CHINA INVESTS BIG-TIME IN GRENADA

UNCLAS SECTION 01 OF 03 GRENADA 000015

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV GJ CH
SUBJECT: CHINA INVESTS BIG-TIME IN GRENADA


1. (SBU) Grenada and the People's Republic of China (PRC)
celebrated the fourth anniversary of relations on January 20,
2009 with protestations of warm friendship and continued
observance of the one China policy. The PRC continues to pour
money into the cash-strapped island nation. Grenada withdrew
its recognition of Taiwan in 2005 after being promised greater
assistance by the PRC. Chinese laborers apparently are not
required to obtain Labor Ministry certification to work in
Grenada. All materials used by the Chinese are brought in under
diplomatic cover, even when imported for commercial use, but
Customs officials sought to rectify this situation but after one
attempt are now afraid to say anything. Grenada's value to the
PRC outside of its ongoing battle for recognition with Taiwan is
not immediately apparent as the country has never been on major
trade routes nor does it produce oil, gas, or any other raw
material.

THE PAYOFF


2. (U) After years of recognizing Taiwan, the former New
National Party (NNP) administration could not pass up the US$250
million dangled in front of it by the PRC in 2005 to adopt the
one China policy. The Taiwanese were invited by the GOG to
leave promptly, with several issues unresolved, including the
non-payment by the GOG on an outstanding loan. Taiwan has
threatened to take the GOG to court, but Grenada's politicians
have not looked back since the switch. To post's knowledge, the
debt has not yet been repaid. In addition to the initial lump
sum, the PRC has provided US$10 million each year for "technical
cooperation", though neither the Chinese nor the Grenadians will
say exactly what it has been spent on.


3. (SBU) During the 2008 election campaign, NNP officials
complained to Charge d'Affaires (CDA) Karen Jo McIsaac, that the
PRC gave its main rival, the National Democratic Congress (NDC),
more cash than it gave the NNP. The donations were allegedly in
the form of cash and, to the NDC, campaign items such as
tee-shirts and posters. (Note: Grenadian voters often wait to
see who will give them the most money, goods, or parties before
they decide which way to vote. There are no laws prohibiting
campaign contributions from foreigners or foreign entities.
The three largest contributors during the 2008 campaign are
rumored to have been the PRC, Venezuela, and St. Vincent and the
Grenadines. The Barbados government was also a source of funds
and political advice for the NDC. Only the Grenada United
Labour Party (GULP) specifically refuses to accept outside
funding. Neither the GULP nor the Peoples' Labor Movement
(PLM),whose political leader told CDA somewhat plaintively that
he would take outside money if someone would just offer it to
him, are truly viable political parties. End note.)

CHINESE LABOR OUTLET


4. (U) In 2006, the PRC brought 600 Chinese laborers to Grenada
to construct a new national cricket stadium, the old one having
been destroyed by Hurricane Ivan in September 2004. The workers
lived on the site, planted a huge garden which supplied most of
their food, and kept to themselves. The Chinese did not
frequent local shops or restaurants and bars. Gregarious by
nature, Grenadians complained about the Chinese policy of
non-fraternization as well as not being able to make money off
so many visitors. Lack of English language skills also hampered
communication, even when the workers ventured out in groups of
six to ten.


5. (SBU) Controversy erupted close to the July 2008 election
over the use of uncertified Chinese labor by the PRC as well as
by local contractors to work on roads and building projects,
replacing local workers. Both the NNP and the NDC governments
have tiptoed around the issue of labor certification so as not
to offend the PRC. However, according to local construction
companies, the Chinese workers do not have work permits.


6. (SBU) Local private contractors also complain that the PRC is
allowed to bid on World Bank, Inter-American Development Bank
(IDB),and United Nations funded projects, undercutting local
companies that must pay real local labor and equipment/materials
costs. The contractors say they do not object when it is a
wholly Chinese government project such as the stadium. But when
the international financial institutions let the PRC bid using
low costs made possible by a PRC-controlled and funded labor
force, and a government that brings materials in under
diplomatic cover, and does not need to pay attention to profit
margins, they cry foul.


7. (SBU) The number of Chinese laborers in Grenada appears to
have dropped in 2008 from its peak of 600 in 2007. PRC
Ambassador Zhang Wanhai told CDA that there are eight diplomats
accredited to Grenada and that at least 90 laborers remain on
the island. The workers are sought out by local and
international investors because "they work harder" than
Grenadian employees and of course are paid less than locals.

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Chinese workers live on site and grow their own food in vacant
areas of the work sites. Although the Chinese claim the Chinese
laborers are "independent contractors", the embassy retains
control of their passports and other documentation. No one CDA
has spoken with knows -- or perhaps will say -- how the workers'
wages are handled, whether the workers receive direct
reimbursement or the PRC embassy is the recipient.

PROMISED ASSISTANCE


8. (SBU) Once the stadium was completed in early 2007, the
Chinese workers fanned out across the country to undertake other
projects, public and private. The PRC promised to build four
agricultural stations, 2000 homes, and to provide scholarships
for Grenadian students to study at Chinese universities. The
scholarships have been instituted and twenty-three Grenadians
are currently studying at various universities around China.
However, the other items have not yet materialized. Instead,
the PRC built a hotel and two restaurants with materials brought
into Grenada under diplomatic cover marked as being material and
equipment to build the stadium. Customs officials attempted in
early 2008 to hold the PRC accountable for these items, but the
issue was quickly swept under the rug by the GOG where it
remains. The antacid-pink-colored hotel and its restaurant
remain in limbo as the government tries to decide if it wants to
pursue the issue. The other restaurant, which opened in early
2007, has been closed down since the collapse of Capital Bank
International in late 2007.


9. (SBU) The promised 2000 homes were part of China's promised
Hurricane Ivan assistance, but unlike the U.S. Government, the
PRC refused to rebuild existing homes. Instead, they demanded
that the government provide vacant land on which they could
build large groups of houses. Negotiations were stalled for
over three years over this issue. Given Grenada's topography,
finding large, flat, empty areas is difficult. One can build on
hillsides - and Grenadians build just about everywhere using
rickety 14-inch wide stilts that can rise as high as three
stories - but there are inherent dangers from landslides caused
by heavy rains, earthquake tremors, or simply too much weight on
unstable topsoil. (Comment: Venezuela, which promised 400
houses using the same principle of building multiple homes on an
empty plot of land, has only completed 200. These were so
poorly built that they remain uninhabitable two years after
completion. Many Grenadians whose homes remain incompletely
rebuilt after Ivan refuse to move, either because they own the
land they are on or because they do not own their land. In both
cases they are afraid they will be moved to less desirable
locations. End comment.)


10. (SBU) Other PRC assistance to Grenada includes kitchen
appliances, office equipment, and vehicles for the police. In
addition, a two-man martial arts expert team from the Chinese
army is stationed at the Royal Grenada Police Force (RGPF)
Special Services Unit (SSU) camp to train local officers. There
is a Chinese teacher at the T.A. Marryshow Community College
(TAMCC),and seven doctors connected to the Ministry of Health
and Grenada General Hospital. With the exception of the Chinese
teacher at TAMCC, none of the others speak English. Grenadian
doctors complain privately that their Chinese colleagues cannot
perform any useful function because of the language gap. One
surgeon told CDA that two PRC physicians are assigned to the
x-ray department but sit there all day because no one
understands them if they speak. Doctors dare not complain too
loudly for fear of censure or of having their right to work at
the hospital revoked by the GOG. The Chinese have also promised
to build a port in Sauteurs at the northern end of the island of
Grenada. The area is environmentally delicate and includes hot
springs and is the site of turtle egg laying. There is no sign
that an environmental impact assessment is planned.

COMMENT


11. (SBU) The PRC's timing was impeccable for seeking
recognition by Grenada. The country was buffeted by Hurricanes
Ivan in 2004 and Emily in 2005 with near total destruction of
its primary foreign exchange earning export of nutmeg (and the
more valuable mace). Promised international assistance was not
sufficient to rebuild leaving the country to choose between
going into debt and not rebuilding. The United States provided
$46 million in assistance after Ivan: 50 percent of the total
promised by all donors. The U.S. remains the only country to
completely expend its assistance package and finish what it
promised to do.


12. (SBU) Chinese assistance appears geared to pull Grenada into
its political orbit, without creating long-term, sustainable
development. China's Ambassador brags that Grenada votes the
"way we want them to" in international organizations. Grenada's
laborers, who definitely could benefit from additional training,
instead have lost jobs to the imported laborers. Neither the
previous nor the current governments has publicly accounted for

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the Chinese funds. Going into the global economic slowdown, the
country is struggling to stay afloat. Grenada's debt remains
insupportably high at 107 percent to gross domestic product
(GDP) which would seem to indicate that however the monies are
spent, they are not being used to assist in lowering the
deficit.
MCISAAC