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. -------------- OPIC Fund a Good Idea -------------- ¶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. -------------- Buyout Strategy Could be Problematic -------------- ¶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