreement.”

The Jamaican banana industry contributed minimally to the export earnings for the years 2008, 2009, 2010, 2011 and 2012. This was due to the exit of the major exporter from the market, as a result of devastating hurricanes in recent years. Jamaica has already commenced initiatives designed to improve the competitiveness of Jamaican bananas. See “The Jamaican Economy—Principal Sectors of the Economy—Agriculture, Forestry and Fishing.”

Imports

Merchandise imports increased by 2.4% in 2012 to US$6,594.9 million from US$6,439.4 million in 2011. This increase in the value of imports was due, in part, to the growth in spending on mineral fuels and related products, food and chemicals. Mineral fuels and related products grew by 3.4% to US$2,390.3 million in 2012. In 2012, expenditure on food rose by 2.2% to US$959.2 million, while chemicals grew by 5.8% to US$924.0 million. For the purposes of this discussion, imports include cost, insurance and freight values and exclude free-zone imports and goods procured in ports.

The following table shows Jamaica’s imports for the five years ended December 31, 2012, and other periods in 2012 and 2013 as indicated:

Imports (c.i.f.)⁽¹⁾

	2008(2)		2009(2)		2010(2)		2011(2)		2012(3)		Jan – June 2012(3)		Jan – June 2013(3)
	(in millions of US$)
Mineral Fuels and related products		3,354.8		1,419.4		1,688.7		2,310.9		2,390.3		1,334.3		1,116.2
Machinery		1,264.3		819.7		793.4		932.1		919.4		442.8		439.5
Food		886.3		801.9		812.9		938.7		959.2		464.2		476.4
Beverages & Tobacco		93.5		79.9		76.0		77.4		81.1		40.4		38.2
Crude Materials (excl. Fuels)		73.4		54.9		60.8		62.8		47.5		22.4		29.8
Animal & Vegetable Oils & Fats		53.9		33.9		32.6		58.6		51.6		32.1		23.1
Chemicals		951.0		738.7		696.9		873.4		924.0		325.3		457.8
Manufactured Goods		883.6		555.4		587.1		645.7		623.7		310.8		284.6
Miscellaneous Manufactured Articles		682.0		461.0		483.0		471.5		480.0		214.9		191.7
Other		118.2		92.8		94.9		68.4		118.2		51.3		51.7
Total Imports		8,361.0		5,057.6		5,326.4		6,439.4		6,594.9		3,238.5		3,108.9

(1) Merchandise imports are c.i.f. values which differ in presentation from import values presented in the balance of payments.

(2) Revised.

(3) Preliminary.

Source: Statistical Institute of Jamaica.

D-40

Trading Partners

The United States of America, the United Kingdom and Canada were Jamaica’s main trading partners for exports in 2012. The main trading partners for imports in 2012 were the United States of America, Canada, Venezuela and Trinidad and Tobago.

The following tables show the direction of trade for the five years ended December 31, 2012, and other periods in 2012 and 2013 as indicated:

Exports (f.o.b.) by Destination

	2008(1)		2009(1)		2010(1)		2011(1)		2012(2)		Jan – June 2012(2)		Jan – June 2013(2)
	(in millions of US$)
NAFTA		1,246.1		784.6		826.6		1,103.9		944.2		420.1		537.0
of which USA		981.8		648.1		659.7		836.2		818.7		342.8		431.2
of which Canada		259.0		131.6		164.9		263.4		122.6		76.3		104.1
European Union		721.3		233.1		173.0		266.0		348.0		202.3		152.9
of which UK		225.3		129.6		83.9		111.7		45.1		25.8		62.3
CARICOM		65.9		66.4		65.5		68.0		83.2		35.4		32.9
Japan		23.9		37.3		15.8		13.7		10.7		7.4		8.2
Other countries		625.6		198.0		254.8		172.7		323.7		194.6		129.0
Total		2,682.8		1,319.4		1,335.7		1,624.3		1,709.8		852.4		851.8

(1) Revised.

(2) Preliminary.

Source: Statistical Institute of Jamaica.

Imports (c.i.f.) by Origin⁽¹⁾

	2008(2)		2009(2)		2010(2)		2011(2)		2012(3)		Jan – June 2012(3)		Jan – June 2013(3)
	(in millions of US$)
NAFTA		3,630.3		2,072.4		2,002.9		2,578.7		2,676.5		1,293.0		1,281.7
of which USA		3,294.4		1,850.3		1,831.0		2,180.2		2,311.2		1,127.8		1,042.1
of which Canada		131.6		106.6		91.7		117.3		101.7		51.2		53.0
European Union		510.2		369.5		354.8		441.6		385.0		178.7		178.0
of which UK		105.5		79.7		82.4		96.3		86.1		36.9		29.1
CARICOM		1,635.3		737.7		868.4		1,025.2		858.3		504.0		431.8
Japan		194.3		118.5		121.0		149.7		209.4		109.4		91.5
Other countries		2,390.9		1,759.5		1,979.3		2,419.6		2,465.7		1,062.2		1,125.9
Total		8,361.0		5,057.6		5,326.4		6,614.8		6,594.9		3,238.5		3,108.9

(1) Merchandise imports are c.i.f. values which differ in presentation from import values presented in the balance of payments.

(2) Revised.

(3) Preliminary.

Source: Statistical Institute of Jamaica.

D-41

INTERNATIONAL RESERVES

Net international reserves of the Bank of Jamaica declined to US$1,125.6 million at December 31, 2012, from US$1,996.1 million as of December 31, 2011. Gross international reserves as of December 31, 2012 were US$1,980.8 million, or approximately 13.3 weeks of goods and services imports. The decline in the international reserves during 2012 was mainly attributable to a decline in official capital and portfolio inflows due to the weak global environment. Reserves were also adversely affected by the prolonged delays in the Government’s signing of the IMF EFF with the IMF. See “Jamaican Economy—IMF Arrangements—IMF Standby Arrangement (SBA) and Extend Fund Facility (EFF).”

With the intensification of the global credit crisis in the December 2008 quarter, international financial institutions took actions to reduce risk exposure, particularly to emerging market debt. These actions included the withdrawal of overseas margin funding arrangements with domestic financial institutions. In response, the Bank of Jamaica made a special loan facility available to facilitate repayment of margin arrangements that were collateralized with Government of Jamaica global bonds. In October 2008, US$168.8 million was provided to financial institutions under this facility. No further disbursements were made, and as of September 30, 2010, the balance on the special loan facility was zero because all loans were repaid.

At October 31, 2013, net international reserves of the Bank of Jamaica were US$890.4 million, with gross international reserves at US$1,726.5 million or approximately 12.0 weeks of goods and services imports.

The following table shows the Bank of Jamaica’s international reserves for the period December 31, 2008 to November 30, 2013:

International Reserves

	2008		2009		2010		2011		2012		Nov 2013
	(in millions of US$)
Supplementary Fund		155.5		259.2		154.1		155.3		157.0		157.7
Special Drawing Rights		0.1		329.0		335.8		330.4		380.3		298.3
Other Reserves		1,639.8		1,170.6		2,489.3		2,334.7		1,443.5		1,270.5
Gross International Reserves		1,795.4		1,751.9		2,979.2		2,820.4		1,980.8		1,726.5
Total Foreign Liabilities		22.5		22.5		807.8		854.3		855.2		836.1
Net International Reserves		1,772.9		1,729.4		2,171.4		1,966.1		1,125.6		890.4
Gross Reserves in Weeks of Merchandise Imports		14.8		18.9		32.3		25.5		17.8		15.9
Gross Reserves in Weeks of Goods & Services Imports		10.9		13.2		23.5		19.2		13.3		12.0

Source: Bank of Jamaica.

Exchange Rates

As part of its economic liberalization program, Jamaica began gradually dismantling exchange controls in 1990 and formally abolished all remaining exchange controls with the repeal in 1992 of the Exchange Control Act. The movement of foreign exchange into and out of Jamaica is unrestricted. All Jamaican residents are permitted to hold, invest and borrow foreign currency. Non-residents are also permitted to invest and borrow both local and foreign currency in Jamaica. However, only an authorized dealer may carry on the business of trading in foreign currency or foreign currency instruments. In addition, an authorized dealer must be party to any transaction involving the buying or selling of foreign currency or foreign currency instruments in return for JA dollars and the lending or borrowing of foreign currency. Cambios and bureaux de change are authorized specifically to buy and sell foreign currency.

Since the repeal of the Exchange Control Act in 1992, the exchange rate has been determined by market conditions and Jamaica has not set any trading band or target. Jamaica intends to conduct its macroeconomic policies in such a way as to maintain relative stability in the foreign exchange market.

D-42

During 2012, the Jamaican dollar gradually depreciated against the US dollar, with the JA/US dollar exchange rate rising from J$86.60 to US$1.00 at December 31, 2011, to J$92.98 to US$1.00 at December 31, 2012, a depreciation of 7.4%. While the Bank of Jamaica’s frequency of intervention was moderate during the March quarter of 2012, there was a marked increase during the June and September quarters. This increase was necessitated by the market’s adverse reaction to the continued delay in arriving at agreement with the IMF. Total purchases and sales reported by authorized foreign currency traders declined to US$10,181.0 million and US$10,278.8 million respectively in 2012, from US$10,864.4 million and US$10,844.9 million respectively in 2011. In the context of the instability of the foreign market during the year, the Bank of Jamaica intervened on several occasions in 2012, which resulted in net foreign currency sales of US$524.6 million, compared to net foreign currency purchases of US$331.3 million for 2011.

The official exchange rate as at November 30, 2013 was J$105.1 per US$1.00, representing a depreciation of 13.0% for the calendar year to date. The accelerated pace of depreciation largely reflected uncertainty about the timing and status of an agreement with the IMF on a medium term economic program.

The Federal Reserve Bank of New York does not report a noon buying rate for the JA Dollar.The official exchange rate published by the Bank of Jamaica for US dollars on December 18, 2013 was J$106.19 per US$1.00. See “Exchange Rates.”

D-43

PUBLIC FINANCE

The Public Sector Budget

The Government of Jamaica includes all ministries, departments and agencies whose activities form part of the budgetary operation of the central administration. The operations of Central Government and state-owned enterprises are now referred to as the Overall public sector.

Jamaica’s fiscal year runs from April 1 of each year to March 31 of the following year. Pursuant to the Constitution and the Fiscal Responsibility Framework, the Minister of Finance and Planning is responsible for preparing estimates of revenue and expenditure and submitting those estimates to Parliament as early as possible but within four months after the beginning of the fiscal year to which they relate. In addition, the Minister of Finance and Planning must present a Fiscal Policy Paper, detailing multi-year budgets and targets and the fiscal strategy being pursued to achieve these targets. The Ministry of Finance and Planning, in conjunction with other ministries, departments, and agencies, prepares multi-year draft budgets, which must be approved by the Cabinet prior to its submission to Parliament. Final approval by Parliament is usually granted by May of the relevant fiscal year.

The budget distinguishes between recurrent and capital expenditure. Recurrent expenditure refers to operating expenditure of the central government, while capital expenditure refers to the central government’s planned investment for the fiscal year. The major criteria used in determining allocation levels for recurrent expenditure are expenditure ceilings based on Jamaica’s economic policy, Jamaica’s priorities for the fiscal year, and commitments arising from the continuation of programs, projects and policies previously authorized by the Cabinet. Such commitments include interest on public debt, a statutory obligation that is paid first, as well as salaries, rent and public utilities. The major criteria used in deciding allocation levels for capital expenditure are current year projections for public investment, multilateral/bilateral programs and the implementation status of projects.

Jamaica’s significant indebtedness has impacted the ability of the Government to use revenue to increase its spending in education, healthcare, and infrastructure and the Government has supplemented that spending and utilized bilateral (project) funding flows to meet the demands of these sectors. Fiscal space has been limited as debt payments must be made before funds are available to Jamaica for other policies and programs. The allocations from revenues to education, healthcare, and national security have been mainly to cover the operating costs of these ministries/sectors. The capital budgets of these ministries, however, have been supplemented by bilateral (project) funding. These funds are used to build and maintain schools, maintain hospital equipment and buildings in the health sector, and make infrastructural improvements. For example, the Jamaica Development Infrastructure Program (JDIP) was implemented to improve the road network throughout the island.

D-44

The following table shows Jamaica’s fiscal results for FY 2008/09 through FY 2012/13 and the FY 2013/14 fiscal budget:

Government Revenue and Expenditure

	2008/09			2009/10			2010/11			2011/12			2012/13		Budget 2013/14(7)
	(in millions of J$)
Revenue and Grants		276,199.8			300,200.1			316,041.4			322,149.8			344,677.7		407,160.3
Tax Revenue		246,216.6			265,860.2			279,874.2			289,882.2			319,764.9		360,517.6
Income and Profits		107,394.9			118,295.6			105,118.7			106,422.8			115,877.1		119,153.6
Production and Consumption		69,253.2			70,996.7			78,571.4			84,628.9			96,459.9		117,089.7
Of which GCT (local)		40,415.7			41,452.1			46,389.9			47,973.2			50,897.1		59,552.8
International Trade		67,275.3			74,485.7			94,144.0			96,511.6			105,305.7		121,928.2
Non-Tax Revenue(1)		16,081.3			21,245.5			20,473.9			16,709.2			18,765.1		34,553.2
Bauxite Levy		4,446.7			1,588.9			421.1			1,524.5			1,163.7		1,540.2
Capital Revenue(2)		1,878.5			5,208.8			5,147.4			10,585.1			1,015.8		1,127.0
Grants		7,576.7			6,296.7			10,124.8			3,448.8			3,968.3		9,422.3
Expenditure		351,521.4			421,458.5			388,768.0			403,122.2			399,278.9		415,206.1
Recurrent Expenditure(3)		310,149.5			387,044.2			333,173.8			349,891.3			361,521.0		370,484.3
Programs		73,310.4			72,042.2			76,917.9			89,699.4			87,201.5		93,664.2
Wages and Salaries		111,533.9			126,286.4			127,901.3			139,556.9			147,381.8		157,253.3
Back pay(4)		0.0			4,656.8			3,339.3			3,524.3			9,602.9		12,230.5
Interest		125,305.2			188,715.6			128,354.7			120,635.0			126,937.7		119,566.8
Domestic		89,522.8			144,869.1			88,049.5			81,547.9			87,729.1		75,523.1
Foreign		35,782.4			43,846.5			40,305.2			39,087.1			39,208.6		44,043.6
Capital Expenditure(5)		41,371.9			34,414.3			55,594.1			53,230.9			37,757.9		44,721.8
IMF		0.0			0.0			0.0			0.0			0.0		0.0
Unallocated		0.0			0.0			0.0			0.0			0.0		0.0
Fiscal Surplus (Deficit)		(75,321.6	)		(121,258.4	)		(72,726.6	)		(80,972.4	)		-54,601.1		-8,045.8
Loan Receipts		212,148.6			299,599.6			212,968.9			163,520.5			144,347.1		103,279.6
External		56,362.5			50,818.1			90,490.2			20,768.1			10,276.9		89,502.1
Domestic		155,786.1			248,781.5			122,478.7			142,752.5			134,070.2		13,777.5
Amortization		148,733.2			169,514.0			102,157.5			128,373.2			88,329.8		105,680.4
External		49,826.1			25,533.1			22,764.0			60,553.0			51,235.0		29,293.0
Domestic		98,907.2			143,980.9			79,393.5			67,820.2			37,094.8		76,387.4
Primary Surplus (Deficit)		49,983.6			67,457.2			55,628.1			39,662.6			72,336.5		111,520.9
Overall Surplus (Deficit)		(11,906.2	)		8,827.2			38,084.9			(45,825.0	)		1,416.2		-10,446.6
GDP(6)		1,012,237.8			1,090,648.6			1,172,409.8			1,260,013.9			1,336,347.8		1,492,000.0

(1) Non-tax revenue includes user fees, dividends from government owned entities and interest revenue.

(2) Capital revenue includes royalties, loan repayments.

(3) Recurrent expenditure refers to the Government’s day-to-day operational expenses.

(4) Back pay represents payments, in any given year, of wages/salaries and allowances due for previous fiscal years.

(5) Capital expenditure refers to Jamaica’s investment for the fiscal year.

(6) GDP is calculated on a calendar year basis. Therefore, the number presented represents an estimate of GDP for the fiscal year. The gross domestic product series was revised in 2003 and subsequently revised again in 2008. This revision was made in order to capture the changing structure of industries in the manufacturing, financial and insurance services, business services and the miscellaneous services sectors. In addition the base year has been changed from 1986 to 1996.

(7) The figures provided in this column represent the 2013/14 Budget.

Source: Ministry of Finance and Planning and the Planning Institute of Jamaica.

Revenue and Expenditure for FY 2012/13

Jamaica posted a fiscal deficit in FY 2012/13 of J$54.6 billion or 4.1% of GDP. This followed fiscal deficits in FY 2011/12 of J$81.0 billion or 6.4% of GDP, and in FY 2010/2011 of J$72.7 billion or 6.2% of GDP. These deficits were due mainly to lower revenue yields due to the contraction in the economy, influenced by the global economic recession, as well as higher wages and salaries and interest costs incurred partly as a result of government intervention in the financial sector in the mid-1990s, which subsequently inflated central government debt stock. The 4.1% of GDP deficit recorded in FY 2012/13 was worse than the 3.8% originally targeted. The decrease in the deficit in FY 2012/13 was mainly due to lower than expected revenue and grants inflows, which outweighed the lower than budgeted expenditure. Jamaica has maintained relatively high primary surpluses over the last five years, despite the reductions in FY 2011/12. The fiscal operations recorded primary surpluses of 5.4% in FY 2012/13, 3.1% in FY 2011/2012, and 4.7% in FY2010/11.

D-45

The primary surplus for FY 2012/13 amounted to J$72.3 billion, compared to the target of J$83.5 billion. This performance relative to the target was largely influenced by a total revenue shortfall of J$16.6 billion, being partly offset by a reduction in primary expenditure of J$5.4 billion. Overall, revenue and grants were J$344.7 billion, or 4.6% below target for FY 2012/13. Compared to FY 2011/12, revenue and grants increased by J$22.5 billion or 7%.

The operations of the overall public sector recorded deficits of 4.5% in FY 2012/13, 6.4% in FY 2011/2012, 6.7% in FY 2010/11, and a budgeted deficit of 0.6% in FY 2013/14.

Revenue and Grants

Total revenue and grants for the central government for FY 2012/13 were J$344.7 billion, or 25.8% of GDP. This represented an increase of 7.0% over total revenue and grants collected in FY 2011/12. Collections in FY 2012/13, however, were 4.6% below expected levels. This below-target performance of revenue and grants was impacted mainly by shortfalls in tax revenue, grants and the bauxite levy. Tax revenue for FY 2012/13 increased by 10.3% along with non-tax revenue, which increased by 12.4% when compared to FY 2011/12. The grants received in FY 2012/13 totaled J$3.9 billion, 10.7% below budget, due mainly to slower than planned execution of capital spending.

Expenditures

Total expenditure (excluding amortization) for FY 2012/13 was J$399.3 billion, or 29.9% of GDP. This represented a 1.0% decrease from FY 2011/12 and was a reduction of J$15.0 billion, or 3.6% below budget. Recurrent expenditure totaled J$361.5 billion in FY 2012/13, representing 90.5% of total expenditure, with capital expenditure representing 9.5% of total expenditure. Recurrent expenditure was J$13.2 billion or 3.5% lower than budgeted, mainly as a result of lower interest payments.

The largest component of recurrent expenditure was wages and salaries, which represented 36.9% of total expenditure (less amortization) in FY 2012/13. Interest costs represented 31.8% of total expenditure in FY 2012/13, 29.9% of total expenditure in FY 2011/12, and 33.0% of total expenditure in FY2010/11. Interest expenditure consumed 36.8% of total revenue and grants in FY 2012/13, compared to 37.4% of total revenue and grants in FY 2011/12, 40.6%, and consumed in FY 2010/11.

Expenditure on wages and salaries in FY 2012/13 increased to J$147.4 billion, or 5.6%, compared to J$139.6 billion in FY 2011/12, due primarily to the backpay associated with the 7% increase to public sector workers effective April 2011, as well as the payment of back pay to teachers relating to contractual obligations that predated the wage freeze that commenced in April 2009. Wages and salaries represented 36.9% of total expenditure in FY 2011/12 compared to 34.6% of total expenditure in FY 2011/12.

Interest costs of J$126.9 billion were J$9.6 billion below budget, and included domestic interest costs of J$87.7 billion and foreign interest payments of J$39.2 billion, which were J$2.4 billion and J$7.2 billion, or 2.6% and 15.6% below budget, respectively.

Even though spending was lower than budgeted, revenue and grants were also lower than anticipated and resulted in a fiscal deficit for FY 2012/13 of J$54.6 billion, which represented a 32.6% reduction in the deficit relative to FY 2011/12.

FY 2013/14 Budget

The Government’s target for FY 2013/14 is a primary surplus of 7.5% of GDP, equivalent to J$111.52 billion, and a fiscal deficit of 0.5% of GDP, equivalent to J$8.05 billion. Revenue and grant inflows are projected at J$405.16 billion with expenditure at J$415.21 billion.

D-46

The FY 2013/14 budget remains consistent with Jamaica’s overall macroeconomic program, which has as its primary goals low single-digit inflation rates, stability in the foreign exchange market, further reduction in domestic interest rates, the maintenance of adequate foreign reserves and the acceleration of economic growth.

Revenue and Grants

The revenue and grants projection for FY 2013/14 represents 27.3% of GDP, an increase of 1.8 percentage points over the 25.5% in FY 2012/13. Tax revenue of J$360.52 billion is estimated to account for 88.5% of total revenue and grants, down from 92% in FY 2012/13.

Tax revenue is budgeted to increase by 12.7% or J$40.75 billion over collections in FY 2012/13. The estimate for tax revenue includes an amount of J$11.3 billion, equivalent to 0.8% of GDP, attributable to revenue measures implemented on March 1, 2013, and April 1, 2013, as part of the tax reform to support fiscal consolidation.

Expenditures

Expenditure (less amortization) is budgeted to increase by 4% over FY 2013/14 due mainly to higher spending on wages and capital programs. The FY 2013/14 expenditure budget is projected to be J$415.2 billion, comprised of J$370.5 billion for recurrent expenditure and J$44.7 billion for spending on capital projects. Of the recurrent budget, J$93.7 billion is allocated to recurrent programs, J$157.3 billion is allocated to wages and salaries and J$119.6 billion is allocated to interest payments.

In the medium-term, the Government is targeting a primary surplus of 7.5% of GDP as well as a balanced budget in FY 2015/16. The contribution of expenditure towards the achievement of these targets is embodied in the FY 2013/14 expenditure profile, with total expenditure, net of appropriations-in-aid, of J$520.89 billion. This is comprised of expenditure of J$415.216 billion and debt amortization payments of J$105.68 billion. Consistent with previous years, debt-servicing, at J$225.25 billion, accounts for the largest portion of the overall budget at 43.24%, followed by education services at J$78.45 billion or 15%, national security services at J$44.22 billion or 9.3%, and health services at J$33.95 billion or 6.5%.

Total debt servicing for FY 2013/14 is projected at J$225.25 billion, or 43.24% of the net budget. This compares to FY 2012/13 revised estimates of J$325.89 billion, or 54.1% of the net budget. A supplementary budget provides additional reserve amounts to account for changes in the budget over the course of the year. Revised estimates reflect the supplementary budget’s estimates of expenditure, which are tabled in February 2013 and will differe from the outturn at the end of March 2013.

As tabled in Parliament on April 4, 2013, projected debt service for FY 2013/14 shows a decrease of J$100.64 billion, or 44.7% of the net budget, when compared with the FY 2012/13 revised estimates, which is mainly due to the effects of the National Debt Exchange Initiative. See “Public Sector Indebtedness—National Debt Management —National Debt Exchange.”

The Government’s borrowing requirement for FY 2013/14 amounts to J$103.28 billion. This amount is required to finance the deficit of J$8.045 billion and cover amortization payments of J$105.68 billion, leaving an overall deficit of J$10.45 billion. The overall deficit will be financed by the use of cash balances from the previous fiscal year.

The expenditure on wages and salaries is budgeted to increase by 6.7% in FY 2013/14. This increase is due primarily to commencement of new rates for reclassified health sector workers, the provision of a J$2.8 billion one-off payment to each public officer under the 2012/2015 Heads of Agreements signed with unions in March 2013, as well as the 2.5% performance incentive payment.

Wage Developments

During FY 2012/13, the Government maintained its policy stance of wage restraint with the signing of no-increase agreements for the FY 2010/11 and FY 2011/12 contract periods with the Jamaica Confederation of Trade Unions (JCTU) and other groups representing public sector workers on May 31, 2012, and later with the Police Groups on October 12, 2012.

D-47

Due to the economic conditions prevalent at the moment, the scheduled 7% pay increase for public sector workers due April 2009 was not implemented. The Government recognized and implemented the April 2009 increase in September 2011. The balance of the increased payment not recognized in 2009 (from May 2009 to August 2009) was paid in December 2011. The arrears for two years (FY 2009/10 and FY 2010/11) are scheduled to be discharged over the medium-term, with two payments in FY 2012/13, and FY 2013/14 and one payment in FY 2014/15.

In March 2013, the Government concluded and signed agreements with unions representing 82% of public sector workers. These agreements exceeded the 70% threshold for the minimum number of unions agreeing to sign to the MOU, established as a prior action deliverable for the IMF EFF. The parties to the agreement committed to, among other things, no increase in wage rates for the period 2012–2015. However, the agreements include a one-off payment of $25,000.00 per annum, to be paid in August 2013, 2014 and 2015, to all employees in the central and local government and public bodies. The annual cost of this agreement for the Government is estimated at J$2.78 billion, or 0.2% of GDP. The wage restraint policy and associated agreements with unions will contribute toward the Government meeting the 9% of GDP wage ceiling by March 2016, as well as wage per GDP targets of 10.6% and 9.7% of GDP for FY 2013/14 and FY 2014/15, respectively.

FY 2013/14 April-September

The primary surplus for the April to September period of FY 2013/14 amounted to J$43.0 billion, compared to the target of J$38.2 billion. The over-performance relative to the target was largely influenced by lower than expected spending on capital and recurrent programs. Overall, revenue and grants were J$4.0 billion, or 2.2% lower than targeted for the April to September period of FY 2013/14. Compared to the similar period last year, revenue and grants increased by J$23.7 billion or 15.0%. Tax revenue fell short of its target by J$5.7 billion, or 3.4%.

Expenditure for the April to September period of FY 2013/14 totalled J$191.1 billion, a reduction of J$10.9 billion or 5.4% relative to budget, with all the main categories, namely programs, wages and salaries, interest and capital expenditure, being lower than expected. This level of overall spending represented an increase of J$3.2 billion or 1.7% above the corresponding period last year. Increased spending was brought on by increases of J$8.0billion, or 82.9%, in capital expenditure and J$5.3 billion, or 7.0%, in wages and salaries, which outweighed a reduction of J$11.6 billion, or 19.0%, in interest costs The higher capital expenditures in 2013 reflected the fiscal effort to support economic growth.

The significantly lower than expected spending, resulted in a fiscal deficit of J$6.6 billion for the April to September period of 2013, which was J$10.4 billion, or 61.2%, better than targeted. This represents a 78.4% reduction in the deficit relative to the same period in FY 2012/13.

Taxes and Tax Reform

Since independence, the Jamaican tax system has been dependent on a multiplicity of indirect taxes including on international trade and an income tax system with different marginal tax rates and several deductible allowances. Jamaica has engaged in major tax reform in the mid 1980’s as well as the 1990’s. In 2004, a comprehensive study of Jamaica’s tax system by a university found that the system, while it had a sound basic structure, had major problems. Since 2004, the Government has sought to address some of the issues identified in the study, including improving reducing indirect taxes through increasing the general consumption tax (GCT) and enhancing the effectiveness of tax administration.

During 2009, 2010 and 2011, the Government introduced additional tax measures aimed at increasing revenue as a percentage of GDP. Following a Green Paper on Tax Reform issued by the Ministry of Finance in May 2011, a White Paper on Tax Reform 2012 was issued on November 15, 2012. The Green Paper and White Paper on Tax Reform focused on several areas to be reformed over a three-year period. These reforms included, among others, the following: removing basic food from the tax system; reducing the statutory corporate income tax rate to be competitive with regional and international competitors; imposing withholding tax on dividends; overhauling capital allowances regime; tax delinquents should not benefit from tax incentives; tax credits for research and development; limited capital gains tax in lieu of a reduced transfer tax and tax administration should be enhanced to increase tax recovery.

D-48

A number of tax measures consistent with the reform process were implemented in May 2012 for FY 2012/13, which included the following:

• Reducing the standard rate of General Consumption Tax (GCT) from 17.5% to 16.5%

• Partially widening the GCT base

• Amendment to the GCT regime as it relates to electricity

• Amendment to the Corporate Income Tax (CIT)

The reduction in GCT was consistent with the Government’s commitment to tax reform and reducing the rate applicable to taxable goods and services. The GCT based was partially widened in an effort to broaden the tax base and reduce administrative issues. This was accomplished by reducing the list of items for exempt and 0% GCT. A small number of basic foods and other critical items was retained because of their social sensitivity or significance to consumption by the most vulnerable. For electricity, GCT payable by residential customers was removed and the standard rate of 16.5% was levied on commercial entities and businesses.

Additionally, the Government reduced the statutory CIT rate to be consistent with the standard Personal Income Tax Rate, so as to match international benchmarks. The CIT was modified as follows:

• The 33.33% rate was retained for the regulated companies, including those regulated by the Financial Services Commission (FSC), Office of Utilities Regulation (OUR), Bank of Jamaica and the Ministry of Finance and Planning.

• The rate was reduced to 25% from 33.33% for unregulated companies.

There was no adjustment to rates applicable to building societies or life assurance companies. The reduction of the statutory CIT rate occurred in the context of the partial widening of the GCT base and an anticipation of enhanced compliance in the payment of CIT and other business taxes.

The imposition of tax on dividends payable to residents was implemented in order to address an anomaly in the system that subjected non-residents to withholding tax on dividends but not residents. Under that regime, a 5% tax was imposed on dividends payable to non-residents, which, when withheld at source, was paid over to the revenue authorities and treated as a final tax.

The asset tax for financial institutions and security dealers regulated by the FSC and Bank of Jamaica was modified to tax 0.2% of total assets of these financial institutions. The tax regime for non-financial institutions was also modified . An annual asset tax was implemented based on the asset value of these companies.

In keeping with equity and to ensure compliance with our trading partners, an adjustment was made to the termination fee structure that relates to mobile-to-mobile and mobile-to-land termination. OUR implemented the following fee structure:

• J$0.05per minute on all calls originating and terminating on a fixed network in Jamaica

• J$0.40 per minute on all other calls (domestic and international) originating in Jamaica; and

• US$0.075 per minute on all international calls for termination to the mobile network.

Calls to emergency and special servicesare among a number of limited exceptions.

The tax free expenses of transportation and commissions were removed from the computation of output tax, which prevents operators in the tourism industry from claiming transportation and commission as a tax free expense when computing the output tax. The 10% GCT rate for the sector was retained. A Hotel Occupancy Room Rate Tax was also implemented, which ranges from US$2.00 to US$ 12.00 per night based on the number of rooms and size of the hotel.

D-49

Certain other revenue measures were introduced in February 2013. These measures consist of including the Telephone Call Tax as part of the GCT base and including all fees and taxes paid at the port, such as the Environmental Levy and the CUF/CAF, as part of the GCT base. Other measures include; amending the GCT Act to account for GCT on the face value of prepaid vouchers and air time, such that telecommunications providers must account for GCT that is due and payable on the face value of the prepaid/airtime sold; increasing the tax on dividends payable to residents to 15.0%; imposing a 5% surtax on the taxable income of large “unregulated companies” with annual turnover of $500,000,000 or more; increasing the Education Tax rate by 0.5% for employers and 0.25% for employees or self-employed persons; increasing the local Stamp Duty Rate and Transfer Tax on properties to 4% and 5% from 3% and 4% respectively; amending the fee profit and gross profit structure for Betting, Gaming and Lotteries, with lottery tax (GPT) to increase; and reforming the Property Tax rate regime and initiate a measure to increase the low compliance rate.

As part of the MOU with the IMF, the Government committed to tax reforms that strengthen tax administration and significantly cutback the system of tax incentives exemptions and zero rates. The tax reform is meant to be targeted to significantly broaden the tax base, simplify the tax system, reduce economic distortions in the system and allow for a phased reduction in tax rates to a competitive level. On November 15, 2013, the Government adopted the Fiscal Incentives (Miscellaneous Provisions) and the Income Tax Relief (Large Scale Projects and Pioneer Industries Act).

The Fiscal Incentives (Miscellaneous Provisions) (FIB) Bill, and the tax law amendments arising out of it, eliminate existing sector-based incentive programs; provides generalized incentives for employment and capital investments, introduces a rule-based and non-discretionary tax system and encourages tax compliance.

The Income Tax Relief (Large-Scale Projects & Pioneer Industries) Bill provides a mechanism through which additional income tax incentives can be offered if the Minister of Finance designates a project as a large-scale project or an economic activity in a pioneer industry.

On December 6, 2013, the Government enacted the Customs Tariff (Revision) (Amendment) Resolution and the Stamp Duty (Amendment of Schedule) Order, amending the Customs and Stamp Duty Act, respectively. The new regime reduces customs duty for many higher rate categories, such as jewelry and auto parts and provides a non-discretionary “productive inputs reliefs” for customs duty on items that are part of local production. There is a similar arrangement for some relief from additional stamp duty. These reforms are aimed at reducing the cost of doing business in Jamaica.

Intervention and Divestment

Jamaica’s intervention in the financial sector in 1997, through FINSAC, was undertaken to rehabilitate financial institutions with liquidity and solvency problems and to protect depositors. This intervention resulted in the protection of 1.5 million deposit accounts with a value of J$68.7 billion and 569,000 individual insurance policies with a total face value of J$174.4 billion. FINSAC’s intervention also provided protection to 55,000 beneficiaries of private pension funds, which had a total value of J$19.0 billion.

The types of assistance FINSAC has provided include the assumption of deposit and other liabilities, the provision of liquidity support, the purchase of ordinary and preference shares, the acquisition of under-performing assets and the provision of subordinated loans. In exchange for such assistance, FINSAC has acquired a combination of equity, board seats and the assets in numerous financial institutions and their related companies. FINSAC’s activities in the banking sector also involved the merger of several financial institutions under its control to create Union Bank of Jamaica Limited, which was subsequently sold in March 2001 for J$1.6 billion.

FINSAC financed its operations through the issuance of government-guaranteed securities. A portion of these securities was repaid with the first installment of the proceeds of loans from the IADB, the CDB and World Bank and an additional portion was repaid with the proceeds of the divestment of approximately J$11.7 billion in assets and property, including many major Jamaican banks, insurance companies, hotels and other businesses. As of April 1, 2001, the remaining J$79.3 billion in government-guaranteed securities issued by FINSAC were assumed by Jamaica as direct obligations. Jamaica’s efforts at restructuring the financial sector were aided in 2000 by the provision of loan packages from the IADB, the World Bank and the CDB. See “Public Sector Indebtedness.”

D-50

As a result of the FINSAC intervention, FINSAC assumed investments in various financial institutions, non-performing loan portfolios and other financial assets, the great majority of which it has divested to the private sector. FINSAC aggressively marketed its non-performing loan portfolio, which resulted in its sale by the end of 2002. In addition, in 2002 FINSAC sold its shareholdings in two of the largest financial institutions that had been in need of intervention and rehabilitation—the National Commercial Bank (the largest commercial bank in Jamaica at that time) and Life of Jamaica (a major insurance company in Jamaica).

Proceeds from these sales have been used to reduce FINSAC liabilities and, consequently, the public sector debt associated with the rehabilitation of the financial sector.

With the fulfillment of FINSAC’s responsibilities of intervening and rehabilitating institutions and subsequently disposing of its majority equity stakes in intervened institutions, the Jamaican Government scaled down the operations of FINSAC as of July 2003. The management of Jamaica’s minority stakes in institutions in which FINSAC intervened as well as the responsibility of completing the legal procedures required to formally close down institutions that have already ceased operations have been assumed by FIS.

During FY 2012/13, the FIS continued with the winding up of residual activities on behalf of FINSAC including selling remaining properties and other sundry assets under its control.

D-51

PUBLIC SECTOR INDEBTEDNESS

General

Under Section 116 of the Jamaica Constitution, all loans charged on Jamaica’s Consolidated Fund, including all external debt payments such as those under the debt securities, represent a statutory charge on the revenue and assets of Jamaica. See “Public Finance—The Public Sector Budget.” These statutory charges are paid without any requirement of Parliamentary approval, directly from revenue and assets, before funds are available to Jamaica for other policies and programs.

The Constitution and the Financial Administration and Audit Act give the Ministry of Finance and Planning overall responsibility for the management of Jamaica’s public debt. The Loan Act limits the amount of funds that may be borrowed. In 2009, the Jamaican Parliament passed legislation increasing the amount of funds that Jamaica may borrow. In November 2012, the House of Parliament approved the Public Debt Management Act, 2012, to make provision for the better management of the public debt. The legislation repealed the Loan Act of 1964 and several enactments related to the incurrence of debt by the Government and other connected matters. The Public Debt Management Act provides for the circumstances under which the Minister of Finance may borrow money, including to finance fiscal deficits, refinance any maturing or outstanding public debt and finance prepayments. The borrowing limits under the Public Debt Management Act are subject to the Financial Administration and Audit Act, as amended, which provides that the Minister of Finance may take any measure to, among others, reduce the fiscal balance to nil and reduce the total debt of Jamaica to 100% or less of GDP, either, by the end of the financial year ended March 31, 2016. The above-mentioned targets may be exceeded on the grounds of national security, national emergency or any other exception ground.

Jamaica has never defaulted on any of its external or domestic debt obligations.

Domestic Debt

At September 30, 2013, Jamaica’s domestic debt was approximately J$1,048.23 billion, which excludes government-guaranteed securities. At December 31, 2012, Jamaica’s domestic debt, which excludes government-guaranteed securities, was J$995.23 billion, an increase of 29.41% when compared to the domestic debt level at December 31, 2010. Jamaica has incurred domestic debt primarily to provide budgetary financing and to cover the capitalization of accrued interest on the Bank of Jamaica’s holding of former FINSAC securities.

In addition to this level of domestic debt, Jamaica has guaranteed certain financial obligations of public sector entities, which carry out major infrastructure projects from time to time. At June 30, 2013, the extent of these internal guarantees was approximately J$33.31 billion.

Currently, Jamaica’s domestic debt consists mainly of Benchmark Investment Notes, following the Jamaica Debt Exchange Initiative (see below), which saw an exchange of some of the previously issued debt instruments (Local Registered Stocks and Debentures). At December 31, 2012, 16.37% of the outstanding domestic debt was scheduled to mature within one year, 36.81% between one and five years and the remaining 46.82% after five years. The interest rate composition of the domestic debt at December 31, 2012, was 56.03% contracted on a fixed rate basis, while 43.88% was contracted on a floating interest rate basis and 0.09% was non-interest bearing.

At September 30, 2013, 6.27% of Jamaica’s domestic debt was scheduled to mature in one year, 27.16% in five years and the remaining 66.57% after five years. At September 30, 2013, approximately 32.22% of the domestic debt was on a floating rate basis and 67.71% on a fixed rate basis. Of the total debt at September 30, 2013, 22.89% was denominated in or indexed to foreign currency (US$ and Euro) and 77.11% was J$-denominated.

At December 31, 2012, Jamaica had J$886.79 billion of domestic bonds outstanding, representing 89.1% of total domestic debt. This represented a J$ 40.5 billion, or 4.57% increase over the level outstanding at December 31, 2011. The remaining J$ 108.44 billion, or 10.9%, is comprised of loans and treasury bills.

D-52

Issuance of treasury bills is limited by statute to a maximum of J$4 billion in total outstanding treasury bills. The outstanding stock of treasury bills at December 31, 2012, was J$4 billion, representing 0.05% of total domestic debt. The stock of treasury bills decreased in 2008 and 2009 and remained at a steady $4 billion for the following years to 2013 in keeping with Jamaica’s planned reduction of the stock of treasury bills in an effort to extend the average maturity of the domestic debt. Treasury bills are auctioned on a multiple-price basis.

Jamaica issues both local and foreign currency-denominated bonds in the domestic market. Foreign currency-denominated bonds that are issued in Jamaica are classified as domestic debt. Of the total domestic debt at December 31, 2012, 18.74% was denominated in or indexed to foreign currency (US$ and Euro). A total of J$186.47 billion, or 18.74%, of the domestic debt was US dollar-denominated, while the remaining J$808.76 billion, or 81.26%, was J$-denominated.

The following table shows domestic debt by instrument type for the five years ended December 31, 2012, and the nine-month period ended September 30, 2013:

Domestic Debt by Instrument Type

	2008		2009		2010		2011		2012		Sept 30, 2013
	(in millions of J$)
Securities
Treasury Bills		4,194.5		3,813.4		4,000.0		4,000.0		4,000.0		4,000.0
Local Registered Stocks		205,120.1		180,573.5		—		—		—		—
J$ Benchmark Notes(1)		—		—		659,066.8		741,015.6		773,786.25		761,755.00
Total		209,314.6		184,387.0		663,066.8		745,015.6		777,786.25		765,755.00
Bonds
Investment Debenture		300,665.6		449,364.9		—		—		—		—
Land		352.6		352.6		331.1		200.1		—		200.1
US$ Denominated		64,224.9		83,733.2		108,813.2		108,116.4		186,469.25		239,984.49
US$ Indexed		26,542.1		30,134.8		—		—		—		—
CPI Indexed Bonds (1)		—		—		23,191.2		24,921.7		26,734.66		38,870.48
Total		391,785.3		563,585.5		132,335.5		133,238.2		213,203.91		278,854.97
Loans
Commercial Banks		7,255.6		5,448.9		4,456.2		3,870.6		3,304.00		2,793.00
Other (including Public Sector)		560.1		593.7		105.7		1,048.2		936.57		823.49
Total		7,815.7		6,042.6		4,561.9		5,134.8		4,240.57		3,616.49
Total		608,915.5		754,015.1		799,964.2		883,388.6		995,230.87		1,048,226.46

(1) These instruments were issued as part of JDX. See “—The Jamaica Debt Exchange.”

Source: Ministry of Finance and Planning.

The following table shows the amortization schedule for domestic debt outstanding as of September 30, 2013:

Domestic Debt Amortization Schedule

as of September 30, 2012

	2013(1)		2014		2015		2016		2017
	(in millions of J$)
Bonds(2)		1,178.52		42,534.58		5,947.74		70,889.68		80,054.91
Loans		169.57		24,825.22		287.75		288.33		288.96
Total		1,348.09		67,359.80		6,235.49		71,178.01		80,343.87

(1) Projections from December 1, 2013 to December 31, 2013.

(2) Includes securities.

Source: Ministry of Finance and Planning.

D-53

The following table shows the interest schedule for domestic debt outstanding as of September 30, 2013:

Central Government Domestic Debt Interest Schedule

as of September 30, 2012

	2013(1)		2014		2015		2016		2017
	(in millions of J$)
Bonds(1)		15,275.82		69,120.86		68,015.54		66,229.99		60,996.76
Loans		170.03		952.25		226.35		209.17		190.76
Total		15,445.85		70,073.11		68,241.89		66,439.16		61,187.52
Contingent Liabilities

(1) Includes securities.

Source: Ministry of Finance and Planning.

The following table shows the maturity structure of domestic debt outstanding as of September 30, 2013:

Domestic Debt Maturity Structure

as of September 30, 2013

	Less than 1 year		1-5 years(1)		5-10 years(1)		10 years & over (2)		Total
	(in millions of J$)
J$ Benchmark Notes		5,962.68		256,455.12		398,326.36		139,327.70		800,071.87
US$-Denominated Notes & Loans		54,582.93		24,853.39		154,640.78		2,528.75		236,605.85
Treasury Bills		4,000.00		—		—		—		4,000.00
Commercial Bank & Public Sector Entity Loans		622.47		3,011.78		150.63		—		3,784.88
Land Bonds
Euro-Denominated Bonds
Other		—		—		—		0.15		0.15
Total		65,168.09		284,320.29		553,117.77		141,856.61		1,044,462.76

(1) Medium-Term debt.

(2) Long-Term debt.

Source: Ministry of Finance and Planning.

The following table shows the interest rate composition of domestic debt outstanding as at September 30, 2013:

Domestic Debt Interest Rate Composition

as of September 30, 2013

	Principal Amount Outstanding		Share of Outstanding Debt
	(in millions of J$)		(%)
Variable Rate Debt		338,836.28		32.44
Fixed Rate Debt		704,873.35		67.49
Non Interest-Bearing Debt		753.13		.07
Total Debt		1,044,462.76		100.00

Source: Ministry of Finance and Planning.

D-54

Comprehensive Debt Management

The National Debt Exchange

Three years after the historic Jamaica Debt Exchange in February 2010, the Government of Jamaica executed a second domestic debt exchange to further realign the portfolio through the extension of maturities and reduction of interest rates. The debt exchange became necessary to address the growing refinancing risk in the one- to three-year period that had again become inherent in the domestic portfolio. It was also one of the actions needed in order for Jamaica to secure an EFF with the IMF.

The Exchange, which was marketed as the NDX, was launched on February 12, 2013, and settled on February 22, 2013. The main features were a voluntary par-for-par exchange for all bonds except the new Fixed Rate Accreting Note (FRAN) offer, which had an exchange ratio of 0.8:1. The new FRAN offer is one where investors are issued principal value of J$80.00 in new notes for every J$100.00 of principal value of Old Notes exchanged. The principal accretes from J$80.00, beginning August 15, 2015, to J$100.00 by the maturity date on August 15, 2028. The introduction of the FRAN was specifically targeted at public bodies and long term investors, such as pension funds.

In addition, the NDX replaced 25 eligible JA and US dollar-denominated benchmark bonds with a nominal value of J$852.5 billion with 22 new benchmark bonds with extended maturities and significantly reduced yields. The NDX had a participation rate of just under 99.0%, translating to a nominal amount of J$841.5 billion tendered for exchange.

The main benefits of the NDX were (1) a reduction in weighted average costs through reduced margins on CPI and variable rate bonds on average by 0.975%, a reduced coupon on locally-issued US$-denominated notes by, on average, 1.792%; reduced coupon on J$-denominated notes by, on average, 3.206%; (2) a reduction in risk associated with variable rate reset rates (tied to treasury rates plus a margin) for variable rate debt reduced by over J$113.0 billion; (3) substantial cost savings averaging J$17 billion per annum through an annualized reduction by an average rate of 2.0%; and (4) a reduction in refinancing risk through an extension of the maturity profile of the domestic debt portfolio by an average of 5 years, and a reduction in redemptions by approximately J$375.0 billion for the period up to 2016.

To increase the aggregate savings of the NDX ahead of the board meeting of the IMF, on March 22, 2013, Jamaica performed, on a private basis, an additional exchange offer with eight leading local holders of various bonds involving approximately J$20 billion and US$51 million, which created four further new local instruments in addition to those created in the NDX transaction.

The Jamaica Debt Exchange

On January 14, 2010, the Government of Jamaica launched its strategic and comprehensive domestic liability management program, marketed as the JDX. The main characteristics were a par-for-par exchange offer with “no haircuts,” voluntary exchange of approximately J$701.5 billion in market-issued domestic debt, voluntary exchange of short-dated, high-yielding interest bearing securities for longer-dated securities with significantly lower yields, the introduction of new benchmark securities, an extension of the maturity profile of the domestic debt portfolio in order to lower refinancing risks, achievement of substantial cost savings, the issue of an appropriate mix of fixed, variable and US$ securities and the introduction of new CPI-Indexed Investment Bonds.

The results of the JDX revealed an overall participation rate of approximately 99.16% with a 100% participation rate from financial institutions. This level of success represented an exchange of approximately J$695.6 billion in eligible bonds.

The immediate benefits of the JDX were the realignment of the domestic debt portfolio, which saw a significant reduction in maturities over the next three years; substantial cost savings through the reduction in the projected interest cost for FY 2010/11 of J$17.1 billon (i.e., US$190.7 million or 15.2% of interest cost); extension of amortization equal to J$148.6 billion (or US$1.66 billion) in FY 2010/11; the creation of twenty-five (25) new

D-55

benchmark bonds in exchange for over three hundred and fifty (350) smaller and illiquid bonds; the removal of US Dollar Indexed Bonds and the introduction of new CPI-Indexed Bonds into the domestic portfolio; and an increase in the fixed rate component of the domestic debt portfolio. Occurring simultaneously with the JDX was the passing into law of the Government Securities Dematerialization Act, which allows domestic securities to be issued in a dematerialized format in the Central Securities Depository operated by the Bank of Jamaica.

External Debt

At September 30, 2013, the total of external debt was US$8,187.0 million, of which 89.8% was denominated in US dollars, 6.2% was denominated in Euro, 1.3% was denominated in Yen, and 1.7% was denominated in Chinese Yuan.

At December 31, 2012, public sector external debt was US$8,255.5 million, a decrease of 1.6% from December 31, 2010. At December 31, 2011, the stock of external debt was US$8,626.1 million, of which 91.3% was denominated in US dollars, 5.2% was denominated in Euro, 1.6% denominated in Yen and 1.5% was denominated in Chinese Yuan. Bond issuances of US$3,724.1 million represented the largest creditor category of Jamaica’s public sector external debt, and accounted for 45.1% of total public sector external debt at December 31, 2012 while bilateral and multilateral obligations of US$4,065.9 million accounted for 49.2%. Multilateral indebtedness was US$3,264.7 million, an increase of 2.9% over December 31, 2010.

Bond issues of US$3,642.5 million represented the largest creditor category of Jamaica’s public sector external debt, and accounted for 44.5% of total external indebtedness at September 30, 2013. Bilateral and multilateral obligations accounted for 50.3% of external debt at September 30, 2013. Multilateral indebtedness was US$3,242.5 million, a decrease of 0.007% over December 31, 2012.

The IADB, for the period 2006–2009, approved a new country strategy for Jamaica in which the bank links its loans to budget support rather than investment loans. Traditional investment loans may also be used if joint agreement is reached between the bank and the Government. The IADB now provides funding for budgetary support, which is accessed through its policy-based loans.

In September 2008, the Inter-American Development Bank (IDB) provided a US$300 million credit facility to help eligible Jamaican financial institutions maintain credit flows. All seven commercial banks currently operating in Jamaica are eligible to participate in the facility. As of June 2010, US$96.3 million of the IDB credit facility had been disbursed. The remaining amount under the credit facility was cancelled because it was not disbursed.

In December 2001, Jamaica issued US$250 million 11.625% fixed rate notes due 2022. In June 2002, Jamaica registered a US$700 million shelf registration statement with the US Securities and Exchange Commission and subsequently in June 2002, issued US$300 million 10.625% notes due 2017 off that shelf. In April 2004, US$125 million was raised through the re-opening of the existing US$300 million 10.625% bonds due 2017. In October 2004, Jamaica issued €150 million 10.5% bonds due 2014, with both issuances placed primarily with investors in Europe. In June 2005, Jamaica raised US$300 million through an offering of 9.0% fixed rate notes due 2015. In October 2005, Jamaica made further issuances of 9.25% US$250 million notes due 2025 and in February 2006, 8.50% US$250 million notes due 2036. In March 2007, Jamaica issued US$350 million 8.0% fixed rate amortizing notes due 2039. In October 2007, Jamaica issued an additional US$150 million 8.0% fixed rate amortizing notes due 2039. In June 2008, Jamaica issued US$350 million 8.0% fixed rate amortizing notes due 2019. In February 2011, Jamaica reopened the US$350 million 8.0% fixed rate bond due 2019, raising an additional US$400 million 8.0% due 2019.

In July 2005, Jamaica issued US$325 million in guarantees with respect to bonds to facilitate the financial restructuring of Air Jamaica Limited, the national airline. In December 2006, Jamaica issued US$200 million in guarantees with respect to bonds to facilitate the restructuring of certain indebtedness of CAP. In June 2007, Jamaica issued US$125 million in guarantees with respect to bonds issued by Air Jamaica. In 2009, Jamaica issued a US$60 million guarantee with respect to the expansion of the Norman Manley International Airport in Kingston. In September 2009, Jamaica issued a guarantee for US$121.65 million to HSBC Bank plc for the financing of the Falmouth Cruise Ship Terminal. Additionally, in December 2009 the Government of Jamaica issued a guarantee to NWC for three loans in respect of The Jamaica Water Supply Improvement Project. The loans were in the amounts of J$1,513.6 million, US$19.3 million and €43.3 million. In October 2010, the Government guaranteed a bond issued by the NWC in the amount of US$275 million.

D-56

In February 2010 the Government guaranteed a loan of US$340 million to the Road Maintenance Fund from China through the Export-Import Bank of China under its global Preferential Buyer’s Credit (PBC). The purposes of the loan are to finance (a) the rehabilitation of roads damaged by hurricanes and (b) an upgrade in infrastructure to certain roads and drainage. A loan of US$20 million between the Caribbean Development Bank and the Student Loan Bureau was also guaranteed in November 2010. This loan is to facilitate the provision of affordable and adequate financing to students from poor and vulnerable households to complete tertiary level programs in approved institutions in Jamaica and the Caribbean. In November 2011, the Government guaranteed a bond issued by the NROCC in the amount of US$294,180,000.

In September 2011, the World Bank provided the Government with a US$100 million Programmatic Fiscal Sustainability Development Policy Loan. The objective of the loan is to enhance fiscal and debt sustainability, increase the efficiency of financial management and budget processes, and reduce distortions and enhance efficiency in the tax system. On December 9, 2011, the Government guaranteed a loan, issued by IDB to the National Water Commission, the purpose of which was to improve the water supply in the Kingston metropolitan area. On the same day, the IDB also issued a US$65 million loan intended to support a sustainable fiscal position by strengthening the Ministry of Finance and Planning’s institutional capacity. On December 13, 2012, the IDB issued a U$30 million loan that intended to support the Government’s efforts to improve human capital and labor market outcomes of the poor by enhancing the efficiency and effectiveness of key social protection programs.

In September 2013, the Government completed an exchange offer, in which Jamaica exchanged all of the 8.50% amortizing notes due 2021 issued by Clarendon Alumina Production (CAP) Limited (and guaranteed by the Government) for 8.50% amortizing notes due 2021 issued by the Government. There was no increase in the Government’s debt as a result of the exchange offer.

Upon the IMF approval of the EFF, certain funds from multilateral and development agencies, such as the World Bank, IDB and the EU, were made available to the Government.

The following table shows medium and long-term public sector external debt by creditor category for the five years ended December 31, 2012 and other periods as indicated:

External Debt by Creditor

	2008		2009		2010		2011		2012		Sept. 30, 2013
	(in millions of US$)
Bilateral
OECD	$	513.6	$	494.5		464.8		404.0		299.4		260.5
Non-OECD		172.9		488.1		540.1		385.4		501.8		614.7
Total		686.5		982.6		1,004.9		789.4		801.2		875.2
Multilateral
IADB(1)		570.2		661.3		1,235.8		1,291.5		1,249.4		1,215.5
IMF(2)		0.0		0.0		800.0		850.0		850.0		872.6
IBRD(3)		309.2		378.9		571.5		660.1		661.6		645.3
Other(4)		319.7		380.0		464.3		505.2		503.7		509.1
Total		1,199.1		1,420.2		3,071.6		3,306.7		3,264.7		3,242.5
Commercial Banks		278.1		300.6		484.0		465.8		436.6		404.2
Other Commercial(5)		40.5		42.3		41.6		36.0		28.9		22.6
Total		318.6		342.9		525.6		501.7		465.5		426.8
Bonds		4,139.5		3,848.6		3,787.4		4,028.3		3,724.1		3,642.5
Total	$	6,343.7	$	6,594.3	$	8,389.5	$	8,626.1		8,255.5		8.187.0

(1) Inter-American Development Bank.

(2) International Monetary Fund.

(3) International Bank for Reconstruction and Development.

(4) Caribbean Development Bank, OPEC Fund for International Development, European Development Bank, European Economic Commission Community and Nordic Development Fund.

(5) Loans from suppliers.

Source: Ministry of Finance and Planning.

D-57

The following table shows Jamaica’s external debt by debtor for the five years ended December 31, 2012 and other periods as indicated:

External Debt by Debtor

	2008		2009		2010		2011		2012		Sept. 30, 2013
	(in millions of US$)
Government Direct	$	5,441.6	$	5,463.9	$	6,287.1	$	6,376.6		5,985.8	$	6,136.1
Government-Guaranteed		901.7		1,130.4		1,302.5		1,399.5		1,419.7		1,266.2
Bank of Jamaica		0.4		0.0		800.0		850.0		850.0		784.76
Total	$	6,343.7	$	6,594.3	$	8,389.5	$	8,626.1		8,255.5		8,187.0

Source: Ministry of Finance and Planning.

The following table shows the amortization schedule for external debt outstanding as of September 30, 2013:

External Debt Principal Amortization Schedule

as of September 30, 2013

	2013		2014		2015		2016		2017		2018
	(in millions of US$)
Multilateral
IADB	$	13.2	$	53.6	$	59.2		90.7		101.1		98.6
IBRD		19.2		36.4		40.8		46.2		46.5		40.2
Other		100.3		427.7		184.1		47.2		58.8		75.9
Total		132.7		517.7		284.1		184.1		206.4		214.7
Commercial Banks		21.2		67.1		74.6		83.3		79.8		58.3
Other Commercial		1.7		6.2		3.1		1.1		1.1		1.1
Bonds		9.5		250.7		472.6		19.0		706.0		281.0
Bilateral		16.0		51.5		85.8		81.7		76.7		74.8
Total	$	668.5	$	893.2	$	920.2	$	369.2	$	1,070.0		629.9

Source: Ministry of Finance and Planning.

The following table shows the interest schedule for external debt outstanding as of September 30, 2013:

External Debt Interest Schedule

as of September 30, 2013

	2013		2014		2015		2016		2017		2018
	(in millions of US$)
Multilateral
IADB	$	5.8	$	23.0	$	22.5	$	21.3	$	19.4		17.6
IBRD		6.3		10.2		9.1		7.9		6.6		4.5
Other		6.4		22.9		19.9		19.0		17.6		15.7
Total		18.5		56.1		51.5		48.2		43.6		37.8
Commercial Banks		4.5		14.4		13.3		11.0		8.0		5.2
Other Commercial		0.1		1.1		1.0		0.9		0.8		0.7
Bonds		126.5		329.1		288.2		265.6		231.6		186.0
Bilateral		3.1		19.7		18.6		17.0		15.3		13.2
Total	$	152.7	$	420.4	$	372.6	$	342.7	$	299.3		242.9

Source: Ministry of Finance and Planning.

D-58

The following table shows the maturity structure for external debt outstanding as of September 30, 2013:

Total External Debt Maturity Structure

as of September 30, 2013

	Less than 1 year		1-5 years		5-10 years		10 years & over		Total
	(in millions of US$)
Bilateral		33.0		329.7		341.2		171.4		875.2
Multilateral		103.3		1,340.0		667.1		1,132.1		3,242.5
IADB		24.1		234.6		372.0		584.7		1,215.5
IBRD		16.1		156.9		125.7		346.6		645.3
IMF		62.2		810.4		0		0		872.6
Other		0.8		138.1		169.4		200.7		509.1
Commercial Bank		48.9		91.9		202.5		61.0		404.2
Other Commercial		3.5		19.2		0		0		22.6
Bonds		0		1,102.7		1,141.8		1,398.1		3,642.5
Total		188.5		2,883.4		2,352.5		2,762.5		8,187.0
Percentage		2.3		35.2		28.7		33.7		100.0

Source: Ministry of Finance and Planning.

The following table shows interest rate composition for external debt as of September 30, 2012:

External Debt Interest Rate Composition as at September 30, 2012

	Principal Amount Outstanding		Share of Outstanding Debt
	(in millions of US$)		(%)
Variable Rate Debt		5,554.1		67.8
Fixed Rate Debt		2,632.9		32.2
Total Debt		8,187.0		100.0

Source: Ministry of Finance and Planning.

D-59

External Public and Publicly Guaranteed Debt (including Bank of Jamaica debt)⁽¹⁾

	Interest			Issue Date	Final Maturity	Currencies	Principal Amount Outstanding at March 31, 2013		Principal Amount Outstanding at September 30, 2013
	%						(in US$)		(in US$)
Multilateral Organizations
World Bank		Various		Various	Various	USD, JPK, GBP, CAD, EUR		651,046,824.0		645,295,143.0
Inter-American Dev. Bank		Various		Various	Various	USD, JPK, GBP, CAD, EUR		1,271,643,263.0		1,215,488,492.0
Others		Various		Various	Various	USD, JPK, GBP, CAD, EUR, SDR		528,246,405.0		509,107,679.0
IMF(2)								849,975,176.0		872,629,956.0
Total Multilateral Organizations								3,300,911,668.0		3,242,521,270.0
Foreign Governments (including Original Loans and Paris Club)		Various		Various	Various	USD, JPK, GBP, CAD, EUR		762,994,091.22		875,167,193.0
Bonds (Global) USD
USD250 mn 2022		11.625	%	Dec. 19, 2001	Jan. 15, 2022	USD		250,000,000.0		250,000,000.0
USD300 mn 2017		10.625	%	June 20, 2002	June 20, 2017	USD		300,000,000.0		300,000,000.0
USD125 mn 2017		10.625	%	April 27, 2004	June 20, 2017	USD		125,000,000.0		125,000,000.0
USD300 mn 2015		9.0	%	June 2, 2005	June 2, 2015	USD		300,000,000.0		300,000,000.0
USD250 mn 2025		9.25	%	October 18, 2005	October 18, 2025	USD		250,000,000.0		250,000,000.0
USD250 mn 2036		8.50	%	February 28, 2006	February 28, 2036	USD		250,000,000.0		250,000,000.0
USD125 mn 2015		Variable		July 2005	July 2015	USD		125,000,000.0		125,000,000.0
USD200 mn 2015		9.375	%	July 2005	July 2015	USD		100,000,000.0		49,623,193.0
USD200 mn 2021		8.5	%	Nov. 16, 2006	Nov. 16, 2021	USD		190,476,191.0		141,767,561.0
USD125 mn 2027		8.125	%	June 2007	July 2027	USD		125,000,000.0		103,887,000.0
USD150 mn 2039		8.0	%	October 11, 2007	March 15, 2039	USD		150,000,000.0		150,000,000.0
USD350 mn 2039		8.0	%	March 15, 2007	March 15, 2039	USD		350,000,000.0		350,000,000.0
USD350 mn 2019		8.0	%	June 24, 2008	June 24, 2019	USD		350,000,000.0		350,000,000.0
USD400 mn 2019		8.0	%	February 14, 2011	June 24, 2019	USD		400,000,000.0		400,000,000.0
USD294.18mn 2024		9.375		Nov 3, 2011	Nov 10, 2024	USD		294,180,000.0		294,180,000.0
Total (Global) USD								3,559,656,191.0		3,439,457,754.0
Bonds (EUR)
EUR150 mn 2014		10.50	%	Oct. 27, 2004	Oct. 27, 2014	EUR		264,745,307.0		0.0
Total (EUR)
Commercial Banks		Various		Various	Various	USD		198,558,981.0		203,047,387.0
Other Commercial (Export Credit)		Various		Various	Various	USD, JPK, GBP, CAD, EUR		463,304,288.0		203,047,387.0
Total								467,434,536.0		404,203,288.0

(1) LEGEND: USD = United States Dollar; CAD = Canadian Dollar; JPK = Japanese Yen; EUR = Euro; SDR = Special Drawing Rights.

(2) These are amounts disbursed under the SBA.

D-60

External Public Direct Debt⁽¹⁾

	Interest			Issue Date	Final Maturity	Currencies	Principal Amount Outstanding at March 31, 2012		Principal Amount Outstanding at September 30, 2012
	%						(in US$)		(in US$)
Multilateral Organizations
World Bank		Various		Various	Various	USD, JPK, GBP, CAD, EUR		651,046,824.0		645,295,143.0
Inter-American Dev. Bank		Various		Various	Various	USD, JPK, GBP, CAD, EUR, UOA		1,262,695,646.0		1,169,445,281.0
Others		Various		Various	Various	USD, JPK, GBP, CAD, EUR, SDR		365,116,685.0		457,511,951.0
Total Multilateral Organizations								2,278,859,155.0		2,272,252,375.0
Foreign Governments (including Original Loans and Paris Club)		Various		Various	Various	USD, JPK, GBP, CAD, EUR		617,593,780.9		553,557,079.0
Bonds (Global) USD
USD300 mn 2017		10.63	%	June 20, 2002	June 20, 2017	USD		300,000,000.0		300,000,000.0
US$125 mn 2017		10.63	%	April 30, 2004	June 20,2017	USD		125,000,000.0		125,000,000.0
USD250 mn 2022		11.63	%	Dec. 19, 2001	Jan. 15, 2022	USD		250,000,000.0		250,000,000.0
USD300 mn 2015		9.0	%	June 2, 2005	June 2, 2015	USD		300,000,000.0		300,000,000.0
USD250 mn 2025		9.25	%	October 18, 2005	October 17, 2025	USD		250,000,000.0		250,000,000.0
USD250 mn 2036		8.50	%	February 28, 2006	February 28, 2036	USD		250,000,000.0		250,000,000.0
USD150 mn 2039		8.0	%	October 11, 2007	March 15, 2039	USD		150,000,000.0		150,000,000.0
USD350 mn 2039		8.0	%	March 15, 2007	March 15, 2039	USD		350,000,000.0		350,000,000.0
USD350 mn 2019		8.0	%	June 24, 2008	June 24, 2019	USD		350,000,000.0		350,000,000.0
USD400 mn 2019		8.0	%	February 14, 2011	June 24, 2019	USD		400,000,000.0		400,000,000.0
USD200 mn 2021		8.50	%	September 5, 2013	November 16, 2021	USD		0.0		141,767,561.0
Total (Global) USD								2,725,000,000.0		2,866,767,561.0
Bond (EUR)
EUR 200mn 2012		11.00	%	January 27, 2004	July 27, 2012	EUR		264,745,307.0		0.0
EUR 150 mn 2014		10.50	%	Feb. 11, 2004	Feb. 11, 2014	EUR		198,558,981.0		203,047,387.00
Total								463,304,288.0		203,047,387.0
Commercial Banks		Various		Various	Various	USD		231,350,026.0		226,892,290.0
Other Commercial (Export Credit)		Various		Various	Various	USD		18,806,194.0		13,582,374.0
Total								6,334,913,443.9		6,136,099,066.0

(1) LEGEND: USD = United States Dollar; CAD = Canadian Dollar; JPK = Japanese Yen; EUR = Euro; SDR = Special Drawing Rights, which are units of measure derived from a group of currencies which constitute the International Monetary Fund loan portfolio; UOA = Units of Accounts, which are units of measure derived from a group of currencies which constitute the Inter-American Development Bank loan portfolio; GBP = British Pound Sterling.

D-61

External Guaranteed Debt⁽¹⁾

	Interest			Issue Date	Final Maturity	Currencies	Principal Amount Outstanding at March 31, 2012		Principal Amount Outstanding at September 30, 2013
	%						(in US$)
Multilateral Organizations
Inter-American Dev. Bank		Various		Various	Various	USD		8,947,617.0		46,043,211.0
Others		Various		Various	Various	USD, EUR		163,129,720.0		139,466,661.0
Total Multilateral Organizations								172,077,337.0		185,509,872.0
Foreign Governments (including Original Loans)		Various		Various	Various	USD		145,400,310.3		321,610,114.0
Commercial Banks		Various		Various	Various	USD		236,084,510.0		177,310,998.0
Other Commercial (Export Credit)		Various		Various	Various	USD, CAD		13,732,731.0		9,028,533.0
Bonds
US$ 125 million due 2015		Variable		July 2005	July 2015	USD		125,000,000.0		125,000,000.0
US$ 200 million due 2015		9.375	%	July 2005	July 2015	USD		100,000,000.0		49,623,193.0
US$125 million due 2017		8.125	%	June 2007	June 2027	USD		125,000,000.0		103,887,000.0
US$ 200 million due 2021		8.5	%	November 2006	November 2006	USD		190,476,191.0		0.0
US$ 294.18 million due 2024		9.375	%	November 2011	November 2024	USD		294,180,000.0		294,180,000.0
Total								1,401,951,079.3		1,266,149,710.0

(1) LEGEND: USD = United States Dollar; CAD = Canadian Dollar; EUR = Euro.

Bank of Jamaica Debt⁽¹⁾

	Interest	Issue Date	Final Maturity	Currencies	Principal Amount Outstanding at March 31, 2012		Principal Amount Outstanding at September 30, 2012
	%						(in US$)
Foreign Governments (including Original Loans)	n.a.	n.a.	n.a.	USD		0.0		0.0
IMF(2)						849,975,176.0		784,759,023.0
Total	Various	Various	Various	Various		849,975,176.0		784,759,023.0

(1) LEGEND: USD = United States Dollar; SDR = Special Drawing Rights.

(2) These are amounts disbursed under the SBA.

D-62

Debt Service Indicators

Public sector external debt as a percentage of nominal GDP decreased to 56.0 % on December 31, 2012 from 60.2% on December 31, 2011. External debt as a percentage of exports of goods and services decreased to 113.7 % on December 31, 2012 from 126.4% on December 31, 2011. External debt service payments as a percentage of exports of goods and services decreased to 6.9 % during 2012 from 7.1% during 2011.

The following table shows public sector external debt indicators for the five years ended December 31, 2012.

Debt Indicators

	2008		2009		2010		2011		2012
	(in millions of US$, except percentages)
External Debt Service Principal	$	486.1	$	203.3	$	265.9	$	677.9	$	565.5
Interest		394.5		387.7		476.7	$	484.4		446.4
Total		880.6		591.0		742.6		1,162.3		1011.9
Exports of Goods and Services(1)		8,027.2		6,160.3		6,294.9		6,826.9		6,491.6
External Debt Service Ratio (%)		11.0		9.6		11.7		17.0		15.6
Interest on External Debt/Exports of Goods and Services (%)(1)		4.9		6.3		7.6		7.1		6.9
External Debt Outstanding/Exports of Goods and Services (%)(1)		79.0		107.0		133.3		126.4		113.7
External Debt/Nominal GDP (%)(2)		50.8		54.7		61.4		60.2		56.0
Domestic Debt/Nominal GDP (%)(3)		60.6		69.8		68.2		71.1		75.8
Total Debt/Nominal GDP (%)(2)		111.4		124.5		119.6		131.3		131.7

(1) Exports of goods, services and current transfers.

(2) Calculated by converting external debt to JA dollars using the average annual nominal exchange rate.

(3) Calculated using Jamaican dollars.

Source: Ministry of Finance and Planning and Bank of Jamaica.

Debt Records

Jamaica has never defaulted on any of its external or domestic debt obligations, which under the Jamaican Constitution are paid without any requirement of Parliamentary approval, directly from revenue and assets of Jamaica, before funds are available to Jamaica for other policies and programs. Since 1993, Jamaica has been involved in only two debt restructurings, which occurred in January 2010 and February 2013. See “—The National Debt Exchange—The Jamaica Debt Exchange.”

On January 25, 1993, Jamaica entered into a multi-year debt service rescheduling arrangement with the Paris Club comprised of OECD creditor governments and their agencies. This accord spanned the 36-month consolidation period from October 1, 1992 through September 30, 1995. Pursuant to the Paris Club Accord, the parties finalized the single outstanding bilateral implementing agreement in January 1996.

In March 1996, Jamaica formally completed a three-year extended fund facility with the International Monetary Fund.

D-63

Summary of Economic Information

	2008			2009			2010			2011			2012
	(in millions of US$, except where noted)
DOMESTIC SECTOR(1)
Nominal GDP (J$ millions)		997,314.8			1,065,718.5			1,153,677.9			1,239,765.6			1,313,051.7
Nominal GDP(2)		13,814.8			12,118.9			13,232.4			14,431.8			14,795.4
Real Gross Domestic Product (J$ millions)(3)		760,776.6			734,997.2			724,359.4			734,534.6			731,007.5
Real GDP(2)		11,064.0			10,689.1			10,534.4			10,682.4			10,631.1
Percent Change in Real GDP		(0.8	)		(3.4	)		(1.4	)		1.4			(0.5	)
Real GDP per capita (J$/person)		328,987			313,366			307,645			311,840			309,519
Inflation
Consumer Price Index (Percent Change)		16.8			10.2			11.7			6.0			8.0
Interest Rates (%)(4)
Weighted Average Loan Rate		21.4			21.5			20.4			19.5			18.4
Weighted Average Deposit Rate		6.6			6.7			3.8			2.6			2.2
Treasury Bill Yield(5)		24.4			16.8			7.5			6.5			7.2
Unemployment Rate (%)(6)		10.6			11.4			12.4			12.7			13.9
EXTERNAL SECTOR
Average Annual Nominal Exchange Rate (J$/US$)		72.9			88.5			87.4			86.1			89.0
Export of Goods		2,682.8			1,319.4			1,335.7			1,622.4			1,709.9
Alumina		1,230.5			368.0			402.8			580.7			508.3
Sugar		104.3			72.3			44.2			62.2			94.1
Imports of Goods		8,361.0			5,057.6			5,326.4			6,439.4			6,594.9
Goods Balance (c.i.f.)		(5,678.2	)		(3,738.2	)		(3,990.8	)		(4,817.0	)		(4,885.1	)
Current Account Balance		(2,793.3	)		(1,127.5	)		(934.9	)		(2,124.1	)		(1904.8	)
Gross Foreign Direct Investments		1,436.6			540.9			227.7			218.2			228.8
Net Foreign Direct Investments		1,360.7			479.8			169.5			143.6			204.6
Increase/(Decrease) in Reserves		(104.8	)		(43.5	)		442.0			(205.3	)		(840.5	)
Net International Reserves of the Bank of Jamaica		1,772.9			1,729.4			2,171.4			1,966.1			1,125.6
Weeks of Coverage of Goods Imports(7)		14.8			18.9			32.3			25.5			17.8
PUBLIC FINANCE (J$ millions)(8)
Revenue and Grants		276,199.8			300,200.1			316,041.4			322,149.8			344,677.7
Expenditure		351,521.4			421,458.5			388,768.0			403,122.2			399,278.9
Fiscal Surplus (Deficit)		(75,321.6	)		(121,258.4	)		(72,726.6	)		(80,972.4	)		(54,601.1	)
Fiscal Surplus (Deficit) as a % of Nominal GDP		(7.4	)		(11.1	)		(6.2	)		(6.4	)		(4.1	)
Primary Surplus		49,983.6			67,457.2			55,628.1			39,662.6			72,336.5
Primary Surplus as a % of Nominal GDP		5.0			6.2			4.6			3.1			5.4
Loan Receipts		212,148.6			299,599.6			212,968.9			163,520.5			144,347.1
Amortization		148,733.2			169,514.0			102,157.5			128,373.2			88,329.8
Overall Surplus (Deficit)		(11,906.2	)		8,827.2			38,084.9			(45,825.0	)		1,416.2
Overall Public Sector Surplus (Deficit)(9)		(96,162.5	)		(125,424.5	)		(78,551.4	)		(80,640.9	)		(60,135.7	)
Overall Public Sector Surplus (Deficit) as a % of Nominal GDP		(9.5	)		(11.4	)		(6.7	)		(6.4	)		(4.5	)
PUBLIC DEBT
Domestic Debt (J$ millions)(10)		608,915.5			754,015.1			799,964.2			883,388.6			995,230.87
Percent of Nominal GDP		60.2			69.1			68.2			70.1			75.8
Public Sector External Debt		6,343.7			6,594.3			8,389.5			8,626.1			8,255.5
Percent of Nominal GDP		45.7			53.5			62.5			58.9			56.0
Total Public Sector Debt (J$ millions)		1,119,401.9			1,344,864.8			1,520,301.0			1,630,414.9			1,762,811.0
Percent of Nominal GDP		110.6			123.3			129.7			129.4			131.9
External Debt Service Ratio		11.0			9.6			11.7			17.0			15.6
TOURISM
Total Visitor Arrivals		2,859,534			2,753,446			2,831,297			3,077,233			3,306,168
Occupancy Rate (% Hotel Rooms)		60.4			59.0			60.5			60.5			62.3
Visitor Expenditures(11)		1,975.5			1,925.4			2,001.2			2,008.3			2,069.6

(1) The gross domestic product series has been revised. This revision was made in order to capture the changing structure of industries in the manufacturing, financial and insurance services, business services and the miscellaneous services sectors. In addition, the base year has been changed from 1996 to 2003.

(2) Calculated using the average annual nominal exchange rate.

(3) At constant 2007 prices

(4) Loans are in domestic currency.

(5) Tenors of Treasury Bills are approximately 182 days.

(6) Includes all persons without jobs, whether actively seeking employment or not. In 2003, three labor force surveys were conducted (in April, July and October). Four labor force surveys were conducted in each of 2005, 2006, 2007 and 2008 (in January, April, July and October).

(7) Calculated on the basis of gross international reserves.

(8) Fiscal year data from April 1 to March 31. For example, 2010 refers to the period April 1, 2010 to March 31, 2011.

(9) Overall Public Sector comprises the central government, the Bank of Jamaica, governmental statutory bodies and authorities and government-owned companies.

(10) Does not include contingent liabilities in the form of guarantees of certain obligations of public entities.

(11) Estimate.

Source: Bank of Jamaica, Statistical Institute of Jamaica, Ministry of Finance and Planning and Jamaica Tourist Board.

D-64

THE MONETARY SYSTEM

Bank of Jamaica

The Bank of Jamaica was established in 1960 pursuant to the Bank of Jamaica Act 1960 and commenced operations in 1961. The Bank of Jamaica Act, together with the Banking Act 1992, the Financial Institutions Act, the Building Societies Act and the Bank of Jamaica (Building Societies) Regulations provides the Bank of Jamaica with the statutory authority for regulating the activities of the banking system.

Amendments to the Banking Act and the Bank of Jamaica Act designed to strengthen the Bank of Jamaica’s oversight in banking activities became law in October 1997 and March 2002, respectively. Amendments to the Financial Institutions Act, which regulates merchant banks, and the Building Societies Act, which regulates building societies, also became law in October 1997 and March 2002, respectively. See “—the Financial System” and “—Legislation and Regulation.” Amendments to the Bank of Jamaica Act, subjecting money transmitters and remittance agencies to licensing regimes and regulations comparable to those applicable to other institutions that deal with approved foreign currency became law in February 2004. These amendments will bring Jamaica in line with the Financial Action Task Force’s (FATF) 40 revised recommendations.

In addition to its operations relating to the issue and redemption of currency and as banker to the Government of Jamaica, the Bank of Jamaica’s primary role remains the development and implementation of monetary policies aimed at achieving Jamaica’s inflation objectives and maintaining long-term stability in the foreign exchange market. As the banking supervisory authority, the Bank of Jamaica is also required to ensure the soundness and development of the financial system pursuant to the Banking Act, the Financial Institutions Act and the Building Societies Act and Bank of Jamaica (Building Societies) Regulations.

Money Supply and Interest Rates

The monetary base expanded by 6.5% in 2012, following increases of 7.8% and 4.9% in 2011 and 2010, respectively. The monetary base comprises currency issue in the hands of the public, plus vault cash held in the banking system, statutory cash reserves and demand deposits of commercial banks held at the Bank of Jamaica. The deceleration in the rate of growth in 2012 was primarily reflected in a relatively lower rate of expansion in currency issue. The rate of growth in currency issue for 2012 was 3.3% relative to 10.5% in 2011. Money supply (M2) grew by 6.6% in 2012, relative to a growth of 4.1% in 2011 and 1.7% in 2010. The growth in M2 in 2012 largely reflected growth in demand deposits. In 2012, currency in circulation and demand deposits increased by 3.6% and 16.0%, respectively.

For the first ten months of 2013, the monetary base declined by 6.1% relative to a contraction of 5.7% for the comparable period of 2012. The contraction in the monetary base during the first ten months of 2013 largely reflected net currency redemption of 10.2% and a decline of 85.3% in the commercial banks’ current account. This compared to net currency redemption of 12.1% and a decline of 42.5% in the commercial banks’ current account during the first ten months of 2012. For the first nine months of 2013, the stock of money supply (M2) grew by 2.3% as compared to a decline of 3.0% for the corresponding period of 2012.

During 2012, the Bank of Jamaica maintained its monetary policy stance despite the emergence of heightened uncertainty among the public and excess liquidity in the domestic financial markets, particularly towards the end of the year. The uncertainty was mainly in regard to the timing and content of an agreement with the IMF on a new medium-term economic program. In this context, the Bank of Jamaica maintained the interest rate on its 30-day Certificate of Deposit (CD) and overnight instrument at 6.25% and 0.25%, respectively, throughout 2012. Additionally, the domestic cash reserve and liquid assets requirements were maintained at 12.0% and 26.0%, respectively. This policy stance occurred despite the emergence of heightened uncertainty among the public and the existence of excess liquidity in the domestic financial markets, particularly towards the end of the year. The uncertainty was mainly in regard to the timing and content of an agreement with the IMF. This uncertainty resulted in an accelerated pace of depreciation in the exchange rate, relative to the previous year. Despite this faster pace of depreciation, the inflation trajectory remained generally favorable and in line with the Bank of Jamaica’s projection for the year. The increased instability in the foreign exchange market towards the end of the year further prompted

D-65

the Bank of Jamaica to focus on removing excess JA Dollar liquidity. In this regard, the Bank of Jamaica introduced three special variable rate instruments that were offered to primary dealers and commercial banks from October 31 to November 5, 2012. In addition, the Bank of Jamaica continued to intervene in the foreign exchange market to smooth supply and demand conditions.

The weighted average domestic currency loan rate of commercial banks decreased to 17.45% as of September 30, 2013 from 18.44% as of December 31, 2012 and 18.03% as of December 31, 2011.

The following tables show determinants of money supply and interest rates for the five years ended December 31, 2012:

Money Supply

	2008		2009(3)		2010		2011		2012
	(in millions of J$)
Narrow Money (M1)		100,097.1		107,818.0		112,234.4		120,569.9		133,264.5
Currency		41,995.8		44,614.8		48,476.7		52,853.8		54,734.7
Quasi-Money(1)		213,042.3		224,192.2		225,430.1		230,848.7		241,202.8
Monetary Base(2)		71,498.6		81,116.2		85,093.0		91,710.1		97,648.5
Broad Money (M2)		313,139.4		332,010.2		337,664.4		351,418.5		374,467.3

(1) Quasi-money comprises time deposits and savings deposits.

(2) The monetary base comprises currency issue in the hands of the public, plus vault cash held in the banking system, statutory cash reserves and demand deposits of commercial banks held at the Bank of Jamaica.

(3) Revised figures.

Source: Bank of Jamaica.

Interest Rates

	2008		2009		2010		2011		2012
	(%)
Domestic Currency Loan Rate		21.7		21.1		20.4		18.0		18.4
Domestic Currency Time Deposit Rate		9.8		9.0		4.9		4.2		3.9
Treasury Bill Yield(1)		24.5		16.8		7.5		6.5		7.2

(1) Tenors of treasury bills are approximately 182 days.

Source: Bank of Jamaica.

During the five years ended December 31, 2012, the yield on 182-day treasury bills decreased from 24.5% in 2008 to 7.2% in 2012. At December 31, 2008, the treasury bill yield was 22.0% for bills of 92 days maturity. As a result of a moderation in inflation and inflationary expectation, as well as stability in the foreign exchange market, particularly after the March 2009 quarter, the 91-day and 180-day Treasury bill yields declined to 16.0% and 16.8%, respectively, by the end of December 2009. With the success of the JDX program, the associated improvement in the fiscal accounts, continued achievement of the targets under the IMF Standby Arrangement and reductions in inflation, the 91-day and 180-day Treasury bill yields declined to 7.40% and 7.48%, respectively, as at December 31, 2010. The yields on these tenors declined further to 7.37% and 7.46%, respectively, in the January 2011 auction.

On December 31, 2011, the Treasury bill yields were 6.21% and 6.46% for 91-day and 182-day, respectively. This continued the trend of declining rates from the previous three years. This decline was a result of the continued moderation in the inflation and inflationary expectations and stability in the foreign exchange market. The treasury bill yields increased marginally to 7.67% and 7.18% for the 91-day and 182-day maturity, respectively, at December 31, 2012. There were mixed movements in the weighted average yields on treasury bills for the year. In particular, there was an overall decline of 18 basis points (bps) to 6.31% in the weighted average yield on the Government’s 30-day instrument. On the other hand, the weighted average yields on the 90-day and 180-day instruments increased by 146 bps and 72 bps to 7.67% and 7.18%, respectively. The movements in the market-determined treasury bill yields reflected the uncertainty in the domestic economy, which primarily stemmed from the delay in arriving at an agreement with the IMF on Jamaica’s medium-term macroeconomic program. This uncertainty led to instability in

D-66

the financial markets, which was reflected in reduced private capital inflows, continued decline in the NIR, sustained depreciation of the exchange rate, a general aversion to the Government’s longer-term bonds, investors displaying a preference for money market instruments at the very short end of the market and high levels of JA dollar liquidity in the system.

In the summer of 1998, the Bank of Jamaica announced its medium-term goal to reduce the cash reserve requirement for commercial banks. As a first step towards meeting this goal, the Bank of Jamaica reduced in increments the cash reserve requirement for commercial banks from 25% prior to August 1998 to 17% in May 1999, thereby equalizing the cash reserve requirement for commercial banks and other deposit-taking institutions. Having equalized the cash reserve requirement, further reductions were gradually effected, resulting in an overall reduction to 9.0% at March 2002. In response to challenges which emerged from the global financial crisis in 2008, the Bank of Jamaica instituted a number of initiatives, including increasing the cash reserve requirement. During 2008, the cash reserve requirement was increased from 9.0% as of December 2007 to 11.0% as of December 2008. In January and February 2009 the cash reserve requirement was increased by a further 3.0 percentage points to 14.0%. However, consistent with the general loosening of monetary policy since the first quarter of 2009, the requirement was reduced by 2.0 percentage points to 12.0% effective July 1, 2010. Since then, the cash reserve requirement has been maintained at 12.0%.

The Bank of Jamaica monitors the level of liquid assets outstanding to ensure that at all times supervised financial institutions meet their statutory liquidity obligations. The liquid assets requirement for deposit-taking institutions was 26.0% at December 31, 2011, and commercial banks held excess liquid assets of J$28.1 billion above the statutory minimum requirements. By December 31, 2012, the liquid asset holdings of commercial banks had decreased to J$14.2 billion above the statutory minimum requirements.

The Financial System

Regulatory and Supervisory Structure

Regulation and supervision of the financial system is primarily undertaken by two institutions, the Bank of Jamaica and the Financial Services Commission. The Bank of Jamaica regulates and supervises the commercial banks and other licensed deposit-taking financial institutions under powers contained in several statutes and regulations. The Financial Services Commission, which became operational on August 2, 2001, is the sole regulatory and supervisory agency for certain non-deposit taking financial institutions, including securities dealers, unit trusts, mutual funds, insurance companies, and pension funds. It similarly derives its supervisory authority from various statutes. The supervisory structure is complemented by the Financial Regulatory Council (FRC), an umbrella entity comprised of the Governor of the Bank of Jamaica (chair) in his capacity as Supervisor of Banks, the Executive Director of the Financial Services Commission, the head of the Jamaica Deposit Insurance Corporation, and the Financial Secretary or his/her nominee. The Solicitor General is also invited to these meetings to assist with legal issues affecting the financial sector. The FRC utilizes a proactive and coordinated approach to sharing regulatory information and developing policy for the financial sector, thus helping in the early detection of cross-sector problems and enhancing the implementation of consolidated supervision rules and principles.

The deposit-taking system in Jamaica continues to be impacted by the weakened global economy, as well as significant macro-economic shifts in the local economy including, among other things, the Government’s Debt Exchange Program in January of 2010, and policy adjustments related to the program entered into with the International Monetary Fund in February 2010. Notwithstanding these developments, the deposit-taking system remained adequately capitalized due mainly to the reforms of earlier years that ensured that institutions remain subject to strict regulatory requirements and oversight. A 100% risk weighting for Government foreign currency denominated instruments was implemented. Capital ratios have remained above the minimum risk weighted capital ratio of 10.0% and the capital to total assets (leverage ratio) requirement of 6.0%. At December 31, 2012, the risk weighted capital adequacy ratio for the deposit-taking financial institutions was 14.1% and the capital to total assets ratio was 10.8%. This compares with the Basel minimum requirement for risk weighted capital adequacy ratio of 10.5%. While the Basel Committee does not currently impose a leverage ratio, in December 2009, it proposed the introduction of a similar leverage ratio—to be initially tested under a parallel run at 3%. The Federal Reserve Bank sets its minimum leverage ratio at 3% to 4%.

D-67

An indirect impact on Jamaica resulting from the global financial crisis was the loss in credit facilities, including cuts in and withdrawal of margin funding arrangements. In response, the Bank of Jamaica made a special loan facility available to domestic financial institutions to facilitate repayment of margin arrangements held with overseas brokers. These margin arrangements had been collateralized with Government of Jamaica global bonds. By September 30, 2010, loans extended under this special loan facility had been repaid. There is also evidence that there was a deterioration in the asset quality of deposit-taking institutions over the period between December 2009 and December 2011, when non-performing loans moved from 4.7% at the end of 2009 to 8.9% at the end of 2011. The deterioration was attributable to the decline in real growth consequential on the decline in the demand for Jamaica’s exports given the economic recession in Jamaica’s major export markets. The deteriorating trend has since reversed and at December 31, 2012, non-performing loans as a percentage of total loan portfolio improved to 6.8%. Data as of September 30, 2013 shows non-performing loans are 5.8% of total loans.

There was also limited exposure to the regional CL Financial Group (CLICO), into which the Trinidad and Tobago authorities intervened in January 2009. This exposure was limited to credit facilities extended to a CLICO affiliated institution which acquired shares in a Jamaican Corporation. The debt was subsequently repaid.

Jamaica’s financial system is integrated with regional and international financial markets. Since the beginning of the liberalization process in 1991 until 1994, the banking and insurance services sector expanded significantly. Since 1995, however, the financial system has undergone consolidation as a result of a combination of closures and mergers. As at September 30, 2013, the number of deposit taking institutions in operation consisted of seven commercial banks, two merchant banks and finance houses and three building societies.

On December 31, 2012, the assets considered the net of provision for losses including contingent accounts (customer accounts for acceptances, guarantees and letters of credit), and liabilities of commercial banks, amounted to J$659.8 billion, representing a 7.5% increase over December 31, 2011. On the asset side, total loans and advances (gross) were J$307.5 billion at December 31, 2012, representing an increase of 15.6% compared to 2011. On the liabilities side, total deposits were J$444.8 billion in 2012, representing an increase of 11.2% compared to 2011.

Latest data at September 30, 2013 reflected total assets and liabilities of commercial banks amounting to J$731.9 billion and comprised primarily of loans and advances (gross) of J$355.8 billion. The main liability item deposits totaled J$476.6 billion.

The total assets and liabilities of deposit-taking financial intermediaries other than commercial banks (i.e., building societies and merchant banks) was J$222.7 billion at December 31, 2012, representing an expansion of 7.6% over 2011. Outstanding loans and advances (gross) in these entities at December 31, 2012 was J$101.5 billion, representing an increase of 5.5% over 2011, while deposits were J$139.3 billion, representing an increase of 8.5% from 2011.

At September 30, 2013, total assets and liabilities of deposit-taking financial intermediaries (other than commercial banks) was J$229.6 billion. Loans and advances (gross) amounted to J$101.6 billion while total deposits totaled J$149.5 billion.

Legislation and Regulation

Laws and regulations governing the financial sector include:

• The Bank of Jamaica Act 1960;

• The Unit Trust Act 1971;

• The Financial Institutions Act 1992;

• The Banking Act 1992;

• The Securities Act 1993;

D-68

• The Building Societies Act and the related Bank of Jamaica (Building Societies) Regulations 1995;

• The Industrial and Provident Societies Act and the related Bank of Jamaica (Industrial and Provident Societies) Regulations 1995;

• The Deposit Insurance Act 1998;

• The Insurance Act 2001;

• The Financial Services Commission Act 2001;

• The Pensions (Superannuation Funds and Retirement Schemes) Act 2004;

• The Terrorism Prevention Act 2005;

• The Terrorism Prevention (Reporting Entities) Regulations, 2010;

• The Proceeds of Crime Act 2007;

• The Proceeds of Crime (Money Laundering Prevention) Regulations, 2007; and

• Micro Credit Legislation.

Jamaica implemented upgraded deposit-taking financial legislation in the form of the Financial Institutions Act and the Banking Act in 1992 to provide for, among other things, a standardized legal framework for the operations of commercial banks and other licensed deposit-taking intermediaries, including enhanced minimum capital adequacy standards. In addition, these acts provided the Bank of Jamaica, in certain instances, and the Minister of Finance and Planning in others, with the means to take actions such as issuing “cease and desist” orders and assuming temporary management of such institutions when there is evidence of unsound banking practices or where the institution’s financial viability is in jeopardy.

In order to strengthen the existing regulatory framework, in light of the difficulties in the financial sector, Parliament passed amendments to the Banking Act, the Financial Institutions Act, the Building Societies Act and the Industrial and Provident Societies Act in October 1997. Some features of these amendments included:

• empowering the Minister of Finance and Planning to take control of the shares of any licensee that is no longer viable, to effect a sale of the licensee’s shares or assets or to restructure the entity in the interest of its depositors;

• empowering the Supervisor of Banks to issue “cease and desist” orders in respect of financial institutions experiencing problems and to require special audits of these institutions;

• enhancing the existing “fit and proper” criteria that relate to directors, significant shareholders and senior management of licensees;

• tightening credit limits for unsecured lending, and prohibiting the issuance of unsecured credit to any affiliated parties;

• imposing a lower ceiling on total lending to or investment in all affiliated parties;

• tightening investment limits;

• reducing the non-accrual period for interest on non-performing loans from six months to three months;

• imposing minimum solvency standards and risk-based criteria;

D-69

• specifying the obligations of bank auditors in the presentation of findings and imposing obligations on auditors to report irregularities to the Bank of Jamaica;

• allowing for the examination of the accounts of holding companies of supervised financial institutions; and

• prohibiting industrial and provident societies from taking deposits without written authorization from the Minister of Finance and Planning.

These revisions provided the Bank of Jamaica, in certain instances, and the Minister, in others, with a wider range of sanctions and greater powers of intervention to use with respect to troubled financial institutions. See also “Public Finance—Improvements in the Legislative and Regulatory Framework.”

In March 2002, further amendments were made to Jamaican banking laws to grant the Bank of Jamaica expanded powers to supervise financial institutions with deposit-taking capability. These amendments included:

• the transfer to the Bank of Jamaica of powers of the Minister to assume temporary management of deposit-taking institutions in the event that the Bank of Jamaica believes that such an intermediary is, or appears, unlikely to meet its obligations;

• the granting to the Bank of Jamaica of powers to assess fines for specific offences under the Banking Act and Financial Institutions Act;

• the granting to the Bank of Jamaica of power to require a deposit-taking institution to legally separate its banking operations from its securities-trading activities and investment activities undertaken on behalf of investor clients;

• the granting to the Bank of Jamaica of power to effectively carry out consolidated supervision of banks and other companies that are members of a group of which the bank is a member; and

• the broadening of the types of cases in which a bank may disclose information concerning specific customer accounts.

These revisions have significantly increased the scope of the Bank of Jamaica’s regulatory authority, including its powers of intervention, by expanding the Bank of Jamaica’s ability to temporarily manage troubled financial institutions. See also “Public Finance—Improvements in the Legislative and Regulatory Framework.”

Additionally, in February 2004, amendments were passed to the Bank of Jamaica Act, which effectively brought all operators of remittance companies or agencies under the supervisory ambit of the Bank of Jamaica. The regulatory regime for remittance entities came into effect in July 2005 and involves a licensing requirement that entails fit and proper due diligence checks and assessments of their systems and procedures prior to licensing, as well as both on- and off-site reviews and assessments.

Supervisory powers were further expanded in March 2005 by amendments to the Bank of Jamaica Act to clarify the Bank of Jamaica’s ability to share information with its overseas Regulatory Counterparts. Supervisory powers of sanction were also expanded to expressly deal with breaches by financial institutions of their obligations under non-financial statutes under which specific obligations were imposed (e.g., the Money Laundering Act which was replaced by the Proceeds of Crime Act and the Terrorism Prevention Act. See “—Proceeds of Crime Act” below). This was achieved by amendments to the Banking Act and Financial Institutions Act, which were passed into law in December 2004. In regards to the Bank of Jamaica (Building Societies) Regulations, the amendments were passed in Parliament in November 2004.

As part of the SBA in 2010, reforms have also been proposed and begun to strengthen the financial system. See “The Jamaican Economy—Recent Economic Crisis—IMF Standby Arrangement.”

There are also a number of regulations and best practice standards that govern the operations of financial institutions in Jamaica.

D-70

Bank of Jamaica Act

In December 2010, the Cabinet approved the recommendation for the responsibility for the stability of the overall financial system in Jamaica to be statutorily assigned to the Bank of Jamaica. This will require amendments to the Bank of Jamaica Act, which have been sent to the office of the Chief Parliamentary Counsel for drafting. The proposed amendments to the Bank of Jamaica Act will give the Bank of Jamaica the necessary powers to direct and impose measures to mitigate and control identified risks.

Micro Credit Legislation

The Government is proposing to enhance the legislative framework for privately owned money lending institutions. The new regulatory framework being proposed aims to address the deficiencies inherent in the operations of the industry, provide for improvement in the monitoring of the industry, transparency, protection of consumers and reduction in risks of the industry being used as a vehicle to facilitate money laundering.

Deposit Insurance

In March 1998, Parliament passed the Deposit Insurance Act, designed to protect depositors through the establishment of an explicit Deposit Insurance Scheme (the Scheme). The Deposit Insurance Act established the Jamaica Deposit Insurance Corporation, which administers the Scheme and ultimately the Deposit Insurance Fund (the Fund). The financial institutions covered under the Scheme (policyholders) are all commercial banks, merchant banks and building societies. All deposits (excluding government deposits and deposits from policyholders) held at these institutions are insurable under the Scheme. The insured institutions) must contribute to the Fund (by paying an initial and annual premium), which will be used to pay depositors in circumstances where an insured institution is unable to meet its deposit liabilities. Additionally, the Jamaica Deposit Insurance Corporation is authorized to make loans or advances available with security interests, and to guarantee, indemnify or become liable for the payment of monies or the performance of any obligation thereto, with respect to a covered institution facing financial distress.

When the Scheme was established, the coverage limit was set at J$200,000 per depositor, per institution. In order to maintain or enhance the level of protection to depositors, the limit is constantly under review, and has been adjusted twice since establishment, up to J$300,000 on July 11, 2001, then up to J$600,000 effective July 1, 2007. As at December 2011, 97.2% of insurable deposit accounts were fully covered at the J$600,000 coverage limit. This represented 32.4% of the dollar value of total insurable deposits. Total estimated insured deposits accounted for 46.0% of insurable deposits.

In addition, the Deposit Insurance Act also provides for the sharing of information between the Bank of Jamaica and the Jamaica Deposit Insurance Corporation, to enable the Corporation to be fully apprised of the financial condition of the institutions it insures.

Credit and Provisioning Regulations

The Bank of Jamaica is undertaking a comprehensive re-drafting of the captioned regulations to provide specific legal guidelines for loan accounting, credit classification and provisioning requirements for bad and doubtful debts. The regulations are being reviewed in order to take account of developments in international standards such as the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and banking supervision principles issued by the Basel Committee of Banking Supervisors, such as Basel Core Principles and the Basel Standard for Sound Credit Risk and Valuation of Loans. These standards are themselves subject to comprehensive review by these international standard setting bodies. The Bank of Jamaica is currently therefore awaiting the outcome of these exercises to ascertain the implications for local regulations.

Capital Adequacy Regulations

In 2004, regulations were promulgated establishing minimum risk-based capital standards for commercial banks and licensed financial institutions. These regulations introduced the concept of Tier I and Tier II capital utilized by regulators internationally, which define eligible components and provide the framework for assigning risk weights to on and off balance sheet items. Under the regulations, the overall minimum capital required to be maintained in relation to risk weighted assets is 10%. At December 31, 2011, all supervised institutions were in compliance with this requirement.

D-71

Qualifications of Auditors Regulations

The Bank of Jamaica has drafted regulations that specify the standards for auditors in undertaking an external audit of supervised financial institutions. Among other things, the criteria specified in these regulations relate to the independence, experience and qualification of the external auditors. These proposed regulations would also require prior notification to the Bank of Jamaica of proposed appointments. The Bank of Jamaica would also be empowered to object to the appointment of an auditor if there is evidence that such auditor is not in compliance with the provisions of the regulations. The intention is for these proposed regulations to be promulgated after the omnibus banking legislation has passed.

Bank of Jamaica (Credit Unions) Regulations

The Bank of Jamaica has drafted regulations to establish the supervisory regime applicable to credit unions. These regulations will, among other things, prescribe prudential criteria and minimum solvency standards covering, inter alia, essential areas such as licensing, capital adequacy, liquid assets, credit and provisioning, submission of financial statements and remedial action that can be taken by supervisory authorities with respect to problem credit unions. The draft regulations have benefited from extensive dialogue with the credit union sector and are pending presentation to Parliament by the Minister of Finance and Planning.

The Payment, Settlement and Clearing Act

The Payment, Settlement and Clearing Act was passed in Parliament in November 2010. The legislation formally establishes the legal framework for the oversight of the payment and settlement system and addresses matters such as: finality of payments, effect of insolvency on payments already in the system, and upgrading of the settlement infrastructure by, inter alia, allowing for real-time gross settlement. In this regard, Jamaica implemented a real-time gross settlement system in February 2009 and introduced a Central Securities Depository (CSD) in May 2009. The CSD is intended to house Government of Jamaica and Bank of Jamaica (domestic) securities.

Passage of this legislation is the first step in ensuring that Jamaica’s payment and settlement system operates in accordance with the Bank for International Settlements (BIS) Core Principles for Systemically Important Payment Systems.

The Cooperative Societies (Amendment) Bill

The Cooperative Societies (Amendment) Bill, which has been drafted, will seek to restrict the deposit-taking activities of cooperative societies to those cooperative societies that operate as credit unions. Secondly, it will seek to bring credit unions under the regulatory ambit of the Minister of Finance and Planning and the Bank of Jamaica.

Proceeds of Crime Act

The Proceeds of Crime Act (POCA) was passed by Parliament in early 2007 and came into effect on May 30, 2007. This statute is supported by the Proceeds of Crimes (Money Laundering Prevention) Regulations and the Proceeds of Crimes (Confiscation) Regulations which were also promulgated in 2007. With the passage of the POCA, the former Money Laundering Act, related Regulations and the Drug Offences (Forfeiture of Proceeds) Act were repealed and replaced. The wide-ranging POCA legislation provides for the investigation, identification and recovery of the proceeds of crime. Responsibilities previously delegated to the Bank of Jamaica, as the “competent authority” for deposit-taking institutions under the Money Laundering Act, are now subsumed by the POCA. Among other matters, the Act now provides for revised Threshold Reporting Transaction Limits for banking entities of US$15,000.00 (US$50,000.00 previously) and gives the Minister of National Security (as the responsible minister under POCA) the power to designate professions and businesses as financial institutions for the purposes of reporting and complying with Anti-Money Laundering requirements. POCA also seeks to address all the loopholes that hampered investigative and prosecutorial efforts to combat money laundering that existed under the previous Drug Offences Forfeiture of Proceeds Act and the Money Laundering Act.

D-72

Since its passage in 2007, the POCA has been amended to extend the list of predicate offences and offences in respect of which an assumption of criminal lifestyle can be made, to include offences under the Child Pornography (Prevention) Act, specified offenses under the Sexual Offences Act, and related inchoate offenses such as aiding and abetting and incitement, as well as offenses under the Law Reform (Fraudulent Transactions) Special Provisions) Act (LRFATSPA), which targets offenses such as lotto scam activities.

In October 2013, further amendments to the POCA were passed to:

• clarify the suspicious transactions reporting requirements;

• outline the powers that competent authorities designated under the POCA will have in relation to their role of monitoring compliance with the Anti-Money Laundering (AML) requirements;

• ensure that obligations placed on financial institutions are similarly placed on the entities that are responsible for the implementation of AML prevention, policies and procedures in the financial institution’s group of companies; and

• effect other amendments to the Money Laundering Prevention Regulations under the POCA to strengthen the requirements for Customer Due Diligence (CDD), the application of CDD measures for politically exposed persons (PEP), and the use of risk-based processes to identify and address AML/CFT risks.

Bank of Jamaica AML/CFT Guidance Notes

The Bank of Jamaica Anti-Money Laundering Guidance Notes, which were originally issued during the 1990s, provide specific guidance to all institutions supervised by the Bank of Jamaica on the detection and prevention of Money Laundering and the Financing of Terrorism. Revisions to the Guidance Notes were issued in 2004, 2005 and 2007 to incorporate, among other things, provisions consistent with the revised FATF 40 Recommendations of 2003 and the Eight Special Recommendations for Terrorist Financing; the Ninth Special Recommendation of the FATF on cash couriers and enhanced guidance on customer due diligence verification. During 2009, the Bank undertook another round of revisions with a view to incorporating relevant provisions of the Proceeds of Crime Act (POCA) and the POCA (Money Laundering Prevention) Regulations. The revisions took into account comments from the industry and the completed Guidance Notes were approved by the Minister on April 22, 2010.

Insurance Act

A new Insurance Act was enacted in December 2001 to repeal and replace the Insurance Act of 1972, to provide measures to strengthen corporate governance and the rulemaking process, and to establish prompt corrective action. The Insurance Act is currently being amended to harmonize certain provisions with other financial sector legislation and strengthen the legislative framework for the insurance industry.

Pensions (Superannuation Funds & Retirement Schemes) Act

Reform of the pensions system started with the enactment of the Pensions (Superannuation Funds and Retirement Schemes) Act in 2004, which became effective in March 2005. This Act included new requirements for pension funds such as registration, licensing, investment limits, minimum solvency standards and information disclosure. In 2007, the second phase of the Pension Reform initiative was advanced with the submission of additional drafting instructions for the preparation of amendments to the Act and associated regulations. This was preceded by extensive consultations with major stakeholders in the industry. The legislation will address issues such as mandatory vesting, portability of pension rights, funding and solvency of approved superannuation funds and retirement schemes.

D-73

Terrorism Prevention Act

The Terrorism Prevention Act gives effect to the UN Convention on the Suppression of the Financing of Terrorism as well as to various other UN Security Council resolutions. This Act imposes counter-terrorist financing and reporting obligations on financial institutions, which will assist the authorities in identifying, tracing and ultimately forfeiting assets owned or controlled by terrorists, and provides law enforcement with the widest range of investigative tools to achieve these objectives. The Terrorism Prevention Act was passed by the Parliament in March 2005 and came into effect in June 2005. In March 2010 an amendment to the Terrorism Prevention Act was passed to allow for the level penalties reflected in the proposed Terrorism Prevention (Reporting Entities) Regulations, 2010 to be imposed. (Under Jamaica’s laws penalties set out within Regulations are restricted to the maximum permitted under the Interpretation Act unless the Principal Act to the Regulations expressly provides otherwise).

The Terrorism Prevention Act was amended to address the omission of an express suspicious transaction reporting obligation and to allow for the implementation of the listed entity provisions in the act. Jamaica has since issued its first list of designated terrorists in accordance with the UN Resolution 1267, following the publication of the requisite court order in June 2012. A subsequent court order was published in July 2013.

Further amendments to the Terrorism Prevention Act were passed in October 2013 to, among other things, ensure that property of corresponding value can be confiscated, and to allow for Jamaica’s full implementation of the International Convention for the Suppression of Acts of Nuclear Terrorism of September 4, 2005, the 2005 amendment to the Convention on the Physical Protection of Nuclear Material, the October 14, 2005 amendment to the Protocol to the Convention for the Suppression of Unlawful Acts Against the Safety of Maritime Navigation, and the October 14, 2005 Protocol to the Convention for the Suppression of Unlawful Acts Against the Safety of Fixed Platforms.

Terrorism Prevention (Reporting Entities) Regulations

In March 2010, the Terrorism Prevention (Reporting Entities) Regulations, were promulgated under the Terrorism Prevention Act. These Regulations largely mirror the Know Your Customer (KYC) obligations contained in the Regulations under the Proceeds of Crime Act. Accordingly, the Regulations outline the operational controls that must be maintained by financial institutions particularly when contemplating the commencement of a business relationship or one-off transaction. The Regulations also require financial institutions to establish and maintain appropriate procedures in relation to identification, record-keeping, internal controls, communication, and training of employees. These Regulations also prescribe the requisite Declaration Forms for transactions that the reporting entity knows or suspects are transactions that constitute a terrorism offense; and for the quarterly reports as to whether or not the reporting entity is holding property in respect of a person who is on the United Nations list of designated terrorists or in respect of a person who has links with terrorists or terrorist groups or organizations.

In October 2013, the Terrorism Prevention (Reporting Entities) Regulations were amended to consolidate and intensify the requirements for customer due diligence, the application of CDD measures for politically exposed persons (PEP), and the use of risk-based processes to identify and address AML/CFT risks.

The Financial Investigations Division Act

The Financial Investigations Division Act (FIDA) was passed in March 2010 and brought into effect by Appointed Day Notice in April 2010. The Act gives the existing Financial Investigations Division (FID) of the Ministry of Finance and Planning the necessary statutory powers and protections to carry out that Division’s mandate of investigating and prosecuting financial crime, including money laundering and the financing of terrorism. The FID operates as Jamaica’s Financial Intelligence Unit (FIU) and the passage of the statute will assist the FID in attaining membership with the Egmont Group of FIU. The FIDA was amended in 2013 to, among other things, clarify the FID’s role where Jamaica contemplates entering into information sharing agreements with international counterparts. The FID has also applied for membership with Egmont, which is the global group of financial intelligence units (FIUs).

D-74

The Credit Reporting Act

The Credit Reporting Act was passed in August 2010 and became effective October 1, 2010. This statute establishes a credit reporting system in Jamaica and is designed to improve credit assessment processes and to facilitate enhanced risk management and loan pricing strategies throughout the financial sector. A licensing system is imposed on persons who intend to offer credit reporting services and prescribed reporting processes are outlined to ensure objective and standardized reporting of credit information. Persons offering credit reporting services are subject to regulation by the Bank of Jamaica. Credit Reporting Regulations were issued under the Credit Reporting Act on January 14, 2011. These Regulations, among other things, outline the licensing process including the form of application, licensing fees and information and documentation to be provided in support of an application for a license. Two credit bureau were licensed between March and April 2012 and have been given a twelve month period to start operations.

Standards of Best Practices

To date, the Bank of Jamaica has issued 13 Standards of Best Practices and Guidance for the management of deposit-taking entities. These are:

• Standards of Best Practices for Capital Management;

• Standards of Best Practices for Credit Risk Management;

• Standards of Best Practices for Securities Portfolio Risk Management;

• Standards of Best Practices for Liquidity Risk Management;

• Standards of Best Practices for Interest Rate Risk Management;

• Standards of Best Practices for Foreign Exchange Risk Management;

• Standards of Best Practices for Internal Controls;

• Standards of Best Practices for Real Estate Appraisal Management;

• Standards of Best Practices for the Management or Investment of Customers’ Funds;

• Guidance Notes for the Detection and Prevention of Money Laundering and Terrorist Financing Activities;

• Guidelines for Fit and Proper Assessments;

• Standards of Best Practices for Country and Transfer Risk; and

• Standards of Best Practices for Effective Corporate Governance.

Since the 2005 FSAP exercise, the Bank of Jamaica has engaged in a continuous process of systematically revising these standards in order to further promote the establishment of comprehensive risk management processes in deposit-taking institutions in accordance with the revised Basel Core Principles and as a necessary precursor to full implementation of the Basel Capital Adequacy framework (Basel II). In this regard, the standards relating to credit risk and market risk management have been updated considerably for issue and discussion with the industry.

Basel II/III

Bank of Jamaica is adopting a four phased approach towards the adoption of Basel II, with emphasis on the full implementation of consolidated supervision, full compliance with the Basel Core Principles and the promotion of enhanced risk management frameworks in deposit-taking entities, which are all considered to be necessary

D-75

prerequisites to effective Basel II/III implementation. The second phase will focus on implementation of Pillar II, which deals with supervisory review principles. The third phase will focus on implementation of Pillar III, which addresses market discipline requirements, and in the final phase the Bank of Jamaica will fully adopt Pillar I, which focuses on quantitative assessment. With regard to Basel III, based on preliminary assessments, the Bank of Jamaica does not foresee significant challenges in complying with the more conservative capital definitions proposed under Basel III given that existing Jamaican regulatory requirements are more stringent than those of Basel II capital definition, including, for example, the capital to total assets leverage ratio which has been a legal requirement for banks since 2004.

Consolidated and Conglomerate Supervision of Financial Groups

Legislation governing the activities of deposit-taking entities was amended in 2002 to extend the regulatory and supervisory reach of the Bank of Jamaica beyond the licensee itself, to include the wider financial group of which the licensee is a part. Pursuant to these amendments, the Bank of Jamaica has been working towards the full implementation of a comprehensive consolidated/conglomerate supervision regime. This has included the promotion of the reconfiguring of financial groups containing deposit-taking entities, into supervisable financial structures and the extension of “fit and proper” assessments to principals of financial holding companies and other entities within relevant financial groups. Further enhancements to the legislative framework will be incorporated in the proposed Omnibus Statute, discussed above.

Unregulated Financial Organizations

In 2007, the authorities were faced with the challenge of dealing with over 20 Unregulated Financial Organizations (UFOs). The FSC, with the support of other regulatory agencies, embarked on an extensive public education campaign to increase awareness of factors that should be taken into consideration before investing. This was accompanied by investigations into the business operations of these UFOs. Following investigations by the FSC, the entities were deemed to be in contravention of the relevant laws governing the sector. The investigations have also revealed that the smaller UFOs acted as feeders for the three largest UFOs.

Consequently, the entities were served with Cease and Desist Orders. A Cease and Desist Order is an instruction to an entity requiring it to discontinue any business transaction or any actions that are in contravention of any of the Acts that have provisions for the regulation of the financial sector. To prevent the execution of these Orders, some of these entities have brought legal action against the FSC. However, in all court rulings to date, the FSC has been successful in its bid to issue and enforce the Cease and Desist Orders. A court-appointed liquidator is in the process of winding up one of the major UFOs, while others are involved in litigation. Under the SBA, there will also be additional legislation regarding the regulation of UFOs.

A bill is being drafted to amend the Securities Act of 1993 with the purpose to fight UFOs and strengthen the investigative and supervisory powers of the FSC as well as its authority to share information with other entities.

Financial Sector Assessment Program

During 2005, Jamaica participated in an IMF/World Bank Financial Sector Assessment Program (FSAP), which is a joint initiative of the IMF and World Bank to provide member countries with a comprehensive evaluation of their financial systems. FSAPs are designed to assess the stability of the financial system as a whole and not that of individual institutions. They have been developed to help countries identify and remedy weaknesses in their financial structure, thereby enhancing their resilience to macroeconomic shocks and cross-border contagion. In May 2005, the IMF/World Bank issued a report on the financial assessment that was undertaken in 2005 that indicated that, while Jamaica’s financial systems appeared well-capitalized and supervision had been strengthened in recent years, there was a need to further strengthen the prudential framework for security dealers, enhance the oversight of conglomerates, and develop and test crisis management systems. The report also recommended that priority be given to overhauling the payments system and introducing a central depository for fixed income securities. In this regard, in May 2009, Jamaica introduced a Central Securities Depository for fixed income securities and in November 2010, the Payment, Settlement and Clearing Act was passed.

D-76

Jamaica believes that its supervisory, regulatory and legislative framework is sufficient for maintaining the quality of the institutions in its financial sector. There can be no assurance, however, that substantial additional financial assistance or other government action may not be required in the future as developments in the financial sector continue to evolve.

The Stock Market

Jamaican Stock Exchange (JSE)

The Jamaica Stock Exchange (JSE) is the oldest and largest stock exchange in the English-speaking Caribbean. It was established as a private limited company in August 1968, and floor trading commenced in February 1969. The JSE is a self-regulatory organization, although the Financial Services Commission has regulatory oversight. The JSE has in place a comprehensive code of rules governing members’ conduct and market operations, and has not experienced any market scandal during its 43-year history. The Financial Services Commission also regulates the Jamaican securities industry. Transactions done on the floor of the JSE are settled using a T+3 cycle.

The JSE has undertaken several modernization initiatives in recent years. In 1997, the JSE established a formal relationship with the CUSIP Service Bureau for the assignment of international securities identification numbers (ISIN) for Jamaican securities. In 1998, the Jamaica Central Securities Depository Limited, designed in conformity with G 30 standards, was incorporated as a legal entity and began operations on June 1, 1998. In February 2000, the JSE introduced automated trading, and as of May 2000, all securities listed on the JSE are traded remotely from brokers’ offices.

In May 2000, The JSE All Jamaican Composite index was introduced. This index tracks the performance of local companies. In June of the same year, the JSE Select Index was introduced to track the performance of the 15 most liquid stocks on the JSE.

In 2007, the JSE started the process of demutualization and on June 30, 2008, the JSE became a listed company after listing its Preference Shares.

The JSE launched the Junior Stock Market on April 2, 2009. This market provides an opportunity for local and Caricom small- and medium-size enterprises to raise capital. The JSE Junior Market has been endorsed by the Jamaican government through a ten-year tax break. As such, a company that lists on the JSE Junior Market is not liable to pay taxes on profits for the first five years and during the following five years the company will pay half the going tax rate.

The JSE Combined Index started on April 1, 2011, at 86,897.43 points. This index tracks the performance of all the companies that issue ordinary shares listed on both the Main Market and Junior Market of the Jamaica Stock Exchange.

At the end of 2009, there was one listing on the Junior Market. But by the end of 2011, the market had grown significantly with eleven additional listings throughout 2010 and 2011 bringing the total listed companies to twelve. The JSE ended 2012 with 36 listed companies on the main market. Other companies have expressed an interest in listing their shares on the JSE Junior Market through the submission of a prospectus for review.

The Junior Market has also grown significantly in terms of index movement. After starting at 100 points in 2009, the index had grown to 647.78 points as at December 30, 2012.

In July 2011, the JSE launched the US$ Equities Market which facilitates the trading and settlement of US$ denominated shares. The JSE USD Equities Market Index started at 100 Points and this index tracks the performance of companies whose shares trade in US dollars.

D-77

Trading Activity: Regular Market

In 2012, market volume including block trades totaled 2.58 billion, an increase of 41.72% from the 1.82 billion shares traded in 2011. The value of shares traded in 2012 amounted to J$61.11 billion, an increase of 191.08% from 2011.

Similarly, for the period from January to October 2013, market volume including block trades amounted to 1.13 billion down 48.53% relative to 2,187,713,858 units recorded in the same period in 2012. On the other hand, market value, including blocks, has decreased by 49.19% for the stated period to just over J$10.52 billion. A decline was also experienced by the number of transactions (including blocks) of 7.02% to 15,528. For the stated period there were 210 trading days.

At December 31, 2012, market capitalization totaled J$590.64 billion, down 4.65% from 2011. The top ten (based on market capitalization) listed companies account for approximately 85.38% of market capitalization, with the top 5 listed companies accounting for 67.63% of market capitalization at December 31, 2012. At June 30, 2012, there were 35 domestic companies and 3 foreign companies listed on the JSE, and market capitalization totaled J$563.46 billion.

Market volume (excluding blocks) for the period January to October 2013 amounted to 1,112,887,995 units compared to 1,238,903,486 units in 2012. This represents a decline of 126,015,491units, or 10.17%. Likewise, market value decreased to J$10.49 billion from J$15.75 billion in 2012. This reflects a decrease of 33.40% or J$5.26 billion.

Between January and October 2013, the number of transactions has decreased by 20.42% to 15,511 when compared to the total transactions for the same period in 2012. Seventeen block trades have been processed for the stated period compared to the 14 blocks trades in 2012. Market volume in the block market for the stated period amounted to 12,978,416 units and in the comparative period of 2012 the market volume amounted to 948,810,372 units. The total value of block trades year to date 2013 stood at J$34.31 billion relative to J$4.96 billion in 2012.

Since the start of the year 2013, the month that recorded the largest number of transactions was January with 1,737 transactions. Meanwhile, the month that experienced the least transactions was April with 1,360 transactions. In April, the smallest monthly volume traded and value traded were recorded which amounted to 41,629,553 units and $401,748,325.41 respectively. The month of February registered the highest market volume and value of 210,205,202 units and $1,912,341,856.02 respectively.

For the period January to October 2013, the main advancers were Caribbean Cement Company Limited up 107% to close at J$2.07 and Ciboney Group Limited up 66.67% to close at J$0.05. On the other hand, the main decliners were Radio Jamaica Limited down 38.69% to close at J$1.22 and Sagicor Investments Jamaica Limited down 29.27% to close at J$15.66. Trading occurred in 33 ordinary shares, of which 9 shares advanced and 22 shares declined.

D-78

The following table shows yearly trading data for the Jamaica Stock Exchange for the period beginning in January 2001 to October 2012:

Jamaica Stock Exchange Trading Data

Period		Period-End Market Capitalization		Value Traded		Period-End Market  Index		No. of Listed Companies		No. of Brokers
		(in millions of J$)		(in millions of J$)
	2001		197,717.5		5,948.4		35,723.6		43		10
	2002		292,297.9		7,636.9		45,396.2		41		10
	2003		512,884.4		24,237.3		67,586.7		42		10
	2004		879,297.2		35,994.8		112,655.5		41		11
	2005		839,852.8		40,746.7		104,510.4		41		11
	2006		822,862.4		37,041.0		100,678.0		44		11
	2007		876,690.6		29,047.4		107,968.0		44		11
	2008		597,277.0		67,026.9		80,152.0		45		11
	2009		544,882.5		12,190.1		83,321.9		43		11
	2010		564,720.7		20,828.6		85,220.8		43		11
	2011		619,444.8		20,994.0		95,297.2		40		11
	2012		590,637.4		61,109.5		92,101.2		36		11
	January to October 2013		491,761.7		10,521.5		81,832.16		35		11

Source: Jamaica Stock Exchange.

Main Market Index

From the start of the year, all the indices in the regular market recorded decreases. The JSE Combined Index decreased by 11.15% from January 1, 2013 to October 31, 2013. In 2013, the index peaked at 92,435.27 points in January and registered a low of 79,863.72 points in April before ending the stated period at 81,832.16 points at October 31, 2013. The All Jamaican Composite and the JSE Select indices declined by 11,484.51 points or 12.60%, and 299.42 points, or 12.03%, respectively, to close at 79,677.09 points and 2,190.25 points, respectively. The JSE Cross Listed index decreased by 80.20 points, or 9.18%, to close at 793.73 points.

The following table shows the market indices for January to October 2013:

Index	Value 2013* points		Point  change(1)			Percent  change(1)
Main JSE Index		81,832.16		(10,269.06	)		(11.15	%)
All Jamaican Composite Index		79,677.09		(11,484.51	)		(12.60	%)
JSE Select Index		2,190.25		(299.42	)		(12.03	%)
JSE Cross Listed Index		793.73		(80.20	)		(9.18	%)

(1) Measured against 2012.

Source: Jamaica Stock Exchange.

For the period January to October 2013, on average the stock prices declined by 0.43% and the advance decline ratio was 9:22.

Trading Activity Junior Market

On April 2, 2009, the JSE launched its Junior Market. The total volume traded amounted to 569.8 million shares valued at J$5,185.3 million in 2012. For the period January 1, 2013 to March 31, 2013, volume amounted to 47.85 million shares with a value of J$225.74 million.

D-79

For the period January 1, 2012 to December 31, 2012, the JSE Junior Market Index decreased by 13.50% to close at 647.78 points. For the period January 1, 2013 to October 31, 2013, the JSE Junior Market Index increased by 13.09% to close at 732.59 points.

As at October 31, 2013, the market capitalization of the Junior Market amounted to J$25,875.79 million. At October 31, 2013, there were 19 domestic companies listed on the Junior Market.

Market volume increased to 432,950,395 units, compared to 108,103,695 units in the comparative period of 2012. Likewise market value increased to J$1,303.6 million from J$563.5 million in 2012. Similarly, the number of transactions increased to 6,311 from 4,336 in 2012.

There were 210 days of trading for the stated period.

The following table shows yearly trading data for the Jamaica Stock Exchange Junior Market for the period from January 2009 to October 2013:

Jamaica Stock Exchange Junior Market Trading Data

Period	Period-End Market Capitalization		Value Traded		Period-End Market Index		No. of Listed Companies		No. of Brokers
	(in millions of J$)		(in millions of J$)
2009				0.0		150.0		1		11
2010		8,466.8		192.2		379.9		8		11
2011		23,595.0		1,248.0		748.9		12		11
2012		22,101.6		5,185.3		647.8		16		11
January to October 2013		25,875.8		1,303.6		732.6		19		11

Source: Jamaica Stock Exchange.

JSE Junior Market Index

The JSE Junior Market Index started the year 2013 at 647.78 points and at October 31, 2013 the Index closed at 732.59 points. This represents an increase of 13.09%. Three companies were listed during the period January to October 2013 bringing the total listing on the Junior Market to nineteen companies. The newly listed companies are Caribbean Cream Limited (May 17, 2013), Eppley Limited (July 29, 2013) and Caribbean Flavours and Fragrances Limited (October 14, 2013).

Market Developments

In June 2013, the JSE launched the Bond Market which facilitates the trading and settlement of fixed income securities, whether they are corporate bonds, Government of Jamaica securities, the securities of any other sovereign CARICOM country.

In July 2013, the Jamaica Stock Exchange offered 20% of its Ordinary shares to the public by way of an IPO. The offer opened on Friday July 5, 2013, and closed on Monday, July 8, 2013, and was oversubscribed by 41%. The sale were priced at J$2.85 each. More than 150 applications were received for the Offer. The invitation was for a subscription and sale of 38.25 million shares of which 28.05 million were newly issued for subscription and 10.2 million were existing shares. The JSE listed the shares on July 23, 2013.

As at October 31, 2013, the total number of companies listed on the regular market stood at 35 while the total number of companies listed on the Junior Market stood at 19. There were 33 ordinary shares listed and 10 preference shares as at October 31, 2013 on the regular market.

D-80