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2011 Investment Climate Statement - Grenada


2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011
Report
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The Government of Grenada (GOG) seeks to attract foreign direct investment and, with limited exceptions, encourages investors to enter in and operate enterprises in all fields of lawful economic activity. There is no minimum entry requirement and no restriction on foreign ownership, repatriation of capital, dividends, interest or other distributions and gains. Foreign and local investors are given equal treatment. The main sources of information and data are the Grenada Industrial Development Corporation and Ministry of Finance.

Openness to Foreign Investment

The GOG encourages the establishment and development of new businesses and offers a wide range of incentives to potential investors. All of these incentives and concessions are designed to make investments more profitable. Concessions are available under the Income Tax Act, the Common External Tariff (SRO 42/09), the Property Transfer Act, the Petrol Tax Act and the Customer Service Charge Act. Screening by the Financial Information Unit to confirm eligibility is required for foreign investors seeking government investment incentives. Recognizing that due diligence in vetting investors and their qualifications may be a lengthy and cumbersome process, investors are required to sign a “shareholders declaration form” to vouch for their bona fides in order to proceed with the investment while screening is still underway. Once GOG due diligence is complete, the Cabinet will conclude within six weeks whether the investor and its proposal qualify for the incentive. While there is no appeal from Cabinet’s decision, an investor may decide to continue with the project absent the investment incentives.

The judicial system upholds the sanctity of contracts.

Grenada has a generally liberal investment regime. Cottage industries, including travel agencies, tour operators and guides, cultural activities, taxis and bus transportation, personal and household services like beauty care and cleaning, small scale primary agriculture, fishing and quarrying, accommodations facilities containing less than ten rooms, and small scale construction, are not open to foreign investment. Otherwise, there is no economic or industrial strategy that has discriminatory effects on foreign investors, or sectors in which foreign investors are not treated the same as national investors. However, non-Grenadian investors may be subject to the Alien Landholding License, which levies a 10 percent fee on the purchase of Grenadian stock or real estate; a Property Transfer Tax of 15 percent (versus 5 percent for Grenadian nationals); and the annual renewal of a Work Permit. There are no limits on foreign ownership or control. Investors may not invest in or operate Investment Enterprises which are prejudicial to national security or detrimental to the natural environment, public health or the national culture or which contravene the Laws of Grenada. Grenada accepted but has not yet implemented regional obligations on anti-competition concerns.

Acting on reports of improprieties with regard to contracts signed by the prior government, the GOG in 2009 established a commission to review certain projects involving foreign investment. The commission’s work has not been completed and no contracts have been voided to date. Delays in the implementation of some contracts have been reported.

Transparency International Corruption Index: N/A

Heritage Economic Freedom Index: N/A

World Bank Doing Business 2011: 92 (upgraded from 98 in 2010)

Millennium Challenge Corporation Indices: N/A

Conversion and Transfer Policies

The Reciprocal Encouragement and Protection of Investment Agreement with the United States protects U.S. investors against performance requirements, restrictions on transfers, and arbitrary expropriation and sets forth procedures for the settlement of disputes. By providing a more open and secure environment for investment, it also promotes private sector development. There have been no recent changes in the Agreement. There is no difficulty in obtaining foreign exchange. There are no restrictions or delays regarding remittances.

Expropriation and Compensation

Under the Constitution, the Government shall not compulsorily acquire or take possession of any investment enterprise, or any asset of an Investor except for a purpose which (a) is in accordance with the laws of Grenada; (b) is on a non-discriminatory basis; (c) is in accordance with the procedures provided by law; (d) provides for prompt payment of adequate and effective compensation together with interest from the date of acquisition or taking possession of the investment enterprise or asset to the date of payment at the commercial bank rate on loans to the corporate sector; and (e) provides for the right of access to the High Court by any person claiming such compensation for the determination of any interest in or right over the investment enterprise or asset and the amount of compensation. There have been no expropriation actions against foreign investors in recent times, although local Grenadians have had their lands expropriated to permit foreign investment. There are no special sectors which may be more at risk of expropriation than another. There are no laws forcing local ownership.

Dispute Settlement

Grenada is a constitutional monarchy within a Parliamentary System based on the British model. The executive power is vested in the Prime Minister and his Cabinet, who have responsibility for concluding and signing trade treaties and trade-related agreements with foreign countries.

The Judicial System is based on English Common Law.

The judiciary has four levels. Magistrates Court deals with minor civil and criminal cases, while the High Court deals with cases falling under the different Acts of Parliament. Appeals from the Magistrates Court are heard by the High Court, while appeals from the High Court are heard by the Eastern Caribbean Court of Appeal. The Privy Council in London is the final Court of Appeal once all appeals have been exhausted at the local and regional levels.

Grenada is a member of the International Centre for Settlement of Investment Disputes (ICSID). In 2009 and again in 2010, ICSID ruled in Grenada’s favor in a 2005 dispute involving oil exploration licenses provided to an American investor, RSM Production. The 2009 ruling is at present the object of a stayed annulment proceeding.

In the event of disputes between foreign parties within an investment, or between foreign investors and Grenadian parties, or between Grenadian partners, or between the investors and the GOG with respect to an enterprise, the disputants shall first seek to settle their differences through consultation or mediation to reach an amicable settlement. In the event that the disputants fail to resolve the matter, they may then: (a) submit their dispute to arbitration under the Arbitration Act No 2 of 1989; (b) invoke the jurisdiction of the courts of Grenada; (c) invoke the jurisdiction of the Caribbean Court of Justice; or (d) adopt such other procedures as provided for in the Articles of Association of the investment enterprise. There is generally no government interference in the court system. While occasionally such government interference has been alleged, it has not been proven to date. A more common problem in Grenada’s judicial system is lengthy and/or incomplete trials. These are dragged out by the non-appearance of required witnesses or attorneys resulting in multiple continuances. It is exceedingly rare that a judge holds anyone in contempt for ignoring a summons and many trials are eventually dropped because of the no-shows.

Performance Requirements/Incentives

The Government does not maintain any measures alleged to violate the WTO’s TRIMs text.

The legislation of Grenada provides a package of benefits and concessions for specific activities. Incentives available include tax holidays, import duty exemptions, repatriation of profits and withholding tax exemptions. Incentives that are trade-related are notified under Article 25 and Article 27 of the Agreement on Subsidies and Countervailing Measures. The Government encourages the establishment and development of new businesses and offers a wide range of incentives to potential investors. All of these incentives and concessions are designed to make investments more profitable. Concessions are available under the Income Tax Act, the Common External Tariff (SRO 42/09), the Property Transfer Act, the Petrol Tax Act and the Customer Service Charge Act. Incentives include accelerated depreciation (50% on plant & machinery; 10% on building); investment allowance (100% write off on total investment); carry forward of losses for 5 years; 100% relief from customs duties on plant, equipment & raw materials; and deductible expenditure incurred for training, research and development. Other incentives include no restrictions on foreign ownership; no restrictions on foreign currency transactions; no restrictions on the repatriation of profits, capital, and dividends; and relief from double taxation. Certain incentives may be linked to the site of investment, the number of persons employed, or other factors. There has been no instance in which the G0G has had to review an approved investor for non-compliance with incentive requirements.

There are no performance requirements linked to investments. The Reciprocal Encouragement and Protection of Investment agreement with the United States protects U.S. investors against performance requirements. An investment enterprise may be wholly owned by either foreign or domestic investors. There are no requirements that foreign investors purchase from local sources; that Grenadian nationals own shares in a foreign investment; that foreign equity in a project be reduced over time; or that technology be transferred.

Foreign investors may be subject to the Alien Landholding License, which levies a 10 percent fee on the purchase of Grenadian stock or real estate; a Property Transfer Tax of 15 percent (versus 5 percent for Grenadian nationals); and the annual renewal of a Work Permit.

Right to Private Ownership and Establishment

Investors may purchase or lease privately owned land and dispose of or transfer their interests in the land under the Alien Land Holding Licence Act and the Property Transfer Tax Act, No 37 of 1998. Investors may hold State lands by grant or lease from the State.

Foreign and domestic private entities may freely establish, acquire, own and dispose of interests in business enterprises.

Protection of Property Rights

The Constitution and Investment Code Incentives Act protect personal property including investments and the property of investors. Grenada recognizes and enforces secured interests in moveable and real property. The legal system protects the acquisition and disposition of all property rights.

The intellectual property rights of investors and investment enterprises, such as, but not limited to, patents, trademarks, brand names, and copyrighted materials in printed, recorded, or electronic format are guaranteed by the Patents and Act (Cap 227 of the consolidated laws of Grenada) or the Trademarks Act (Cap 284 of the consolidated laws of Grenada), or the Copyright Act Cap No 32 of 1988 (Cap 67 of the consolidated laws of Grenada). Grenada is a member of the World Intellectual Property Organization (WIPO), the Paris Convention, the Berne Convention and the Patent Cooperation Treaty.

Domestic legislation regarding intellectual property protection has not yet been amended to bring it in line with the TRIPs Agreement.

Administration of intellectual property laws in Grenada is under the responsibility of the Ministry of Legal Affairs.

The registration of patents, trademarks and copyright is done at the Registry of the Supreme Court. Grenada operates a re-registration system based on registration in the United Kingdom.

Grenada’s system for registering patents is governed by the Registration of the United Kingdom Patents Act, Cap. 283. In accordance with the legislation, based on Section 91 of the U.K.’s Patents and Design Act of 1907, any patent holder in the United Kingdom may apply within three years from the date of issue of the patent to have it registered in Grenada.

Under the Registration of the United Kingdom Trade Marks Act, Cap 284, any person being registered as the proprietor of a trade mark in the United Kingdom may apply at any time during the existence of the registration to have it registered in Grenada.

Transparency of the Regulatory System

The Government of Grenada recognizes that, for investors, transparent information on rules and regulations dealing with investment, their formulation and their implementation are critical. The Investment Act promotes transparency by authorizing key sectors for which the government may (but need not) offer investment incentives, streamlining processes, standardizing treatment of investors, defining investment rights, providing procedural guarantees and reducing the scope for political influence in business negotiation. The Government also promotes investments by consulting with interested parties; simplifying and codifying legislation; using plain language drafting; developing registers of existing and proposed regulation; expanding the use of electronic dissemination of regulatory material; and by publishing and reviewing administrative decisions. While these steps help deliver clarity to investors, there are occasions where consultations are not broad enough to generate public awareness of particular proposals or where draft legislation does not receive a public hearing.

Tax, labor, environment, health and safety, and other laws and policies do not distort nor impede investment, though the laws are not always applied in a consistent manner. In theory, bureaucratic procedures, including those for licenses and permits are sufficiently streamlined and transparent. In practice, local authorities recognize that the implementation of procedures is inconsistent, that much red tape remains to be cut, and that greater emphasis on service with training to increase the work force’s capabilities is needed. There are no informal regulatory processes managed by non-governmental organizations or private sector associations.

Legal, regulatory and accounting systems are generally transparent and consistent with international norms.

Efficient Capital Markets and Portfolio Investment

Grenada has policies to facilitate free flow of financial resources. Its currency, the Eastern Caribbean dollar, has fixed exchange rate established by the regional Eastern Caribbean Central Bank. Foreign personnel of investment enterprises and their families may also repatriate their earnings, after paying of Grenadian personal income tax and all other taxes due. The GOG encourages foreign investors to seek investment capital from financial institutions chartered outside Grenada due to the short supply of capital within the country rather than tap the local financial market or access low-interest rate loans or government grants directed towards local borrowers. However, exceptions occur. Foreign investors are more likely to tap local financial markets for working capital.

The private sector has access to the limited number of credit instruments available. Grenadian stocks are traded on the Eastern Caribbean Securities Exchange (ECSE), whose limited liquidity may pose difficulties in conducting transactions. The Grenada Authority for the Regulation of Financial Institutions (GARFIN) establishes a regulatory system for encouraging and facilitating portfolio investment. While the estimated total assets of the largest banks are US 1.03 billion, information is not available on the percentage of the asset base deemed to be non-performing. Grenada has not experienced cross-shareholding or hostile takeovers.

Competition from State-Owned Enterprises (SOEs)

Grenadian state-owned enterprises are established by Acts of Parliament, feature a Board of Directors named by the Government, and are answerable to particular ministries. Twenty five of 28 authorized SOEs are operational. They secure credit on commercial terms from commercial banks. SOEs submit annual reports to the National Assembly and are subject to audits shared with their parent ministries. SOEs manage transportation infrastructure (ports and airports), housing, schools, hospitals, and cement production, among other functions.

Corporate Social Responsibility (CSR)

Producers and consumers are familiar with the concept of CSR. Businesses frequently sponsor public entertainment events, cultural showings, and charitable causes. The economic downturn and the Haitian earthquake both spurred the private sector to new initiatives linked to CSR. Firms that promote CSR are more favourably viewed by the community. There is little familiarity with international CSR standards.

Political Violence

Grenada is a politically stable country with little or no political violence. Political infighting can negatively impact investment immediately preceding or following a change in government. On the whole, investors in Grenada may benefit from a stable economy; developed infrastructure, relatively low crime rate, and generally good quality of life. Several sectors, including agriculture, health, and tourism, remain underdeveloped.

Corruption

Grenada is party to the Inter-American Convention against Corruption. According to the World Bank's worldwide governance indicators through 2008, government corruption was a problem. In March 2007, Parliament passed the Integrity in Public Life Act, the country's first anticorruption bill. It requires all public servants to report their income and assets for review by an Integrity Commission. Although its members were named in January 2010, the Commission is not yet operational. The Office of Ombudsman was established by the Ombudsman Act of 2007, and the country’s first ombudsman since independence was named in September, 2009. The ombudsman received approximately 60 complaints, of which two to date have resulted in investigations by the Ombudsman.

Bribery is illegal in Grenada. Grenadian officials take allegations seriously. Corruption allegations may be handled by a variety of institutions, including the ombudsman, the Financial Information Unit of the Ministry of National Security, the Attorney General and the Department of the Public Prosecutor. The Financial Intelligence Unit housed within the Ministry of National Security investigated anonymous allegations of corruption against the Minister of Finance, concluding that they were based on forged documents.

Corruption was also alleged in the2010 RMS trade complaint against Grenada noted in A.4. . Allegations of corruption were aired in the course of the 2007 election. Grassroots organizations are vocal in serving as whistle-blowers for possible instances of corruption.

Bilateral Investment Agreements

Bilateral Investment Agreements established between Grenada and the following countries are designed to encourage and protect international investments and to ensure that investors receive fair, equitable, and nondiscriminatory treatment.

Reciprocal Encouragement and Protection of Investment with the United StatesThe agreement protects U.S. investors against performance requirements, restrictions on transfers, and arbitrary expropriation and sets forth procedures for the settlement of disputes. By providing a more open and secure environment for investment, it also promotes private sector development.

Investment Protection and Promotion Agreement with the United KingdomThe agreement encourages British investor confidence by setting high standards of investor protection applicable in international law. Key elements include provisions for equal and non-discriminatory treatment of investors and their investments, compensation for expropriation, transfer of capital and returns and access to independent settlement of disputes.

Grenada is also party to the following:

Caribbean Community (CARICOM) – The Treaty of Chaguaramas established CARICOM in 1973. Its purpose is to promote economic integration among its fifteen Member States. Investors operating in Grenada are given preferential access to the entire CARICOM market. The Revised Treaty of Chaguaramas goes further to establish the CARICOM Single Market and Economy (CSME) by permitting the free movement of goods, capital and labor within CARICOM States.

Organization of Eastern Caribbean States (OECS) – The 1981 Treaty of Basseterre established the Organisation of Eastern Caribbean States (OECS). Its nine member include Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines and two associate members, Anguilla and the British Virgin Islands. The purpose of the Treaty of Basseterre is to promote harmonization among Member States in areas concerning foreign policy, defense and security, and economic affairs.

Economic Partnership Agreement (EPA) – The 2007 Economic Partnership Agreement (EPA) between the European Community and the CARIFORUM states, including Grenada, is intended to alleviate poverty and promote regional integration and cooperation. It fosters the gradual integration of the CARIFORUM states into the global economy by improving their trade capacity and creating an investment-conducive environment. The Agreement promotes trade-related developments in areas such as competition, intellectual property, public procurement, the environment and protection of personal data.

Caribbean Basin Initiative (CBI) – The objective of the Caribbean Basin Initiative is to promote economic development through private sector initiative in Central America and the Caribbean islands by expanding foreign and domestic investment in non-traditional sectors, diversifying CBI country economies and expanding their exports. It permits duty free entry into the United States of products manufactured or assembled in Grenada.

Canada’s Commonwealth Caribbean Countries Tariff (CARIBCAN) – Established by Canada in 1986, CARIBCAN is a unilateral economic and trade development assistance program that provides duty free access to Canada’s market for the majority of products originating in the Commonwealth Caribbean.

OPIC and Other Investment Insurance Programs

Grenada’s accession to the Overseas Private Investment Corporation (OPIC) entered into force on June 27, 1968. A current OPIC project provided insurance in 1994 to a USD 7.5 million transaction between the Grenada Electricity Services Ltd (GRENLEC) and WRB Enterprises. Grenada is a member of the Multilateral Investment Guarantee Agency (MIGA).

Labor

Grenada has signed and ratified all of the International Labor Organization’s undertakings and has enshrined these rights in its labor laws, including the Labour Relations Act No.1 of 1999 and the Employment Act No. 1 of 1999. Grenadian law upholds the right of workers to be represented by a trade union of their choice. There are no restrictions on the activities of trade unions as long as they operate within the parameters set out by the local law. The majority of the workforce is unionized and the labor relations atmosphere on the island is generally stable. The increase in prices of food and other basic items as a result of higher oil prices coupled with the global economic downturn will impact expected 2010 wage and salary negotiations, increasing the potential for strikes. In accordance with the Trade Union Recognition Act No 29 of 1979 (Cap 325 of the consolidated laws of Grenada), investors shall grant union representation at any site of employment if the majority of their employees indicate the desire for union representation and investment enterprises shall contribute to the social insurance and welfare programs for their workers in accordance with the National Insurance Act.

Grenada experiences particular shortages in the availability of mid-level managers.

Foreign Trade Zones/Free Ports

There are no Free Trade Zones or Free Ports.

Foreign Direct Investment (FDI) Statistics

FDI Inflows, 2006-2010 (Historical)

(US$ mil dollars)

Source: Grenada’s Central Statistics Office

2006 2007 2008(proj) 2009(proj) 2010(proj)

Inflows: 95.6 167.4 148.1 96.5 106.2

GDP (historical): Not Available

Ratio of Inflows to GDP (historical): Not Available

Gross Domestic Product, 2006-2010

Current Prices (US$ mil dollars)

Source: Grenada’s Central Statistics Office

2006 2007 2008 2009 2010(proj.)

497.3 499.6 562.5 513.4 519

Priority Sector FDI Inflows 2006-2010 (Historical)

(US$ mil dollars)

Source: Grenada Industrial Development Corporation

2006 2007 2008 2009 2010

PRIORITY SECTOR

Tourism 66.1 210.2 207.7 91.1 (not avail.)

Manufacturing 0.2 10.2 2 8.3 “ “

Services 2.1 9 69.9 44.2 “ “

PRIORITY SECTOR FDI

SUBTOTAL 68.4 229.4 279.6 143.6

Percentage of FDI Inflow to Priority Investment Sectors by Country of Origin 2005-2010

Source: Grenada Industrial Development Corporation

2006 2007 2008 2009 2010

North America 3.4% 1.86% 1% 2.58% (not avail.)

Europe (including UK) 94.1% 87.9% 98.1% 83.91% (not avail.)

Caribbean 2.3% 3.64% .25% 13.51% (not avail.)

China (PRC) .2% 6.6% .65% (not avail.) (not avail.)

Number of Jobs Generated by FDI Inflow, 2006-2010

Source: Grenada Industrial Development Corporation

2006 2007 2008 2009 2010

108 168 274 122 (not avail.)

Foreign Direct Investment – Stock: Pending or Not Available

Grenadian Foreign Direct Investment Abroad – Stock: Pending or Not

Available

Examples of Foreign Direct Investments:

St. George’s University

WRB

KM2 Solutions

Amerijet

Republic Bank of Trinidad and Tobago

LIME

Digicel

Century 21

For further information, please contact the United States Embassy.

Bernard Link

Chargé d’Affaires

U.S. Embassy St. George’s

Grenada

Tel: (246) 444-1173/ext. 228

Email: linkbe@state.gov

Lesley-Ann Hardy

Commercial Assistant

U.S. Embassy St. George’s

Grenada

Tel: (246) 444-1173/ext. 225

Email: hardyla@state.gov

Contacts for Investment-Related Inquiries

Grenada Chamber of Industry & Commerce

Building #11

Frequente Industrial Park

P.O. Box 129

St. George’s, Grenada

Tel: (473) 440-2937

Fax: (473) 440-4485

Email: gcic@spiceisle.com

Website: www.grenadachamber.org

Grenada Industrial Development Corporation (GIDC)

Frequente Industrial Park

Frequente

St. George’s, Grenada

Tel: (473) 444-1035

Fax: (473) 444-4828

Email: invest@grenadaidc.com

Website: www.grenadaidc.com

Ministry of Finance

Financial Complex

The Carenage

St. George’s, Grenada

Tel: (473) 440-2928/440-2731-6

Fax: (473) 440-4115

Email: finance@gov.gd

Website: www.gov.gd

Web Resources

Foreign Commercial Service, U.S. Department of Commerce

http://www.buyusa.gov/caribbean/en/

http://www.export.gov/index.asp

Foreign Agricultural Service, U.S. Department of Agriculture

http:/www.fas.usda.gov/

http://www.export.gov?fas/fas.asp?pName=mr



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