Identifier
Created
Classification
Origin
06GEORGETOWN281
2006-03-24 19:07:00
UNCLASSIFIED
Embassy Georgetown
Cable title:  

NATIONAL MILLING COMPANY FENDS OFF OPENING

Tags:  EAGR EAID ECON GY 
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UNCLAS GEORGETOWN 000281 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EAGR EAID ECON GY
SUBJECT: NATIONAL MILLING COMPANY FENDS OFF OPENING
OF FLOUR MARKET


UNCLAS GEORGETOWN 000281

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EAGR EAID ECON GY
SUBJECT: NATIONAL MILLING COMPANY FENDS OFF OPENING
OF FLOUR MARKET



1. SUMMARY: Acting Chief Cabinent Secretary, Nanda
Gopaul, announced at a March 23 press conference that the
GOG had reached agreement with the National Milling
Company of Guyana (NAMILCO),a subsidiary of Kansas-based
Seabord Corporation, to reduce the price of flour by
G$200 (US$1) per bag. The arrangement will allow NAMILCO
to retain its exclusive right to import flour, despite
efforts by rival wheat product manufacturers to pressure
the GOG to open the import market. END SUMMARY.


2. Gopaul's annoucement came one day after Minister of
Tourism, Industry and Commerce, Manzoor Nadir, revealed
in an interview that the GOG had decided against
importing flour. Since 1986, NAMILCO has had the sole
right to bring flour into Guyana. As the country's only
miller, the company has historically purchased wheat the
GOG has received from the PL-480 program and sold it on
the local market. Guyana has not received wheat through
this program for the last two years, leading NAMILCO to
purchase wheat in international markets.


3. As a result, wheat product manufacturers, specifically
the Edward B. Beharry Group, began pressuring the GOG in
early 2006 to open the flour market to imports, claiming
that flour sourced from Mexico and Trinidad would be
cheaper than that produced by NAMILCO. NAMILCO
acknowledges that Trinidad has five times the production
capacity and could supply enough flour for the entire
CARICOM market. Advocates for importing wheat also
pointed to the Caribbean Single Market Economy (CSME) as
a lever for opening the market. Article 155 of the Treaty
of Chaguaramas, the basis of the CSME, grants Guyana
special permission to restrict wheat imports so long as
it benefits from PL480. Nadir notified NAMILCO in early
February that, "as a consequence of the full loss of thte
Pl480 program", the GOG was to consider opening the flour
market to imports.


4. NAMILCO then sought Embassy assistance in the matter.
While the opening of the market is the GOG's decision,
the Embassy did inform Nadir that Guyana's failure to
secure PL480 assistance in the past few years should not
be interpreted as a complete end of the program. In
addition, various private sector figures, including
Guyana Manufacturing Association head Norman McLean,
lobbied the GOG on NAMILCO's behalf. NAMILCO also invoked
concern about Guyana's food security should the mill
close and Guyana become reliant on flour milled elsewhere
in the region.


5. COMMENT: Arguments about the benefits of competition
in the flour market and food security aside, NAMILCO has
argued convincingly that various constraints in Guyana's
business environment challenge its competitiveness. The
lack of deep water port facilities limit the size of
vessels to transport bulk commodities such as flour,
which raises freight costs. In addition, the costs of
electricity in Guyana are far higher, a complaint
consistently made by the business community. While
NAMILCO may have scored a short term reprieve, its long-
term position against regional producers remains
extremely vulnerable. END COMMENT.



BULLEN