Fiscal Foolishness!

Spring is here. The birds are nesting. It’s budget time and our fancy turns, not to love, but to our wallet, and our minds are full of questions.
So how much do you owe the bank? Thousands? Millions? Your car? Your house? Very few of us can afford to finance everything without help. Most of us turn to the bank.
And if we discover that we cannot pay back the money or meet our obligations, most of us know that the worst thing we can do is ignore the bank and hope it will go away.
But banks don’t go away. They might be quiet for a while, but they don’t disappear. They just wait until the loan and the accrued interest have reached, shall we say, interesting proportions, and then they pounce.
Of course, some political leaders, being not too bright at the best of times, don’t understand this simple fact of economic life.
Take Grenada, for instance. Under a series of new expenditure reduction measures, government workers face an expected 5-percent cut in their salaries beginning next month, according to Grenada’s finance minister, who also said that Grenada’s largest expenditure is its debt repayment which includes money owed to Taiwan’s Exim Bank, the Export-Import Bank of the Republic of China (Taiwan), a government-owned bank established in 1979 to facilitate export and import trade.
Diplomatic ties between Grenada and Taiwan were severed in 2005. Since the departure of the Taiwanese, the Caribbean country has failed to service millions upon millions in loan debts to the Exim Bank. Taiwan has accused Grenada of trying to use Mainland China as a bargaining chip to demand more financial aid from Taiwan.
Sound familiar?
A spokesman for Taiwan reprimanded Grenada for trying to cash in on the cross-strait confrontation that then existed, saying the Caribbean state had requested USD 245 million from Taipei for a five-year cooperation plan in addition to the millions of dollars the nation had received from Taiwan since the opening of official relations in 1989.
Is there a Standard Operating Handbook for Caribbean Leaders Seeking Handouts? They all seem to do it and they are think they are “sooooo clever”, until someone calls their bluff, that is.
After the severing of diplomatic ties, Grenada has refused to acknowledge all requests from Taiwan to regulate the loan situation.
So folks, the next time you don’t feel like paying your bills, just walk away from them. Our political leaders are shining examples of role models for us all. Just follow the leaders, the Pied Pipers, into economic ruin!
Ultimately, in accordance with the agreement, Taiwan was obliged to file suit in a US District Court for the Southern District of New York and won a summary judgment in 2007. The sum concerned has now grown to about US$28 million with interest and penalties.
No surprise there; it happens all the time. You don’t pay, the debt grows.
Technically, the ongoing loan dispute between Taiwan and Grenada does not involve Taiwan’s Ministry of Foreign Affairs because the issue is a commercial arrangement between a Taiwan bank and the Grenada government. The foreign ministry did not take part in the loan contract, even though the bank in question is state-owned, because the loan in question was “commercial”.
The Associated Press reports that the government of Grenada warns that “aggressive efforts” by Taiwan to collect a US$28 million ruling would hurt the tourism-dependent economy of the Caribbean island.
Crying over spilt coconut water, methinks! Any responsible government would have considered the implications of its reprehensible behaviour before taking a decision to default on loans.
Grenada Finance Minister Nazim Burke said cruise operators and airlines could halt operations in Grenada after receiving legal papers filed by US lawyers compelling them to turn over any money they owe Grenada in fees or other payments. Already, one cruise operator has threatened to cancel its 20 stops in Grenada until next year as a result of the effort to seize port fees.
We can only hope that our government will avoid the pitfalls of rash decisions and consider wisely the results of their own personal and perhaps outdated prejudices regarding China and Taiwan.
The Exim Bank has been trying to collect on the judgment, but the Grenada Government and its representatives have not responded to correspondence or returned telephone calls.
So remember, folks, don’t do as Grenada did; if the bank calls, respond! You might get help.
The Exim Bank recently filed a motion with the court to compel the Grenada Government to provide information about its foreign assets presumably so that the bank could eventually seize them to satisfy the judgment.
With the Grenada authorities announcing that they plan to re-open the offshore financial services industry, after it collapsed six years ago under the weight of massive, government-sponsored fraud, Grenada’s lack of interest in satisfying the Ex-Im Bank judgment should be a warning to anyone who is contemplating depositing or investing any funds with a Grenada entity.
Hand on your heart, dear reader, would you invest in a country that refused to pay its debts?
In 2005, Dr. Mitchell broke off ties with Taiwan in favour of Mainland China. The Taiwanese claimed then that the former Grenadian leader decided to move away from Taipei after their leaders asked him to account for the use of the loans that had been extended to the small East Caribbean island. Accountability was obviously not acceptable to the Mitchell government.
One of the loans for 10 million U.S dollars was taken from the Exim Bank by the Mitchell government in January 2000 to help build the Ministerial Complex at the Botanical Gardens in St. George’s.  Another loan for US$6 was contracted with Taipei to help build the first national stadium at Queen’s Park, which collapsed during Hurricane Ivan; and so on.
When the NNP regime broke off relations with Taiwan, the Exim Bank requested full payment of all outstanding monies by July 1, 2005, but the Grenada administration ignored the request. The Grenada government’s folly in refusing to respond to the bank may result in some foreign investors being afraid to do business with Grenada. If Grenada sells water to cruise ships that come into the harbour, the cruise ships
will have to pay the money over to the Taiwanese bank and not to Grenada. The same goes for landing fees levied on airlines.
Grenada is on the brink of ruin. The country is presently in no position to repay the millions owed to Taiwan and might have to look at diplomacy as a possible way out of the crisis. Prime Minister Thomas might be forced to engage fellow Caribbean leaders who still maintain friendly ties with Taiwan, such as St Vincent’s Dr Ralph Gonsalves and St Kitts’ Dr Denzil Douglas, and, possibly, our own Dr Kenny Anthony to try and work out a political solution to the Grenada – Exim Bank financial dispute.
According to reports, Mainland China has been appraised of the situation by the Grenada government but Beijing seems reluctant to intervene or make any pledges to help write of the millions owed to Taiwan by St George’s.
Whatever happened to honesty in government? Has the Caribbean become a pirates’ nest of embezzlers, smart operators and conmen?
By the way, Grenada is no exception, although I have to say that, in recent years, the one Caribbean country I have dealt with that has openly declared that it would like to enter into a joint venture but could not because it could not afford the costs is Grenada. The others? Never again! Crooks and scoundrels! Empty promises, goods and services delivered, payment outstanding for months and years at a time, and sometimes forever.
Lucky the Exim Bank that was able to get a court order requesting businesses that owe monies to Grenada to pay the funds to the bank. The court’s decision has been passed on to several airlines flying into Grenada, as well as a number of cruise lines that do business with the island.  Among them are said to be American Airlines, Delta Airlines, Caribbean
Airlines, Continental
Airlines, British Airways and Virgin, as well as Carnival Cruise Lines, and Princess Cruise Lines.
Many Caribbean countries have been particularly vulnerable to the lure of dollar diplomacy, in part, because they carry massive amounts of debt. Last year, unbelievably, Mainland China encouraged the  ever-deepening of the debt burden by pledging to “lend” $1 billion to Caribbean countries for development projects. “Lend” is the key word. Debts have to be paid back – with interest!
“These are among the most indebted countries in the world,” says Norman Girvan, an economist and UWI professor in Trinidad. “When you have a country that depends heavily on tourism and it faces a severe downturn, I’m not surprised that a country like Grenada can’t repay its loans.” Of the 10 countries in the world with the highest debt to gross domestic product ratios, four are found in the Caribbean, including Grenada, according to IMF data. Grenada’s debt, which stood at 99 percent of its GDP in 2010, according to IMF numbers, has left it with little wiggle room to repay Taiwan.
USD 28 million is not a particularly large sum of money. And that’s the point precisely! You might ask why the Ma administration does not withdraw the case over such a small sum. But you may just as well ask why Mainland China does not donate the money to Grenada to help the country pay off its debt.
This sad case underscores the dangers in small bit-players playing the diplomatic game with the big guys. Whenever there is a policy change either from Beijing or Taipei or both, small countries will not get what they expected or perhaps what they were promised, and this will inevitably lead to their economic and diplomatic meltdown.
It is ironic that the peoples of this region who revel in the historic excuses of slavery and colonial excesses are now, through their governments, rushing into a new era of bondage under economic burdens that
will eventually crush them, break their spirits, and rob them of their economic freedom.
The Grenada debacle must be a wake-up call to the nations of the Caribbean. Self-sufficiency in all things must be the motto. No longer can the nations of the region look to the big nations for handouts.
Taiwan itself is a shining example of a “small” nation, shunned diplomatically by the world and blocked from foreign capital and loans at the insistence of Mainland China, yet still able to grow from an impoverished country whose products were synonymous with poor quality into one of the strongest economies in the world with no foreign debt, foreign reserves that assure the country of a fourth place ranking among the richest nations, and a reputation for quality products unequalled in industry.
The latter-day colonial powers long since discovered that they owe their former colonies nothing but kind words, pats on the head, knighthoods and other birthday-list honours for their leaders. Baubles cost nothing, and they keep the native chiefs happy.
Mainland Chinese, the new colonialists from the East, are hard-nosed, unemotional businessmen who calculate the value of every dollar invested and the returns thereon. They cannot be blackmailed into paying for the sins of their forebears, as the Europeans have been.
Mainland China is in the process of re-colonizing the Caribbean, not with military might, but with soft loans that bankrupt politicians in equally bankrupt nations eagerly accept without a thought of consequences down the road.
The piper has to be paid; there are no free lunches; better a donor in the hand, than two in the bush; the treasure chest of traditional wisdom overflows with advice.
Need I say more?