SURINAME: BANANA PARASTATAL TO PRIVATIZE

UNCLAS SECTION 01 OF 02 PARAMARIBO 000305 SIPDIS STATE FOR WHA/CAR JROSHOLT COMMERCE FOR MARIA ELENA PORTORREAL E.O. 12958: N/A TAGS: BTIO EAGR ECON EINV ETRD NS SUBJECT: SURINAME: BANANA PARASTATAL TO PRIVATIZE PARAMARIBO 00000305 001.2 OF 002 ¶1. (U) Summary. The week of July 21, the Foundation for the Preservation of the Banana Sector in Suriname (SBBS) announced a public call for interest in the international open tender for the privatization of the parastatal banana company Surland N.V. SBBS restructured Surland N.V. with the assistance of the European Commission (EC),and it is now producing at record levels. The continued success of the banana sector depends on the right partner in the privatization as well as the successful implementation of the Economic Partnership Agreement (EPA),which Suriname is expected to sign on September 2, 2008. End Summary. -------------- STARTING ALL OVER AGAIN -------------- ¶2. (U) In April 2002, when the Government of Suriname (GOS) was forced to shut down its parastatal banana company, Surland N.V., due to crippling labor disputes and a severe financial crunch, many predicted it was the beginning of the end of Suriname's banana sector. But, a robust restructuring plan, co-funded by the European Commission (EC) and headed under the name Stichting Behoud Bananen Sector (SBBS) (Foundation for the Preservation of the Banana Sector in Suriname),revitalized the company's operations and led to the resumption of banana exports in 2004. The EC provided Suriname with approximately 23 million Euro (Richard van der Horst, Head of the European Commission technical section told Econ Off that only two-thirds of this amount has been used or obligated to date) to upgrade the company's infrastructure, and other substantial investments in the sector over the following three years allowed Surland N.V. to reach new heights in production and earnings. ¶3. (U) In 2007, Surland N.V. produced a record 56,245 tons of bananas, up from 47,000 tons in 2006. The income from the exports also increased, from US$ 14.3 million in 2006 to US$ 21 million in ¶2007. SBBS Managing Director Philippe Dury, originally contracted for SBBS by the EC but now contracted by SBBS partner, the Belgian-based Univeg group of companies, told Econ Asst that export volume is expected to reach 68,000 tons in 2008, with an estimated US$ 34 million of earnings. SBBS Board Member Anand Ramkisoensingh told the press that SBBS is aiming to make Surland N.V. one of the largest banana producers in CARICOM. In 2007, SBBS increased its workforce by 327 to 2,157 employees. Land currently under cultivation amounts to 1550 hectares, and SBBS is considering acquiring additional land. -------------- EUROPEAN COMMITMENT -------------- ¶4. (U) EC assistance was a key factor in the SBBS success in restructuring Surland N.V. The EC provided part of the funding of the restructuring program, and made other accommodations for the sector as well. The EC lowered import licensing fees for products entering the European market which resulted in the SBBS saving millions of Euros a year. ¶5. (U) The latest trade treaty, the newly minted Economic Partnership Agreement (EPA) between the European Union countries and CARIFORUM countries, will allow Suriname's bananas to enter the European market duty and quota free. Suriname is expected to sign this agreement on September 2, 2008. It is estimated the EPA will save SBBS 4.5 million Euros per year. Pending privatization, SBBS plans to re-allocate these savings to increasing production and improving cost efficiency, thereby improving the company's competitive position in the world market. The company will have another EPA benefit as well, as the EPA offers financial and technical assistance for the sector. -------------- PRIVATIZATION -------------- ¶6. (U) The privatization process for Surland S.V. began the week of July 21 with SBBS announcing a call for "expressions of interest" from national and international companies planning on participating in the international open tender for Surland N.V. Companies providing an "expression of interest" will receive a note of presentation on the operation, and then will be required to respond with their formal "definitive interest" by Monday, August 18 at 2:00 p.m. local time. ¶7. (U) SBBS is in an excellent position to privatize Surland N.V. now due to world market conditions and the company's recent growth spurt. Unlike in 2006, when the GOS first tried to privatize the company and failed, the prospects are high. Even before the public call, a number of firms, both local and foreign, approached the Ministry of Agriculture, Animal Husbandry and Fisheries to express PARAMARIBO 00000305 002.2 OF 002 their interest. The Ministry has already held exploratory talks with the Belgian-based Univeg group of companies and the Irish firm Fyffes. ¶8. (U) A lot is at stake during the privatization process. Charge d'Affaires of the Delegation of the European Commission Helena Laakso told the press the EC is concerned the SBBS find the "right partner," specifically, a company large enough to secure entry to the European market. While Surland N.V.'s progress is impressive, in the international scene it is still small, producing just a fraction of the total European demand. SCHREIBERHUGHES