Unlocking Private Capital for Growth in the Caribbean: Jamaican Experience

Unlocking economic growth in the Caribbean requires investments in critical infrastructure and resilience. Estimates vary far and wide, but billions of dollars are required. Fiscal space is limited though and the debt to GDP ratio stood at 82 percent on average in 2024, across the Caribbean. Mobilizing private capital has long been recognized as an important priority and the World Bank supports projects and reforms to enable and mobilize private capital in the Caribbean and beyond.

The volumes are nowhere near the desired levels yet, but there are successes to report and build on. One of them is in Jamaica.

Private capital mobilization attracts and leverages investments from private sector sources to finance projects that contribute to economic growth and development. Instead of relying solely on public funds, governments and international organizations create conditions that encourage businesses, investors, and financial institutions to invest in areas such as infrastructure, renewable energy, healthcare, and technology.  

For private investors, these opportunities offer multiple benefits. Investments in critical sectors such as infrastructure and utilities provide stable, long-term financial returns, while risk mitigation mechanisms, such as public-private partnerships (PPPs) and concessional funding, help protect against uncertainties. Engaging in such initiatives also allows investors to access new markets, expand their portfolios, and build strategic partnerships with governments and financial institutions.  

The recently completed Foundations for Competitiveness and Growth Project (FCGP) supported Jamaica in enabling private sector-led development. A relatively small US$56 million project resulted in private capital mobilization of nearly US$600 million. This result was primarily achieved by supporting PPP and privatization transactions. FCGP financed a project preparation facility at the Development Bank of Jamaica which in turn funded necessary studies, assessments and transaction advisory. Twenty-six PPP and privatization transactions were completed during the implementation period. Importantly, the project provided a foundation for future support by other development partners as Jamaica continues to ramp up its PPP program. 

A public-private partnership is just one modality for private capital mobilization.  Another component supported Micro, Small and Medium Enterprises (MSMEs) in key Jamaican industries, including coffee, sauces and spices, lobster, cocoa, handicrafts, poultry, and others. To boost MSME productivity the project used a supply chain approach and worked with anchor firms and their suppliers. Twenty-four supply chains with 454 MSMEs participated in the project with sales increasing by 56% more than in comparator firms. The project demonstrated significant potential for expanding supply chains by professionalization and expansion of MSMEs, ultimately contributing to growth and job creation. 

Another very different modality of private capital mobilization deployed in Jamaica was the placement of the catastrophe bond or Cat Bond. A Cat Bond allows entities exposed to natural disaster risks to transfer a portion of that risk to bond investors for a period of one to five years. Cat Bonds work in a similar manner to insurance in that they pay out when a disaster event meets certain pre-defined criteria or “parameters” (e.g., a specified earthquake magnitude). The first Jamaica Cat Bond was issued in 2021 and mobilized US$185 million from capital markets to provide financial protection for Jamaica against potential economic losses by severe tropical storm winds over three hurricane seasons. Upon the expiration of the first Cat Bond, Jamaica decided to continue with the practice and issued its second Cat Bond in 2024.  

Cat Bonds, in combination with other disaster risk financing instruments deployed by Jamaica, ensure fiscal resilience and protect the economy in case of a major natural disaster. This fact was recognized by credit rating agencies: in 2021, Fitch Ratings issued a “Non-Rating Action Commentary” that the Cat Bond “significantly strengthens the country’s natural disaster risk mitigation strategy.” In a subsequent comment in 2024, following the issuance of the Cat bond renewal, Fitch Ratings noted that “this financing approach allows Jamaica to transfer some hurricane risk to the bond markets without interrupting its current rapid decline in debt-to-GDP.”  Improved ratings, in turn, enable better market access for Jamaica and its businesses. 

Much more can be done to mobilize private capital in Jamaica and the Caribbean.  Continuing with major reforms and at the same time putting in place effective mechanisms for blended finance solutions, PPPs, and innovative financial instruments, can all play a role. The World Bank Group continues working with countries across the Caribbean to identify opportunities for greater private capital mobilization.