Identifier
Created
Classification
Origin
08PARAMARIBO177
2008-04-30 21:02:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Paramaribo
Cable title:  

RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -

Tags:  EAGR EAID ETRD ECON BTIO NS 
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PP RUEHGR
DE RUEHPO #0177/01 1212102
ZNR UUUUU ZZH
P 302102Z APR 08
FM AMEMBASSY PARAMARIBO
TO RUEHC/SECSTATE WASHDC PRIORITY 0142
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHAO/AMCONSUL CURACAO 1257
UNCLAS SECTION 01 OF 02 PARAMARIBO 000177 

SIPDIS

STATE FOR WHA/CAR JROSHOLT
EEB/TPP/ABT/ATP FOR JSPECK

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E.O. 12958: N/A
TAGS: EAGR EAID ETRD ECON BTIO NS
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -
SURINAME

REF: SECSTATE 39410

PARAMARIBO 00000177 001.2 OF 002


UNCLAS SECTION 01 OF 02 PARAMARIBO 000177

SIPDIS

STATE FOR WHA/CAR JROSHOLT
EEB/TPP/ABT/ATP FOR JSPECK

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EAGR EAID ETRD ECON BTIO NS
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -
SURINAME

REF: SECSTATE 39410

PARAMARIBO 00000177 001.2 OF 002



1. (SBU) SUMMARY: Rising food prices, in particular of the
Surinamese staple, rice, have received extensive play in the media,
but did not result in public disorder or runs on foodstuffs.
Political attention was high, with the opposition blaming the
government, the government looking towards international conditions,
and both sides calling for quick-fix policy solutions which would
reduce government revenue with the intent of creating lower prices
for consumers. The remainder of this cable addresses selected
topics keyed to paragraph 7 from reftel. END SUMMARY.


2. (U) DEMAND: Price increases affected all food items, whether
locally produced or imported. Suriname imports nearly 75 percent of
its food. Price increases for imported food varied depending on
product origin. Fifty percent of food imports came from Europe.
Fifty percent or higher price increases of European goods were due
to increased food prices in Europe, the devaluation of the
Surinamese Dollar (SRD) vis-`-vis the Euro, and increased
transportation costs due to the price of fuel. (Note: The SRD is
linked to the U.S. dollar for foreign exchange. End Note.)
U.S.-origin goods increased in price, but more modestly since the
exchange rate was stable and because of the closer proximity of the
countries.


3. (SBU) SUPPLY: Rice is Suriname's most important agricultural
commodity. Rice is locally produced. As of March 2008, the supply
was double that of local demand; despite this, the price of rice had
increased by approximately 100 percent. This was predicted by rice
producers and exporters, according to a local banker in Nickerie in
January 2008. Producers attributed the price increase to an
anticipated world-wide shortage of rice due to Asian crises and the
shift of many growers world-wide to biofuel commodities. Sector
stakeholders agreed that lucrative rice prices in neighboring Guyana
and French Guiana, which are both reporting rice shortages, resulted

in Suriname prices skyrocketing. The bulk of Suriname rice exports
have traditionally gone to Jamaica and Haiti, with a small portion
exported to Europe. World demand for cargo rice as animal feed, due
to the high world market price of corn, was another factor cited.
Distributors told us they have not noticed any significant changes
in their sales figures, and in a conversation with Post a local
businessman shrugged off shortage fears by saying "every Hindustani
is keeping two barrels full of rice in his house." (Note: Keeping
this amount of rice at home is normal practice for Hindustanis and
should not be confused with stockpiling due to the price increase.
End Note.) The rice industry has 55,000 tons of rice in stock and
has calculated the maximum local need through August 2008 will be
only 20,000 tons. This leaves over half the rice currently in stock
for the export market. The percentages of the rice crop going
toward local or export markets remained the same as in past, the
difference is the rice industry received higher profits due to the
high value of rice on the international markets. However, local
officials and producers are discussing how to maintain social and
economic stability in light of high prices. Surinamese rice growers
and distributors/exporters advised the government to implement
export regulations on rice in order to maintain a stable local
market until the September harvest. This is to maintain an optimal
market situation, and not to prevent shortages, however.


4. (SBU) POLITICAL AND ECONOMIC IMPACT: Loud calls were made for
the government to step to the plate and take concrete action.
Employers called on the government to stop hiding behind the
international market as the cause of the problem. Opposition
members voiced dismay of the government's handling of the situation.
Although Suriname was fortunate not to have any protests or
violence stemming from this food price crisis, labor unions used the
rising food prices and ever increasing inflation to demand higher
wages, transport subsidies, and other assistance packages. Unions
representing civil servants called for wage increases of between 10
and 22 percent. (Note: The 12-month inflation for March hit double
digits at 13.8 percent. End Note.) The Governor of the Central Bank
of Suriname stepped in and advised employers, both private and
government, not to implement any excessive wage increases that might
fuel the inflationary pressures on the economy. He advised only
wage increases that could be matched by increases in production and
exports of natural resources. The government responded to the
public's demands with an array of short-term initiatives and
quick-fixes to put money back in the hands of consumers (see
paragraphs 6 and 7).


5. (U) ENVIRONMENTAL IMPACT: Increased food prices did not
discernibly impact Suriname's environment.


6. (U) GOVERNMENT POLICY RESPONSE - REGIONAL: Through statements
made by Vice President Ram Sardjoe, the government acknowledged an
economic crisis. On a regional level, Suriname engaged CARICOM
member states at the Heads of State meeting where all CARICOM

PARAMARIBO 00000177 002.2 OF 002


members agreed to work together to find a collective solution. One
suggestion at the meeting was that import duties on non-CARICOM
goods under the Common External Tariff be lowered or temporarily
suspended. The Government of Suriname produced a list of 48 products
it imports from non-CARICOM sources to submit to CARICOM for
consideration under this suggested program.


7. (U) GOVERNMENT POLICY RESPONSE - DOMESTIC: Political attention
to the issue was high. Minister of Trade and Industry Clifford
Marica attempted to curb some of the immediate damage. The Suriname
government has engaged in price-setting on food staples, and in
reaction to rising costs, the government negotiated with business to
lower profit margins to seven percent on a list of 44 "basic" food
staples -- to be applied to both importers and retailers. Baby
food, historically subsidized by the government, was slated to
increase only slightly in price. The government will continue to
provide foreign exchange for these imports at a reduced exchange
rate, as historically has always been the case. Government
negotiations with the Bakers' Association resulted in agreements to
maintain current bread price levels, and bakers agreed to calculate
bread prices (plain white roll, not specialty breads) using an
artificially low price. The GOS assigned a group of Ministers to
identify problem areas and present further possible solutions, and
President Ronald Venetiaan stated that his first priority is to
assist low income families. Some opposition members proposed the
government suspend fuel taxes, currently around 1 SRD per liter, in
order to leave more money in the hands of consumers. Privately, two
coalition parliamentarians told Post they also favor a reduction in
the government take on fuel sales.


8. (U) IMPACT ON POST PROGRAMS: Post has noticed no impact in its
programs as of yet although complaints about U.S. rice growing
policy as a "subsidy program" that works against exports have been a
frequent, if muted, complaint when Post officers visit rural
Nickerie, the rice-growing region of Suriname. Most rice growers
admitted domestic and local problems are the chief cause of
underproduction in Suriname's local rice industry, and complained
about U.S. policy only as an addendum. The Speaker of the National
Assembly was quoted in the press on April 28 as stating rising food
prices were caused by the U.S. war in Iraq. While the food price
issue has received extensive play in the media, media attention has
focused on government options more than on placing blame. Post
continues to monitor local media articles and editorials for
positive or negative content regarding the United States and food
prices, but has found little to note.

SCHREIBER HUGHES