VZCZCXRO4227
PP RUEHGR
DE RUEHWN #0992/01 1601949
ZNR UUUUU ZZH
P 091949Z JUN 06
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 2675
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1455
RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL
RUEHCV/USDAO CARACAS VE

UNCLAS SECTION 01 OF 03 BRIDGETOWN 000992 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ECIN ETRD EAID PGOV PREL XL
SUBJECT: EASTERN CARIBBEAN DELAYS ENTERING CARICOM SINGLE 
MARKET 
 
REF: A. BRIDGETOWN 553 
     ¶B. BRIDGETOWN 206 
 
¶1. (SBU) Summary:  CARICOM's delay in setting up a special 
fund for less developed countries threatens to further 
postpone the entry of the small nations of the Organization 
of Eastern Caribbean States (OECS) into the CARICOM Single 
Market and Economy (CSME).  The OECS members made the 
establishment of a Regional Development Fund (RDF) a 
precondition for their entry into the single market and 
declined to join other CARICOM members in signing the CSME in 
January.  Continued setbacks in creating the development fund 
have led to a debate within the OECS over whether to sign the 
CSME without first having the fund in place.  Questions have 
also been raised about the utility of the OECS nations even 
being in the single market.  Although the OECS members may 
ultimately elect to sign the CSME without the development 
fund, the current regional discussion has raised serious 
questions about whether the CARICOM single market would 
actually benefit the Eastern Caribbean.  End summary. 
 
-------------------------------------------- 
Eastern Caribbean Waits for Development Fund 
-------------------------------------------- 
 
¶2. (U) The six nations of the OECS (Antigua and Barbuda, 
Dominica, Grenada, St. Kitts, St. Lucia, and St. Vincent and 
the Grenadines) attended the CSME signing ceremony on January 
30, but chose not to sign the agreement at that time in order 
to wait until CARICOM established a Regional Development Fund 
to assist the less developed nations in the region (ref B). 
The OECS heads of government declared their intention to sign 
the CSME by June 30, by which time it was thought the RDF 
would be in place.  Now that it appears probable the 
development fund will not be established by the end of June, 
a debate has ensued about when to join the single market. 
 
----------------------- 
Prime Ministers Divided 
----------------------- 
 
¶3. (U) The OECS heads of government have sent various signals 
regarding their intentions toward signing the CSME with or 
without the development fund.  Following an April CARICOM 
meeting, statements by OECS Prime Ministers suggested the 
sub-region would wait for the finalization of the RDF, which 
the leaders were confident would be in place by their 
suggested June 30 CSME signing date.  After, however, 
CARICOM's Council for Finance and Planning (COFAP) failed 
during a May 19th meeting to agree on details for funding the 
RDF, Antigua Prime Minister Baldwin Spencer explained that 
OECS participation in the CSME is contingent upon 
establishing the development fund, but stopped short of 
stating that Antigua would not sign if CARICOM missed the 
June 30 date.  In contrast, the Prime Ministers of St. 
Vincent and Dominica made clear that the OECS had committed 
to sign the CSME by June 30 regardless of whether the RDF was 
in place.  Eastern Caribbean leaders will attempt to reach a 
consensus during their June 21 meeting in St. Kitts that 
marks the twenty-fifth anniversary of the founding of the 
OECS. 
 
---------------------------------- 
Who Pays for the Development Fund? 
---------------------------------- 
 
¶4. (U) Money is behind CARICOM's impasse over establishing 
the RDF, which has been envisioned to hold anywhere from 
US$120 to US$250 million that would be made available to fund 
development projects in the less developed CARICOM member 
states.  The May 19th CARICOM meeting was to have settled the 
contentious issue of the amount each country should 
contribute to the RDF.  The small Eastern Caribbean states 
are looking toward regional economic powers Jamaica, 
Trinidad, and Barbados to donate the majority of the funding 
while an assessment would be made to determine the 
contributions from other CARICOM members.  A funding formula 
is being discussed at a June 9th COFAP meeting in Barbados 
and should be settled upon at a CARICOM Heads of Government 
meeting in July in St. Kitts. 
 
¶5. (SBU) Note:  Dominica Foreign Minister Charles Savarin 
told P/E Counselor during a May 18 conversation that the USG 
should send a signal as to how much it would contribute to 
the development fund.  Savarin suggested that the U.S. match 
 
BRIDGETOWN 00000992  002 OF 003 
 
 
Trinidad's contribution.  This appeared to be Savarin's 
initiative alone and not an official CARICOM request.  End 
note. 
 
---------------------------------- 
OECS at a Disadvantage in the CSME 
---------------------------------- 
 
¶6. (U) Establishment of the RDF has become the key element of 
the CSME for the Eastern Caribbean states, which see the 
development fund as potentially making up for the competitive 
disadvantage they are at compared to more developed CARICOM 
members.  An assessment carried out by the OECS Secretariat, 
the organization's St. Lucia-based professional staff, found 
that the small (population 500,000) sub-region has higher 
labor and energy costs than most CARICOM states.  Combined 
with poor transportation, these costs have made it difficult 
to attract manufacturing or other non-tourism related 
investment.  The result has been a steadily worsening trade 
deficit with the rest of CARICOM.  Consumers in the OECS 
already see their market dominated by products from Trinidad, 
the region's industrial giant.  Many local observers believe 
the CSME will be a boon to Trinidad at the expense of the 
Eastern Caribbean. 
 
------------------------------ 
So Why Join the Single Market? 
------------------------------ 
 
¶7. (U) Regional business leaders have typically expressed 
quiet concern over the impact of the CSME on the Eastern 
Caribbean, choosing not to confront their government leaders 
who have been staunch supporters of CARICOM-wide economic 
integration.  This calm was broken in May when Allen 
Chastanet, President of the St. Lucia Hotel and Tourism 
Association, publicly challenged the CSME during a hoteliers 
meeting in Dominica.  "The question is why is it taking our 
ministers so long to figure out that the CSME offers nothing 
for the OECS.  Right now Trinidad and Tobago has a massive 
trade surplus with us.  We don't have a hope in hell in 
competing," he declared.  Chastanet recommended that the 
Eastern Caribbean focus instead on strengthening its own 
integration through the OECS. 
 
-------------------- 
Don't Knock Trinidad 
-------------------- 
 
¶8. (U) Dominica Prime Minister Roosevelt Skerrit came to the 
defense of the CSME by dismissing Chastanet's criticism and 
decrying what the PM described as "a growing negative 
attitude in the OECS towards Trinidad."  While recognizing 
that Trinidad has a substantial trade surplus with the OECS, 
Skerrit said that that the people of the Eastern Caribbean 
should not criticize the Government or people of Trinidad for 
taking advantage of their economic strength.  The PM cited 
Trinidad's willingness to assist its less developed 
neighbors, such as aiding Dominica when the country faced 
financial collapse several years ago or Grenada after 
Hurricane Ivan destroyed much of the island's infrastructure 
in 2004. 
 
------- 
Comment 
------- 
 
¶9. (SBU) The Eastern Caribbean's insistence upon receiving 
special development funds in exchange for entering the 
CARICOM single market is based upon both fear and hope.  The 
small countries in the region fear their increasing economic 
marginalization within the larger Caribbean and the dominance 
of their small market by products from Trinidad and to some 
degree Jamaica.  Their hope is that with the Regional 
Development Fund in place, the OECS will receive funding for 
development projects that will help it to better compete 
within the CSME.  The case of Ireland using European Union 
(EU) development funds to become an economic success story is 
often presented as an example of what could happen within the 
Eastern Caribbean.  The problem with the analogy is that the 
OECS countries are much smaller than Ireland and their 
populations lack the high educational level attained by the 
Irish.  Most importantly, the Eastern Caribbean is part of 
CARICOM, not the dynamic economy of the EU. 
 
¶10. (SBU) The six OECS member states will most likely gain 
 
BRIDGETOWN 00000992  003 OF 003 
 
 
access to money through the Regional Development Fund and 
ultimately join the CSME.  How the OECS intends to apply this 
new assistance to its development needs remains uncertain. 
Given that the region already receives significant aid from a 
variety of international donors, the RDF will not be the 
determining factor in turning the Eastern Caribbean around; 
the small island states will remain on CARICOM's economic 
margin for the foreseeable future.  Independent of CARICOM 
and the single market, the OECS has taken significant steps 
toward closer economic integration among its member states 
(ref A).  Continuing along these lines represents the Eastern 
Caribbean's best hope of gradually becoming more competitive 
within the CSME and beyond. 
KRAMER