Public discussion surrounding the depreciating dollar have been one sided, looking only at the negatives associated with the decline. With the exception of Dr. Damian King (Senior Economist, UWI), I’m yet to see a different perspective on the implications.
Dr King views in summary:
Some Jamaicans (companies, individuals etc.) will lose from the depreciation in the dollar, while others will gain. Since both the winners and losers are Jamaicans operating in the economy, the country is not made worse off with a depreciated dollar.
King went on to give an example, highlighting that Every purchase of foreign exchange is also a sale. Somebody is selling it. So if you have to pay me $150 for a US dollar, what you lose is exactly what I gain. You pay more, I get more. If the cost of haircuts suddenly rise to $1,500 a head, that is terrible for everyone else but it is great for barbers. The whole country is not worse off because barbers are part of the country. The identical thing is true for any other transaction, including US dollars.
Can we follow the Chinese? China has come under pressure from the United States (US), for supposedly manipulating their currency to gain unfair trade advantages – it is widely agreed that the Chinese dollar (Yuan) is undervalued. The argument is that the Chinese keep their dollar undervalued so their goods and services will remain ‘cheap’ and competitive in foreign markets. An undervalued currency also allows for lower cost labour which has resulted in some major US companies moving their manufacturing to factories in China (e.g. Apple & Nike) – outsourcing.
This Chinese example, presents a model for Jamaica. We need to increase production of goods and services and use the depreciated dollar as our competitive advantage. We’re unlikely to compete with China’s manufacturing prowess but services (BPO, Tourism, etc.) could provide superfluous returns.
Outsourcing to Jamaica: As I write, Sutherland International (a US base outsourcing company) is looking to launch its operations on the UWI Mona campus. This venture is expected to see over 13,000 students and other professionals being employed full-time and part-time. A depreciated Jamaican dollar is as much a ‘problem’ as it is an ‘opportunity‘. It is an opportunity for us to embrace a more modern approach in participating in the global world and improving our competitiveness.
Some Opportunities:
1. A cheaper Jamaican dollar will attract more investors who are looking to take advantage of Jamaica’s educated, yet highly unemployed labor force.
2.Increase tourist visitors – It will be cheaper for tourists to visit Jamaica and as such more will come (The Land of Usain Bolt & Bob Marley)
3.We will import less (due to a depreciated dollar) and hopefully increase local production
4.Local goods & services will become more competitive in foreign markets – locally produced goods/ services will become cheaper.
Jamaica’s tourism industry (one of our main foreign exchange earners) could also benefit significantly from a depreciated dollar, especially with the expected tax hike for US consumers – what has been termed the Fiscal Cliff. Tax increase will reduce disposable income of US consumers and since tourism is classified as a luxury it will likely be first on consumers ‘cut-back-list’. A depreciated dollar could help Jamaica offset any repercussions to the industry in the event that the US Fiscal Cliff is realized.
Looking at Solutions:
We need to embrace the opportunities associated with a depreciating dollar and look to increase production, exports and services offered globally.
At Balcostics Research, our aim is to empower leaders with the required data & information to make better decisions. Our Research Management & Outsourcing services support Organizations & Consultants with project execution: Learn More
Balcostics 
Production requires an integral input – energy. Energy is bought with US dollars, so I’m not so sure our products will benefit from a competitive advantage.
LikeLike
Thanks for taking the time to comment Verlis. You raised a very good point, I believe we would have to focus mostly on services and production of raw materials (Agriculture, craft etc.). Manufacturing as you rightly identified, would be too expensive given high energy cost.
LikeLike
I could not wait to get to the end of the article to highlight the importance of energy in realizing the opportunities identified. As Verlis identified (and you admitted), energy is an integral part of almost every thing that we do and as the use technology is embraced in areas such as agriculture and services the reliance on energy increase exponentially. Therefore, while I am in agreement with you in regards to the opportunities identified, energy is still the single most import issue the government has to face in crafting a sustainable economy policy.
LikeLike
Can’t deny the energy problem at all, we need a solution indeed.
LikeLike
Luwayne excellent, absolutely visionary perspective. It has energized me greatly. This perspective confirms my belief that we have many opportunities here, despite the decline in the dollar value. And, while I do concur that energy is one of the main drivers, I also believe that we are perfectly positioned to expand the service, creative, tourism and agricultural sectors. Those of us who provide a lots of these services/operative outside of Jamaica in capacities that could provide the necessary fillip must band together and contribute to the (further) development of these sectors – towards exporting, feeding the nation and earning foreign exchange.
When you compare Jamaica with the other islands we are hands down far more trainable where the service industry is concerned; especially since we are far less “entitled” than many. Our human resources are “wild” (at the best of times) but when trained appropriately and or harnessed, we bring the suave, gracious, pleasant, patient character coupled with so much creativity to everything business. Some of our neighbours would be hard put to perform with that winning combination; and this could be the component we need to project globally; to start on the road to success. The million dollar question is what is the “commencement methodology?”
LikeLike
Happy you found the perspectives useful Jennifer, I think the commencement is underway already, early days however 🙂
LikeLike