Category: Caribbean

Among other markets developments seen moving slowly in the Caribbean, a single currency appears some way off. “In a sense the Caribbean is moving in an evolutionary way towards this,” says Carl Ross, senior managing director at Bear Stearns. “If CSME gets up and running and proves to be successful, maybe 10 years down the road they can think about it,” he adds. “The best currency, if there is a single currency in the Caribbean, should be the US dollar. I don’t think a Caribbean currency will ever really work, although I’d love to be proven wrong.” According to the Caribbean Development Bank (CDB), talks on a single currency are on hold until regional market conditions are right. “As far as the single currency is concerned, there is a decision to let that be in abeyance,” says Compton Bourne, president of the CDB. Others are slightly more bullish. Janette Cupid-St. Hilaire, director of public sector finance at the T&T Ministry of Finance, says a single currency is only around 4-5 years off. They were speaking at the Caribbean Investment Forum in Montego Bay, a LatinFinance/Euromoney conference. Delegates are slightly more optimistic about the prospects for a link up between the stock markets of Barbados, Trinidad and Tobago and Jamaica, though exchange officials are still waiting for the regulators. The consensus suggests that unified regional trading could start this year, though Jamaican dealers who have endured much talk and little action remain skeptical.

Despite a strong record of debt repayment, Jamaica says current bond spreads are too high for the sovereign risk. “We strongly believe that the cost of financing is more than it ought to be, even when objective factors are considered,” says Omar Davies, Jamaica’s minister of finance and planning. “Despite serious fiscal challenges, most of [the Caribbean countries] maintain excellent repayment records . . . But the international financial market place has not factored this element sufficiently into its pricing decisions,” says Davies. Though he praises international capital markets for relative speed and absence of conditionality, costs are too high, especially for long term infrastructure projects. “A concern to us in Jamaica, which is directly linked to the cost of financing, is the perception of risk in the region.” Small size, lack of diversity in the economy, exposure to natural disaster are the main issues, Davies adds. According to the minister, Jamaica saw 6% inflation and under 10% unemployment for the first time in 30 years in 2006. He is upbeat about the outlook for 2007, predicting 6%-7% inflation and 3% growth, with a decrease in debt. Davies does not expect disruption from the election. “There is absolutely no reason for any expectation of any change in the fundamental macro economic policies,” says Davies. He was speaking at the Caribbean Investment Forum in Montego Bay, a LatinFinance/Euromoney conference.

Trinidad and Tobago’s National Gas Company (NGC) is planning a return to the international markets, Daniel Sankar, vice president of finance and information management at NGC, tells LatinFinance. A $195m issue with a 15-year average life is expected to hit the market at the start of the third quarter. Sankar says he favors bond financing over the bank market and is mulling a reopening of a bond issued last year through Citi and Lehman. No mandate has yet been awarded.

Trinidad and Tobago is getting pitches for external borrowing, but is not looking to issue any time soon. “We have been approached by many financial institutions,” says Janette Cupid-St. Hilaire, director of public sector finance at the T&T Ministry of Finance. “We do not need to borrow to maintain a presence in the market.” She adds that the sovereign will continue to refinance and that there are maturities in 2009, 2014 and 2020. T&T has been refinancing domestic debt in the local markets. “Borrowing at low interest rates encouraged more borrowing, and that exacerbated the debt problem,” says Cupid-St. Hilaire, speaking of international EM issuance in general.

Air Jamaica hit turbulence Thursday with a $125m sale of 20-year amortizing 8.125% bonds, priced at 98.949 to yield 8.250%. Price talk ahead of the deal shifted around, with reports ranging from 7.625% to 8.000%. Thanks to what one buysider away from the deal identified as sellside trading support, the bonds closed the day at 98.100-99.100. Lead bankers quoted the bid-ask at 98.900-99.100, a hair below reoffer. Jamaica’s sovereign interpolated curve at the 15-year maturity widened out 10bp to 7.85% during the day, according to a banker working with Air Jamaica. Bear Stearns led. Average life was 15 years.

Jamaica’ flagship airline, Air Jamaica, aims to price $125m in 2027 amortizing notes, with an average life of 15 years Thursday afternoon. The bonds, rated B1/B by Moody’s and S&P, are heard by a trader coming at 7.625%-7.875%, a slight pickup to where the sovereign would price the same maturity. A person close to the transaction says it should come at a modest concession to the interpolated curve which was around 7.75% area Wednesday night. The deal will not grow. Jamaica is guaranteeing the bonds. Proceeds will be used to revamp the fleet and pay down debt. Bear Stearns has sole books.

Digicel Group, the Caribbean cell phone operator, laid down the gauntlet Thursday to its biggest competitor in the region, Cable & Wireless. “We are very proud of taking and growing the market in the Caribbean and, as a result, cannot understand how the former monopolist in those markets has recently made claims of achieving the number one market position in Grenada and being only 1% behind us in St. Vincent & the Grenadines,” says Colm Delves, Digicel Group CEO. “All of our own data and third-party research refutes this. I challenge C&W to substantiate these claims,” Delves adds. The claims apparently appear in C&W’s recent end of financial year statements. Digicel says it has a 21% lead over C&W in market share in Grenada and a 26% lead in St. Vincent & the Grenadines.

Telecoms technology company Nortel has appointed Alvio Barrios to be the new president of the Caribbean and Latin America region (CALA), effective June 1, 2007. Barrios will report to chief executive Mike Zafirovski and will be based at Nortel’s Sunrise, Florida office. He will be responsible for sales, operations and marketing for the CALA region. Barrios replaces Martha Bejar, who is leaving the company.

A recent World Bank report finds that high levels of crime and violence threaten Caribbean growth and prosperity. In many countries, as crime increases, access to financing declines; spending on formal and informal security measures increases; and worker productivity drops. Reducing the homicide rate in the Caribbean by one third could more than double the region’s rate of per capita economic growth, the report estimates. Drug trafficking has driven murder rates in the Caribbean to the highest per capita in the world, and assault rates are significantly above the world average.

Trinidad & Tobago-based Petrotrin priced Tuesday $750m in 15-year amortizing bonds at 99.579 with a 6.000% coupon to yield 6.062%, or 140bp over the 10-year US Treasury. This was in line with expectations. The comp, Trinidad’s natural gas company NGC, was yielding 6.10% last week. Citi led the issue. Petrotrin is rated Baa2.