Letters & Opinion

A “Developer’s Guide” – Part one

Image of David Prescod
By David Prescod

LAST week we discussed the description of these citizenship by investment schemes by the Prime Minister of St. Vincent as being “a race to the bottom”. We also looked at the issue of “due diligence”, noting that it really only meant that no record of criminal activity by applicants for these passports had been found, and that it provided no indication of the character of those persons applying for citizenship.

We also referred to the call by the Prime Minister of Saint Kitts for regional countries to collaborate on these schemes while indicating that there should be no competition on price. We noted the difference in the number of passports proposed for sale by Saint Lucia, a maximum of 500 per year, and those sold by St. Kitts over the last two years, approximately 2,300 each year and asked how this collaboration was supposed to work? St. Lucia is now to remove that limit.

And so we come to this new concept of development and what it means for Saint Lucia. But first we need to discuss a phrase that is now more and more often being used, and that is “Foreign Direct Investment”, or “FDI”. An impressive term, but from a layperson’s point of view all it really means is that someone overseas has gone to their bank, withdrawn their savings or secured a loan and then used that money to buy property, buy an existing business, or start a new business in Saint Lucia. This is good for our economy as business activity is increased, more people are employed, and that money from outside in effect stays here and circulates.

There is another route for investment however, where investors from outside of the country come in, borrow money from our local banks and then go on to construct hotels or invest in businesses. Not an ideal set of circumstances as first, our local pool of money doesn’t grow, and then if these projects fail, our local banks are exposed to the loss of the funds loaned to these overseas investors. We know some of those examples.

FDI is therefore preferable as it grows our economy and some of the risk of failure is borne by external investors, their banks, and financing institutions. This idea of risk of failure is critically important to the assessment of projects as it ultimately decides which projects are implemented, and even then, it determines the interest rates that are attached to the loans for those projects. These ideas of risk and FDI are essential to our discussion, and a little more on this follows.

Increasingly we hear that Foreign Direct Investment has dried up, and that in effect, it has become more and more difficult to find overseas investors willing to invest in Saint Lucia. Some persons attribute this to the fallout from the effects of the crash of the financial markets in 2008 without however indicating how this is so, and it seems that at some point soon, the life of this rationale will have to expire. The world seems to have gotten over that crisis, as, according to the IMF April 2016 World Economic Outlook, modest economic growth of 3.2% is expected globally this year.

There is no question that the financial crisis of 2008 affected our economy, as we know that our tourism sector was affected by the decline in arrivals and a decline in expenditure by those tourists. We are also told that the collapses of some tourism related projects at that time were related to this crisis, while the February 2016 IMF Article IV Consultation on Saint Lucia points to the large exposures to tourism-related projects as driving non-performing loans in domestic banks to a peak of 29% of total loans.

What the IMF Article IV consultation seems to be indicating is that, while some may point to the financial crisis of 2008 as the reason for reduced FDI inflows, our local banking sector has been significantly involved with the financing of tourism related projects which ultimately failed, and those failures are still affecting the banks negatively. That involvement by our local banks in financing these tourism related projects also suggests that the low levels of FDI inflows to Saint Lucia either pre-dated or started at the time of that financial crisis. In other words, this problem of low levels of FDI inflows has been around for a long while.

Two more interesting conclusions are made in the IMF World Economic Outlook (WEO) referred to above with respect to FDI, now referred to as capital flows as they relate to emerging economies (not St. Lucia – those emerging economies are much larger, but the principle holds). The first is that, while capital flows to emerging market economies as a whole fell markedly in 2015, the slowdown in fact began sometime in 2010. The period of the slowdown, 2010-2015, was also not unprecedented, the report indicating similar slowdowns during the 1980s and 1990s.

The second point made in that IMF WEO was that much of the slowdown could be explained by the decline in the difference in the rate of growth in emerging market economies versus advanced economies. In other words, as the opportunity for profit in emerging markets declined with their slowdown in growth, capital stayed home where the opportunity for profit became comparable to that in emerging markets.

In summary then, capital moves to economies with relatively higher rates of growth compared to advanced economies, and even then those flows are subject to assessments of the risks involved in investment. In Saint Lucia, (as in much of the region), we can readily see that the fundamentals for attracting capital are not in place, and this is the main reason for the low levels of FDI. We can suggest that our low levels of growth are remnants of the financial crisis, but Hurricane Tomas in 2010 and the December 2013 trough also had similar impacts on our economy. In effect, any strong breeze or heavy shower of rain can send our economy into crisis, and as we all know, the risk of these events taking place is relatively high. It has to be difficult to attract capital under these conditions of low rates of growth and high levels of risk.

It is our inability to attract capital under sound economic conditions which has given birth to this Citizenship by Investment Programme in Saint Lucia and in other islands. We gloss over our economic frailty by referring to the 2008 crisis as the cause of our difficulties when we must be aware that this is not the case. We then use this false excuse to hide the fact that we are unable to attract legitimate inflows of foreign capital, and then go on to justify the selling of our passports as a means to this end. But we know the admonition: the end does not justify the means.

And so the questions we should be asking ourselves are firstly, how do these projects implemented using CIP funds avoid the question of risk, and secondly, how do our economies grow in the absence of this CIP money when it inevitably dries up? To put the second question a little differently, what should we be doing now to strengthen our economy that we are not doing, and why are we avoiding it with this false promise of CIP cash. Because if our economy strengthens, legitimate money will return.

As we approach the issue of how one can become a developer, it is useful to review the routes available to citizenship under this country’s Citizenship by Investment Programme. For Saint Lucia, citizenship may be obtained by investment of US$200,000 into the Saint Lucia National Development Fund, or US$300,000 in an approved real estate development. Saint Lucia also provides the options of investing in an approved enterprise project, or in the purchase of US$500,000 in non-interest bearing government five year bonds.

In the case of the real estate option, purchasers are required to maintain ownership of that real estate for a period of at least five years. This means that purchasers of real estate can acquire citizenship, then five years later sell their share in the property and recover their money and maybe more if the property appreciates, and still remain a citizen of this country. In effect, they stand to obtain their citizenship at no cost and might even make a profit doing so.

On the face of it, if your net worth is in excess of US$3m and you want to buy a Saint Lucian passport, you can obtain one for free if you invest in real estate, but if you make a contribution to the government’s development fund that passport will cost you US$200,000. It is left to be seen which route the applicants will take.

Next week, Part 2 of this “Guide” takes a look at one of the developers in our midst.


  1. I thought this article excellent, and await part two, but we have some serious problems facing us immediately. WE NEED A NEW PRIME MINSTER RIGHT NOW!


    Because of the Greed an selfish character of the many mis-educated Negro Sambos, these reprobates, Rickets John Wayne, Jeff Fedee, Peter Josie, Mary Isaac, Gail Rigobert and such traitors, who sold the people of St. Lucia this ignorant fraudster kooyon Allen Chastanet as a leader, I will call myself “PROPHET SON OF MAN”. I TOLD YOU DISBELIEVERS THAT ALLEN CHASTANET WAS A WORTHLESS IMBECILE, WHO WOULD BE AN INTERNATIONAL EMBARRASSMENT.

    WHAT ELSE WOULD YOU CALL THIS BEHAVIOR IN THE HOUSE OF PARLIAMENT TODAY BY THIS IDIOT ALLEN CHASTANET; PLEASE TELL ME PLEASE. As Student Government President I mastered Robert’s Rules of Order, but mate cannot even read a simple sentence – SORT PWEE !!!



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