Important Information
This information is provided for general educational purposes only without regard to your particular investment needs. This material, including any attachments or hyperlinks, should not be taken as investment or tax advice of any kind whatsoever (whether impartial or otherwise) on which you may rely for your investment decisions, nor be construed as an offer, solicitation or recommendation for any investment strategy, product or service. Investors should consult their financial and tax adviser before making investments in order to determine the appropriateness of any investment discussed herein.
Material authored by any particular Artisan Partners individual or team represents their own views and opinions, which may or may not reflect the views and opinions of Artisan Partners, including its autonomous investment teams or associates. Statements are based on current market conditions and other factors, which are as of the date indicated and are subject to change without notice. While this information is believed to be reliable, there is no guarantee to the accuracy or completeness of any statement in the discussion.
All investments are subject to risk, which includes potential loss of principal. Past performance is not indicative of future results.
This material may reference index or other information that is subject to copyright by its respective service provider, including the following: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. Frank Russell Company ("Russell") is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication. The herein referenced S&P index ("Index") is a product of S&P Dow Jones Indices LLC ("S&P DJI") and/or its affiliates and has been licensed for use. Copyright © 2024 S&P Dow Jones Indices LLC, a division of S&P Global, Inc. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). None of S&P DJI, Dow Jones, their affiliates or third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and none shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. Source ICE Data Indices, LLC, used with permission. ICE Data Indices, LLC permits use of the ICE BofAML indices and related data on an "as is" basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Artisan Partners or any of its products or services.
© 2024 Artisan Partners. All rights reserved.
Jamaican Me Hurricane Ready, Others Should Follow
Emerging market countries must deal with a host of development issues, from social unrest to inadequate institutions and corruption. A select few face an additional natural disaster risk that can derail their development: hurricanes. While countries can’t choose where they are geographically located, they can choose whether and how to prepare for potential natural disasters. With the traditional peak of hurricane season upon us, we thought it would be appropriate to highlight the case of Jamaica.
Jamaica is a prime example of a Caribbean island that has transformed its fiscal position to better withstand a potential hurricane disaster. It has reduced its debt-to-GDP ratio from a peak of 144% in 2012 to an expected 67% by the end of 2024. Since 2013, Jamaica has averaged a 6.7% of GDP primary surplus. This has successfully brought its fiscal house in order, providing it with the much-needed fiscal space to respond to hurricanes and diversify its financing mix.
The Jamaican government has around $780 million USD available from disaster risk financing instruments. These include contingency funds, contingent credit facilities, catastrophe risk insurance facilities, a natural disaster fund, a catastrophe bond and more. These instruments total around 4% of nominal GDP, which is close to the government’s estimated average impact of natural disasters (4.5% of GDP). Jamaica also currently has a Resiliency and Sustainability Facility (RSF) arrangement with the IMF that provides low-cost funding to implement measures that contribute to natural disaster preparedness, including building fiscal and physical resilience. They also have a Precautionary and Liquidity Line (PLL) from the IMF. All of these measures have reduced the hurricane risk premia embedded in Jamaica’s debt vis-à-vis that of its Caribbean peers.
When Category 5 Hurricane Beryl struck the Caribbean in early July 2024, passing just south of Jamaica, the government only drew from the first two layers of its emergency financing response strategy. Had the hurricane made landfall in Jamaica, the other layers of the strategy would likely have been tapped.
Other Caribbean islands, like The Bahamas, could benefit from following Jamaica’s lead. The Bahamas is undergoing a significant fiscal consolidation, and its next step should be to improve its hurricane preparedness strategy. A low hanging fruit solution would be to reach an agreement with the IMF that would allow it to tap the RSF. That would be a step in the right direction, and one we would applaud.
Contact the Editorial Staff
Have a question or comment? We welcome your feedback. Comments will not be made public, but will be read by a member of our editorial staff.
Thank you for your question or comment.