The Mitchell government has a strong base of support among immigrants in North America who have contributed to revenues through remittances and investments. The prime minister, himself a graduate of U.S. educational institutions, has promoted close relations with these expatriate sectors, as well as with the governments of the United States and Canada. A major focus has been on increasing educational and technical exchanges between Grenada and the United States. Grenada has also been cooperating closely with the United States in narcotics interdiction efforts. However, recent setbacks have made foreign relations less stable. In September 2001, Grenada was blacklisted by the Financial Action Task Force for failing to act against money laundering. The reputation of the government has also been tainted by its decision to strengthen its ties with Libya, a country regarded by the United States as a sponsor of terrorism. In early 2002, Canada began to require visas for Grenada citizens because of a passport scandal.
As a small country, Grenada's main arena of action is naturally regional. Mitchell has upgraded his country's presence in Caribbean Community (CARICOM) affairs. He has aggressively promoted implementation of the single market economy, a key aspect of regional economic integration. As chairman of CARICOM in 1997, Mitchell played a key role in resolving ethnopolitical instability that occurred in Guyana after general elections in December 1997. Mitchell and two other CARICOM leaders succeeded in brokering an agreement between the African and East Indian political elements. He has also been supportive of the Association of Caribbean States (ACS), a grouping that brings CARICOM nations together with their Central American and northern South American counterparts for the purposes of functional cooperation and future free trade. Through the ACS, Mitchell hopes that Grenada will be able to take advantage of the technological development of larger regional countries, such as Mexico. Under the Mitchell government, Grenada has pursued particularly cordial relations with Cuba. Mitchell believes that Grenada can learn from Cuba in technological areas and that Cuba can learn about the building of democratic institutions from Grenada and the other Caribbean countries. With this in mind, he has visited Cuba a number of times, and Cuban president Fidel Castro paid a reciprocal visit to Grenada in 1998. In October 2002, evidence of strengthening relations with Cuba were demonstrated when Cuba sent its first ambassador to Grenada since the overthrow of former Grenadan prime minister Maurice Bishop in 1979.
In early 2001 a libel suit brought by Mitchell in 1999 was decided, but not in Mitchell's favor. The judge ruled the law criminalizing the publication of defamatory material was unconstitutional. (The suit was triggered when Grenada Today published a letter from a reader, criticizing Mitchell for "spending millions of dollars to bribe" voters in the 1999 election.) Also affecting Mitchell's ability to govern in early 2001 were rumors that members of his cabinet were involved with the diversion of millions of dollars from the First International Bank just before it collapsed. Banking in Grenada was undergoing close international scrutiny by the Organization for Economic Cooperation and Development (OECD). OECD was investigating whether Grenada banking practices were facilitating illegal activity such as money laundering. In July, the International Monetary Fund (IMF) cited the need for Grenada banks to improve on their accounting in light of the increase in unidentified influx of capital from private sources.
In response, in 2002 and 2003 the government forced 36 offshore banks to close (leaving just nine in operation) in an effort to meet regulatory standards and curb international money laundering and other crimes. The international group, Financial Action Task Force (FATF), an agency of the OECD, was tightening regulations to reduce opportunities for international crime and for financing of terrorism. Grenada and other countries where offshore banking operates had no choice but to comply, or risk being cut off from IMF and other international financial support.