Representatives of major banks turned down an impassioned request by the government of Jamaica this week for emergency financial help to cope with an expected deficit of $430 million needed to pay off loans, buy wheat and oil and keep the country's battered economy going in 1980.
Several persons who attended a meeting in New York City Monday between Finance Minister Hugh Small and officers of eight banks said the financiers acknowledged that they were unwilling to help at this time, mainly because of the possibility that Prime Minister Michael Manley's government may be unseated in a coming election.
"It was a very political meeting," Small said in an interview here yesterday. "The bankers were holding up public opinion polls showing Manley would lose."
A Citibank official, who confirmed that Jamaica's politics had been discussed extensively, said "the reaction of the banks was that there is a possibility there will be a new government and we'd just have to go back to it after the election."
Without speedy financial aid, U.S. observers said yesterday, Manley's leftist government is sure to face even worse economic problems, with political consequences that are unpredictable.
The present crisis arose last month when Manley's government broke off months of negotiation with the International Monetary Fund for new credits rather than accept new conditions that included a $50 million cut in government spending and further reductions in imports.
Manley has indicated that this crucial decision will be the major issue in the election to be called later this year.
His main opponent will be Edward Seasa, head of the conservative Jamaican Labor Party. Manley's Peoples National Party espouses a mixed economy and broad social and economic reforms that include some socialist elements.
International banks, which have some $374 million in loans outstanding to Jamaica, have made clear that they prefer a government that will come to terms with the IMF, because IMF credits provide a cushion against defaults in the private banking sector.
However, Small said yesterday, the IMF's conditions had "battered the whole psychology of our society over the course of the last three years," and led finally to the attempt to change course.
Nevertheless, the decision by Manley and his party to break off the talks has faced the Jamaican leader with the most serious political and economic risks since he came to power.
Jamaica's foreign debt for the current year is expected to be $1.3 billion -- $430 million more than earnings from tourism, bauxite, sugar, bananas and other items.
The largest single foreign expense that the government has this year is $338 million in interest and principal on outstanding loans from foreign banks, governments, and international agencies such as the IMF.
The country also will spend $285 million for oil, $150 million for food, mainly wheat and feedgrains from the United States and Canada, and nearly $300 million for foreign parts and equipment.
"The time has arrived in the life of a country when you have to put food and jobs first," Small said yesterday. "We have told the bankers that when it finally comes down to a choice between feeding our people and paying off the loans, we will advise them of our decision."
Small said Jamaican companies already are in arrears by $80 million to foreign suppliers because of the lack of dollars at the central bank.
He said that layoffs have already occurred at pharmaceutical plants, some bakeries cannot get flour and the poultry, garment and paint industries are experiencing difficulties in continuing to operate.
Thus far, the response from oil exporters has been muted. Small said Venezuela has pledged $94 million and loans also are promised by Iraq and Libya.
Hopes for other immediate relief apparently were dashed at the meeting with the commercial banks.
Small said he told the bankers that Jamaica would continue to pay bank loans as they came due. Last week, the government paid $6 million interest to the Bank of Nova Scotia.
In return, he said, he asked for a resumption of credits to importers and exporters, so that vital food raw materials and equipment could continue to flow to his Caribbean country. These credits were halted by some banks earlier when Jamaica began to fall behind in paying for these goods.
Small said he also asked for a one-year deferral on repayment of an unspecified amount of principal on previous loans.
"It was a very impassioned plea and Mr. Small had a very sympathetic audience," said a banker who was present. "Unfortunately business is business."
Represented were the Royal Bank of Canada and Bank of Nova Scotia, leaders of the Jamaica loan consortium, and Citibank, Chase, First Chicago, Bank of America, Bank of Tokyo and Credit Lyonnais.
The banker said it was his understanding that the Manley government had initially signed an agreement with the IMF for new credits, based on domestic financial measures agreed to by the Jamaican regime. However, he said, elements of Manley's party opposed the agreement and it was renounced.
Looking ahead, the banker speculated:
"Let's say they survive through an election without social chaos, and then a new government comes in. . . . The Fund [IMF] would certainly be prepared to be flexible."