Identifier
Created
Classification
Origin
08PORTOFSPAIN195
2008-04-30 19:23:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Port Of Spain
Cable title:
IMPACT OF RISING FOOD/COMMODITY PRICES - TRINIDAD AND
how-toVZCZCXRO2544 PP RUEHGR DE RUEHSP #0195/01 1211923 ZNR UUUUU ZZH P 301923Z APR 08 FM AMEMBASSY PORT OF SPAIN TO RUEHC/SECSTATE WASHDC PRIORITY 9128 INFO RUCNCOM/EC CARICOM COLLECTIVE RUEHRC/AMEMBASSY ATO CARIBBEAN
UNCLAS SECTION 01 OF 03 PORT OF SPAIN 000195
SIPDIS
SENSITIVE
SIPDIS
STATE FOR WHA/EPSC, WHA/CAR
EBB/TPP/ABT/ATP JANET SPECK
E.O. 12958: N/A
TAGS: EAGR ECON EFIN ETRD ECIN TD
SUBJECT: IMPACT OF RISING FOOD/COMMODITY PRICES - TRINIDAD AND
TOBAGO
Ref: (A) 07 POS 278 (B) State 39410 (C) POS 185
SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY
UNCLAS SECTION 01 OF 03 PORT OF SPAIN 000195
SIPDIS
SENSITIVE
SIPDIS
STATE FOR WHA/EPSC, WHA/CAR
EBB/TPP/ABT/ATP JANET SPECK
E.O. 12958: N/A
TAGS: EAGR ECON EFIN ETRD ECIN TD
SUBJECT: IMPACT OF RISING FOOD/COMMODITY PRICES - TRINIDAD AND
TOBAGO
Ref: (A) 07 POS 278 (B) State 39410 (C) POS 185
SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY
1. (SBU) SUMMARY: With food price inflation reaching 19.7%
year-on-year, public concern and political fallout over the cost of
food is growing. The "food crisis" has spotlighted the government's
neglect of agriculture and the nation's dependence on imports.
Although domestic food production meets local demand for some basic
items, the country imports twice as much food as it exports in
dollar terms, relying heavily on international markets for wheat and
other staples. The GOTT has tried to deflect blame for food price
inflation on global dynamics and "profiteering" retailers. To
address public concern and reestablish its credibility, the GOTT
needs to implement and communicate a coherent agricultural
development strategy. Given its importance to T&T and the region,
food security may weigh heavily on the agenda when T&T hosts the
Summit of the Americas in 2009. END SUMMARY.
--------------
Domestic Demand
--------------
2. (U) Rice, legumes, chicken, "ground" provisions (root
vegetables),and flour are staples of the Trinbagonian diet. While
T&T is able to satisfy some domestic demand with local production of
fruits, vegetables, rice, and boilers, T&T is a net food importer.
It relies heavily on international markets for staples such as rice,
grains, dairy products, legumes, and root vegetables. In dollar
terms, T&T imports twice as much food as it exports. While the cost
of imports has risen, with flour prices increasing between 8% and
39% in April, prices of domestically grown foods also have risen
steadily. The most recent Central Bank figures estimate
year-on-year food price inflation reached 19.7% in March 2008, with
fish, milk, cheese, and eggs rising by more than 30%. Fruits,
vegetables, bread, and cereals have all increased by double digit
amounts.
3. (U) With a reported 17-23% of the population living below the
poverty line (US$109 per month),steep price increases are having a
sharp impact on many household budgets. An estimated 22,700
individuals receive food assistance through a national cash transfer
program started in 2006, but this figure reflects only a fraction of
the estimated 200,000 plus citizens living below the poverty line.
Planned increases in electricity and water rates will further strain
the budgets of low and middle income families.
--------------
Domestic Supply
--------------
4. (U) With a few notable exceptions, food supplies in T&T have not
been disrupted by the "food crisis." In December 2007, the GOTT
initiated a food importation drive to help reduce costs and maintain
supplies. Under this initiative, the National Flour Mills (NFM)
imports frozen foods in bulk and sells it cheaply to local food
outlets. Recently, however, rice and flour, which are not included
in the importation initiative, have been in short supply. Speaking
with EconOff, the NFM Communications Director confirmed that the
flour shortages stem from distribution problems and panic buying,
not supply issues. Nevertheless, the shortages have led to
rationing by retailers and isolated looting of delivery trucks along
a dangerous stretch of highway. Unable to secure rice from Guyana,
T&T importers have looked to Brazil for parboiled rice. Shipment
delays have caused shortages, and while NFM reports sufficient
supplies of locally grown white rice, media reports indicate
otherwise.
5. (SBU) Public discussion about the need to increase local food
production has focused on government action, not private investment.
Farmers are capitalizing on the "food crisis" to highlight GOTT
neglect of agricultural infrastructure, specifically irrigation and
access roads. Small hold farmers, who typically lease or squat on
government and private lands, have limited financial resources with
which to expand production. Moreover, the rising costs of imported
agricultural inputs are affecting both prices for locally grown food
and the viability of existing agricultural activities. In some
cases, farmers allege that GOTT import initiatives are eroding their
markets by undercutting prices.
--------------
Political Impact
--------------
6. (SBU) While there has been significant criticism of the GOTT,
public discontent has not translated into violent protests or riots.
Nor, given the balance of power in parliament, is this issue one
PORT OF SP 00000195 002 OF 003
that threatens the government's ruling majority. Critics and
opposition leaders, though, point to the GOTT's alleged role in
aggravating current situation, highlighting its emphasis on
industrial development to the detriment of agriculture. Opposition
leader Basdeo Panday, for example, blamed the current crisis on the
GOTT's allocation of agricultural lands for residential development,
as well as the GOTT's failure to convert fallow sugarcane fields
into farmlands. Panday and others, including local business
contacts, also point to the GOTT's inability to address
inefficiencies at the nation's port and inadequacies in the local
transportation network. For their part, local rice farmers recently
criticized the GOTT's "make-work" employment programs for attracting
unskilled labor away from agriculture. They also argue that
government favoritism towards industry undermines the agricultural
sector.
7. (SBU) The Prime Minister and his "food crisis" spokesperson,
Minister of Consumer Affairs Peter Taylor, however, focus on the
role of external forces in rising prices, including biofuels. They
also have blamed retailers, accusing them of price gouging.
Responding to calls to eliminate the value added tax on all food
items, Manning said that doing so would have no effect on prices as
retailers would not pass on these savings. These remarks have
antagonized the private sector, while doing little to deflect
criticism from the GOTT. With rare exception, Minister of
Agriculture Arnold Piggott has been absent from the debate. It was
Taylor, not Piggott, who delivered a much anticipated April 23
address before Parliament on the "food crisis." This address merely
reviewed existing GOTT efforts, suggested that people eat more
locally grown foods, and threatened legal action against
"profiteers," offering no new solutions.
--------------
Economic Impact
--------------
8. (U) Rising prices for imported food have put additional pressure
on monetary policy, as the Central Bank already has its hands full
containing the effects of government spending fueled by energy
revenues. Overall inflation reached 9.8% year-on-year in March
2008. In the face of expectations that food prices will continue to
rise, Central Bank Governor Ewart Williams recently called for
urgent spending cuts to avoid the prospect of "endemic" double digit
inflation. The usually reserved Williams remarked that, "We are
facing a situation that could get out of control and that could
easily slip away from us."
9. (U) In an effort to contain inflation in FY2007, the Central Bank
issued more than TT$2.3 billion (almost US$400 million) in
government bonds. While the inflation rate moderated by October
2007 to 7.3%, project spending and wage agreements signed in the
run-up to national elections in November drove annual headline
inflation to 10% in January, and the food price index topped 20%.
In response, the Central Bank raised its benchmark interest rate for
the first time in 17 months and increased the commercial bank
reserve requirement.
--------------
Environmental Impact
--------------
10. (U) Post is not aware of any environmental impacts directly
attributable to rising food prices.
--------------
Government Policy Response
--------------
11. (SBU) Food price inflation has been a serious issue for the GOTT
for more than a year. In 2006, the GOTT assembled a Ministerial
Task Force on Prices, and in August 2007 it held a "national
consultation" on food prices, which highlighted several initiatives,
including a joint agricultural project with Cuba (Ref A). Since
these consultations, proposed initiatives have largely disappeared
or been delayed, raising public ire. Faced with mounting criticism
over the lack of progress, PM Manning outlined the government's
comprehensive plan to address food prices on April 2, and Taylor
reiterated it on April 23.
12. (SBU) GOTT's proposals include the creation of 7,000 farms from
fallow sugarcane lands, the development of several large scale
farming operations, a greenhouse demonstration project in
conjunction with PCS Nitrogen, and the importation of low cost food
products from Latin America (Reftel C). Notably, the Prime Minister
has resisted calls for food subsidies, stating such measures simply
lead to black market profiteering and unfair trade practices. Most
recently, however, Piggott stated that the Ministry of Agriculture
PORT OF SP 00000195 003 OF 003
was considering new agricultural incentives, including subsidies for
rice farmers. [NOTE: The GOTT has been promising to distribute
sugarcane lands for several years without much progress. It has now
proclaimed that 5,700 plots will be allocated to former sugarcane
workers by late June 2008; critics are skeptical of this timeline.
END NOTE]
13. (U) The GOTT also is working with CARICOM neighbors to address
the "food crisis." At a recent meeting in Barbados, regional
leaders agreed to decrease or remove the Common External Tariff
(CET) on 34 food products. There are also plans to develop large
tracts of land in Guyana under the Jagdeo Initiative, and the GOTT
is funding a feasibility study for expanding regional ferry service
to decrease transportation costs in the southern Caribbean. CARICOM
will hold a meeting for investors in Guyana in June in an effort to
generate interest in public/private partnerships for the region's
agricultural projects. However, the lack of donor support for
CARICOM agricultural projects at a June 2007 conference in Port of
Spain suggests the region may have difficulty attracting private
investment.
--------------
Impact on Post Programs
--------------
14. (U) There has been no impact on post programs.
--------------
Policy Proposals
--------------
15. (SBU) Public outcry over the rising cost of food and government
inaction has put the GOTT on the defensive. Academics, government
critics, and local pundits have labeled the GOTT's agricultural
development strategy as short-sighted and unsystematic. To
adequately address public concern and reestablish credibility on
agricultural development, the GOTT needs to implement and
communicate a coherent agricultural development strategy and explain
clearly why it chooses not to pursue certain proposals, such as
subsidies.
--------------
Comment
--------------
16. (SBU) Given its impact on daily life, we do not expect food
price inflation to disappear from the government's agenda or
political commentary. The GOTT and others in the region can be
expected to raise food security, biofuels and related issues at
Summit of the Americas (SOA) preparatory fora. It will be important
for U.S. officials to show sensitivity to the food security
challenges facing the Caribbean. This may be a good time, for
instance, to consider whether the U.S. can support local and
regional initiatives, including by engaging directly with CARICOM on
this concern. END COMMENT
AUSTIN
SIPDIS
SENSITIVE
SIPDIS
STATE FOR WHA/EPSC, WHA/CAR
EBB/TPP/ABT/ATP JANET SPECK
E.O. 12958: N/A
TAGS: EAGR ECON EFIN ETRD ECIN TD
SUBJECT: IMPACT OF RISING FOOD/COMMODITY PRICES - TRINIDAD AND
TOBAGO
Ref: (A) 07 POS 278 (B) State 39410 (C) POS 185
SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY
1. (SBU) SUMMARY: With food price inflation reaching 19.7%
year-on-year, public concern and political fallout over the cost of
food is growing. The "food crisis" has spotlighted the government's
neglect of agriculture and the nation's dependence on imports.
Although domestic food production meets local demand for some basic
items, the country imports twice as much food as it exports in
dollar terms, relying heavily on international markets for wheat and
other staples. The GOTT has tried to deflect blame for food price
inflation on global dynamics and "profiteering" retailers. To
address public concern and reestablish its credibility, the GOTT
needs to implement and communicate a coherent agricultural
development strategy. Given its importance to T&T and the region,
food security may weigh heavily on the agenda when T&T hosts the
Summit of the Americas in 2009. END SUMMARY.
--------------
Domestic Demand
--------------
2. (U) Rice, legumes, chicken, "ground" provisions (root
vegetables),and flour are staples of the Trinbagonian diet. While
T&T is able to satisfy some domestic demand with local production of
fruits, vegetables, rice, and boilers, T&T is a net food importer.
It relies heavily on international markets for staples such as rice,
grains, dairy products, legumes, and root vegetables. In dollar
terms, T&T imports twice as much food as it exports. While the cost
of imports has risen, with flour prices increasing between 8% and
39% in April, prices of domestically grown foods also have risen
steadily. The most recent Central Bank figures estimate
year-on-year food price inflation reached 19.7% in March 2008, with
fish, milk, cheese, and eggs rising by more than 30%. Fruits,
vegetables, bread, and cereals have all increased by double digit
amounts.
3. (U) With a reported 17-23% of the population living below the
poverty line (US$109 per month),steep price increases are having a
sharp impact on many household budgets. An estimated 22,700
individuals receive food assistance through a national cash transfer
program started in 2006, but this figure reflects only a fraction of
the estimated 200,000 plus citizens living below the poverty line.
Planned increases in electricity and water rates will further strain
the budgets of low and middle income families.
--------------
Domestic Supply
--------------
4. (U) With a few notable exceptions, food supplies in T&T have not
been disrupted by the "food crisis." In December 2007, the GOTT
initiated a food importation drive to help reduce costs and maintain
supplies. Under this initiative, the National Flour Mills (NFM)
imports frozen foods in bulk and sells it cheaply to local food
outlets. Recently, however, rice and flour, which are not included
in the importation initiative, have been in short supply. Speaking
with EconOff, the NFM Communications Director confirmed that the
flour shortages stem from distribution problems and panic buying,
not supply issues. Nevertheless, the shortages have led to
rationing by retailers and isolated looting of delivery trucks along
a dangerous stretch of highway. Unable to secure rice from Guyana,
T&T importers have looked to Brazil for parboiled rice. Shipment
delays have caused shortages, and while NFM reports sufficient
supplies of locally grown white rice, media reports indicate
otherwise.
5. (SBU) Public discussion about the need to increase local food
production has focused on government action, not private investment.
Farmers are capitalizing on the "food crisis" to highlight GOTT
neglect of agricultural infrastructure, specifically irrigation and
access roads. Small hold farmers, who typically lease or squat on
government and private lands, have limited financial resources with
which to expand production. Moreover, the rising costs of imported
agricultural inputs are affecting both prices for locally grown food
and the viability of existing agricultural activities. In some
cases, farmers allege that GOTT import initiatives are eroding their
markets by undercutting prices.
--------------
Political Impact
--------------
6. (SBU) While there has been significant criticism of the GOTT,
public discontent has not translated into violent protests or riots.
Nor, given the balance of power in parliament, is this issue one
PORT OF SP 00000195 002 OF 003
that threatens the government's ruling majority. Critics and
opposition leaders, though, point to the GOTT's alleged role in
aggravating current situation, highlighting its emphasis on
industrial development to the detriment of agriculture. Opposition
leader Basdeo Panday, for example, blamed the current crisis on the
GOTT's allocation of agricultural lands for residential development,
as well as the GOTT's failure to convert fallow sugarcane fields
into farmlands. Panday and others, including local business
contacts, also point to the GOTT's inability to address
inefficiencies at the nation's port and inadequacies in the local
transportation network. For their part, local rice farmers recently
criticized the GOTT's "make-work" employment programs for attracting
unskilled labor away from agriculture. They also argue that
government favoritism towards industry undermines the agricultural
sector.
7. (SBU) The Prime Minister and his "food crisis" spokesperson,
Minister of Consumer Affairs Peter Taylor, however, focus on the
role of external forces in rising prices, including biofuels. They
also have blamed retailers, accusing them of price gouging.
Responding to calls to eliminate the value added tax on all food
items, Manning said that doing so would have no effect on prices as
retailers would not pass on these savings. These remarks have
antagonized the private sector, while doing little to deflect
criticism from the GOTT. With rare exception, Minister of
Agriculture Arnold Piggott has been absent from the debate. It was
Taylor, not Piggott, who delivered a much anticipated April 23
address before Parliament on the "food crisis." This address merely
reviewed existing GOTT efforts, suggested that people eat more
locally grown foods, and threatened legal action against
"profiteers," offering no new solutions.
--------------
Economic Impact
--------------
8. (U) Rising prices for imported food have put additional pressure
on monetary policy, as the Central Bank already has its hands full
containing the effects of government spending fueled by energy
revenues. Overall inflation reached 9.8% year-on-year in March
2008. In the face of expectations that food prices will continue to
rise, Central Bank Governor Ewart Williams recently called for
urgent spending cuts to avoid the prospect of "endemic" double digit
inflation. The usually reserved Williams remarked that, "We are
facing a situation that could get out of control and that could
easily slip away from us."
9. (U) In an effort to contain inflation in FY2007, the Central Bank
issued more than TT$2.3 billion (almost US$400 million) in
government bonds. While the inflation rate moderated by October
2007 to 7.3%, project spending and wage agreements signed in the
run-up to national elections in November drove annual headline
inflation to 10% in January, and the food price index topped 20%.
In response, the Central Bank raised its benchmark interest rate for
the first time in 17 months and increased the commercial bank
reserve requirement.
--------------
Environmental Impact
--------------
10. (U) Post is not aware of any environmental impacts directly
attributable to rising food prices.
--------------
Government Policy Response
--------------
11. (SBU) Food price inflation has been a serious issue for the GOTT
for more than a year. In 2006, the GOTT assembled a Ministerial
Task Force on Prices, and in August 2007 it held a "national
consultation" on food prices, which highlighted several initiatives,
including a joint agricultural project with Cuba (Ref A). Since
these consultations, proposed initiatives have largely disappeared
or been delayed, raising public ire. Faced with mounting criticism
over the lack of progress, PM Manning outlined the government's
comprehensive plan to address food prices on April 2, and Taylor
reiterated it on April 23.
12. (SBU) GOTT's proposals include the creation of 7,000 farms from
fallow sugarcane lands, the development of several large scale
farming operations, a greenhouse demonstration project in
conjunction with PCS Nitrogen, and the importation of low cost food
products from Latin America (Reftel C). Notably, the Prime Minister
has resisted calls for food subsidies, stating such measures simply
lead to black market profiteering and unfair trade practices. Most
recently, however, Piggott stated that the Ministry of Agriculture
PORT OF SP 00000195 003 OF 003
was considering new agricultural incentives, including subsidies for
rice farmers. [NOTE: The GOTT has been promising to distribute
sugarcane lands for several years without much progress. It has now
proclaimed that 5,700 plots will be allocated to former sugarcane
workers by late June 2008; critics are skeptical of this timeline.
END NOTE]
13. (U) The GOTT also is working with CARICOM neighbors to address
the "food crisis." At a recent meeting in Barbados, regional
leaders agreed to decrease or remove the Common External Tariff
(CET) on 34 food products. There are also plans to develop large
tracts of land in Guyana under the Jagdeo Initiative, and the GOTT
is funding a feasibility study for expanding regional ferry service
to decrease transportation costs in the southern Caribbean. CARICOM
will hold a meeting for investors in Guyana in June in an effort to
generate interest in public/private partnerships for the region's
agricultural projects. However, the lack of donor support for
CARICOM agricultural projects at a June 2007 conference in Port of
Spain suggests the region may have difficulty attracting private
investment.
--------------
Impact on Post Programs
--------------
14. (U) There has been no impact on post programs.
--------------
Policy Proposals
--------------
15. (SBU) Public outcry over the rising cost of food and government
inaction has put the GOTT on the defensive. Academics, government
critics, and local pundits have labeled the GOTT's agricultural
development strategy as short-sighted and unsystematic. To
adequately address public concern and reestablish credibility on
agricultural development, the GOTT needs to implement and
communicate a coherent agricultural development strategy and explain
clearly why it chooses not to pursue certain proposals, such as
subsidies.
--------------
Comment
--------------
16. (SBU) Given its impact on daily life, we do not expect food
price inflation to disappear from the government's agenda or
political commentary. The GOTT and others in the region can be
expected to raise food security, biofuels and related issues at
Summit of the Americas (SOA) preparatory fora. It will be important
for U.S. officials to show sensitivity to the food security
challenges facing the Caribbean. This may be a good time, for
instance, to consider whether the U.S. can support local and
regional initiatives, including by engaging directly with CARICOM on
this concern. END COMMENT
AUSTIN