ST. VINCENT AND THE GRENADINES

COUNTRY OVERVIEW

LOCATION AND SIZE.

Saint Vincent and the Grenadines are islands situated between the Atlantic Ocean and Caribbean Sea, north of Trinidad and Tobago. They form part of the Windward Islands, which also include St. Lucia, Dominica, Grenada, and Martinique. The island of Saint Vincent has an area of 344 square kilometers (133 square miles) and its 32 dependent islands and cays in the Grenadine island chain have a total area of 45 square kilometers (17 square miles). The main inhabited islands of the Grenadines are Bequia, Mustique, Union Island, and Canouan. Others are privately owned. Saint Vincent is approximately twice the size of Washington, D.C., and has a coastline of 84 kilometers (52 miles). The capital and only town of any size is Kingstown, situated on the island's southwest coast.

POPULATION.

The population of Saint Vincent and the Grenadines was estimated at 115,461 in mid-2000. This represented a population growth rate of 0.43 percent from the previous year, consistent with annual average increases of 0.4 percent from 1995 onwards. At this rate of growth, the population will stand at approximately 125,000 in 2010. The great majority of Vincentians live on the main island of Saint Vincent, with the population of Bequia, the largest dependency, numbering no more than 5,000.

Saint Vincent and the Grenadines' relatively low population growth rate is partly the result of family planning campaigns supported by the government and partly a consequence of marked patterns of migration. The island has traditionally depended on migration to the United Kingdom, United States, and other, larger Caribbean islands as a solution to its chronic unemployment problem, and in 2000 there were an estimated 7.75 migrants per 1,000 population. The country's population is evenly distributed among age groups, with 30 percent of Vincentians aged between 0 and 14 years, 63 percent between 15 and 64, and 7 percent 65 and older. Life expectancy on the islands is 72.3 years. Approximately 66 percent of the population is of African descent, with smaller communities of mixed-race, white, and Indian-descended Vincentians. The Anglican church is the largest in the country, attracting 47 percent of the population; 28 percent of the people are Methodists and 13 percent Roman Catholics, with the remainder adhering to other faiths. Most people live in small villages or towns, which are mostly situated around the coast.

OVERVIEW OF ECONOMY

Saint Vincent and the Grenadines' economy is largely based on agriculture, bananas in particular. It has been so for many years, but other economic activities have become more important in recent years, namely tourism, manufacturing, and financial services. Bananas have been Saint Vincent's main export and source of revenue since the 1950s, when the British colonial authorities actively encouraged the establishment of a local banana industry. The regularity of income from banana-growing lay behind the island's steady economic growth in the 1980s and early 1990s, but the crop is always vulnerable to hurricanes, drought, and disease, and suffered serious problems in 1994. The removal of preferential access into the European Union (EU) market was threatened by a 1997 ruling by the World Trade Organization (WTO). The ruling stated that the EU was unfairly favoring Caribbean producers at the expense of Latin American exporters. This created a loss of confidence in the industry's long-term future. Even so, recent years have witnessed an attempt to improve the regularity and quality of banana exports through an irrigation and rehabilitation scheme initiated by the government and the Windward Islands Banana Development and Exporting Company (WIBDECO).

Recent governments have tried to encourage diversification into other agricultural exports, and Saint Vincent exports a wide range of fruits and vegetables both to the United Kingdom and to regional (that is, Caribbean) markets. The traditional cultivation of arrowroot has been expanded as an export industry, and fishing is an important sector within the economy.

Industry is divided between manufacturing for the local and regional market and that destined for export to North America. The former includes food processing (flour and rice) and brewing, while the latter includes some garment and electronic components assembly, as well as the manufacture of sporting goods such as tennis rackets. There is a mixture of small local companies and local subsidiaries of foreign corporations.

Saint Vincent and the Grenadines has also sought to develop a range of service industries, of which tourism is the most important. Tourist facilities range from extremely exclusive, mostly privately-owned resorts and villas on islands such as Mustique and Canouan to a growing cruise ship facility in Kingstown. Yachting is also extremely popular around the beautiful Grenadine island chain. In recent years, the country has entered the financial services sector, with a large number of banks and other financial institutions present in Kingstown. This sector has attracted some controversy on account of its alleged secrecy. Saint Vincent has also been subject to criticism from the United States, both for its large-scale marijuana cultivation and for the alleged role played by the southern Grenadine islands as shipment points for cocaine en route from South America to the United States.

According to the Caribbean Development Bank (CDB), Saint Vincent and the Grenadines had a total external debt of $99.3 million at the beginning of 1999. The country's major economic problem, however, remains a high level of unemployment, affecting at least 22 percent of the workforce in 1999. According to the World Bank, some 30 percent of people in the English-speaking Windward Islands live in conditions of poverty.

POLITICS, GOVERNMENT, AND TAXATION

Saint Vincent and the Grenadines is an independent state within the British Commonwealth. It claims as its head of state Queen Elizabeth, who is represented on the islands by a governor general. The nation's form of government is a parliamentary democracy. The governor general selects the prime minister, usually the leader of the majority party in the unicameral (one-house) House of Assembly. The House of Assembly consists of 21 seats (15 representatives chosen by popular election and 6 appointed senators). The Eastern Caribbean Supreme Court, based in Saint Lucia, carries out judicial functions. One judge from the court is based in Saint Vincent.

Vincentian politics have been dominated by the figure of Sir James Mitchell since he and his National Democratic Party (NDP) first won elections in 1984. Elections in 1998 gave the NDP its fourth consecutive victory, but there was considerable controversy. The NDP won 8 out of 15 seats in parliament but only 45.3 percent of votes cast. The opposition Unity Labour Party (ULP) won only 7 seats but 54.6 percent of the vote. After political unrest and subsequent mediation from representatives of the Caribbean Community (CARICOM) in 2000, it was agreed that fresh elections would be brought forward by 2 years to March 2001. In those elections the ULP took 56.7 percent of the vote and occupied 12 of the 15 seats in the National Assembly; the NDP took 40.7 percent of the vote and held only 3 seats. Ralph Gon-salves was subsequently appointed as prime minister.

There is little ideological difference between the 2 main parties in Saint Vincent and the Grenadines, and both support a mixed economy in which government encourages and regulates private-sector growth and foreign investment. Differences tend to be as much personal as political, although the ULP puts particular emphasis on the need to reduce unemployment through the continued rehabilitation of agriculture and government spending on infrastructure . Governments are able to exert particular influence on the economy, in part because it is so small and in part because there is a relatively large public sector .

Taxation is made up of a mixture of income tax , indirect sales taxes, and taxes levied on companies and foreign-owned financial institutions. In an attempt to increase fiscal revenues from International Business Companies (IBCs), the government introduced legislation in 1996 ensuring almost complete secrecy concerning their financial transactions. The government has also attempted to raise revenues by acting as a flag of convenience, offering registration facilities for foreign shipping companies. Both of these measures have led to criticism not only from the political opposition but also from in ternational bodies concerned with money-laundering and marine safety.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

The infrastructure of Saint Vincent and the Grenadines is not fully developed, although recent government initiatives have involved improvements in roads, port facilities, and hospitals. Of 1,040 kilometers (646 miles) of roads only 320 kilometers (199 miles) were paved in 1996. Roads in rural areas, particularly in the north of Saint Vincent, are often poor. There are no railways, and the single international airport, near Kingstown, is unable to receive wide-bodied jets. Discussions have taken place with potential foreign investors concerning the runway's extension, while opponents of this scheme favor a new airport.

Lack of infrastructure has hampered the growth of tourism, even though the government has recently invested in a cruise ship jetty (landing wharf) at Kingstown as well as an airport on Canouan. Small farmers also complain that poor roads are an obstacle to transporting fragile commodities such as bananas to dock or to inland collection points. Saint Vincent and the Grenadines also suffers from having to import most of its energy supplies, mainly petroleum, from Trinidad and Tobago. About one-third of the country's annual electricity production of 64 million kilowatt hours (kWh) is derived from hydro-electric schemes, while annual consumption is estimated at 60 million kWh.

Telecommunications, dominated by Cable & Wireless, are generally good, and there is growing use of cellular phones. There were an estimated 20,500 main line telephones in use in 1998, but Internet use is as yet relatively underdeveloped.

ECONOMIC SECTORS

The most recent available statistics (1996) show that agriculture accounted for 10.6 percent of Saint Vincent and the Grenadines' gross domestic product (GDP). Farming, and banana cultivation in particular, is, however, an important source of employment and constitutes the country's main export, valued at $14.4 million in 1999. The most recent employment statistics, dating from 1991, show that approximately 22 percent of Vincentians worked in agriculture.

Industry accounted for 17.5 percent of GDP in 1996 and has grown considerably since the 1980s. Even so, it is still a relatively small sector, comprising mainly food processing for local markets and some export-oriented manufacturing. In 1991, some 9 percent of the labor force was employed in manufacturing, with a further 11 percent working in construction.

Services accounted for 71.9 percent of GDP in 1996. Leaving aside government services, the largest contributor to this sector was tourism, which produced approximately $74 million in visitor expenditures in 1998. Other growing segments of the service sector were those related to offshore financial transactions and related informatics (information science) or electronic data processing. In 1991, before the financial sector grew, about 5 percent of the working population were employed in hotels and restaurants, while less than 2 percent were classified as involved in "financial intermediation."

AGRICULTURE

Saint Vincent's mountainous terrain made it less suitable as a sugar-producing center than most other Caribbean islands, but the banana industry, beginning in the 1950s, was well suited to a territory mostly made up of small, family-run farms. A combination of protective quotas and stable prices guaranteed by Britain and then the European Union (EU) underpinned the steady growth of the banana industry in the 1980s and early 1990s, despite occasional hurricanes and other natural disasters. In the 1980s, bananas contributed, on average, 60 percent of export earnings and were the island's single biggest economic activity. This situation changed dramatically in 1995 when the United States complained to the WTO that the EU banana regime discriminated against Latin American producers. A series of legal rulings ensued, with the U.S. introducing trade sanctions against the EU, which has sought to find a compromise between the WTO ruling and its commitments to Caribbean banana producers. As a result, the late 1990s were marked by considerable uncertainty in Saint Vincent's banana industry and a drop in production from almost 80,000 tons in 1990 to 37,435 tons in 1999. According to the World Bank, the banana crisis has already caused "a decline in the central government's revenue growth, a slowdown in the pace of domestically financed investment, a rise in unemployment, and major financial difficulties for the Banana Growers' Association." Even so, recent efforts to improve banana production through irrigation schemes show a determination on the part of local farmers and their organizations to ensure the industry's survival. One possible strategy is to concentrate on the organic and "fair trade" markets in Europe.

Other important crops include coconuts, sweet potatoes, and ornamental flowers, some of which are exported to "niche markets" in the UK and U.S. The government has encouraged diversified small farming by splitting up some 7,000 acres of state-owned land into 1,500 small-holdings . Arrowroot, traditionally used as a food thickener, is now grown as a dressing for computer paper, and acreage of this crop has expanded in recent years, making Saint Vincent and the Grenadines the world's largest producer. Less well documented is the significant cultivation of marijuana, which is believed to be grown in the mountainous interior of Saint Vincent. In January 2000, U.S. Marines participated in a controversial crop eradication program, in which millions of plants were reportedly destroyed.

The fishing sector has benefited from extensive foreign development funding, most notably from Japan. There are now jetties and fish refrigeration facilities in Saint Vincent, Bequia, and Canouan, the large complex in Kingstown having been dubbed "Little Tokyo."

INDUSTRY

Saint Vincent and the Grenadines has a small industrial sector, but one that has grown in importance in recent years. Most manufacturing revolves around food processing, such as rice milling and flour production, for the local and regional market. The major producer is the East Caribbean Group of Companies. There is also large-scale production of chicken feed and polypropylene bags, while the local brewery, the Saint Vincent Brewery Ltd., which produces beer and soft drinks, accounts for approximately 30 percent of total industrial production. The other industrial sector is geared towards exports into the North American market and includes a handful of assembly plants producing garments and sports goods, especially tennis rackets.

Saint Vincent's industrial growth (there is no industry on the Grenadines) is hampered by several factors, including poor infrastructure, relatively high wages, and fierce competition from lower-wage areas elsewhere in the Caribbean and Latin America. Increasingly, Saint Vincent's industrial output has been directed towards other territories in the Eastern Caribbean.

SERVICES

Saint Vincent came relatively late to tourism, although its dependencies such as Bequia and Mustique had developed a reputation for exclusive luxury tourism as early as the 1960s. In recent years, the main island of Saint Vincent has tried to capitalize on its spectacular natural beauty by encouraging cruise ship companies to include it on their itineraries and by developing the yachting sector. In 1999, according to the Caribbean Development Bank, these 2 sectors showed a marked increase in visitor arrivals, bringing total arrivals to 223,125. On the other hand, stayover arrivals declined slightly by 1.5 percent from the previous year. There are few large hotels in Saint Vincent or in its dependencies, and as a result the $75 million annual tourist expenditure is more widely distributed through small hotels and retailers than in many other Caribbean countries.

The government has sought to expand tourism by opening a new cruise ship pier at Kingstown, upgrading the airport on Canouan, and improving the Leeward Highway on the west coast. Deliberations on the enlargement of the existing airport or the building of a new one continue. But Saint Vincent, which has few white sand beaches and an otherwise underdeveloped infrastructure, is not suitable for mass tourism and has wisely concentrated on attracting a small "upmarket" tourist clientele.

The other major service sector deals with overseas financial business. The 1996 legislation ensuring near total secrecy on taxation and other financial activity encouraged the arrival of many IBCs, totaling 2,698 in 1999. But there have been persistent allegations that the country's stringent secrecy provisions have served to conceal illegal financial operations such as tax evasion and drug money laundering. In early 2001, the international Financial Action Task Force (FATF), supported by European and North American governments, named Saint Vincent and the Grenadines, among other Caribbean countries, as a suspected location of financial irregularities. Related to the financial sector is a small data processing sub-sector, in which there is limited employment in computerized financial dealings.

The retail sector is underdeveloped, with few large stores or supermarkets. Markets, both in Kingstown and Bequia, are busy, and many rural Vincentians depend on small village corner stores. The growth of tourism and yacht chartering in particular has produced a noticeable increase in specialist retail outlets.

INTERNATIONAL TRADE

With imports of $180 million and exports of $47.8 million in 1998, Saint Vincent and the Grenadines' import bill is on average approximately 4 times that of what it earns through exports. Its main source of imports in 1998 was the United States, which contributed some 35 percent of the total. The other main suppliers of the country's imports were other CARICOM countries (22 percent) and the United Kingdom (11 percent). The main imports of foodstuffs, fuel, and machinery are distributed among those suppliers.

The main export, bananas, is directed towards the United Kingdom, which accounts for 42 percent of Vincentian exports. The other main export market is

comprised of CARICOM members such as Trinidad & Tobago, which imports much of Saint Vincent's agricultural produce. Rice, flour, and other food items are also exported regionally.

The deficit in the balance of trade is partly offset by tourism receipts and by revenue from the financial sector. Another important source of foreign exchange is the regular remittance payments sent back by Vincentians working overseas.

MONEY

Saint Vincent and the Grenadines has experienced steady growth in GDP in recent years (except in 1994), averaging over 3 percent annually since the mid-1990s. In 1999, GDP growth stood at 4.5 percent, a fall from the 1998 figure of 5.7 percent. This economic progress reflects a steady increase in tourism and the revenues generated by financial services, which has partly counter-balanced problems in the banana industry. Inflation has been low in recent years and, in 1999, was estimated at less than 1 percent. As a result, consumer prices are relatively low, and visitors from neighboring islands such as Grenada and Barbados now come to Saint Vincent to take advantage of lower prices.

Saint Vincent and the Grenadines' financial stability is in part because of its membership in regional financial institutions. The Eastern Caribbean dollar, a currency shared with the 7 other members of the Eastern Caribbean Central Bank (ECCB), is stable and has been pegged at a rate of EC$2.7: US$1 for many years. This means that Saint Vincent and the Grenadines is not particularly vulnerable to fluctuating exchange rates , although transactions with Europe have been affected by the low value of the euro. There are plans for ECCB member countries to participate in a regional stock exchange, further integrating the economies of the small islands, but by early 2001 little real progress had been made.

POVERTY AND WEALTH

Saint Vincent and the Grenadines is not a country of social extremes. There is a small middle class, traditionally involved in retailing and the professions, while a significant group of small farmers benefited from the "banana boom" of the 1980s, resulting in much improved housing conditions in many rural communities. Society is not prohibitively stratified, and educational opportunities exist for upward mobility. The literacy rate is high at 98 percent for both men and women.

There are no recent figures relating to income distribution in Saint Vincent and the Grenadines, but World Bank and other sources suggest that at least 30 percent of the population still lives in poverty, including the large numbers of unemployed. The most underdeveloped and marginalized area of the main island is the north, where villages such as Sandy Bay, Owia, and Fancy are still without electricity (although a project to connect them was underway in 2000). Here, the volcanic terrain limits the development of agriculture and there are few economic opportunities other than cultivating marijuana. The inhabitants of the poorest north coast settlements include the last descendants of the Black Caribs, a community descended from the island's indigenous population and slaves who escaped the sugar plantations in the 18th century and revolted against the British. On the east coast, the once thriving town of Georgetown is now almost deserted, abandoned since the government-owned sugar mill was closed

in the 1970s. Here, as elsewhere beyond the Kingstown area, educational and medical services are basic.

In contrast, the wealthier middle-class suburbs around Kingstown have a full range of amenities and facilities. The more prosperous banana-growing villages of the fertile inland valleys are also evidence of economic success. The wealthiest sectors of the population include those involved in the tourism industry, the new financial services sector and, according to critics, those with political connections.

WORKING CONDITIONS

Figures from 1991 (the most recent available) showed a total employed workforce of 33,440, with unemployment standing at 19.8 percent. More recent statistics, from 1999, suggest that unemployment stood at 22 percent. Figures cited by the newly elected Unity Labour Party say unemployment may be as high as 45 percent (although this number may be inflated for political reasons). Pay and working conditions are average by regional standards, and workers in agriculture, manufacturing, and the large public sector enjoy the protection of well-organized growers' associations and trade unions. According to the International Labor Organization (ILO), the government observes basic working legislation. Wages, although low by North American standards, are higher than in many poorer Caribbean nations and range between $100 and $300 per week for jobs in agriculture and manufacturing. The large civil service is well represented by trade unions and is able to negotiate substantial salary increases.

Conditions are toughest in agriculture, where many small farmers work remote and usually mountainous holdings without adequate irrigation or other inputs. Much of this work is carried out by families, and women, as well as some children, are widely involved in agricultural production as well as retailing.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1498. Saint Vincent sighted by Columbus on his third voyage of discovery.

1627-73. Islands claimed but not settled by Great Britain.

1673-1762. Jointly administered by Great Britain and France as neutral territory.

1763. Saint Vincent ceded to British after conflict with France.

1779-83. Islands occupied by French forces.

1796. Suppression and mass deportation of the Black Caribs by General Abercrombie.

1833-1960. Islands are part of the British Windward Islands colony.

1950s. First banana exports to United Kingdom.

1979. Islands declare independence from United Kingdom and become part of the British Commonwealth.

1984. James Mitchell of the conservative New Democratic Party becomes prime minister and dominates politics until 2000.

1987. Hurricane Emily destroys 70 percent of banana crop.

2000. Mitchell resigns amidst political controversy; Ralph Gonsalves, head of the United Labour Party, is elected in 2001.

FUTURE TRENDS

Saint Vincent and the Grenadines' short-term economic prospects depend to a large extent on the fate of its banana industry. If preferential access into the EU is removed or substantially reduced, the industry will not be able to compete with large Latin American producers and will collapse, creating widespread poverty among small farmers. Attempts to diversify away from dependency on bananas have begun, but will need to be accelerated over the next decade. The country's food processing and export industry also faces potential threats from cheaper regional competitors such as the Dominican Republic, which are now involved in reciprocal free-trade agreements with CARICOM countries.

Tourism seems to have a more healthy future, and the potential of the main island and its dependencies has yet to be fully realized. The authorities will have to balance the need for increased visitor arrivals with keeping the islands' reputation as an unspoiled and exclusive destination for the wealthier tourist. More doubtful is the outlook for the financial services sector, especially if the government is forced to remove secrecy provisions through international pressure. Overall, the medium-term future for Saint Vincent and the Grenadines does not look particularly bright, and the government will face an uphill task in reducing current levels of unemployment and poverty.

The Unity Labour Party, which attained a majority in the 2001 parliamentary elections in March of 2001, has stated that its aim is to add 1,500 jobs to the economy right away, invest in infrastructure to allow for the creation of more jobs in the medium and long term, boost the information technology and tourism industries, and provide more support for the production of bananas, sugar, and arrowroot. However, it is too early to say whether these ambitious plans can be realized, especially as many of these plans rely on government expenditures which may not be possible given existing government funding.

DEPENDENCIES

St. Vincent and the Grenadines has no territories or colonies.

BIBLIOGRAPHY

Caribbean Development Bank. Annual Report 1999. Barbados, 2000.

Economist Intelligence Unit. Country Profile: OECS. London: Economist Intelligence Unit, 2000.

"The Path to Caribbean Nationhood." Unity Labour Party. <http://www.ulpsvg.com/manifesto/manifesto2.htm>. Accessed July 2001.

"Saint Vincent and the Grenadines." South America, Central America and the Caribbean 2001. London: Europa Publications, 2001.

"St. Vincent and the Grenadines and the IMF." International Monetary Fund. <http://www.imf.org/external/country/VCT/index.htm>. Accessed July 2001.

U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html>. Accessed July 2001.

U.S. State Department. Background Notes: St. Vincent & the Grenadines. <http://www.state.gov/www/background_notes/stvincent_0600_bgn.html>. Accessed July 2001.

—James Ferguson

CAPITAL:

Kingstown.

MONETARY UNIT:

Eastern Caribbean dollar (EC$). One EC dollar equals 100 cents. There are coins of 1, 2, 5, 10, 25, and 50 cents and 1 EC dollar, and notes of 5, 10, 20, 50, and 100 EC dollars.

CHIEF EXPORTS:

Bananas, fruit and vegetables, arrowroot, sporting goods.

CHIEF IMPORTS:

Foodstuffs, machinery and equipment, chemicals and fertilizers, minerals and fuels.

GROSS DOMESTIC PRODUCT:

US$309 million (1999 est.).

BALANCE OF TRADE:

Exports: US$47.8 million (1998 est.). Imports: US$180 million (1998 est.).