You aren't smokin' ganja--Jamaica's stock market is tops in the world for 2015.

Channeling Steve Harvey announcing Miss Universe 2015 in the post title, I don't believe that I made a mistake in this instance. In the rest of the world, 2015 was a rather forgettable year when investing in nearly anything made you next to no money (or lost you money). Stocks, bonds, cash...it was all a big blah. But wait, there was one exception: while other stock markets worldwide were busy going nowhere (or down), Jamaica's rallied over 80% this year:

Amid the middling returns of the world’s best known indexes -- the Dow Jones Industrial Average dipped about 1 percent, the Euro Stoxx 50 lost 6 percent in dollar terms-- foreign acquisitions, stronger investor safeguards and a rebounding economy helped the Jamaica Stock Exchange surge more than 80 percent in 2015.

With a market capitalization of about $5.3 billion (the Dow has $5.23 trillion), Jamaica lives on the fringe of frontier status. And although the exchange’s benchmark index lost 5 percent last year and 13 percent in 2013, investors should pay attention, according to Carl Bennett, a vice president of investor relations at Bank of New York Mellon. “I’m really impressed with what they’ve done to attract capital to the market,” he said, pointing to new measures to combat insider trading and market manipulation.

With economic growth forecast to accelerate for a third straight year, reaching 1.4 percent in 2015 according to estimates compiled by Bloomberg, the Caribbean island of 2.8 million people is slowly emerging from recession while struggling with one of the world’s highest debt burdens. The government has restructured local bonds twice since 2010, accepting an International Monetary Fund-led financing package in 2013. That didn’t deter individual Jamaicans and institutional investors from pouring money into local stocks this year, said Jovano Johnson, an equity trader at Kingston-based Mayberry Investments Ltd.

To be sure, economic growth reaching 1.4% in 2015 is hardly spectacular for a developing country. It also has one of the world's highest debt service burdens. Nor has the country definitively solved its high crime rate. Still, following the saying that every dog has its day, even the perpetual laggard Jamaica's stock market has done well because everyone else's isn't really doing any better by comparison.

Call it a case of Jamaica's situation not possibly getting worse resulting in a stock market rally of sorts. The real question is if this momentum can be continued.

Yes, Virginia, these dollars bear Queen Elizabeth II's image

The Eastern Caribbean Currency Union (ECCU) is the world's smallest currency union among the four existing worldwide. The European Monetary Union (EMU) is known by all, whereas the other two are in Africa. What makes the ECCU doubly interesting is that it is pegged to the US dollar. In fact, it predates the EMU by half a century, although it changed the currency it is being pegged to from GBP to USD halfway through:

The OECS members share a common currency, the Eastern Caribbean dollar, which has been pegged to the U.S. dollar since 1976 at EC$2.70=US$1, and was pegged to the British pound at EC$4.80=£1 from 1950 to 1976. Prior to the recent inception of the European Central Bank, the ECCB was one of only three common central banks in the world and the only one where the member countries have pooled all their foreign reserves, the convertibility of the common currency is fully self-supported, and the parity of the exchange rate has not been changed.

Now, there's thought-provoking stuff over at the IMF site concerning the challenges faced by ECCU. Overall, it makes economic sense for micro-sized economies to band together currency-wise:

In terms of the benefits, the small size of these countries means that the currency arrangement allows them to take advantage of scale economies. It also allows them to diversify risk. This means that if one country gets hit by an external shock or natural disaster, the other countries can pool resources and deal with the shock more effectively.

Again, because of their size, these islands can provide, at the regional level, more cost-effective public services. So that is a major benefit. What also matters a great deal is when the union speaks with one voice the countries can be better represented at the global level. 

That said, it is subject to the same sorts of problems the Eurozone faces:

Interestingly enough, the ECCU is actually a microcosm of the European Economic and Monetary Union, since the ECCU has also faced rising fiscal deficits, unsustainable debt levels in a number of states, a lack of fiscal integration, and challenges in parts of the financial sector that can undermine the stability of this union. As illustrated by the European experience, overcoming these challenges is particularly difficult in monetary unions. 

What can I say? God save the queen--and the East Caribbean Dollar

Mur-dah! Today, let's look at the utterly fascinating intersection of e-commerce, nationality for sale, and the turn for the worse in any number of Middle East countries. I saw the banner advertisement above while visiting Ahram Online that pretty much sums up the mood in Egypt and that outstanding exercise in democracy called the "Arab Spring" (hip-hip-hooray for freedom!) Apparently, real Egyptians do not share the white man's misguided euphoria over regime changes that were supposed to help usher in Western-style political institutions.They just keep piling into the streets and killing each other with abandon. Instead of a democracy emerging from a plurality of voices expressing their discontent that led to Mubarak's downfall, they perhaps inevitably succumbed to the rule of the best-organized and -disciplined faction aside from the military in the Muslim Brotherhood. That is the first component of this post.

The next component in this story is the ever-changing quest of small Caribbean nations for gimmicks--I mean--"additional sources of state revenue." Their small size and remote location means that their viable sources of revenue tend to look the same. To wit:

1. tourism
2. tax havens (paradis fiscaux)
3. offshore gambling sites
4. flags of convenience
5. nationality for sale

I think these are self-explanatory; let me go through the first four: Beach-loving Westerners have in the past been attracted to these destinations' more pristine waters since they do not lie in more polluted shipping lanes. As more cruise ships dock, the fees pile. For a long time, they have also offered themselves as headquarters for dummy corporations created for the purpose of avoiding taxes in industrialized nations (or laundering money for the more cynical). Given their limited population but access to the Internet, many also sought to host online gaming operations. Lastly, they have also offered to domicile international vessels to skirt maritime regulations or to save on various costs alike certification and so forth.

The global financial crisis has caused difficulties for pursuing (1)-(4): Fun-in-the-sun loving Westerners obviously do not have as much disposable income at a time when countries like Spain have unemployment rates north of 25%. So much for those Caribbean cruises. Meanwhile, as deficits spiral into eternity for any number of industrialized countries, organizations like the OECD have tightened the screws further on tax havens. While results are mixed, there is little doubt that it's no longer as easy to hide income as it was before. As for offshore gambling sites, the United States has not allowed those to ply their trade in this largest of all markets since 2006--see the case of Antigua. Finally, the trade in licensing vessels from elsewhere with flags of convenience is usually dependent on the health of global trade. (There is also an ongoing crackdown of sorts on FOC.) Suffice to say, it's not so healthy nowadays.

So, (1)-(4) have been rather negatively affected as sources of income for tiny island nations. These are indeed sour times. However, the ad above struck me as a possible way to make the best of a bad situation as various places on earth go to heck and beyond: Here, of course, the argument is to secure financial and personal security lest the Muslim Brotherhood go the way of the Ayatollah Khomeini (or even just Ferdinand Marcos). Another website selling citizenships to St. Kitts touts the following benefits if you invest in a home there costing at least $400,000:

• Visa free travel to all EU schengen countries including Switzerland, Canada, UK and Ireland
• No residence or minimum stay requirements
• Tax free – no income or wealth tax.
• Lifetime citizenship
• Easy second passport and citizenship for your family members.
• Extra Privacy in small peaceful country.
• Dual citizenship benefits.
• Choice of Real estate investment.
• No Personal visit required

The last is their italicization, not mine. It's most definitely a sordid business, but who am I to say what tiny island nations can and cannot do? Certainly they have their own set of challenges. While the lengths they have gone to generate revenue may appear...iffy to some, what are the alternatives in a world where international rules of the game are set by far larger nations? As the saying goes, try walking in their shoes.

To keep you up to date with other integration projects--this is the international political economy zone, after all--consider the fate of the Caribbean Community. If you think processes of Asian economic integration are going more slowly than ideal like yours truly, what more the Caribean Community's Common Single Market and Economy (CSME) which has ground to a virtual standstill by its own admission? To be sure, CARICOM has worthwhile aims such as erasing migration barriers for tertiary degree holders wishing to work in these fair islands. Still, alike many other regional integration projects--in Asia, the Middle East, you name it--let's just say attention is not focused on the political impediments to achieving ever closer union as the EU used to proclaim.

Rickey Singh offers this commentary after CARICOM heads of state gathered for a retreat (sadly, an especially apt term for integration efforts) in Mazaruni, Guyana and put integration processes "on pause":

It was simply awful public relations for the Heads to have issued a two-page statement on their retreat, through the Community Secretariat (on May 22) headlined: 'Caricom Leaders Focus on Prosperity for the People'. Then, by the following day, for the public to learn of a statement from incoming new chairman, Prime Minister Denzil Douglas of St Kitts and Nevis, that the Heads of Government have agreed that inauguration of the CSME "will now take longer than anticipated".

How long would this "longer" period be? And why the glib talk about placing "greater focus on prosperity of the people" in the absence of referencing any new approach in their conduct of the community's business; or any specific project/ programme to inspire the promised "re-energising" process?

Further, why have they failed to offer even a two-paragraph response on their initial thinking of the 10-page working document on "Re-energising Caricom Integration" that they had in their possession long before flying into Guyana for the two-day retreat?

To add to the agony, the Caricom leaders apparently felt they were saying something new when they piously announced that, as regards the single economy they "recognised that the process towards full implementation would take longer than anticipated".

The Jamaica Observer ups the concern factor by stating CARICOM itself is at risk. Change the places and names concerning gridlock and this could be true of any integration project you can to name:

Theirs was a shared vision of the region benefitting economically and socially from a strong and united Caricom. And while we are not here suggesting that the current Heads of Government are not committed to that ideal, we can't ignore the possibility that they lack the drive to ensure that Caricom does not lose momentum.

That, we believe, is contributing to lingering scepticism among Caribbean people about the regional movement, as far too often decisions are not followed up by actions to ensure implementation. And even when policies are implemented, we have seen in a few instances disregard by some member governments for the agreements.

We accept that economic unions are difficult to manage, especially for the fact that each member state comes to the union with its own needs and ideas... and notions of sovereignty. But the European Union, despite the challenges that it faces, is testament to the fact that economic and political partnerships can work. And if the Europeans can make a reasonable success of it with 27 nations, there's no reason why 15 much smaller states in the Caribbean can't do the same.

We sincerely hope that our current leaders are not now sounding the death knell for Caricom.

Starboek News also offers informative commentary. You begin to appreciate what the EU has done, warts and all, and how it has persevered in the face of adversity. It remains a model the rest of us aspire to and for that and we certainly wish it well. As for CARICOM, this occasional reggae listener needn't add: they're tellin' you da truth, mon!

Cloud nine--ah--where you find me
Some boy wan' reach cloud ninety
We're smokin' like a genie
The skunky and the greenie

Jamaica is a colourful place full of colourful people. It brought the world the ganja-smoking Rastafarian reggae idol Bob Marley--a massive influence on contemporary pop culture despite passing away many years ago. Indeed, his offspring urge us to board the "ganja bus" (I'll take the Venga bus, thank you.) It's also the home country of exceptional athletes like the fastest man on Earth, Usain Bolt. (As an aside, the Jamaican track and field team will be using my alma mater, the University of Birmingham, as training grounds in preparation for the 2012 London Olympics.)

Unfortunately, this sort of colourful behaviour from our Jamaican friends extends to realms where being staid and boring is of great benefit--economic management. A few months ago, Forbes lumped Jamaica in with the ten economies hardest hit by financial crises, with a national debt at 113% of GDP and a CCC+ credit rating. As we shall see, the country's troubles far predate the current crisis. It's reminiscent of the same sad story that ails any number of developing economies. Jamaica has not had much luck in diversifying away from primary commodities--in their case, bananas. In classic underdevelopment alleviation fashion, the Jamaican government has urged the country to move up the value-added ladder as far as bananas are concerned. From the Miami Herald:

The global financial crisis, which has battered Caribbean economies, is forcing Jamaica and other countries in the region to rethink how they do business. Although most Caribbean nations continue to wrestle with how to avert financial meltdown, Jamaica is mounting an aggressive campaign to help diversify its economy.

The banana plantation in Annotto Bay, about 22 miles north of Kingston, is at the forefront of how Jamaica is reinventing itself from a country that once shipped fresh bananas and other produce to one that now processes and packages them.

``This year we have an export business that we didn't have last year,'' said Rolf Simmonds, commercial director for Jamaica Producers Tropical Foods, a division of Jamaica Producers Group, which revamped its business model in November. ``We were exporting bananas. This year we are exporting banana chips and doing well at it. We are building a business slowly but surely.''

No longer should shipping ackee, cocoa, Scotch Bonnet peppers or banana in its raw form be good enough, farmers are being told. Can it, box it -- add value to it, government officials are demanding. ``We are having to deal with two significant challenges at the same time,'' Prime Minister Bruce Golding said in a recent interview with The Miami Herald. ``One is how to charter our way out of this global storm, but secondly how to address long-standing structural deficiencies in our economy . . . and how to do that in the midst of the global storm.''

These measures have, to date, not been enough to improve foreign exchange earnings. Aside from a failure to diversify from primary product exports, Jamaica has also been beset during the financial crisis by dwindling remittance earnings from its overseas workers and falling prices commanded on world markets for bauxite:

``The Jamaican economy has relied too much on too narrow a range of industries over the years,'' Finance Minister Audley Shaw said. ``We've relied on bauxite, we've relied on tourism and we've had limited manufacturing that has gotten worse and it got worse not just because of the implosion. Jamaica had its own implosion long before the world implosion.''

Even before the recession blew a $1.3 billion, or 20 percent, hole through Jamaica's budget, the country's economy was already on shaky ground: External debt of almost $6.2 billion, years of anemic economic growth, the removal of guaranteed markets and prices for sugar and bananas, and the 1995 collapse of more than 40 banks.

Now, Jamaica finds itself in even more dire straits after believing it would be insulated from the recession. In the past year, remittances have fallen by 16 percent or $300 million; tourism [visitor arrivals, I guess] is up, but earnings are down by $100 million; and the closing of three out of the country's four bauxite plants that produce aluminium ore at a loss of $900 million.

The endgame is predictable here: a holla for help from the IMF. Like other borrowers, the IMF has prescribed some belt-tightening for Jamaica in order to get it in better shape to repay a forthcoming $1.3 billion loan. However, social unrest in the wake of IMF conditionalities have predictably arisen, and Jamaican Prime Minister Bruce Golding has had to backtrack on tax increases on basic necessities such as vegetables, bread, sardines, animal meal and fishing gear. Nevertheless, he also emphasizes that new sources of public revenue need to be found.

All this government wrangling has come at a price of a delayed letter of intent (LOI) for Jamaica to request a standby agreement from the IMF. However, we receive news today [1, 2] that the government will send the LOI off to the powers-that-be in Washington soon as it has already been completed. The IMF will review Jamaica's application on January 27.

Note that the current government was partly elected on a platform of curbing previous excesses of the previous government. Moreover, the refrain here remains a familiar one of the IMF being an unwelcome but necessary guest. Here's an op-ed from Kevin O'Brien Chang in the Jamaica Gleaner:

In all probability, the raft of tax increases announced by finance minister Audley Shaw on Thursday was largely dictated by International Monetary Fund (IMF) conditionalities. We can weep and wail and gnash our teeth and abuse the heartless IMF to 'kingdom come', but deep down we all know Jamaica is reaping the bitter fruits of decades of borrow-and-spend government, and the chickens have now come home to roost.

Beggars can't be choosers, and borrowers can't dictate terms from lenders. It's not like the IMF is an invading army holding guns to our heads and saying, "Take this money or else!" We are the ones pleading for a loan. The IMF is merely saying, as all bankers do, "You want money to borrow? Well here are my conditions. Take it or leave it." And given the gigantic hole in the budget right now and the fact that nobody else will lend us any more money, Jamaica has two choices - negotiate an IMF agreement, or declare national bankruptcy.

So, in domino terms, Golding is basically matching his doubles as the game unfolds and cussing the lousy hand in front of him. Anyone who can add and subtract knows Jamaica is presently stuck in a deep hole dug by Omar Davies and Derick Latibeaudiere, under whose stewardship Jamaica averaged less than one per cent economic growth and over 10 per cent inflation from 1994 to 2007. Has any other finance minister and central bank governor pairing, with such a dismal record, ever been given such an extended run?

Yet Golding knew what he was getting into when he begged Jamaicans to vote for him in September 2007. True, no one predicted the current global financial crisis. After all, the Bear Sterns' folks who used to advise our government on global financial matters were so ignorant about what was coming that their company went totally bankrupt.

Indeed, many Jamaicans elected Bruce Golding and the Jamaica Labour Party (JLP) in 2007 precisely because he convinced them that the People's National Party (PNP) had Jamaica on an unsustainable path, and that he could set the country straight. So yes, we understand things are tougher than you figured, Bruce. But it's time to stop whining about what the PNP did and show us that you are the 'big-time driver' you claimed to be and not some learner who bought his license.

Whatever happened to the kinder, gentler IMF? Still, I like the current PM's notion of being a 'big-time driver'. I just hope that the vehicle he's helming isn't--you guessed it--the ganja bus. I'm tellin' you the truth, mon!