Massive blow!

Massive blow!

Controversy over Rooms on the Beach land deal causes Moon Palace to scrap multi-billion-dollar expansion plans


Sunday, March 15, 2020

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Already bracing for massive economic fallout from the impact of the coronavirus disease (COVID-19) on Jamaica, the island has received another body blow as Palace Resorts has scrapped its plan for a multi-billion-dollar investment in Ocho Rios, St Ann.

The Mexican hotel chain, through its subsidiary Puerto Caribe Properties Limited, had inked a deal worth US$7.2 million with the Urban Development Corporation (UDC) for the purchase of two prime beachfront properties in Ocho Rios to construct a five-star hotel adjacent to Moon Palace Hotel, which it now operates.

The project was reportedly planned to involve an investment of US$225 million in the first phase and US$270 million in the second phase.

The investment was earmarked to create 2,200 direct jobs during the first construction phase and 600 permanent jobs. In the second phase it was projected to create an additional 1,500 jobs during the construction phase and 3,000 indirect jobs.

It was also projected that the Government would receive more than US$9 million in revenue during the first year of the concluded investment, US$10 million during the second year, and approximately US$11 million in revenue during the third year.

The investors had also pledged to pump millions of US dollars into the redevelopment of Ocho Rios, which would make the area more conducive to other investments, and pour US$1 million into the nourishment of a significant section of the Government-owned beach to which the public would have full access.

But less than two months before it was scheduled to begin construction under the terms of its agreement, the company has written to the UDC indicating that it is backing out of the deal because of the controversy which surrounded the sale price of the land and insinuations that it was a corrupt deal.

“Whilst we were engaged in preparation for the construction of the hotel, it came to our attention, much to our displeasure, that our name and brand were subject to political discussions, inimical to our reputation, in which sufficient care had not been taken to ascertain all the facts surrounding our negotiations with the UDC,” the company said in a letter signed by its Executive Vice-President Gibran Chapur Dajer.

“We are careful at all times when we do business, both in our homeland country of Mexico as in any other company we invest in, to comply with their laws and regulations and not to become involved, directly or indirectly, in the political process of those countries.

“We seek to be good and considerate corporate citizens of every country in which we invest, and the adverse publicity, both locally and internationally, given to the acquisition of land and buildings by us from the UDC has caused us much discomfort and to seriously rethink whether or not Jamaica is a suitable place for us to make a substantial, or indeed any further investments,” said Dajer.

“Accordingly, we hearby inform you that we will not be developing the Ocho Rios lands purchased from you, and that you should proceed to retransfer the said lands to yourselves, as provided for in the [sale] agreement, and repay to us the purchase price paid to you in accordance with the terms of the agreement,” added Dajer.

The sale of the beachfront property by the UDC had irked former Contractor General Dirk Harrison who, in a report published by the Integrity Commission, said ministerial interference caused the State entity to sell the property well below its initial sale price of US$9.3 million, despite valuations which gave a cumulative lowest value of US$11.8 million.

But the commissioners distanced themselves from the report and told a media briefing that had the probe into the deal been done by the Integrity Commission, it might have arrived at different conclusions to those of Harrison.

The deal was also criticised by the parliamentary Opposition, with Senator Lambert Brown telling the Senate that the deal was “stained by corruption”.

Opposition Leader Dr Peter Phillips also called for a forensic probe of the deal which, he charged, could be another example of corruption by the Andrew Holness Administration.

However, Government Minister Daryl Vaz had rejected the allegations which he said at the time were “false and disingenuous”.

Vaz also scoffed at claims that the deal was “a travesty and not in the interest of both the Government and, by extension, the people of Jamaica”.

Yesterday Vaz, who is the minister without portfolio in the Ministry of Economic Growth and Job Creation, told the Jamaica Observer that he was always worried that vulgar politicking by the Opposition and the false innuendos could torpedo the deal.

“This is a most unfortunate development and shows what harm persons can do to the country when they focus on politics and cast aspersions without a proper appreciation of the facts,” said Vaz.

“This was a crucial investment with strategic importance for the people of St Ann and the wider Jamaica. This was a multi-dimensional strategic investment which would have brought in hundreds of millions of dollars in foreign exchange, employ thousands of our people, and fast-track major development.

“I am hopeful that the Government can engage in discussions with the principals of Puerto Caribe to continue their plans to invest in Jamaica, even if it's not the Ocho Rios site, which unfortunately became controversial because of desperate, irresponsible political utterance. It is real when they say 'loose lips sink ships', and that is what has happened in this case,” added Vaz, as he pointed to a May 2019 interview published by the Observer with attorney-at-law Hugh Hart who negotiated the deal on behalf of Puerto Caribe Properties Limited.

At that time Hart had told the Observer that if there was any suggestion that the company had anything to do with a shady deal they would walk away.

“They are very straight people. They have been in business for many years and have already spent a lot of money in Jamaica. They are prepared to expand their business in Jamaica but if people want, for political purposes, to put any kind of slant on it, from their point of view they would just clear out,” he said.

“There is a clause in the agreement that if they do not start construction within a certain time the UDC can take back that land and return the money they paid without interest. So you find that is what they will probably do if there is any suggestion of a shady deal,” added Hart.

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