An economic insight

Caribbean Buffeted by Global Price Spikes

By Bert Wilkinson

GEORGETOWN, Guyana, Mar 19 (IPS) -

As the single parent of a five-year-old boy, Sonita Balkaran can barely make ends meet these days. A clothing vendor in one of this city's five municipal markets, Balkarran has watched in horror the steady decline of her living standard, estimating that her spending power has shrunk by about 50 percent in the last year.

"The price of anything you can think about has gone up," she said one very hot afternoon this week. "What hurts is that your salary is not going up and prices are not moving up by a few points. They are jumping up. Ask anyone," she added, touching on a subject that has brought political discomfort to some governments and misery for ordinary Caribbean people in the last year.

Early in March, Caribbean Community leaders flew to the Bahamas for their annual mid-term summit, with the rising cost of living as a main agenda item of the two-day session. The bloc represents a combined population of some 15 million people.

When it was all over, they announced a plan to suspend the common external tariff (CET) applied to some imported goods across the 12-nation trade bloc and to drastically reduce the rates on others for a period of up to two years.

It has become increasingly clear that the era of cheap food and raw materials is over. In the past year, global fuel prices have doubled, in turn pushing up the cost of key commodities like wheat, corn and barley. Food prices have also been squeezed by the expanding use of grains for biofuels.

"As net importers, the Caribbean countries are particularly vulnerable to these international price hikes," noted Antigua and Barbuda's finance ministry this week. "While our countries may seek to mitigate the impact... there are very few policy options available to the governments of small developing countries that would eliminate or significantly reduce the impact of external shocks on the domestic economy."

Officials say the government will subsidise gas and diesel prices to keep them unchanged, but concede that "with the price oil climbing to over 100 dollars per barrel [of oil], this policy is hardly sustainable."

"The days of cheap oil are gone," Trinidad's Patrick Manning agreed at the Caricom summit. "We need hemispheric collaboration to face this challenge, which increases with urgency with every passing day."

Manning was one of the leaders who had attended a special December summit in Guyana devoted to only two issues -- a new trade and aid pact with the European Union, and rising living costs in the Caribbean.

Since then, trade ministers have met at least three times in special session to address the problem, passing their recommendations on to the trade bloc's special ministerial council and then to leaders who signed off on the waiver of import duties earlier this month.

Items now attracting zero import duties are cheese, cooking oil, breakfast cereal, baby formula and milk powder. Infant juices get a waiver for six months. Others like milk, chicken, beef, lamb, onions, oatmeal, beans, potatoes and some household items like ceramic products will also get special treatment. The CET on these items will be no more than five percent, down from 30 percent.

"The CET is the only instrument available for intervention at the regional level to address the issue of the rising cost of living," the leaders said in a statement after the Bahamas summit.

Countries like Barbados and Trinidad, net importers of many food items, have found it harder to cope than others. Prices for some items in Barbados have risen by at least 30 percent. The governing Democratic Labor Party used the cost of living issue to great effect on the campaign trail leading up to general elections in January, which it won by a landslide.

In Grenada, a very nervous Prime Minister Keith Mitchell sought a record fourth term this year, and pushed leaders into flying to Guyana in December to discuss the issue, as the steep spikes in cost of living became impossible to ignore.

Further north in Antigua, the finance and economy ministry called a special public forum in the capital this week to explain that there is little governments could do to address the issue.

The forum came in the midst of a raging debate involving Antigua and other small Eastern Caribbean states about the price of flour and what the increases have done to the food basket. Governments have asked the trade bloc to relax rules governing the importation of flour from outside the bloc even as traditional suppliers say they have enough on hand to meet demands.

Some have suggested easing restrictions on trade with South American countries like Brazil and Colombia, which offer lower prices on food goods than the United States, one of the Caribbean's biggest partners.

Governments in Barbados, Guyana and Trinidad say the most sustainable answer to the crisis is to increase agricultural production in the region.

Guyana, easily the largest Community member with more than 133,000 square kilometres and a population of only 730,000, has virtually been begging farmers and investors in the region to come and develop mega food farms. Trinidad has sent investors, and the previous Barbados government had talked about accepting an offer of five dollars per acre, per year to lease farmland in Guyana, the same price locals pay.

Next month, Guyana will host an agricultural investors' forum following up on a special leaders' summit on agriculture held in Trinidad a few months back to tackle this very question, but for ordinary folks like Balkarran, no relief is on the horizon.

"My son eats a big meal in the morning and after school but I have to find snacks for him at school. That I can barely afford now. A pint of kerosene has moved from 25 cents to about a dollar. How poor people will be able to afford this I don't know," she said, keeping an eye on her clothing as passers-by merely window shopped.