VZCZCXYZ0000
RR RUEHWEB

DE RUEHBH #0062 0301644
ZNR UUUUU ZZH
R 301644Z JAN 09
FM AMEMBASSY NASSAU
TO RUEHC/SECSTATE WASHDC 6077
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHDG/AMEMBASSY SANTO DOMINGO 2917
RUEHKG/AMEMBASSY KINGSTON 8611
RUEHWN/AMEMBASSY BRIDGETOWN 5692
RUEHPU/AMEMBASSY PORT AU PRINCE 3624
RUEHSP/AMEMBASSY PORT OF SPAIN 4779
RUEHBE/AMEMBASSY BELMOPAN 0109
RUEHPO/AMEMBASSY PARAMARIBO 0936

UNCLAS NASSAU 000062 
 
SIPDIS 
 
STATE FOR WHA/CAR, SANTO DOMINGO FOR USFCS, USDOC FOR ITA MICHELLE 
BROOKS 
 
E.O. 12958:  N/A 
TAGS: EINV EFIN ETRD ELAB PGOV BF
SUBJECT:  THE STANDARD AND POOR'S CONTROVERSY 
¶1. SUMMARY:  Standard and Poor's Sovereign Report released on 
December 29, 2008 has generated heated debate between the governing 
Free National Movement (FNM) and opposition Progressive Liberal 
Party (PLP) officials.  The report states that the FNM's decision to 
 
delay several PLP signed contracts by six months to two years 
directly contributed to the current economic downturn.  Prime 
Minister Ingraham and Minister of Finance Zhivargo Laing have both 
accused S&P of placing unfair blame on the FNM, saying they 
inherited a sluggish economy and cannot be held responsible for the 
current economic downturn.  S&P continues to stand by their research 
and maintains the accuracy of information in their reports.  END 
SUMMARY. 
----------------- 
HE SAID, SHE SAID 
----------------- 
¶2. The S&P Sovereign Report released on December 29, 2008 has 
generated heated debate in The Bahamas.  The report states that the 
FNM's decision to delay several PLP signed contracts bt six months 
to two years contributed to the current downturn in the Bahamian 
economy.  Minister of Finance Zhivargo Laing immediately asked S&P 
to corroborate its assertion, stressing that the FNM party inherited 
a sluggish economy and cannot be blamed for external factors out of 
their control.  Laing further said that the former PLP 
administration spent $800 million in its five years in office 
without any evidence of capital investment. 
 
¶3. S&P analyst Olga Kalinina explained that S&P's conclusions were 
drawn from a series of meetings where the uniform complaint was that 
the FNM party's decision to defer several PLP initiated contracts 
caused a significant loss in growth momentum. She clarified, 
however, that it is not uncommon for new governments to reassess 
contracts signed by previous administrations, especially if those 
contracts are signed in the period leading up to general elections. 
Kalinina agreed that the global recession made the Bahamian economy 
vulnerable, but pointed out that significant growth momentum was 
initially lost due to the FNM.  Laing publicly noted that S&P's 
response was insufficient and did not corroborate the suggestion 
that FNM was to blame for the economic downturn. 
-------------- 
WE TOLD YOU SO 
-------------- 
¶4. The Minister's comments received criticism from members of the 
PLP opposition, especially local businessman and lawyer Paul Moss 
who said that S&P is a respected, non-partisan rating agency.  Moss 
told local media the S&P report lends unbiased support to the PLP's 
position that the FNM is partly responsible for The Bahamas' 
economic condition because it prevented growth by suspending a 
number of capital projects.  PLP officials have now called upon the 
GCOB to publish the results of the review in accordance with its 
promise of transparency within the "Trust Agenda." 
--------------------- 
WE SHALL NOT BE MOVED 
--------------------- 
¶5. PM Ingraham addressed S&P's statements at the Bahamas Business 
Outlook seminar on January 15.  He asserted that the organization 
had been misinformed and was drawing conclusions based on partisan 
reports.  He echoed Minister Laing's defense that review of the 
contracts was necessary but argued that it was not a "protracted" 
period and said S&P should have obtained GCOB response before 
publishing such a claim.  He expressed his concern that some of the 
contracts were politically motivated, having been signed within six 
months of the general election, and added that within two weeks of 
coming to office the FNM deemed some contracts unnecessary (such as 
a $4 million school in Acklins Island where there are only 40 
students).  The PM noted that GCOB recently signed an agreement to 
build the straw market for far less than the $23 million earmarked 
by the former PLP administration. 
 
¶6.  Following the PM's statement, Kalinina reiterated that S&P met 
with both GCOB officials and private sector stakeholders when 
researching their report.  She maintains S&P's position on the 
report and denies any charges of bias. 
¶7.  COMMENT:  S&P's conclusion that the FNM administration impeded 
economic growth has some credence.  However, Laing's argument that 
the economy was already waning and the review process was needed 
also holds weight.  While it is clear that some of the proposed PLP 
projects were excessively expensive, it is also true that FNM 
administration had the ability to proceed with viable projects in a 
more timely manner. 
 
ZUNIGA-BROWN