By Anya Lewis-Meeks
Grenada, affectionately referred to as the “Spice Island” by its some 100,000 locals, is known for its beautiful beaches, calypso-rich carnival and charming people. Tourism is the primary source of income for most of its residents. However, like several other Caribbean countries, Grenada is crippled by foreign debt.
In fact, Grenada is one of four Caribbean countries to restructure its debt in the past year—with Grenada’s public debts being larger than its annual economic output.
According to Grenadian Prime Minister Keith Mitchell, public debt concerns have become so large that they are significantly impeding growth and development.
This concern for debt vs. development is not unique to Grenada, nor is it unique to other Caribbean islands, but in fact remains a crisis that has affected many developing countries mired in debt around the world. Jubilee USA’s website lists several impediments to development that countries have suffered from as a result of debt agreements, those affected ranging from Heavily Indebted Poor Countries (HIPCs) such as Haiti and Honduras, to Middle Income Countries (MICs) such as Grenada, Jamaica, and many other Caribbean islands.
In many respects, however, Grenada’s personal troubles stand apart.
The country was devastated in 2004 by Hurricane Ivan that not only decimated many of the buildings on the island, but similarly wiped out most of the nutmeg and cinnamon trees that gave the “Spice Island” its name.
Nutmeg trees, which take ten years to grow to full production, require a massive amount of upfront investment, which just wasn’t available to farmers after the hurricane severely damaged their crop.
Ten years after the hurricane, 2014 sees Grenada’s nutmeg production at just 20% of the level it had been prior.
While nutmeg is the island’s biggest export crop, tourism is Grenada’s primary source of income. It was also damaged by a rather more unnatural disaster—the collapse of the financial system in 2008-2009.
As a result, the two industries that contributed to the island’sgrowth were damaged almost irreparably by forces outside of the island’s control, even as governments tried to frantically spend their way out of stagnation. According to the IMF, as a result of increased deficits due to this spending, public debt in the region averaged 70% GDP in 2012, and current-account deficits were at 23%.
In 2013, Oliver Joseph, Grenadian Minister of economic development published a heartfelt letter reprinted in the Guardian, saying, “Our tiny island of Grenada, with not many more than 100,000 inhabitants, is saddled with a debt that cannot be sustained.” The letter continues with a description of the circumstances that have placed the island in debt, but also ends with a solution: “We are prepared to become pioneers of a new debt-restructuring model that would spare countries from protracted entanglement in the debt trap. Grenada urgently needs debt relief from all its creditors.”
The Caribbean Debt Network (CDN), which is comprised of religious leaders and trade union representatives across the Caribbean, launched in April to chart this pioneering course. Jubilee USA’s Eric LeCompte visited the island that month to support the CDN’s new plans for debt restructuring to discuss the ultimate question: “How do we get the highest amount of debt reduction with the lowest amount of austerity?”
Although that question is difficult to answer, particularly with the lack of an international bankruptcy system and the fear of ever-circling Vulture Funds, LeCompte emerged hopeful that negotiations between Grenada and other Caribbean countries will further the introduction of an international debt framework. With the IMF releasing a report discussing the reprofiling of debt just last week, and in light of the new disappointing Supreme Court decision on Vulture Funds, these discussions are more essential than ever. As LeCompte puts it, “We believe we’re working on the most important issues of our time…We need to build an economy that promotes and protects the participation of the most vulnerable.”