ST. VINCENT PM USES INDEPENDENCE DAY TO "PASS OUT

C O N F I D E N T I A L BRIDGETOWN 001377 SIPDIS SIPDIS WHA/CAR FOR ALAIN NORMAN SOUTHCOM ALSO FOR POLAD E.O. 12958: DECL: 10/29/2017 TAGS: CVIS ECON EFIN PGOV PREL XL EINV SUBJECT: ST. VINCENT PM USES INDEPENDENCE DAY TO "PASS OUT GOODIES" REF: A. 07 STATE 148506 ¶B. 07 BRIDGETOWN 774 ¶C. 07 BRIDGETOWN 1256 Classified By: AMB. MARY M. OURISMAN FOR REASONS 1.4 (B) AND (D). Summary -------------- ¶1. (SBU) During Ambassador Ourisman's October 26-28 visit to St. Vincent and the Grenadines (SVG) to celebrate that nation's Independence Day, the Ambassador attended Independence Day activities and spoke to Prime Minister Gonsalves on issues ranging from Cuba to foreign investment in the Grenadines. The Ambassador also attended a dinner co-hosted by the OAS Secretary General, and was present for several speeches in which PM Gonsalves announced large pay raises and other "goodies" aimed at the robust public service sector. Business community leaders and Embassy contacts described the announced give-aways in such a poor, developing country as "obscene" and expressed concerns about the Gonsalves administration's continued efforts to restrain and isolate the private sector community. End summary. OAS-Trust of the Americas Grand-Opening -------------- ¶2. (U) The GOSVG planned an OAS-Trust of the Americas grand-opening to coincide with Independence Day weekend. OAS Secretary General Jose Miguel Insulza and Trust of the SIPDIS Americas executive director Linda Eddleman (former State Department Deputy Assistant Secretary for Regional Economic Affairs) both attended the grand opening of the SVG Young Americas Business Trust (YABT) national chapter and the Business Labs program. Former ambassador to the United States Ellsworth John was announced as the Chair of YABT St. Vincent and the Grenadines. ¶3. (SBU) At a dinner co-hosted by OAS and the GOSVG, Ambassador John introduced OAS SecGen Insulza by noting his popularity in his homeland of Chile, citing polls that allegedly show Insulza would win a Presidential election there if it were held today. While PM Gonsalves and OAS SecGen Insulza both praised the founding of the YABT and Business Labs programs in SVG, the St. Vincent and the Grenadines Chamber of Commerce President Jerry George bemoaned privately that even though the program is meant to encourage entrepeneurship programs and Ambassador John approached him for financial contributions after the ceremony, his presence was not recognized during the event. George pointed to the slight--and the strong emphasis during the program on the GOSVG's role in business development--as evidence that the Gonsalves government is not sincerely engaged with the business community or committed to promoting the private sector. "We Want Our Friends To Be Friends" -------------- ¶4. (U) During his speech to the police force at the Old Montrose police barracks, PM Gonsalves referenced the foreign diplomatic corps in attendance. Implicitly referring to the presence of Ambassadors from Cuba, Venezuela and the USA, Gonsalves stated that he wished that the friends of SVG could also be friends with each other. Ambassador Ourisman mentioned the quip when she approached PM Gonsalves for a short pull-aside following the speech. She expressed the USG's desire that the GOSVG vote against (or abstain) on the annual UNGA resolution introduced by Cuba condemning the U.S. economic embargo. Ambassador Ourisman stressed the dire human rights situation caused by the current Cuban regime. ¶5. (C) In response, PM Gonsalves explained the GOSVG's view that by engaging the Cuban government, it will help to "soften" some of the GOC's worst practices. Gonsalves expressed the belief that the United States would not support the Cuban embargo if it were not for the politics of the South-Florida Cuban community and its influence on U.S. Presidential elections. He also claimed that his country's stance on Cuba was largely dictated by CARICOM. He did however pledge that when he meets with PM Owen Arthur of Barbados and PM Hubert Ingraham of the Bahamas on November 16th as part of a CARICOM working group, he will raise the issue of Cuba and the need to possibly revisit CARICOM's stance. (Note: Given the assistance of the GOC on the Argyle Airport project and continuing Cuban projects such as the energy-saving lightbulb replacement and eye care assistance, Gonsalves is highly unlikely to change his stance on Cuba. End Note.) Don't Build It and You Will Go: Chatam Bay Forfeiture -------------- -------------- ¶6. (C) The Ambassador then questioned PM Gonsalves about a recent court case in which the GOSVG expropriated land from an American citizen, Haze Richardson, who owns the successful Grenadines resort of Petit St. Vincent (PSV). In June the High Court of SVG ruled that since Mr. Richardson and his Chatam Bay Club Ltd. (and Chatam Bay Development Corp. Ltd.) had not developed the 100 acres of land at Chatam Bay, Union Island for over 20 years, the GOSVG had the legal right to forfeit his ownership of the land. He corrected the Ambassador, emphasizing that the government did not/not expropriate the land, but used the country's laws on forfeiture and the guidelines of the Alien's (Land-Holding Regulation) Act, first passed in 1926, to get the land back in the public domain. According to this Act (and the court ruling),if a foreign investor does not develop land within "five to ten years", then the investor must forfeit the claim to the land to the government with no compensation. When PolOff suggested that Mr. Richardson has contributed to St. Vincent and the Grenadines by investing in PSV for so long, the PM replied that Mr. Richardson had been caught smuggling contraband several years ago, and had not "done so much" for SVG. ¶7. (C) According to Gonsalves, the land in question is already in the possession of the government, even though Richardson has filed an appeal. He emphasized that the GOSVG had offered all along to pay Richardson the original purchase price of the land ($435,000 USD) plus interest, but that Richardson's lawyer had demanded a payment of $25 million USD. Gonsalves reiterated that he was still willing to honor his original offer and even offer interest of up to six percent, even though the GOSVG is under no obligation to offer any compensation whatsoever. He conceded that the perception of the case as an "expropriation" worried him, as the perception could damage investor confidence in St. Vincent and the Grenadines. More Ralph Rhetoric -------------- ¶8. (U) As the meeting concluded, the Ambassador reiterated the USG's commitment to following-through on the deliverables from the June 2007 Conference on the Caribbean, citing the recently signed Biodiversity agreement with OECS. Gonsalves welcomed the news and said he looked forward to partnering with the USG on these initiatives. ¶9. (U) The remainder of Independence Day ceremonies featured PM Gonsalves giving trademark lengthy speeches, in which he announced several "goodies" for the people of St. Vincent and the Grenadines. PM Gonsalves announced a series of tax cuts, pay raises and bonuses, aimed mostly at the country's large public service sector. He announced a retroactive 5% salary raise for 2007 and an additional 5% salary raise for all public servants, in addition to a 6% increase due to a reclassification exercise. The PM's promised hand-outs totaled $12.4 million USD (Note: The size of SVG's public service sector is unclear, as the Department of Labor and the Office of Statistics have offered contradicting figures. Labor informed PolOff that approximately 65-70% of the SVG workforce works in the public service and government, while Statistics claims that according to the 2001 Census, only 7000 workers out of SVG's workforce of 34,000 work in the public sector, or about 20 percent. End Note). While not stated explicitly, it is presumed that the funding of these "goodies" is possible because the government revenues have reportedly increased by 40% since the Spring 2007 implementation of the Value Added Tax (VAT). Gonsalves cited recent statistics from the Eastern Caribbean Central Bank (ECCB) putting SVG's growth for 2007 at 6.6 percent. ¶10. (U) PM Gonsalves continued to employ some familiar rhetoric, referring to the need for developing a "post-colonial economy" and praising the GOSVG's efforts to promote an "Education Revolution" and a "Wellness Revolution". Gonsalves also stressed the need to counter St. Vincent's growing crime problem, and even chastised the country's magistrates for not being tough enough on crime. He also praised the work of the RSS C-26 program and SVG's Coast Guard, noting also the need to improve and strengthen SVG's Coast Guard. SVG Business Community Pessimistic -------------- ¶11. (C) After the official program, the Embassy's Deputy Chief of Mission (DCM) hosted dinner with members of the SVG business community, including the President of the Chamber of Commerce, Jerry George, an American citizen and jewelry manufacturer, Denzil Bacchus, and the Prime Minister's first cousin, Ken Boyea. In a lively discussion, the invitees complained of the current government's limitations on private enterprise, citing the 2005 closure of one of the Amcit's factories and the recent closure of the Kingstown Medical College. George bemoaned the lack of investment in SVG and harshly criticized the PM's announced pay raises and other benefits for public servants as "obscene." Admitting that in the short term the benefits would increase cash flow, the guests criticized the moves as politically motivated, despite the PM's jokes that he is not calling elections any time soon. Jerry George cited the Buccament Bay resort (being built on St. Vincent's West Coast) as the only example of FDI the government has successfully attracted, and attacked the Argyle Airport project as a waste that will leave SVG further in debt. Septel will detail the Airport's progress and the specific concerns of the business community. ¶12. (C) The business leaders strongly refuted the ECCB's statements of 6.6% economic growth in SVG, suggesting that PM Gonsalves had finally found a way to influence how that organization compiles its figures. According to them, the only anecdotal growth visible in the country is in the public sector; however, Ken Boyea, who owns the country's two Kentucky Fried Chicken (KFC) franchises, admitted that sales at his stores had risen in 2007. Comment -------------- ¶13. (SBU) While the GOSVG, and PM Gonsalves in particular, welcomed the Ambassador with a warm reception, the mood of this visit was far less ebullient than when she traveled to St. Kitts and Nevis in September. Unlike the rapid and impressive investment taking place in St. Kitts, the pace of investment in SVG has reached a practical standstill. PM Gonsalves is focusing his energies on government-funded projects to improve the country's infrastructure, such as the enormous international airport and a cross-country highway. Most, if not all, of these plans rely on foreign government loans and assistance, mainly from Taiwan, Cuba, and Venezuela. At the same time, PM Gonsalves has sought and received debt relief from the Italian government and is likely to pursue debt relief with the USG as well. End Comment. OURISMAN