Dominica: Privatize and Pauperize
WHEN HURRICANE HUGO RIPPED ACROSS Dominica in September, destroying 80% of the banana crop, it presented the nation with an opportunity to move toward a more diversified and self-reliant...
...Call the Youth Development Division...
...But, she admits, the tax changes essentially shifted the overall burden from foreign investors and higher-income brackets to lower-income ones...
...Other AID-funded projects, particularly road resurfacing and rural electrification, were more effective in convincing many Dominicans that the Charles government, with the help of its friends in the White House, could deliver the goods...
...We have to get deeper into debt in order to get out of debt," Charles says...
...Charles is nevertheless optimistic about the prospect of establishing another zone near the northeast coast, where she also hopes to construct a new international airport...
...But the shortsighted approach to the issue currently being taken by AID and the Eastern Caribbean governments, "doesn't even recognize, much less develop, our agricultural potential," Graham says...
...In Dominica, as in Grenada, this "private sector-led" development strategy has not resulted in the job-creating foreign investment predicted by AID and the multilateral lenders...
...We could easily sell six to eight times what we're selling now...
...The International Monetary Fund, too, saw an opportunity to pursue its global "free trade" policies...
...T HE CHARLES ADMINISTRATION REFERS TO the years 1978-1988 as "ten years of growth...
...HE POTENTIAL FOR AN ALTERNATIVE strategy based on local food processing, use of local materials and skills, and regional links between agriculture and industry, remains untapped...
...Opposition political parties are divided between a social democratic labor party and one led by disgruntled merchants cut out of the spoils by Charles...
...many others have been sent home, their surgery postponed for lack of beds or oxygen...
...What we need are industries where there is more value added in Dominica...
...Dominica: Privatize and Pauperize I. Author's interview, Roseau, Dominica, Dec...
...U.S.AID Memorandum on Dominica, prepared for the June, 1988 meeting of the CGCED...
...They greatly increase the burden on women, who must make up for the loss of public services by increasing their own household and community labor at they same time that they and their sisters must seek wage labor or increase their food and export crop production to keep up with rising costs...
...Our health service is satisfactory now...Some people are asking for another pediatrician, but we don't require two pediatricians in the country...
...In the same year, the World Bank spearheaded plans for a new, more far-reaching adjustment program to encourage "policies that will create the right environment for productive investment by the private sector and for export growth...
...According to Robin Phillips, the official in charge of AID's budget support and structural adjustment programs in the Eastern Caribbean, "We need to keep favorable governments in power long enough to maintain privatization...
...5. U.S.AID Project Paper, Program Assistance to Dominica, Sept...
...With the aid of the World Bank, and direction from the U.S...
...businesses, publicize the U.S...
...furnish reports at threemonth intervals "in a format acceptable to AID" to show that the funds were being spent on government projects to aid private investment...
...investors, but the kind of investment they promoted was the cut-andsew type that has a limited and very short-term benefit to the economy...
...During the second half of the 1980s, Dominica's government succeeded in reducing its budget deficit and demonstrating an increased rate of overall economic growth (GDP)-but at the cost of doubling the country's debt to 51% of GDP by the end of 1987.2 The long-term indebtedness of a small country such as Dominica is not a priority concern for the IMF...
...They now face the likely loss or reduction of their guaranteed UK market, along with lower banana prices after 1992...
...With rising living costs, jobs in the new garment factory were eagerly snapped up...
...The hand-written placards they carried were eloquent testimony to the consequences of structural adjustment: "Please help the nurses in the hospital...
...A special fund has supported what the Agency calls "highly visible activities," such as small road and water projects and school repairs in rural towns...
...Wages have increased slightly for some, but so have prices...
...But for many, wages barely cover the cost of getting to work...
...The World Bank, "Dominica Structural Adjustment Program Paper," Washington, 1985...
...Several nongovernmental organizations founded by Left activists have gained respect and support...
...in 1980, the country's exports paid for only a fifth of its imports...
...But there is nothing natural or inevitable about Dominica's poverty...
...1983...
...Dominica will never be able to provide optimal services," says Prime Minister Charles...
...The opportunity, which last came after Hurricane David ten years ago, is likely to be missed again...
...Badly overworked nurses in Dominica's clinics and hospitals have left in droves, many in response to campaigns to lure them to U.S...
...4, 1987...
...collaborate with the U.S...
...According to Edward Lambert, manager of a fruit-processing factory jointly owned by the government and several private firms, "Dominica's climate is ideal for citrus and many other tree crops, and there is a great potential market in the region for our fresh fruit, juice concentrate, and chilled fruit sections...
...Banana production rose from the posthurricane low of 1,512 tons in 1980, to 67,725 tons in 1987, when thousands of additional tons of unsold fruit were dumped into the sea...
...Neither puts forward an alternative development strategy, and the latter has stubbornly avoided a coalition approach to the elections, which must be called by August...
...This kind of industry can be planned so that different countries in the region can process different crops, so we don't compete against each other...
...For several years, the World Bank has been urging agricultural diversification, still with an export emphasis, although it has done little to promote it...
...government as its benefactor, and use local revenue to cover the costs of all the administration and paperwork involved...
...As in Grenada, AID was particularly keen to revamp Dominica's tax structure...
...Instead, countries in the region, including Trinidad, St...
...Rather than offering a serious plan for food security, the government is begging Europe to continue buying Dominican bananas and pinning hopes on AID's scheme for "exotic" exports...
...Wealthy Dominicans who fall ill are carried by helicopter to Martinique or by jet to Miami...
...Both embody the same problems that have made banana exports a risky and, ultimately, impoverishing enterprise...
...According to the chief technical officer in Dominica's Ministry of Trade, most of the AID funds spent on investment promotion have "gone down the drain...
...invasion of Grenada was being carried out at the request of the Organization of Eastern Caribbean States (OECS), over which Charles presided at the time.7 (In his book on the CIA, Veil, Robert Woodward reports allegations that Eugenia Charles herself received a payoff of $100,000, arranged through the State Department.') But by 1987, AID funds to Dominica and other Caribbean states had begun to dwindle...
...Dominicans are well aware of the political motives of U.S...
...Several hundred strong, the demonstrators marched in dignified columns to government headquarters...
...Their practical and educational efforts may gradually crystallize into a scenario for development that builds on local and regional resources and skills...
...In the wake of Hurricane Hugo, disaffection from Charles' Freedom Party is widespread and growing...
...A development strategy-or even a survival strategy-based on unprocessed agricultural exports from countries where size, terrain, and location ensure a relatively costly product runs counter to common sense...
...But the priorities of those who control Dominica lie elsewhere...
...If we don't achieve the growth rate necessary to cover our debts, we'll be in real trouble...
...Govemment of Dominica, Statistical Digest: Ten Years of Growth: 1978-1 988, Roseau, Commonwealth of Dominica, 1988...
...Vincent, and Barbados, are importing grapefruit and concentrate from Miami...
...N O GOVERNMENT LEADING DOMINICA IN 1980 would have found it easy to place the country on a course toward economic independence...
...The crops to be exported include dasheen, tannias, yams, ginger, hot peppers, okra, papayas, pineapples, breadfruit, mangos, soursop, plantain, and passion fruit...
...The government was also required to open the country to more imports and to work with the World Bank on a plan to "privatize" and "adjust" the economy...
...Because Dominica's currency is pegged to the U.S...
...Lucia, Dominica, Grenada, and St...
...People expect this, but they'll have to learn otherwise...
...After five years of AID-funded efforts to persuade foreign investors to set up export operations in Dominica, only 472 new jobs had been created in a new AID-backed industrial free zone...
...This policy will maintain the attractiveness of Dominica's low-skilled labor for labor-intensive light manufacturing and help contain the costs of its tourism product...
...But as long as the traditional elite remains in charge, Dominica's dependence on foreign markets and "experts" is likely to deepen, while its land and people grow ever poorer...
...The government's own statistics reveal a 23% decline in the number of pupils enrolled in primary schools between 1978 and 1987, when the population grew by nearly 10...
...One Dominican farmer observed, "The United States has been seeing our Caribbean countries for years as your back yard...
...production...
...To ensure that it would not be held accountable on record, AID asked the World Bank and IMF "to continue to carry the [budget linel item (to balance the books, as it were)" but that "it should be listed as coming from unnamed sources, and with the full understanding of the precarious nature of AID as a source of funding...
...OR THE REAGAN ADMINISTRATION'S CLOSest friend in the Eastern Caribbean, AID funds were bountiful throughout most of the 1980s...
...goods "from those import categories previously approved by AID...in an amount at least equivalent to the grant" within a year of receiving it...
...goods and services, offer a better deal to U.S...
...dollar and tied to that of other OECS countries, devaluation is politically difficult, a fact repeatedly bemoaned by Bank officials...
...Nevertheless, for centuries absentee owners have had most of the country's best farm land planted with a succession of export crops: cocoa, coffee, sugar, essential oils, limes and other citrus fruit, coconuts, and now bananas...
...funding...
...and "give appropriate publicity to the grant" as a U.S.funded program.6 In short, to get $2 million in cash over two years-only 1% of AID spending in the Eastern Caribbean during the same period-Dominica had to meet new, more stringent IMF austerity conditions, spend it all on U.S...
...But Eugenia Charles did not aspire to lead her country in a new direction...
...AID helped revive the banana industry as a quick fix to Dominica's economic problems, even though the Agency was aware that under a system of genuine "free trade," Dominican bananas would easily be priced out of the market...
...An outbreak of influenza, which swept the country not long after the tax was implemented, was dubbed "the three percent flu...
...Instead of improving pay and working conditions, the government "solved" this problem by reducing training programs and eliminating financial aid to nursing trainees...
...Other projects have funded agribusiness, passion fruit planting for export, small business start-ups, skills training for managers and young wouldbe entrepreneurs, partial underwriting of the costs of factory buildings for foreign investors, and advertising in the United States of "investment opportunities...
...Cloth dressings must be used and recycled, and surgical and other wards have been combined...
...2. M. Eugenia Charles, statement to the sub-group meeting on Dominica at the ninth meeting of the Caribbean Group for Cooperation in Economic Development, Washington, June 9, 1988...
...The carrot offered with the austerity stick was $8 million in below-market interest rate loans from the Bank, the IMF, and the Caribbean Development Bank...
...AID made a "verbal commitment" to add $4 million in Structural Adjustment Program (SAP) support grants to the package.2 According to the Bank, the government must "place primary reliance on controlling the growth of real wages...
...Its soil is bountiful and could, if cultivated with planning, feed more than the country's 81,000 people...
...Bananas accounted for 71% of the country's export earnings in 1987, up from 58% in the pre-hurricane boom year of 1978, and tonnage produced has increased each year since...
...A further condition-a standard requirement of many AID grants-stipulated that Dominica had to import U.S...
...At the airport, a large billboard asks, "Need Skilled Workers...
...Prominent among the grants were $24.5 million for road rebuilding, $1.7 million for banana industry privatization and $4.7 million for electrification...
...What she did have to offer was a new patron: the United States, eager to strengthen its new conservative ally to counter the 1979 pro-socialist revolution in nearby Grenada...
...The cost of training nurses who were likely to leave the country was identified as another drain on the government budget...
...Instead, Dominicans (pronounced dominEEcans) depend largely on imported food and subsistence farming, much of it done by women using tools and techniques unchanged for centuries...
...In contrast to significant government programs to support bananas and coconuts-processed by a wealthy entrepreneur who received government subsidies for many years-there has been relatively little support for citrus...
...Others have made their fortunes from imports, exports and land speculation...
...Many small farmers now face the loss of land they and their families have tilled for generations...
...Not surprisingly, the grant had only a slight, temporary affect on the budget deficit...
...Its own prime minister describes it as a country with "few resources except water, land, and people," and says it would be "ridiculous" for its citizens to expect wages or services comparable to those in the United States...
...citizens in March 1988...
...Just down the road near a cinderblock building behind a high chain-link fence, several dozen women stand in a small spot of shade on their lunch break from the factory...
...Many farmers are declaring that they, "won't go back into bananas...
...World Bank economists dismiss Dominica as a "microstate...
...But by far the greater part was-and still is-absorbed by the peasants and farm workers, the fruits of whose labor have been sold for a fraction of their value...
...Prime Minister Charles stresses that some low-income individuals are no longer required to pay income tax...
...The World Bank, Dominica Structural Adjustment Credit: President's Report, Washington, 1987...
...6. Ibid...
...AID, in a memorandum prepared for the 1988 meeting of the CGCED, stated that Dominica was "performing well" under the structural adjustment program arranged by the World Bank-led Tighter Consultative Group for the Eastern Caribbean...
...Neither attempts to enhance the ability of Dominican or other farmers in the Eastern Caribbean to grow food for their own consumption, or to process, package, and market agricultural produce to meet regional needs...
...4, 1987...
...An internal 1988 memorandum states, "Dominica will be devastated by adverse changes in the banana market and has only a few years to prepare for them...
...Farmers have received higher prices for their bananas since 1986, mainly as a consequence of currency fluctuations, but at the cost of a greatly increased workload...
...In the meantime, the plan called for increasing the "efficiency" and income of public utilities...
...Production of many of Dominica's important staple food crops, including dasheen and tannias (two edible roots), plantains, breadfruit, and cassava, has declined...
...Until Dominica's independence in 1978, Britain was willing to cover some of that loss in exchange for the country's militarily strategic location and the riches it produced for a small number of British investors...
...They are falling on their faces...
...The number of beds in the country's main hospital was reduced by 21% during the same period.'6 Doctors at the Princess Margaret Hospital report constant shortages of essential supplies...
...The result was the infamous "three percent" sates tax, which, by the time it is passed on to the consumers, especially in rural areas, often results in much greater price increases...
...This "downstreaming," she says, "is what the business community asked for...
...Commodity exports are always unreliable because of world market and price fluctuations...
...Since independence, a preferential marketing agreement with England that temporarily guarantees above-market prices for West Indies bananas, plus heavy foreign and local borrowing and cash transfusions from the United States, have kept the economy from collapse...
...Prominent among them were elderly farmers, who rose before dawn to take the long bus ride to the capital...
...It's true that they're in our backyard," acknowledged Marilyn Zak, acting AID Director for Latin America and the Caribbean...
...But most of the Agency's goals are being pursued through the IMF and the World Bank, she said, and "Grenada is no longer a problem...
...The present government, the third since independence, is led by Eugenia Charles' Freedom Party, elected in 1980 and re-elected in 1985...
...The Left, which was strong in the 1970s, is now either in exile or dug into labor, community, farmers and popular culture organizing work...
...Although it received $15 million in foreign loans and grants that year, the government reported a $2.8 million budget shortfall and a $27 million national trade deficit...
...4, 1987...
...The World Bank, Dominica Structural Adjustment, 1985...
...With AID and World Bank encouragement, Dominica's government is abandoning these lands in the name of privatization, dividing plots-including land now farmed by cooperatives-and offering them for sale to the highest bidder...
...I In line with this goal, the Freedom Party-dominated parliament enacted labor legislation that allows employers to make separate contracts with individual workers, cutting them out of collective bargaining agreements.'4 Other adjustment program measures required the government to freeze Dominica's minimum wage, toughen its stance toward the civil servants union, and reduce the number of public employees...
...Author's interview, December 4, 1987, Roseau, Dominica...
...Pastures and vegetable gardens have been dug up and replanted in bananas...
...In Dominica as elsewhere, the IMF was willing to plug the balance of payments deficit with loans, in return for changes in government economic policy...
...In 1981, it proffered $11 million on the condition that the country adopt a program of "economic stabilization," requiring cutbacks in government payrolls, social services and public enterprises, and a more regressive system of taxation...
...AID officials confirm that the Agency will not assist Dominica's citrus industry because fruit or juice exports might compete with U.S...
...As a result, said one physician, "A child who comes in for a circumcision is very likely to leave with measles or another infectious disease...
...As of March 1989, the Agency had granted only $1 million...
...A reliable export market can and should be developed as an offshoot of an established domestic market," Lambert contends...
...In 1985, Dominica's earnings from its exports still covered only 51% of its import bills...
...Health care, education and other service cuts may help achieve short-term budget savings and meet structural adjustment targets, but they deplete the "human capital" on which genuine development depends...
...A ID DID NOT BEGIN TO ADDRESS THE COUNtry's underlying economic plight...
...And there are few, if any, crops that could not be grown more cheaply in other countries in the Caribbean or in Africa or Asia...
...8. Bob Woodward, Veil (New York: Simon & Schuster, 1987...
...There, she says, export industries can be "cheaper and more efficient....People here don't have to buy winter coats or pay to heat their houses, so they don't need higher wages," she told a visiting delegation of U.S...
...3. Author's interview, Dec...
...But behind the facade of progress is another reality: ten years of increased economic vulnerability, control by foreign institutions, and continuing impoverishment of the country's rural majority...
...Administration officials were delighted to have Prime Minister Charles stand staunchly beside President Reagan in Washington in October 1983, and state to the world that the U.S...
...9. Author's interview, Washington, June 1988...
...Agency for International Development, the International Monetary Fund and European governments, the Freedom Party has presided over the modernization and expansion of the structures of impoverishment inherited from colonialism...
...Dominica was devastated by major hurricanes that year and the year before which destroyed most of the planted bananas...
...The local elite has always managed to skim off enough of the profits to live in relative luxury...
...Given the costs of incentives and foregone taxes, the net economic gain to the country from the factories is probably negative, and there is nothing to stop companies from moving to other countries that offer even lower wages or more lucrative deals...
...The country's promising rural health clinics, established in the early 1980s and designed to handle such problems, are now seriously understaffed and undersupplied...
...The head of Dominica's Economic Planning Division remarked, "When people in the Caribbean talk about the 'miracle' of economic growth in Taiwan, they shouldn't forget that Taiwan got huge amounts of U.S...
...It was not long before the Reagan administration received a big payoff for its modest investment...
...The IMF was relatively lenient in its dealings with Dominica, as it often is with conservative U.S...
...But a separate memo prepared for the same meeting acknowledges that Dominica' "current mini-boom rests almost entirely on bananas...
...4 To this end, and to help refinance Dominica's IMF loan, AID gave the government a series of direct cash transfers, beginning with a 1983-1984 grant of $2 million, made contingent on the country's compliance with additional IMF-required economic policy changes...
...But the only criterion they had to report to AID was the number of jobs...
...aid in reaction to the revolution in China...
...Like others, Lambert asks, "Why should we be exporting unprocessed cocoa when we could be manufacturing chocolate...
...L ESS OBVIOUS THAN LIVING COST INcreases and reduced social services, but even more damaging in the long run, is the erosion of Dominica's food security...
...The Fund's goal is not to create sustainable economies, but to promote global trade and capital flows and to recover its own investments...
...Experienced machine operators can earn $5 a day or more...
...19...
...Operations must sometimes be done under unsterile conditions...
...Author's interview, Dec...
...According to Acting Chief Agricultural Officer Erroll Harris, Dominica already produces most of the components for small animal feed and could produce more...
...Many are managers for, or junior partners of, the foreign corporations that have reaped the greatest profits from Dominica's soil...
...Mamo [Prime Minister Charles], children are dying from your taxes...
...Because of its rugged terrain and the frequency of heavy rains and hurricanes, Dominica is not well-suited for large-scale export agriculture...
...AID's own Dominica Banana Company Project was in large part responsible for re-establishing Dominica's dependence on bananas in the wake of Hurricane David in 1979, when the destruction of the country's banana crop presented an opportunity to begin a transition to a more diversified and self-sufficient system of agriculture...
...The government reorganized the authority with fewer and lower-paid employees, then sold it to a foreign company...
...allies...
...Now it appears you want to make that yard into your garden...
...patients have had to sleep on the hospital floor...
...The Fund permitted Charles to strengthen her political base by using part of the $11 million to cover the back pay of government employees...
...With less pasture land, farm families raise fewer livestock for local sale or for their own consumption...
...In other "adjusting" countries, including Jamaica and the Dominican Republic, the World Bank and IMF have dealt with the problem of "too high" wages by requiring currency devaluations, which have the double effect of reducing workers' real incomes and of making the adjusted country's exports cheaper...
...Perhaps because it was the most direct and visible aspect of the adjustment program, the tax particularly angered Dominicans and became the subject of biting calypso hits...
...But without the IMF and the World Bank, we wouldn't exist...
...Down with IMF...
...AID-somewhat belatedly-joined the chorus, promoting two projects: the AID High-Impact Agricultural Marketing and Diversification Project (HIAMP), and a new West Indies Tropical Produce project (Tro-Pro...
...Dominican agronomist Neville Graham notes that "Many of these estates were once productive and diversified entities...
...Some of the "trainee" workers receive daily stipends of $1.88, paid by AID to save expense to the employer...
...Although taxes on the majority of Dominicans were already relatively high, he noted, a revenue source was needed to make up for the loss resulting from corporate and high-income tax reductions...
...The projects are geared to increasing exports, mainly to the United States, without any means of ensuring reliable markets or minimum prices...
...Neither HIAMP nor Tro-Pro is likely to reduce the economic vulnerability of Dominica and the other Windward Islands to unpredictable external forces...
...Both are intended to encourage "exotic" fruits and vegetable exports to "specialized market niches" in the United States...
...You can't suddenly slap people with such steep increases, at least not in a democracy...
...He said, "It pains me to see our country importing $50 million [Eastern Caribbean dollars, about $19 million U.S.] yearly worth of meat and chicken....Resources are not put into this kind of development because there's a lack of will at the highest political levels, where entrenched commercial interests benefit from the import and distribution of frozen chicken...
...7. The member nations of the OECS are AntigualBarbuda, St...
...WHEN HURRICANE HUGO RIPPED ACROSS Dominica in September, destroying 80% of the banana crop, it presented the nation with an opportunity to move toward a more diversified and self-reliant economy...
...IN DECEMBER 1988, DOMINICANS DEMONstrated in public for the first time in nine years to protest the three percent sales tax and other structural adjustment austerity measures...
...Regardless of whether such a strategy could succeed in the long run, the Reagan Administration was more concerned with the appearance of success in the short term...
...Other public bodies, including the DOMLEC power corporation and the national Housing Development Corporation, were also to be sold or dismantled...
...Here, the revolution in Grenada got us one big road...
...But if we develop the industry to meet our own needsfirst and then regional demand...we can work out long-term contracts to export our surplus outside the region...
...20...
...We can't afford to send every child to a pediatrician...
...But, Harris says, "We can't get money from AID to develop a feed factory....It's hard to get assistance to support our own livestock production because industrial countries produce too much meat and want to sell it to us...
...4. Author's interview, Bridgetown, Barbados, December, 1987...
...As in Grenada, large amounts of land in Dominica are government-owned or controlled, including agricultural estates that have been sold or abandoned by their owners...
...When it came time for AID to pay its share in 1988, the Agency failed to come through, because of general cutbacks in Economic Support Funds for the Caribbean...
...Today that elite is still largely tied to colonial interests and constrained by a neo-colonial mindset...
...Much other good land-flat areas near the coast or in sheltered valleys-is also owned by non-farmers and is left idle as collateral in commercial ventures or for speculation...
...Kitts/Nevis, Montserrat, St...
...Tro-Pro promises to spend $6.2 million, divided among all Eastern Caribbean states in which AID operates...
...The "reforms," Phillips explained, included "more investment tax credits for entrepreneurs, and some reduction for higher tax brackets...
...hospitals, where even as nurse's aides they can earn more...
...And, nudged by the United States, it negotiated a second deal in 1984, an IMF stand-by agreement, even though the country had not met previous IMF targets...
...Another Dominica senior civil servant places the blame equally on the policies of Dominica's government...
...As a lawyer and a daughter of the landed and commercial elite, she belongs to a class that benefits from the status quo...
...Vincent and the Grenadines...
...Charles even opposed independence...
...The country has always sold cheap and bought dear, essentially operating at a loss...
...We're raising water and electricity rates," said a senior government official, "but we can't raise them fast enough to please the World Bank...
...Prime Minister Charles says her government had no problem with these conditionalities: "The things the IMF wanted us to do were the same things we wanted ourselves.....We believed in privatization before the IMF and World Bank were here...
...They could be the centerpiece of a national plan for a more self-sufficient economy, with land set aside for livestock, beans, potatoes and other crops...
...The World Bank specifically called for the elimination of 30% of the jobs in the country's Central Water Authority, despite the fact that broken sewers and lack of piped water plague many communities...
...government on ways of expanding trade opportunities...
...After two years of planning, only two Tro-Pro staff are in place to cover the entire region, and there are no mechanisms for including farmers in planning and implementation...
...I'd hate to have to wait for communism to take over Haiti to get more...
...Consultants from a multinational firm hired by AID, he said, "were here to attract U.S...
...Since 1985, Dominica has been repaying to the IMF more than it receives...
Vol. 23 • February 1990 • No. 5
