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
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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
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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"
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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
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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
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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
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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