VZCZCXRO2544
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 
 
¶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