Life and debt: documentary analysis

¶ … Jamaican Economy

Fairness of the high interest rates

On the list of the 227 global economies, developed by the Central Intelligence Agency based on the countries' gross domestic product, Jamaica is located on the 114th position. The country faces numerous severe challenges, such as a new peak in federal debt, increasing unemployment rates or increasing crime rates. The country relies heavily on tourism and other services, but these fail to retrieve sufficient revenues. The administration has granted numerous bailouts to companies in trouble, but the difficulties have yet to be resolved.

Throughout the years, Jamaica borrowed impressive sums of money from foreign countries, international institutions as well as multinational companies. Today, the country's total debt amounts to $30.60 billion ($7.36 billion less than the country's GDP). As a new attempt to reduce and restructure the national debt, Jamaica signed a contract with the International Monetary Fund on a standby agreement of 27 months for the sum of $1.27 billion (Central Intelligence Agency, 2010).

As a result of the massive debts to the IMF as well as to other creditors, the access to funds has increased significantly, as the costs of contracting loans have increased through the implementation of higher interest rates. The fairness of this decision is questionable, with validity of the arguments being recognized on both sides. On the one hand, it is natural for the access of large debtors to additional borrowed funds to decrease in order to further deepen the debt accumulation.

On the other hand however, the implementation of high interest rates affects the population in an unfair manner by deepening the gap between the rich and the poor. In this order of ideas, people who are already wealthy do not necessitate loans, but they make deposits and earn high interest. The poorer population however is in dire need of financial resources, but its access to these resources is restricted. In other words, the rich get richer and the poor get poorer.

The impacts upon the economy are also negative as entrepreneurs can no longer access loans to develop their businesses, create employment opportunities, generate revenue and as such contribute to the state budgets. Also, the system is inefficient for the creditors, who are less likely to recuperate their money from a financially burdened country than they would be from recuperating their money from a prosperous economy (Chen, 2009). In a more concise formulation, the implementation of high interest rates in Jamaica is unfair at a deep socio-economic level.

2. The free zone. Trade with the United States

Today, there are a total of five free zones in Jamaica and their main characteristics are that they exempt economic agents from the payment of taxes, as well as duty customs on both imports as well as exports. The first free zones were created with the stated scope of stimulating the textile manufacturing industry, but eventually their features attracted several other types of organizations and industries. "The establishment of free zones is regulated through the Free Zone Encouragement Act, which has now been extended to cover single-entity zones, namely, firms located outside the three existing Free Zones. Companies in Free Zones must export at least 85% of their production; activity is concentrated in textile and clothing production" (World Trade Organization).

The United States of America has been a declared supporter of the Jamaican free zones and it imported most of the products and commodities manufactured in the regions. Yet, it is often argued that the North American country has contracted more companies in the free zones and that it has created "sweatshops" in the region. There are several standpoints to justify this position:

First of all, as mentioned in the Life and Debt documentary, and as stipulated in the legislation, the free zones are not regulated by the Jamaican government

Secondly, this condition leads to the inability of workers to become organized in unions and ask for their rights to be respected

This means that the American contractors, who in effect play the role of employers, minimize all costs, including those with work safety and security, personnel wages and so on; as a parenthesis, the salary of a Jamaican employee in the free zones if of $120 a month

The employees put in extra, unpaid hours and ever work six day weeks. When some of them rebel to ask for more money or the protection of their rights, they are fired.

All the above findings lead to the unfortunate conclusion that the United States of America is unfair in its trade relationship with Jamaica and that it exploits the conditions of the free zones to its own benefit.

3. The impacted stakeholders

The economic situation in Jamaica takes its tool on numerous categories of stakeholders. For instance:

a) The regular citizens are impeded from an access to borrowed funds; this means that they cannot further invest in improving their lives.

b) The high interest rates impact all categories of citizens, but differentiated by their current socio-economic status. From this standpoint, as it has been mentioned previously, the rich get richer and the poor get poorer.

c) The economic agents' access to borrowed funds is also restricted, meaning that their development opportunities are limited. This situation in turn generates a series of effects upon various stakeholder categories: the employees within these small size companies might lose their jobs; the business partners might lose valuable contracts; the living standards of the populations would decrease as the socio-economic problem of unemployment would intensify.

d) As the poor population loses its already scarce sources of income, they are forced to get jobs in the free zones. Here, they will have to make do with a minimum wage of $30 a week and work in tough conditions.