GRENADA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00528R000100050003-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 5
• Document Creation Date: December 22, 2016
• Document Release Date: November 16, 2010
• Sequence Number: 3
• Publication Date: August 28, 1984
• Content Type: MEMO

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0 R 17161S1 AUG SA
FM AreI+EASSY GRENADA
10 SCCS141L WKSI:DC IMMEDIATE 15:5
lu;C AMEroA:+Y ERIDGETOWN
AMEMSASSY CARACAS
AIIEMEASSY KINCTiON
AM[fBASSY to,:DON
AMCMSASSY OTTI:WA
ArdMBASSY PORT OF SPAIN
U:DOC VASNDC
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USCINCLAN.1 NORFOLK VA
CDMU:FORCARIB KEY WEST F1
EJttO. 12356: DEtS: OADR
TAGS:.PGOV, [CON, EINY, us. GJ
SUBJECT: GAIRY SUMMONS US INVESTOR
1. COUFIDENTIAI ENTIRE TEXT.
2. ON 16 AUGUST MR. WILLIAM INGLE DF INGLE'$ TOYS, IIET WITH
tr.ENSSY OFFICIALS TO DISCUSS HIS INVESTMENT PLANS IN GRENADA
AND ASK ACD0 GOG ACTION ON NIS TEOUEST FOR SPtCIFIC EXEMPTION
FROM GOG LAWS PRECLUDING ODIC DISBURSEMENT OF FUNDS. AS NE
PROMISED EARLIER; Ma. INGLE ALSO BRIEFED EMBASSY OFFICERS
ABOUT THE MEETING ME HAD WITH SIR ERIC GAIRY lid NIGHT BEFORE
AUGUST 1S). INGLE MAD BEEN INVITED BY INTERMEDIARIES EARLIER
IN 1NE WEEK 10 MEET WITH GAIRY ON THE EV1r.ING of THE 75TH.
IKE MEETING HELD Al DAIRY'S NOME ABOVE St. GEORGE': LA:TED
APPROXIMATELY IWO 11052. AS INGLE INIEKED HE WAS ?PATTED
DOVT:? CEFORE BEING ALLOWED To SEE GRIKY. HE SAW APPROXIMATELY
12D-3D BODYGUARDS AT INC MOUSE.
3. AMOM.i THE HOSE IRTESCSTING A:SERTID1S GAIRY MADE DURING THE
MEETING V?.5 THAT GIARY CONSIDER: THE CURRENT INTERIM GOVERNMENT
AS 'ILLEGAL.' GAIRY COIITIMUED THAT WHEN INOT IF) ME WAS
(ELECTED PR1r4 MINISTER ME WOULD NOT CONSIDER THE DECISION: Of
1NE Cu;P.EwT'GDdRMMtu1 AS tIaDING. IN THIS REGARD GAM
ASKED IIIGLE ABOUT THE CORtE:+10:iS ME HAD RECEIVED FROM THE
INIEKII1 GDt'ECV;IEHT TD START MI: E1'SIWESS AND IMPLIED TMAT INGLE
MIGHT Mkll:l&IN :DnE GUT NOT ALL OF THE CONCESSIONS UNDER A
GAIRY GOVERNMENT.
4. GAIRY it SO TCID. II;GLI THAI NE SHOULD FIRE PIS CURRENT
GR-7F OF F:.C'D;v [::?IC E[: ?';i' it r !ENS CF THE r. WTA1,
RIII6
MANUAL RUD 1ECH:I15A1 VD41R. oUIDU (GAIRY'S UNION). BY MI
MEMFEFS OF GnIR~?S UNIX;, MR. INGLE v.3 IDLD HE COULD EU:URE
1N4T M11 IkCTDRY VOULF E. FREED FR031 STRIr.E., ELECTRICAL AND
WATEF. CUTOFF: Ault SABOTAGE, A:to OTHER INCIDENTS THAT MIGHT
KAMMEF CIS PRODU;TIOU. GLINT It::TRUCTED INGLE TO MEET WITH
MR. ALBERT FORSYTH, THE LEADER of GAIRY'S UNION, ON IS AUGUST
10 DISCUS: THE HIRING Of GAIRY WORKERS.
$IN P.CSPCI1:E TO A OL'ESIIU:1 FMC' All Er:fk:SY OFFICER, INGLE
SAID THAI Gk1PY k:P.[D FDA A U:35DDD CAMPAIGN CDr11RIEUT10N. TO
E[ DEPOSITED TO DAIRY'S k000Ut.1 IN J11AMI.
6. IuG:E SL:D Mt .'5tID GET SOCK; It THE EnBO:SY' AFTER HIS
KFE111;G FD+:;1H ~u :ATURD.Y. EMEDrFS St; GESTED THAT EIFORE
THAI nE[i11.0 1101E :r.Otr D SPIAr: 70 TN[ AIFLD .
CHARLES 1'DOD SC INGLE WOULD EE PRIMED VIiN FACTS
GRENADA'S UNION HISTORY I1;S1EkD OF 1NE MISIUFORMA1I6.
PRDEAEIY RECEIVE FROM ICR:YTN.
(A) POL 111CAL C0M!61i VE HAVE HEARD THAI DAIRY NAS SEEN
SNAKING DDWN 10;kl EUSIUtSS AND WE MALL REPORTED NIS THREATS TO
MEMBER: OF IKE HOTEL A::C:Ik11Ctl. THIS IS THE FIRST INS1tl+CE
WE KNOW OF USING SIMILAR .TACTICS V;1K A. FOREIGN IRYESiDR.
MR. INGLE WISELY STAYED k:'A'Y FROM CDUFFC:J1&Ti011 451111 DAIRY,
BUT CLEARLY WAS DISIUREED ET TP.E E11000KTER. AS HE APTLY PUT
IT, HE FELT IIHE Nr vec rrrt+~:r. v1Y. Ivr MkFIt
(B) ECONOMIC COMMENT: IF THERE ARE ANT MORE INCIDENTS LIKE
THIS AND ONE OF THE INVFSIORS G0E: TO IRE PRESS 11 WILL UNDERCUT
MANY Of OUR INVESTMENT PROMOTION EFFORTS PRIOR TO 1NE-ELECTIONS.
SHOULD IN! MIDDLE NOT COALESE AND GAIRY VIN IKE UPCOMING
ELECTION THERE MAY BE LITTLE REED FOR A FULL-11ME ECONOMIC/
COMMERCIAL EFFORT IN GRENADA.
LAWRENCE
CO F I.DE1-1T I AL
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CONFIDENTIAL ?
L e gartment o~ f State
238
PAGE 01 GRENAD 82886 00 OF 02 11 29Z
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P Jg7TA117 A Q 84 -
FM AMEMBASSY GRENADA
TO SECSIATE WASMDC PRIORITY 1950
INFO AMEMBASSY BRIDGETOWN
IISDOC WASHDC
E.O. 12356: DECI: OADR
TAGS: ECON, SAID, ECIN, EFIN, GJ
SUBJ: ECONOMIC POLICY ISSUES SCHEDULED FOR DISCUSSION AT THE AUGUST
16 GRENADA ADVISORY COUNCIL MEETING
2. BEGIN SUMMARY. IN MEETINGS BETWEEN US MISSION OFFICIALS AND GOG
DEPUTY CHAIRMAN ALLAN KIRTON AND DIRECTOR GENERAL OF FINANCE
LAURISTON WRSON; GOG INTERLOCATORS SAID THE ADVISORY COUNCIL MEETING
OF AUGUST 16 WOULD DISCUSS THREE IMPORTANT ECONOMIC POLICY MATTERS,
D I VEST ITIIRF THE USURYLAW AND THE REVISED INVESTMENT CODE. A
DISCUSSION OF THOSE ISSUES FOLLOWS. END SUMMARY.
3. OIVFc~ T1TIIR --GOG ACTION ON DIVESTITURE WILL FOLLOW AN INTERNAL
REVIEW OF IRE SINGH COMMITTEE REPORT (SEE GRENADA 2885) AND DELIBER-
ATION OVER WHICH STATE-OWNED ENTERPRISES SHOULD BE DIVESTED AND AT
WHAT SPEED. WE BELIEVE THAT SOME RESULTS OF THIS INTERNAL REVIEW
SHOULD BE AVAILABLE TO THE GOG BEFORE 16 AUGUST. ALTHOUGH NO PROMISES
HAVE BEEN MADE, DIRECTOR GENERAL OF FINANCE WILSON HAS HINTED
BROADLY THAT AGREEMENT COULD BE REACHED BY THE ADVISORY COUNCIL TO
DIVEST MOST OF THE LIST OF ENTERPRISES NAMED IN THE SINGH REPORT;
THE GRENADA DAIRIES, THE GRENADA RESPORTS CORPORATION,
PROCESSING PLANT, THE COFFEE PROCESSING PLANT, THE NATIONAL FISH-
ERIES CORPORATION AND THE AGRO PROCESSING PLANT.
4. USURY LAW--THE USURY LAW IS A DIFFICULT ISSUE FOR THE GOG TO
TACKLE. CURRENTLY INTEREST RATES IN GRENADA ARE CAPPED AT AN UNREAL-
ISTICALLY LOW RATE OF 12.1/2 PERCENT. THE MINISTRY OF FINANCE CLAIMS
IN ITS CONVERSATIONS WITH THE BANKING COMMUNITY, THAT THE BANKERS ARE
AKSING FOR THE CEILING TO BE RAISED TO 15 PERCENT FOR "ORDINARY LOANS
WITH LOWER PREFERENTIAL RATES MAINTAINED FOR HOUSING, AGRICULTURE AND
FISHERIES. THE MINISTRY OF FINANCE IS COUNTERING THE BANKER'S PROPOS-
ITION BY PROPOSING A NEW CEILING OF 17-1/2 PERCENT ON ORDINARY LOANS
AND THE MAINTENANCE OF PREFERENTIAL RATES FOR AGRICULTURE, HOUSING
FISHERIES. CONVERSTIONS BETWEEN USAID OFFICIALS AND BANKERS SHOW
THAT ONLY ONE BANK IS SERIOUSLY CONCERNED ABOUT A COMPLETE LIFING OF
INTEREST RATES, A LOCAL COOPERATIVE BANK WITH A LARGE PORTFOLIO OF
LOW INTEREST LOANS. THE OTHER BANKS, ALREADY ENJOYING SPREADS OF $ TO
7-1/2 PERCENT, ARE UNDERSTANDABLY RELAXED ABOUT A RISE IN INTEREST
RATES,
5. THE GOG SEEMS IMPERVIOUS TO US MISSION SUGGESTIONS THAT THE CAP
ON INTEREST RATES ADVERSLY AFFECTS GRENADA'S ABILITY TO ATTRACT
OVERSEAS FUNDS, WHETHER THESE FUNDS BE FROM LOCAL MERCHANTS EARNING
FOREIGN EXCHANGE, WORKING CAPITAL OF A MANUFACTURING FIRM THAT MUST
BUY INPUTS FROM ABROAD OR THE FUNDS AN INVESTOR MAY BRING IN TO SET
SP AN OPERATION IN GRENADA. THE USURY LAW AND FOREIGN EXCHANGE
CONTROLS ARE A DISINCENTIVE TO THE REPARTRIATION OR IMPORT OF
FOREIGN EXCHANGE IN GRENADA. FOR BUSINESS CONCERNS TO HOLD FOREIGN
EXCHANGE IN GRENADA, THEY MUST FIRST OBTAIN FINANCE MINISTRY PER-
MISSION TO HOLD A BANK ACCOUNT DENOMINATED IN A FOREIGN CURRENCY.
FUNDS IN THESE ACCOUNTS DO NOT ACCRUE INTEREST. FOR FIRMS AND
TELEGRAM
INDIVIDUALS THAT IMPORT FUNDS FOR LOCAL INVESTMENT, THESE FUNDS ARE
SUPPOSED 10 BE EXCHANGED FOR EC DOLLARS THAT CAN EARN AT MOST 6-1/2
PERCENT FROM LOCAL BANKS.. SINCE THESE MEASURES PREVENT THE PRIVATE
SECTOR FROM EARNING MARKET INTEREST, GRENADA IS DENIED ACCESS TO MUCH
OF THE FOREIGN EXCHANGE EARNED BY ITS NATIONALS AND RESIDENTS.
6. THE GOG DISCUSSION OF THE USURY LAW IS FOCUSSING ON THE INTERNAL
EFFECTS A RISE IN INTEREST RATES MIGHT HAVE, BOTH REAL AND PERCEIVED,
ON THE COST OF LIVING. THE FIRST REAL EFFECT WOULD BE AN INCREASE
IN THE COST OF CONSUMER LOANS. LATELY THESE LOANS HAVE FUELED A
SMALL NEW CAR IMPORT BOOM - ADDING MAINLY TO TRADERS PROFITS. WERE
GRENADIANS FACED WITH THE REAL COST OF FUNDS WE WOULD EXPECT TWO
RESULTS: (1) MARKET RATES WOULD ATTRACT MORE CAPITAL AND (2) BY
CHARGING MORE REALISTIC INTEREST RATES, FUNDS WOULD FLOW TO MORE
PRODUCTIVE ACTIVITIES. A WIDELY PERCEIVED
EFFECT OF A RISE IN INTEREST RATES WOULD BE AN INCREASE IN THE
COST OF IMPORTED FOOD. WE SEE LITTLE REASON TO FEAR THIS FOR TWO
REASONS: (1) EVEN IF THE CEILING RATE WERE CHANGED, THE COST OF
MONEY IS A VERY SMALL COMPONENT IN THE COST OF
FOOD; (2) THE
TRADING COMPANIES ARE THE PRIME LENDEES ON THE ISLAND AND AS SUCH
WOULD BE LAST ENTITIES CHARGED THE HIGHEST ALLOWABLE-RATE OF
INTEREST. SINCE ALL PIROPOSALS FOR RATE INCREASES UNDER CONSIDERATION
BY THE GOG PROVIDE PREFERENTIAL RATES FOR AGRICULTURE, HOUSING AND
FISHERIES, THESE IMPORTANT POLITICAL CONSTITUENCIES ARE PROTECTED
IN ANY EVENT.
7. THE US MISSION HAS NO PREDICTION WHAT THE GOG WILL DECIDE
TO DO WITH THE VARIOUS USURY LAW PROPOSALS. WHAT WE DO FEAR
IS THE GOG WILL INSTITUTE A HALFWAY MEASURE THAT WILL INCUR
THE WRATH OF THOSE WHO THINK THEY WILL BE AFFECTED BY A CHANGE,
WOTHOUT PROVIDING GRENADA THE BENEFICIAL EFFECTS OF A SUBSTANTIAL
INTEREST RATE REFORM THAT WOULD ATTRACT GRENADIAN FUNDS, PRIVATE
AND BUSINESS HELD, PLUS FOREIGN FUNDS, FROM, ABROAD.
8. IN US MISSION DISCUSSIONS WITH THE rnr. n~tHE TF un~
CONDITIONS FOR THE NEXT ESF GRANT WE HAVE RASED THE_USURY lA
AND FOREIGN EXCHANGE CONTROLS AS TWO AREAS NEEDING REFORM WE
NAVE NOTED THAT WE PREFER NO USURY LAWS, VIEW A NOII-BINDING
CEILING AS A SECOND BEST ALTERNATIVE AND FURTHER THAT WE DO NOT
CONDONE PREFERENTIAL RATE STRUCTURES. THE US MISSION AND THE GOG
HAVE AGREED TO CONTINUE DISCUSSIONS ON RELAXATION OF FOREIGN
EXCHANGE CONTROLS TO REMOVE THIS IMPEDIMENT TO CAPITAL FLOWS.
9. NVESTMFNT CODE---THE GOG IS SUPPOSED TO HAVE REVISED ITS INVESTM
GUIDE IT CIRCULATED IN LATE MAY. THE US MISSION HAD MADE NUMEROUS
APPROACHES TO THE GOG ON THIS ISSUE NOTING THAT-THE LAST VERSION,
WITH ITS _RISERVATION OF 21 SECTORS FOR GRENADINA ACTIVITY WAS
DIFFICULT TO SELL AS AN INDUL M 0 FOREIGN INVESTMENT. WE HAVE
SUGGESTED INSTEAD THAT GRENADA USE THE CARICOM FISCAL INCENTIVE
GUIDELINES, FROM WHICH GRENADA'S 1974 INVESTMENT LAW WAS DERIVED;
AS THE BASIS FOR ANY FUTURE INVESTMENT GUIDELINES. IN THIS MANNER
GRENADA'S LEGISLATION WOULD BE NO MORE RESTRICTIVE THAN THAT IN
NEIGHBORING ISLANDS. US MISSION OFFICIALS LEFT A DRAFT EMBODYING
THESE SUGGESTIONS WITH GRENADIAN OFFICIALS IN LATE JUNE. WE HAVE
NOT SEEN ANY GOG REVISED COUNTER-DRAFTS.
10. WE HAVE MADE THE 11S P0 S~TIOH VERY CLEAR TO THE GOG; THAT
THE COG' LEGISLATION SHOULD BE NO MORE
FIFI S AND IT SHOUL REPRESENT A REAL INCFNIIVF In INVESTMENT
BOTH DOMESTIC AND FOREIGN. FURTHER WE HAVE MADE VARIOUS
REPRESENTATIONS ON THE NEED TO STRFAMIIIF THE G G INVESTMENT
REVIEW PROCESS. OPIC HAS ASSISTED US IN THIS PROCESS BY PRESENTING
SPECIFIC INSTANCES WHERE INVESTMENT HAS BEEN DELAYED BY INTERNAL
PROCEDURES. WHEN THE NEW VERSION EMERGES AFTER GOG CONSIDERATION
WE WILL REVIEW IT IN LIGHT OF THE ABOVE AND REPORT.
LAWRENCE
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