THE DEBT CRISIS. Despite Reagan initiative, Caribbean Basin trade woes worsen

Five years after President Reagan unveiled an ambitious blueprint for prosperity in the Caribbean, the region's economic woes appear graver than ever. Government and private experts credit the President's Caribbean Basin Initiative (CBI) with dramatizing the plight of the tiny island nations and Central American countries that have become the object of acute American security concerns.

But they add that expectations aroused by the ambitious trade-and-aid program for the Caribbean Basin have not been matched by performance.

After five years and millions of dollars in United States aid and private investment, the economies of the region are still in the doldrums. Despite some success stories - for example, progress toward export diversification - unemployment is up and purchasing power is down, while the gap between import costs and export earnings is greater than ever.

Meanwhile, CBI gains have been offset by a sharp drop in the prices of traditional exports, such as Jamaican bauxite. One result is that the value of the region's exports to the US actually declined last year by 10 percent.

Even critics of the initiative concede that big external debts and weak infrastructures in the region, among other things, have posed major obstacles to economic reconstruction.

Administration officials also complain that some countries in the region have not gone far enough in instituting the free-market reforms needed to stimulate economic growth.

Still, some experts say CBI has done little to help and may have actually complicated the region's already serious economic problems.

The Reagan administration considers the region strategically important. Half of all US exports and imports travel along trade routes through the Caribbean. The region is an outlet for $7 billion in annual US exports.

The stated concern behind the CBI has been the concern that high inflation, skyrocketing unemployment, and declining growth could eventually produce political instability in the Caribbean.

The centerpiece of the program was a plan to remove US import duties on most Caribbean products for 12 years. But spurred on by US labor unions and various affected industries, Congress denied duty-free status to many Caribbean exports.

Meanwhile, tax incentives designed to make private investment in the region more attractive have been cut, while US aid contributions to the region - though higher than before CBI - have been trimmed for budget reasons.

The most serious damage was inflicted when the US, in 1985, imposed restrictive quotas on imported sugar, a major Caribbean export. The restrictions, designed to help US cane and beet-sugar producers, have slashed export earnings and thrown 100,000 Caribbean laborers out of work.

But many development experts say the problems with CBI run deeper than Congress, to the very conception of a program tailored more to US needs and interests than to those of the region it is designed to serve.

CBI's accent on making the region attractive to US business has come at the expense of efforts to develop local skills and industries, critics say.

``CBI has not built on the productive strength of the region,'' says Stephen Hellinger, a Washington-based development analyst. ``Instead, it encourages offshore production - such as the assembling of electronic components - that creates little stable employment and has few backward linkages into the local economies.''

Despite these misgivings, private experts agree that, with changes, CBI can be better adapted to the needs of Caribbean development.

``Ultimately, the region is stagnant because there's no good way to market and distribute the products it makes,'' says Stuart Tucker of the Overseas Development Council. ``The only way you're going to radically change the economies in the region is with major new amounts of US aid for economic development.''

In addition, some experts say CBI will need to do a better job of encouraging local self-sufficiency to reduce the region's import bill and its vulnerability to fluctuations in the American market.

``Let [the US] ask us what we produce and help us make it more efficiently, rather than turning our whole economy around to suit what [the US] wants,'' entreats Joan French, a Jamaican development analyst.

The US will also need to help lift the onerous burden of the region's external debt, to free the resources needed to stimulate investment and production.

``The first test of US sincerity would be to let us sit down as partners and say, `This will work, this will not work, this is what is politically possible in our countries,''' says Atherton Martin, a former agriculture minister of Dominica and now Caribbean director of the Development Group for Alternative Policies.