216. Memorandum Prepared in the National Foreign Assessment Center, Central Intelligence Agency1


JAMAICA: Need For Assistance

Prime Minister Edward Seaga, faced with an empty treasury, is moving quickly to negotiate balance of payments assistance with the International Monetary Fund (IMF)—which likely will pave the way for additional aid from Western countries. Talks with IMF officials in Washington are scheduled later this week and an accord may result by the middle of next month. [portion marking not declassified]

In the interim, Seaga’s overwhelming election mandate gives him the leverage to avert further political deterioration. In the longer term, however, both local and international experts agree that substantial Western assistance—fast-disbursing aid for the current fiscal year—will be essential for political stability and economic recovery on the troubled island over the next four or five years. [portion marking not declassified]

[Page 518]

Seaga’s Problems and Prospects

Seaga’s election has improved prospects for Jamaica’s recovery across the board. Although the government is virtually bankrupt and may be forced further into arrears on its foreign debt—now about $1.4 billion—Seaga will have widespread support for the near term among the private sector, organized labor, small farmers, the security forces, and the international financial community. As he formulates and begins to implement his recovery program over the next few months, local opposition groups probably will have little success in capitalizing on continuing economic hardship across the country. [portion marking not declassified]

Seaga recognizes that a new IMF agreement is the first critical step in securing additional aid. The World Bank, for example, is considering a $30–$50 million loan to accompany IMF credits. Jamaica also has negotiated a $100 million credit from a consortium of US and Canadian commercial banks that is tied to the IMF negotiations. [portion marking not declassified]

The Jamaican government, particularly concerned about shortfalls over the next two months, appears to have a good chance of bridging the gap. Seaga expects within the next few days to receive $48 million in credits from Venezuela’s oil facility. He also has available a $25 million loan from Iraq, which he intends to keep in reserve unless Caracas fails to honor its pledges. The Prime Minister hopes that bilateral aid from Western countries will enable him to save the Iraqi funds and to avoid requesting early payment of Jamaica’s levy—about $55 million due on 15 January—on North American bauxite companies. These alternative sources, nevertheless, provide him an ace in the hole. [portion marking not declassified]

The Longer Term

Despite their current euphoria, Seaga’s supporters will tolerate only a short “honeymoon;” they have high expectations of “deliverance” from the eight years of negative economic growth under the Manley government. To consolidate his position, Seaga will have to quickly translate his popularity among the local business community into increased confidence among Western aid donors and gradually among foreign investors. [portion marking not declassified]

IMF talks will concentrate on a three-year economic recovery program that would allow Jamaica to draw about $190 million annually from the IMF and to benefit from IBRD assistance of about $60 million. [5 lines not declassified] The fund hopes that the US will kick in $50–$60 million in fast-disbursing aid in 1981. Seaga’s success in convincing Washington and other Western donors to provide increased assistance both in the near and long term will largely determine the stability of [Page 519] his government. His first crisis will be precipitated by powerful unions resisting further cuts in real wages under a new IMF program. Eventually, any strains in Seaga’s government will benefit the pro-Cuban left, which is certain to regain its political influence if Seaga’s moderate course does not lead visibly to economic recovery. [portion marking not declassified]

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Country Chron, Box 23, Jamaica, 1980. Secret. Prepared by John Gannon, Office of Economic Research, and [name not declassified], Latin American Division of the Office of Political Analysis, and coordinated with the National Intelligence Officer for Latin America. According to a note on the first page, the memorandum was requested by Brzezinski.