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 
 
¶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. 
 
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Comment 
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¶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