Caribbean Business Environment

3165 Words Feb 26th, 2012 13 Pages
TABLE OF CONTENTS

TOPIC PAGE

Executive Summary 3
Background 4
Economic Environment 5
Social Considerations 6 - 7
Political Considerations 7 - 8
The Industrial Relations Climate 8 - 9
The Current State of the Private Sector 9 -10
Technological and Infrastructural Capabilities 10 - 11
Conclusion 11
Appendix 12
Bibliography 12

EXECUTIVE SUMMARY

This report provides an analysis and evaluation of the factors that would affect the operations of a hotel that our company is interested in setting up in Jamaica. To effectively undertake this study, a PEST (Political, Economic, Sociocultural and Technological) analysis was carried out.

The PEST Analysis
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Despite these positive indicators, Jamaica’s economy suffers from serious debt problems (with debt-to-GDP ratio at more than 130%), high inflation (14% as of May 2010), high interest rates, large-scale unemployment and underemployment. Jamaica's onerous debt burden hinders government spending on infrastructure and social programs as debt servicing accounts for nearly half of government expenditures. In Jamaica’s 2010 budget 11% of recurring expenditure was allocated to National Security whereas only 9% was allocated to Health. We highlight some of the economic factors that are of concern to our company.

High inflation rate means high cost of living and reduction in the spending power of both locals and tourists alike. Reduced spending power would translate into less hotel rooms being booked or being booked for a shorter period because visitors may not be able to afford the high cost of hotel rooms and all the other amenities that go along with a vacation.

High interest rates would increase the cost of doing business in Jamaica. The government’s claim on credit resources crowds out the private sector’s access to credit. Therefore, bank lending is concentrated in a few sectors, causing interest rates to rise. This would inhibit us to some extent from acquiring funding, and therefore our company would have to explore alternative sources of start-up capital.

High debt-to-GDP ratio - The government's difficult fiscal position hinders spending on infrastructure and
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