BARBADOS - EMBASSY INPUT ON OPIC-SUPPORTED

UNCLAS BRIDGETOWN 000684

SIPDIS

SIPDIS

STATE PASS TO OPIC FOR JENNIFER RENEE DOHERTY AND JAMES F.
HANSLEY

E.O. 12958: N/A
TAGS: EINV EFIN BB XL
SUBJECT: BARBADOS - EMBASSY INPUT ON OPIC-SUPPORTED
INVESTMENT FUND

REF: STATE 57353


1. Summary: In response to Ref A, Post concurs with the
establishment of an OPIC-supported investment fund in the
region that will target Barbados, among other countries.
That said, the buyout strategy outlined in paragraph 4 of
reftel may face local opposition. End Summary.

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OPIC Fund a Good Idea
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2. The OPIC-supported investment fund outlined in Ref A
seems like a good idea and the fund could become an important
source of financing to promote economic development in
Barbados. The country has graduated from World Bank lending
due to its relatively high GDP per capita, and can use more
sources of funding. The government is most interested in
promoting investment in areas other than tourism and
residential property development as a way to diversify the
economy.


3. Post also encourages the fund managers to look beyond
Barbados for investment opportunities in other Eastern
Caribbean countries. The island-nations of Antigua and
Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia,
and St. Vincent and the Grenadines generally have a greater
need for investment than Barbados.

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Buyout Strategy Could be Problematic
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4. Barbados is a very small island. Some Barbadians view
the foreign purchase of island property or a local company as
tantamount to ceding sovereignty. Although the Prime
Minister is a strong advocate for foreign investment, a
foreign company trying to take over a local company may still
face political resistance. A buyout investment strategy may
work, but only if the fund managers take into account the
political obstacles to such investment.


5. As a workaround, foreign investors in Barbados often
assume a low profile or take minority shares in companies.
For example, the American company Leucadia National
Corporation holds a roughly 40 percent stake in the local
electric company, Barbados Light and Power. Most foreign
investments in property, for instance, use a local
businessperson for the public face of a project. As an
example, Barbadian construction magnate Sir Charles Williams
is the face of the new billion-dollar Apes Hill residential
development, even though most of the financing comes from
overseas.
GILROY