VZCZCXRO1361
PP RUEHGR
DE RUEHPO #0253/01 1222249
ZNR UUUUU ZZH
P 022249Z MAY 06
FM AMEMBASSY PARAMARIBO
TO RUEHC/SECSTATE WASHDC PRIORITY 8281
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHAO/AMCONSUL CURACAO 1012
RUEHTG/AMEMBASSY TEGUCIGALPA 0023
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 PARAMARIBO 000253 
 
SIPDIS 
 
 
SIPDIS 
 
STATE FOR WHA/CAR LLUFTIG, WHA/EPSC, WHA/CEN, EB/TPP/ABT 
STATE PLEASE PASS TO USTR/SHAWN DONNELLY USTR/JAMES MURPHY 
 
E.O. 12958: N/A 
TAGS: ECON EIND EINV EAID ETRD EAGR KPRV HO NS
SUBJECT: IN SEARCH OF VIABILITY: RESTRUCTURING, EU MARKET 
ACCESS, AND COMPETITIVENESS FOR SURINAME'S BANANA EXPORTS 
 
REF: A. 03 PARAMARIBO 067 
 
¶B. 04 PARAMARIBO 196 
¶C. TEGUCIGALPA 668 
     ¶D. 05 PARAMARIBO 337 
 
PARAMARIBO 00000253  001.2 OF 002 
 
 
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Summary 
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¶1. The European Union's (EU) development assistance package 
for Suriname's banana sector targeted improving 
productivity in the hopes of making Suriname's state owned 
banana company  SBBS - attractive enough to potential 
buyers for the next round of privatization in June 2006. As 
an African, Caribbean and Pacific (ACP) banana exporting 
g 
country, Suriname also expects to gain from the EU's 
revised 2006 liberalized tariff rates for ACP banana 
imports. It is as yet unclear whether the combined aid and 
lowered tariff restrictions are sufficient to make the 
company attractive enough to potential buyers, especially 
if non-ACP Latin American banana producers (i.e., "dollar 
bananas") still manage to crowd out Suriname exports in the 
EU market. End summary. 
 
¶2.  Beginning in 2003 and 2004 the EU spend almost 2.5 
million Euros to help restructure SBBS after the GOS had 
declared the company bankrupt and suspended its operations 
(See Ref. A). The EU invested an additional 2 million Euros 
in 2005 for irrigation improvements. Finally, on February 
28 the Government of Suriname (GOS) received an additional 
4.46 million Euros bringing the total assistance package to 
approximately 9 million Euros to help modernize and 
rehabilitate the ailing state owned banana company. IDB 
also contributed an additional 7.3 million USD. 
 
¶3. As a consequence of EU development assistance, banana 
exports resumed in 2004 and the GOS began the process of 
preparing to privatize the firm (See Ref. B). In 2005 SBBS 
produced 3.3 million boxes, a 256 percent increase since 
resumption of production in 2004. By September 2005, SBBS 
was again fully operational and able to re-employ 1,750 
laid-off workers. Productivity yields realized in 2005 were 
1,918 boxes per hectare. F.o.b. costs in 2005 averaged 7.81 
USD per box while the goal was set at 6.21 USD per box. At 
a recent signing ceremony between Suriname's Minister of 
Planning and Development Cooperation, Rick van Ravenswaay, 
and local EU representative, Helena Laakso, both sides 
expressed confidence that Suriname's banana sector will 
soon see better days as they anticipate the next round of 
privatization. 
 
¶4.  This financial assistance comes on the heels of the 
EU's decision in November 2005, to adopt a new regulation 
setting the import tariff for bananas from MFN countries 
(i.e., "Latin dollar bananas") at 176 Euros per metric ton 
(m/t).  The new import regime, which includes a duty-free 
annual import quota of 775,000 m/t for ACP bananas, went 
into effect January 1, 2006. In obtaining export licenses 
in 2005 for 35,000 m/t of bananas, Suriname exporters spent 
a total of 9 million Euros. For 2006, Suriname is expecting 
with the new tariff structure to spend only 3 million Euros 
-a significant saving. This new rate has drawn the ire of 
non-ACP producers (see Ref. C), however these EU 
adjustments are meant to have the positive effect of 
decreasing costs for Suriname's banana producer and thus 
freeing more funds for working capital. 
 
¶5.  According to Minister van Ravenswaay, the GOS will 
continue to work to further "stabilize" the company as it 
moves to the next privatization round. The last round of 
privatization efforts in May 2005 failed to attract any 
bidders (see Ref. D). Some trade experts have estimated 
that the average non-ACP Latin American bananas f.o.b. 
costs average $5.60/box, it is yet to be seen whether the 
effects of the new EU tariff of 176 Euros per m/t on dollar 
bananas can keep Surinamese exports competitive with their 
f.o.b. costs in 2005 averaging 7.81 USD per box. The 
stabilization of the company alluded to by the Minister 
will need to take the dollar banana benchmark into account 
in order to make the company attractive enough to potential 
buyers. 
 
PARAMARIBO 00000253  002.2 OF 002 
 
 
 
¶6.  A "Call for Expression of Interest" was published in 
Paramaribo newspapers on Saturday April 22, 2006. The call 
was opened to all national and international registered 
companies who are either directly involved in the banana 
business or are in a partnership with such an international 
company. This move is seen as giving fair notice to local 
bidders who complained that they were excluded in last 
round by larger international firms. SBBS plantations are 
located on 2 estates, Jarikaba, which covers 1,350 
hectares, and Nickerie, which covers 1,012 
hectares. Currently the company has 1,547 hectares under 
production. The deadline for submission of interest was 
April 29. A decision is expected by June. 
 
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Comment 
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¶7. As SBBS goes through its current privatization cycle, it 
remains unclear whether future/continued productivity gains 
under EU assistance and tutelage can get Suriname banana 
exports to the benchmark f.o.b. costs of so-called dollar 
banana exporters from non-ACP Latin American countries. A 
show of interest by international bidders in this tender 
round will signal a new found confidence that the gains in 
SBBS's productivity and market access can/will sustain the 
competitiveness of Suriname's banana sector. 
 
BARNES