The Multinational Monitor



The private sector as "savior"

by Jonathan Friedland

In a crowded room overlooking the esplanade of Grenada's capital, St. George's, U.S. Agency for International Development (AID) mission chief Jim Habron recently told local businessmen, "The private sector has got to be the savior of Grenada."

His statement was met with hushed murmurs of approval by the 40 men, who represent the cream of Grenada's merchant class. The men, with family names like Huggins and Mcintyre, have long dominated Grenada's commercial ties with the outside world and profited from their unchallenged position. But the revolution of 1979, which led to the formation of a government increasingly disposed towards state intervention in the economy, challenged the role of the merchants. "The squeeze was on," said Charles "Laddie" McIntyre, president of the Grenada Chamber of Commerce and owner of diverse holdings here, including a new soft drink factory, gas stations and a car dealership.

Now the Interim Council Government of Nicholas Braithwaite, under the tutelage of the Reagan Administration, is seeking to reverse the trend of government involvement in the Grenadian economy. Thus far, the United States has provided advisers to revamp Grenada's tax, investment and banking laws in order to attract foreign investors, and has identified government owned properties, such as the Grenada Beach Hotel and the Grenada Commercial Bank, for sale. In addition, AID has hired the consulting firm Coopers and Lybrand to identify U.S. investors eager to take advantage of Grenada's inclusion in the Caribbean Basin Initiative and to help arrange joint ventures with local businessmen.

The U.S. advisers have called for the abandonment of a 55 percent corporate tax promulgated under the Maurice Bishop Government with the reduction of the reserve requirements for commercial and state-owned banks from 20 percent to six percent, which is the requirement of the Eastern Caribbean Central Bank. Officials and businessmen here say that the high tax rate helped to pay for an expanded civil service and military under the Bishop Administration, which helped keep unemployment low. After the October 1983 invasion by U.S. and Caribbean troops, the civil service was reduced drastically and the militia disbanded, leaving about half of the island's youth without work.

But now, the United States -and with less intensity, the Interim Council -is banking on the private sector to provide jobs and to revitalize the ailing economy, which has been buffeted by both the events of last October and weak world markets for its chief exports of nutmeg, bananas and cocoa. The United States is even working to prevent any new investment in state-owned enterprises that are targeted for "re-privatization" in its zeal to turn Grenada into a free market economy, according to some officials. "There is a lot of pressure, from the highest level, not to lend to the Grenadian government for the rehabilitation of these state-owned enterprises," Marius $t. Rose, the chief economist of the Caribbean Development Bank, said in a recent interview. "There is a lot of pressure to make Grenada a totally unregulated economy," he added, arguing that it is "short-sighted" to impose an "alien and impractical economic system" on the island.

The reason why a totally free-market system is impractical, say some analysts here, is because Grenada's private sector is underdeveloped and because of the pressure of an ever-growing number of dropouts on Grenada's limited job market. "There is no entrepreneurial class on Grenada," said one AID advisor who asked to remain anonymous. "There are merchant cartels here that mark everything up 200 percent." He added that the Grenadian private sector has been able to create only 100 new job openings a year, while the number of drop-outs has climbed to 1,000 annually.

"The businessmen here are engaged in what we call invoice capitalism," said George Louison, the former agriculture minister in the People's Revolutionary Government and the head of the Maurice Bishop Patriotic Movement. "Anyone who places their future in the hands of Grenada's merchants will be in for a rude shock," he added.

The AID mission is not placing all its bets on the merchants, however, but believes that foreign investors will provide the impetus needed to rebuild the Grenadian economy. Besides Coopers and Lybrand's efforts to induce foreign businessmen from as far afield as Hong Kong to consider Grenada, the U.S. Overseas Private Investment Corporation has also led missions of U.S. investors here. Because of the political uncertainties aroused by the expected but as yet unscheduled general elections, however, only one foreign investor has actually committed since the October invasion -a U.S. toy company that is setting up shop in the old People's Revolutionary Army quarters at True Blue.

"There are a number of projects pending," explained Charles McIntyre, "but investors are waiting and watching for the outcome of the elections." The six parties standing for the elections, however, are all running on platforms that call for a mixed economy, as is prevalent throughout most of the Caribbean, and are suspicious, in varying degrees, of the U.S. emphasis on free--market policies.

"As long as the government can run things well, like agroindustries, we should hold on to them," said the National Democratic Party leader George Brizan. "A number of the New Jewel Movement economic policies were good," he added, "despite the fact that their politics and human rights record were rotten."

The program you are seeing now contains a large portion of the programs conceived by the PRG," said IMF official Dr. Victor Calender, But he added, " I would find it difficult to believe that given the recent occurrences, that any incoming government would not be aware of the private sector."

Calender and other economic officials here said the "ideological approach" adopted by the Reagan Administration in Grenada was misguided, however. "Private investment has a definite role to play, but it cannot take up the slack by itself," said Herbert Blaize, leader of the Grenada National Party. "There is a role for the state in the economy, a leading role," he explained. "You cannot import American yardsticks to measure the Grenadian situation."

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