1 Interaction of the Debt Management Office in Jamaica with the International Capital Markets 4th Annual Meeting of Latin American & the Caribbean Public Debt Management Specialists Port of Spain, Trinidad & Tobago May 14-16, 2008 Dian Black Ministry of Finance and the Public Service Kingston, Jamaica

2 Contents  Introduction  External Financing & Execution Strategy  Composition of External Creditors  Relationship with External Players in the International Capital Markets (ICM)

3 Introduction  Government of Jamaica’s medium term borrowing programme guided by medium – term Debt Management Strategy Debt Management objective – “ To raise adequate levels of financing on behalf of the Government of Jamaica at minimum costs, to develop and implement strategies to ensure the long-term sustainability of the public debt while maintaining risk at an acceptable level”.

4 Introduction Key objectives of the Debt Strategy Foster a more interactive relationship with the local and international markets Extend and smooth the maturity profile of the debt to better manage refinancing risk Increase the transparency and predictability of debt issuance and operations Address aspects of liability management

5 Introduction  Jamaica’s total debt– J$ 1,000,676.5mn of which :- Domestic debt – J$ 562,108.1mn, External debt –J$438,568.4mn Total Debt/ GDP – 126.1%

6 External Financing  Jamaica entered International Capital Markets (ICM) in 1997 Reasons for entering Increased domestic interest rates resulting in high levels of domestic debt servicing costs Advantage of lower external interest rates which would facilitate lowering of domestic interest rates Exit from commercial bank restructuring in 1990 Graduation from Paris club bilateral rescheduling in 1995 – no longer a heavily indebted country

7 Execution Strategy  Objective to access the ICM to the extent of gross external amortisation of the external debt to maintain good external debt indicators  Use of external advisory service external financial advisors provide valuable information monitor developments in the markets interface with investment houses to harness market intelligence Foster relationship with investors  External Legal Counsel Selection based on range of services to be provided lowest all-in costs for handling transaction  Local Registered Stocks  Treasury Bills  Investment Debentures  Variable Rate Investment Bonds  Fixed Rate Registered Bonds  US$ Indexed Linked Bonds  US$ Denominated Bonds  Land Bonds  Commercial Loans

8 Execution Strategy  Timing Monitor market developments with the assistance of the financial advisors to determine appropriate time for entry Schedule issues to coincide with maturities Interest of Investment house to go to market  Lead Manager Determination based on Request for Proposals (RFP) RFP sent to financial institutions – sometimes receive unsolicited RFP

9 Execution Strategy Short listing based on the following criteria Low cost financing Risk minimization Diversification of investor base Extension of maturity profile Selection of Lead Manager based on Terms being offered – tenor, currency Lowest all in cost – competitiveness of process helps to keep fees and expenses low Country coverage by financial institution Support from secondary market

10 Execution Strategy  Structure and Type of Bonds Decision based on Market conditions Tenor – based on portfolio needs, must be consistent with debt strategy objective of extending maturity profile of the debt Ease of execution Investor’s interest Currency – US$ usually first choice, € - volatile although hedging opportunities exist, exchange rate risk implications Size – based on annual borrowing requirement as well as investor’s preference – institutional investors prefer liquid instruments while retail investors prefer smaller issues

11 Execution Strategy  Marketing Meetings with investment banks to promote Jamaica’s credit story Develop relationship with banks and investment community Road shows – major European and North American cities Usually held at the time of issuance, also non-deal Conference calls Presentations to investors by lead managers Publication of research articles by lead managers

12 Execution Strategy  Distribution Geographic distribution – initially investors dominated from USA and Europe broadened to include Latin America, Caribbean and Gulf states Mainly Institutional investors – Insurance companies, Pension funds, Mutual funds, Hedge funds, Banks, Money managers Initially comprised of mainly retail investors

13 Execution Strategy  Documentation Offering Circular/ Prospectus Comprised of historical and financial data,legal, regulatory and taxation systems, political structure, relationship with the international investment community,features of bonds, clearance and settlement and payment systems Underwriting Agreement Fiscal Agency Agreement Purchase Agreement Global Note  Initial Phase – Bonds issued under “Regulation S/144A” under the US Securities Act which allow for sale offshore and to qualified institutional buyers in the USA  Since December 1991 US$ bonds issued under Schedule B Registration Statement with the US SEC  February 2002 – issued under “Shelf” Registration Programme

14 Execution Strategy Shelf Registration facilitates registration of securities intended for future issuance Benefits of Shelf Registration oGreater flexibility oAbility to access international capital markets at very short notice oAbility to take advantage of favourable market conditions

15 Composition of External Creditors March 2008

16 Relationship with External Players  External Creditors Multilaterals & Bilaterals Loans from Multilaterals & Bilaterals for project Financing Commercial Banks also supply loans mainly for suppliers credit Investors Invest in Eurobonds Conference calls Roadshows Provide information on web-site

17 Relationship with External Players  Lead Managers Provide market intelligence on an ongoing basis Structure Bond issues Provide Pricing indication for new issues Propose appropriate marketing & distribution strategy Arrange Investor roadshow Provide coverage on Jamaica’s credit story

18 Relationship with External Players  Rating Agencies Annual/quarterly review On going dialogue Quarterly conference calls

19 Questions?