Identifier
Created
Classification
Origin
09BRIDGETOWN243
2009-04-24 21:21:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Bridgetown
Cable title:  

SAINT LUCIA: ECONOMIC PROMISE AND PITFALLS

Tags:  ETRD XL PGOV KCRM PREL INRB 
pdf how-to read a cable
VZCZCXRO8827
RR RUEHGR
DE RUEHWN #0243/01 1142121
ZNR UUUUU ZZH
R 242121Z APR 09
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC 7338
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHDG/AMEMBASSY SANTO DOMINGO 5971
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
UNCLAS SECTION 01 OF 02 BRIDGETOWN 000243 

SENSITIVE
SIPDIS

SANTO DOMINGO FOR ROBERT JONES

E.O. 12958: N/A
TAGS: ETRD XL PGOV KCRM PREL INRB
SUBJECT: SAINT LUCIA: ECONOMIC PROMISE AND PITFALLS

Summary

UNCLAS SECTION 01 OF 02 BRIDGETOWN 000243

SENSITIVE
SIPDIS

SANTO DOMINGO FOR ROBERT JONES

E.O. 12958: N/A
TAGS: ETRD XL PGOV KCRM PREL INRB
SUBJECT: SAINT LUCIA: ECONOMIC PROMISE AND PITFALLS

Summary


1. (U) The economy of St. Lucia is suffering from a decline
in tourist arrivals, but the consensus is that the country is
on the right path and should do well when the global economy
recovers. American businesses see potential for their
investments in St. Lucia, but believe the government needs to
take steps to address Export Fees, Bond Issues and the Alien
Land Tax. Alternative energy is emerging as a potential
growth industry, with minor obstacles remaining before
significant progress can be made. End Summary

--------------
Alternative Energy Opportunities
--------------


2. (U) Lucelec, the electrical utility on St Lucia, is
planning to expand its renewable energy offerings according
to Cornelius Edmund, the System Planning Engineer. Lucelec
currently relies exclusively on diesel oil to provide
electricity. St. Lucia generates 54 megawatts of electricity
a year with 9 diesel engines supplying 1 power station.
Edmund believes that the high cost of oil during 2007-2008
provided an incentive to shift to more alternative energy
sources, but the current low price is having the opposite
effect. Environmental concerns are important, but cost is
driving the discussion.


3. (U) Edmund assured poloffs that wind farms are planned to
go up by the end of 2009 and should initially produce 6
megawatts, with the ability to double that within a few
years. The land has been scouted, but not yet purchased.
Land is the major impediment to development of wind farms, as
no tourist hotel wants to be in viewing range of a wind farm.
According to Edmund, photovoltaics are under discussion, but
the lack of a legal framework to sell electricity back to the
grid has stalled development. Geothermal has a projected
capacity of 12 megawatts, but the most promising location is
in UNESCO protected land, and UNEC, a Canadian firm has
initial rights of development. Biomass, using old tires,
banana stems and other agricultural waste is also under
consideration.


4. (U) Edmund said Lucelec is planning to add 40 megawatts
over the next 15 years to meet the expected demand of 75
megawatts, in addition to replacing aging equipment. St.
Lucia has the 2nd cheapest electricity in the region, but

costs are still very high and are an obstacle to
manufacturing.


5. (U) CARILEC, the regional association of Electric
Utilities, agrees with the need to push for alternative
energy solutions. The association provides training workshops
and conferences, publications, and benchmarking studies for
the 33 member utilities. According to Nigel Hosein, the
Executive Director, the small electricity footprint of the
region prevents economies of scale. The whole region uses
approximately 7000 megawatts of power. 3000 in Puerto Rico,
1500 in Trinidad and Tobago, 700 in Jamaica, 200 in Barbados,
and much smaller amounts in the rest of the EC. Hosein
believes that these amounts are too small to attract much
interest from major suppliers despite the potential for
solar, wind, geothermal and waste energy. Solar water
heaters are used throughout the region, but only to provide
hot water, not electricity generation.

--------------
Investment Promotion
--------------


6. (U) O'Donavan Yarde, Director of the St. Lucia National
Development Corporation (NDC) told poloffs in a recent
meeting that the NDC is pitching St. Lucia as an attractive
location for foreign investments, in the fields of education
and creative expression in an attempt to capitalize on the
most promising sectors identified by EPA directives. The NDC
welcomes foreign educational institutions and pointed to the
success of Monroe College, a New York-based school that
offers undergraduate degrees to St Lucian nationals and has
just recently added an MBA program. Yarde noted that the
whole Eastern Caribbean has a paltry number of universities,
with the University of the West Indies being the biggest
regional university. There are a number of foreign medical
schools throughout the region, but no four-year colleges
other than UWI. The most ambitious students matriculate to
the U.S., Canada and the UK instead of staying in the region
and contributing to growth at home. Distance learning

BRIDGETOWN 00000243 002 OF 002


programs are successful, but according to Yarde what would be
most welcome would be the entry of an ITT Tech or Devry type
of technical school to offer more practical skills training.

-------------- -
AmCham Scoop - Potential, but Obstacles Remain
-------------- -


7. (U) Members of the newly formed St. Lucia-American
Chamber of Commerce told us recently that the main issues
that concern the group are Export Fees, Bond Issues and the
Alien Land Tax. Export fees are $37 USD plus 5 percent of
the value of any good that needs to be sent out of St. Lucia.
This makes it very difficult for stores to return defective
or unpopular merchandise, or to hold product shows.
According to those involved in the jewelry trade, it is
relatively easy to skirt these regulations, but it is a
hassle. The Alien Land Tax requires foreigners to obtain a
'Character Certificate' from the local police in their place
or residence and to undergo due diligence on their finances
and state of affairs. The problem is not the requirements
but the fact that it can take anywhere from six months to two
years to finish. This lengthy process makes buying or
selling real estate to a foreigner very difficult to manage.


8. (U) Bond issues are a government required-insurance
system to compensate for paying duty if a good is sold
locally. Duty is not collected at the point of sale, but is
paid up front. Insurance is required as well as 70 percent
in cash for the duty on current assets. This has the
greatest impact on local businesses that do not have access
to the tourist duty free market. This was in comic display
as the President of Harry Edwards Jewelers informed us that
upon reporting a robbery of a $10,000 watch, the first
comment from the police was that he would have to pay duty on
that item. And indeed he would, unless he could prove that
the thief was a tourist, and that he took the merchandise out
of the country.

--------------
Comment
--------------


9. (U) St Lucia is an ideal location for solar and wind
power and, with a moderate investment, could become an
environmentally friendly country with great public relations
benefits for the tourist sector. The low price of oil is
muting enthusiasm, but price stability, environmental
concerns, and the preservation of foreign currency should
provide the incentive to move forward. The economy is
flagging and will continue to do so as long as tourist
arrivals are scarce, but the country appears to have set a
broadly business friendly course for the foreseeable future.
Despite the usual customs related woes cited by locals, most
investors remain upbeat about prospects in St. Lucia. End
comment
HARDT