Jamaica Highway 2000 Case Study
5.2 Social and environmental safeguards
The construction of Highway 2000 faced several major environmental and social challenges: i. Relocation of Portmore fisher folk; ii. Creation of Dyke Road Fishing Complex iii. Replanting of mangroves iv. Flood control v. Noise pollution vi. Dust and air pollution during construction vii. Runoff and siltation viii. Landslides
Whereas both phases involved challenges, the involvement of MDBs in the refinancing of the East-West Highway in 2011 contributed to differences in the way these challenges were handled. The MDBs have higher social and environmental safeguards than commercial banks or the China Development Bank; and this benefitted all phases of the project. For example, all land acquisitions on the North-South Link employed the same standards of compensation as on the East-West Highway.
As noted in Section 4.7, there were environmental challenges on the North-South Link, principally runoff and siltation at Old Fort Bay in St. Ann. In response, CHEC accepted that construction of the Highway “may have created or exacerbated, a few challenges to some residents in close proximity to the highway.“40 Discussions are continuing between CHEC and the residents.
5.3 Financing challenges
The East-West Highway was the first toll road in Jamaica; and the list of project risks was daunting: •
Demand risk: This was Jamaica’s first toll road so there was no precedent. Would Jamaican drivers pay tolls?
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Country risk: In August 2000, Standard & Poor’s assigned its single-’B’ long-term rating to Jamaica’s USD225 million 13.125% bond, indicating a high degree of perceived country risk among global lenders.
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Construction risk: Highway 2000 remains Jamaica’s largest construction project, involving an unprecedented amount of physical and logistical challenges; which could have delayed the project and driven up construction costs.
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Currency risk: Tolls are set and collected in local currency, although there is an exchange rate factor in the toll formula, and if the value of the Jamaica dollar falls significantly, this could increase rates and dampen demand.
Upon commercial close of the East-West Highway, NROCC and Bouygues jointly approached the MDBs for long-term refinancing. However the MDBs could not give their approvals within the tight timetable demanded by the sponsors. This is where commercial lender 40 41
Interview with Mr. Lu Qin, Jamaica North-South Highway Company Interview with Ivan Anderson, Managing Director NROCC
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