A Case For The Development of The Guyanese Food Industry

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By Keith Bernard

After reviewing the 2015 Mid-Year Report, most of the causes and effects regarding the country’s growth rate (which was lower than projected) seemed acceptable. Notwithstanding this, I would mitigate some contraction with the economic activities from the grey economy so as to add at least 20% more to the official Gross Domestic Product (GDP).
My main concern is the Consumer Price Index (CPI) data provided in the report. I was flummoxed as to the reason the CPI for food was 126, or 26% higher than the base, this year. Was this referring to Popeyes and Chinese food? Guyana is the land where raw foods are available in abundance and for this reason, I am advocating for Guyanese to eat local again. Further, I am advocating for a rejuvenation in the food industry by way of introducing advance food processing. This would encompass bulk production of plantain and banana chips, and even frozen fish dinners.
Consider this: why do the plates of chowmein served in Guyana not include dried boras, eschallots and the like? To produce these would be the low-hanging fruit as we would not be reinventing the wheel. Most of the know-how could be had from the Philippines, Vietnam, India, China, Japan, Indonesia and even Mexico. I have had mango chips from the Philippines: it was delicious. I have also consumed packaged curried channa and eggplant from an Indian company. Those merely took me heating them in the microwave for 90 seconds before consumption. For the healthier crowd, there are the likes of rice cakes on the market; these are even being made by Quaker Oats. To say the quality of processed foods has significantly improved over the last several decades would be a terrible understatement. Processors are not only using quality ingredients, but the taste and packaging of food they produce have become superior. Sorry Aunty Betty, but the phoulorie mix and roasted boulanger in the tin taste just as good as yours.
It will take huge amounts of investing dollars to setup the type of large scale, high-tech production and manufacturing lines. This is nothing new to Banks DIH, Demerara Distillers Limited (DDL), Sterling, inter alia. Besides, there are hundreds of local businesses that are already engaged in small to medium scale production of processed food.
There is a way that small manufactures could benefit from an efficient production process – they could lease time from the owner, similar to rice milling. Large investors, or a collection of many small investors, should be able to borrow from the capital market with a government guarantee or be given a 10-year tax free credit for investing with an additional 10 years (post-construction or upon completion and initial operation) for creating jobs for the youth. I would also suggest tax exemptions on interest expenses. Similarly, there could be a public/ private partnership whereby the government construct the building and install the utilities (finance with tax exempt bonds) and then lease it for 99 years to companies. Another way is to buy the equipment from factories located in the United States of America or Canada that were closed for different reason: costs cutting or consolidation/merger/acquisition being among the possibilities. The plant (equipment and systems) could then be relocated and reassembled in Guyana, for instance, like it is done in Mexico and Vietnam. Factories close every day in the United States as well as in Brazil.
Brazil food company, BRF SA (one of Brazil’s largest processors) is having a down year which is also due to it being a dominant commodity exporter. For this reason, it is an excellent opportunity to purchase, at substantial discounts, the machinery needed for the aforementioned opportunities.
These investments should go hand-in-hand with the government’s plan to materially increase energy generation. It is believed by many in the finance industry that the price of oil will remain low for some time; my hope would be until Guyana/Exxon Mobil starts to pump the initial 85,000 barrels per day. Moreover, the report cited the relatively stable exchange rate of the dollar to the US dollar which currently stands around GUY$200 per US$1.
Another alternative is to have a bilateral agreement similar to the Petro Caribe deal Guyana benefitted from with Venezuela, where the latter exchanged its oil for the former’s rice. To this end, I am suggesting Guyana ships raw materials (agricultural) to a company such as BRF SA and have them use its economies of scale to manufacture, at marginal costs, the finished goods which is then re-imported, tax-free of course, and further exempted from sales taxes if sold to school children and senior citizens. It is noted that the minimum wage per day in Guyana is less than US$2 for most of the hardworking folks.
Another positive effect from processed foods is the release of labour tied up in daily food preparation. I envision mostly women would want those microwaves to work harder. Nonetheless, refrigerators and freezers have to be plugged into uninterrupted electricity supply. The issue of interrupted electricity supply should be solved with the discovery and near term production of oil. In addition, the production of oil also brings access to cheap fertilizer. It should be noted too that one of the many petroleum byproducts is tar for roads.
So it is asinine for the food CPI to be 126 in Guyana. It would perhaps be understable for this to be so in Venezuela (whose inflation stands at 68% and its economy expects to contract by 10% this year according to International Monetary Fund) given their mentality of living off a single commodity and Marxism. Moreover, the Venezuelan government is having difficulties paying for medicine and food.
Separately, food and water security is the issue or challenge for the immediate future for the world’s 8 billion plus inhabitants. Poverty is overwhelmingly linked to the price of food and the reality is the world’s poor spend over 50% of their disposable income on food. As such, a rising food CPI is the precursor to the increase in the percentage of your citizens living in poverty. One of the reasons food is inexpensive in America is because of hedging (commodities futures exchange) not for speculative reasons but for price stability. Farmers are less anxious knowing they will sell their crops at a set price when they harvest. In the case of Guyana, a futures exchange could be setup whereby farmers enter into a future delivery contract with food processors. Having the ability to reduce price volatility via futures contract is essential for budgeting.
In the Full Year 2015 Report, let’s see the food CPI below 90 or at least 93, similar to that of furniture.

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