The new government appears to have hit the ground running. Sources suggest that the meetings with the IMF team this week, which many thought would be merely “meet and greet” sessions given that less than two weeks had passed since the new government took power, and the government would not therefore be ready to start negotiations, went much better than expected. This suggests that the Finance Minister, Dr Peter Phillips, making his first major public statement on the economy at the recent Mayberry investment seminar on Wednesday (a coup for Mayberry) was being no more than accurate in describing them as “preliminary talks”, a true prelude to the fuller negotiations expected to begin in February rather than just vague discussions over general issues previously expected.

Even more importantly, in his Mayberry speech, Phillips said that “There is no policy of high interest rates and there will be no policy of high interest rates”. Indeed, he added that “We would like to get the rates even lower if conditions allow”, suggesting that he is completely in sync with Bank of Jamaica Governor Brian Wynter on this critical issue. Moreover, he carefully observed, referring to the keen media interest in the economic management team, that he had “no reason to change the team at this time.”

The context to these statements is extremely important for investors, both local and foreign. Since the second half of last year, there has been increasing unease in the investment community about the status of the IMF agreement, and the overall ability of what had become an unpopular government (with an extremely slim majority) to implement what would need to be further tough decisions on an already long-suffering populace. Sources indicate that Governor Brian Wynter was indeed accurate in saying, at a Jamaica Chamber of Commerce luncheon last year, that 95 per cent of the IMF conditions had been met, but it was a critical 5 per cent that eluded the former government. This includes, in order of immediate importance, the issue of public sector and pension reform (due to its overall impact on the medium-term wage bill), the overruns on major projects such as the JDIP, and the long awaited tax reform.

The general uncertainty created by the issue of whether the IMF deal was “off track” was then compounded by first the resignation of Prime Minister Bruce Golding (who had been widely regarded as strong on his understanding of economic issues), followed by the announcement of a general election. Anecdotal evidence suggests that capital flight had started in the latter part of last year, albeit on a limited scale not readily apparent in the economic statistics, and accelerated immediately after the election. This was driven, in part, by poor initial messaging from spokespersons for the incoming government concerning the level of interest rates and by implication possible changes to the economic team. The uncertainty over the direction of interest rates and the economic team has now been suitably clarified by Phillips as part of his comprehensive 21-page address to investors at Mayberry, leaving the challenge of what the upcoming supplementary budget will reveal. Phillips notes, for example, that the amount budgeted to be spent in the 2010/11budget for the JDIP was over-shot by US$80 million or close to $7 billion.

One of his most encouraging statements was “If as Minster Finance I have to err, I will err on the side of providing for business – small, medium and large – the environment that they need to expand production, hire people and grow the economy. This effort will require a team approach working with the ministries of Justice, Commerce and Investment through the Development Council.” This can be usefully coupled with his comment that “The Jamaica Stock Exchange, including the Junior market, is of great importance to us as a vehicle for achieving our objective of increasing wealth and ownership among the broad mass of Jamaicans.” As Phillips rightly notes, “If our people have no stake in the ownership of the society they will not be committed to building it”.

If one adds to these remarks his intention to package and divest public assets through the Jamaica Stock Exchange, Phillips seems to fully agree with the favourite saying of my late father, Roy Collister: “What Jamaica needs is not more debt, but more equity”. This suggests that one of the previous Government’s most successful initiatives, namely the Junior market of the Stock Exchange, shepherded into existence by GraceKennedy’s Don Wehby in his capacity as a former minister, is safe in his hands, or put another way, he does not plan to fix what isn’t broken. As the first speaker on the opening day of the Jamaica Stock Exchange Investment’s and Capital Markets Conference 2012, “Forging Alliances: Opportunities Amidst the Crises”, he will soon have the opportunity to make this as crystal clear as he has made the issue of interest rates and the economic team.