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SAP 2.84/WP.143
Structural adjustment and agriculture in Guyana:
From crisis to recovery
III. Constraints facing agriculture
Notwithstanding the remarkable turnaround in the income, output and export earnings of Guyana since 1990, there are some serious constraints which are likely to inhibit long-term development of the economy. Some of these are external in origin, relating mainly to increasingly restricted access to markets, but they reveal themselves as pressures to reduce domestic production costs in order to compete. Others are less ambiguously internal, having to do with the depth of the economic problem, with the uneven distribution of the benefits and costs of the recovery programme, and with the growing social and political cleavages in Guyana which cast a cloud on its future economic and political stability.
The first major constraint is that of markets for Guyana's export products. Much of the country's sugar output is sold to markets in which it has preferential access. Guyana can sell up to 163,500 tons a year to the European Union at a price of US$26.7 per pound and it has an export quota in the United States of 12,000 tons a year at a price, which, at US$20.13 in 1997, is above the world price. Guyana can also sell up to 6,000 tons to CARICOM countries and about 39,000 tons in Guyana at prices protected by a 20 per cent tariff. This provides protection for perhaps 220,000 tons. But prices for sugar sold to Europe fell 17-20 per cent between 1995 and 1997 (GUYSUCO). It is also anticipated that the EU preferences will decline by the year 2000 and by that time Guyana plans to have raised output to 300,000 tons per year (IMF, 1997a, p. 8; 1997b, p. 17). It is imperative, therefore, that Guyana be able to produce sugar at internationally competitive prices, which means reducing production costs from about US$0.19 per lb to US$0.13 per lb by the end of the century. Since labour costs represent 50-55 per cent of production costs, this will inevitably mean shedding labour, reducing non-salary benefits (currently at 17.6 per cent of total employment costs; source: GUYSUCO) and raising labour productivity by mechanization, putting more emphasis on incentive payments relative to basic wages and by tightening up management practices. These will become priorities in collective bargaining. GUYSUCO also hopes to reap economies of scale by estate amalgamation and corporate restructuring.
GUYSUCO reduced its workforce from 27,000 to 20,000 between 1993 and 1998, about equally divided between lay-offs and attrition. Legislation enacted in 1997 provides for severance pay of two to three weeks' wages per year worked, depending on the number of years in employment. Nonetheless, shedding more labour or cutting the health, transport and social benefits of sugar workers will be resisted, with or without the support of GAWU, the union which represents them, but which, at the level of its officials, is quite close to the Government. In this regard, GUYSUCO reports that while the number of official strikes has declined in recent years, unofficial action by workers has increased. Reaching its cost targets will not, therefore, be easy.
Rice markets too are problematical. Like sugar, rice finds protected markets in both the European Union and the Caribbean, which, directly and/or, in the case of the EU, indirectly (through its overseas territories of Curaçao, Aruba, Bonaire, Montserrat, and the Turks and Caicos) account for most export sales. As a member of the APC (the African-Pacific-Caribbean countries) it is able, under the Lomé Convention, to share in the sale of up to 125,000 tons of husked rice and 20,000 tons of broken rice to the EU at preferential rates. Guyana supplies between 40-45,000 tons of this quota each year (Bynoe, 1997, p. 88), but it is expected that protection, and therefore prices, will decline in this market in the near future (IMF, 1997a, p. 8). Guyana has already encountered difficulties in the Caribbean as a result of being forced out of markets, such as Jamaica, by cheap US rice imported under PL 480, and further difficulties can be expected as the common external tariff of CARICOM is gradually reduced. Guyana's long-grain rice competes with the heavily subsidized US rice and its production costs, at between US$337 and US$395 per metric ton in 1996, are much higher than those in the United States (estimated at US$256-269 per ton). In recent years, the Dominican Republic has also started exporting rice under the APC agreement. The Guyana Rice Development Board (GRDB) is therefore promoting sales to non-traditional regional markets such as Brazil and to Haiti which hopes to join CARICOM. In spite of its high production costs, Guyana can still produce rice about 50 per cent cheaper than neighbouring producers in Latin America (IICA, 1994, p. 20). The GRDB is also encouraging production of parboiled rice, as opposed to cargo (de-hulled rice, by far the dominant form of export), which is in big demand in some parts of the Caribbean.
Pressures to compete internationally are gradually leading to a concentration of rice production. An estimated 50 per cent of the farmers are now farming less than 15 acres, compared with 75 per cent just a few years ago. The bulk of the exports now come from just 3,000 of the 15,000 farms, and small farmers are engaging in sharecropping with larger farmers. With further increases in land rents and water rates, as is expected, smaller farmers will be further squeezed.
Over the past decade there has been strong growth in non-traditional exports, with Guyana exporting 42 types of provision, fruits and vegetables to regional and other countries. Barbados and Antigua accounted for the lion's share but in 1997 this trade disappeared almost entirely with the identification of pink mealy bug (FAO, 1997, p. 15). Markets in Canada, France and the United States have expanded in recent years for heart of palm, pineapple, copra, plantains and citrus. Their potential is, however, restricted by "inadequate and unreliable external transportation by both sea and air, lack of fresh produce handling facilities at the airport, and unreliable supplies of electricity and water" (Bynoe, 1997, p. 39).
On the production and internal marketing side, constraints can be traced back to the economic crisis as well as to institutional bottlenecks. One that affects most producers, but especially rice and non-traditional product growers, is the continued dilapidated state of drainage and irrigation works. The reasons have to do with inconsistent and complex legislation, inadequate funding for both capital and operations, shortage of qualified staff because of poor salaries, and overlapping institutional jurisdictions (Bynoe, 1997, pp. 39-40, and FAO, 1997, p. 6). Cash shortages are thought to be the main problem and part of the reason for this is that users do not pay the fees expected of them. Collections are made by neighbourhood democratic councils, the lowest level of administration, but these lack skills and are seen as "too removed from the needs of the people" (FAO, 1997, p. 6). Water rates are widely considered to be too low, collection inadequate and retention of collections by NDCs to offset administration costs too high. The result is that only some 30 per cent of rates are received. Improvements have been made at the regional level by the re-establishment in 1994 of the National Drainage and Irrigation Board but farm-level problems still remain and the Government is reluctant to replace RDCs with direct input from user groups, which many believe is the answer (see FAO, 1997, op. cit.). Given the importance of drainage and irrigation, these problems are serious impediments to long-term output growth. Indeed, farmers tend to rank poor drainage as the number one impediment to increasing output (FAO, 1997, Annex 1, p. 78).
Insecurity of land tenure exacerbates the drainage and irrigation problems, while being by itself an important impediment to growth. There are four types of land tenure in Guyana with great regional variation: freehold, government leasehold to individuals or cooperatives, private leasehold (much of which is very short term), and squatter-occupied land. Obtaining a government lease can be a time-consuming, frustrating process, characterized by arbitrariness and lack of transparency. Many farmers consequently end up with "provisional leases" which act as a deterrent to investment, obtaining credit, and payment of drainage and irrigation fees. Landlord/tenant disputes over the responsibilities for water fees are common, as are problems between absentee landlords and landless, and between squatters and others (FAO, 1997, op. cit., pp. 18-19). There is no single authority determining land usage, no clear strategy for opening new agricultural land, and inadequate safeguards to the illegal occupation of Amerindian reserve lands (Ministry of Finance, 1996, Volume 1, pp. 8-10).
Other constraints on rice production are said to be lack of timely access to machinery and lack of credit (because of short-term leases) for small farmers; poor pest and disease control because of overdependence on a limited number of species (although three new varieties have recently been introduced which should alleviate this problem) and poor seed crop (IICA, 1994, p. 21). Constraints on non-traditional crops are more varied and include poor extension services, low-quality planting material, lack of internal transportation and storage, poor quality control, lack of machinery, operating inputs and credit and high post-harvest losses due to inadequate packaging (ibid., pp. 24-26). The New Guyana Marketing Corporation (NGMC) which handles these commodities is underfunded and poorly organized.
None of these constraints is insurmountable, but together they serve to limit growth in the output of sugar, rice and non-traditional crops. These commodities are in any case susceptible to the vagaries of the weather and in 1988 several suffered the effects of El Niño, sugar output falling by some 8 per cent, or 22,000 tons (FAO, Statistical data base, 1998). Such uncertainties, in combination with the marketing and production constraints, will likely result in pressure to promote the expansion of production for export of commodities such as minerals, timber, and fish, all of which are essentially unregulated and accompanied by serious environmental question marks. Furthermore, their production has important implications for the Amerindian population.
The mining of gold and diamonds takes place in dispersed, isolated places and uses chemicals which can be harmful to people and the environment. The classic example of this was the major cyanide spill by the Canadian Omai Gold Mines company in 1995 which caused massive damage to the Omai and Essequibo rivers. But the rush to exploit Guyana's rich gold deposits leads to other damage too. Rivers are dredged, roads driven through forests, and many thousands of essentially young male prospectors converge upon the hinterland of Amerindian lands. Communities are encroached upon, their habitat irreversibly damaged and themselves exposed to alcohol and drug abuse and violence; sexual abuse of women is not uncommon (Forte, 1996a and 1996b).
Forestry is equally unregulated and many species are being over-harvested. Much of the rainforest is now being logged, often with the active complicity of Amerindians. As in mining, direct returns to government and the communities are negligible but environmental and social damage is considerable. There is a need to raise stumpage fees, build up a more effective monitoring and policing system, and to re-examine earlier secretive deals with large multinational companies, many with horrendous track records in Asia. There is also a need to provide protection to those Amerindian communities which have chosen to bar logging and to offer their workers alternative employment in both mining and forestry, geared to sustainability, such as the promotion of eco-tourism and training in policing and enforcing acceptable production practices (Forte, 1996a).
While fish production has increased substantially, it too is not adequately regulated because of underfunding by the Department of Fisheries and the Coastguard. In consequence, several species, including prawns and shrimps, are being over-fished in the inland fishery by use of inappropriate nets. Meanwhile, shortage of capital prevents Guyanese fishermen from fishing on the continental slope, which is then left as an open "ground" to foreign fleets. Substantial damage has occurred to inland fishery from mining and forestry operations and from the destruction of mangroves. Amerindian fishermen especially need educating to cease resorting to destructive fishing techniques, involving dynamite and poison (Ministry of Finance, 1997, pp. 8-14). Thus, while there is undoubted potential for expanding output and exports of these commodities, each carries with it serious environmental problems which the Government seems unwilling or unable to deal with and each raises questions about its social impact.
Ultimately, however, the biggest question facing the Guyanese economy is whether politics can transcend the racial divide which has grown between Indo- and Afro-Guyanese. There has long been a racial flavour to the political discourse in Guyana, although both parties, at least in their official policy stances and in their choice of elected and appointed officials, have disowned it. Unfortunately, in the run-up to the last election (1997) and in the aftermath of the PNC-disputed return to power, outbreaks of racial violence and sentiments of racial exclusivity increased. Even the Working People's Alliance, a left-wing party which was founded on the basis of cross-racial working-class unity, fell victim to the imperatives of choosing sides. Such developments are very discouraging to those who see poverty and class rather than race as the paramount categories of political organization and who recognize the absolute necessity for racial harmony if Guyana is to prosper. Yet, the social impact of the crisis and of the more recent reform programmes do indeed defy easy racial categorization. Those who suffered from the crisis included farmers and workers from all ethnic communities. Moreover, the reform programme, for which many Indo-Guyanese now credit the PPP, was initiated by the PNC and some of the most politically difficult policy changes were made by that government.
Sustaining recovery in Guyana will thus require a solution to the tensions between the two dominant communities. This will not be easy as the sense of aggrievement among PPP supporters persists of having been fraudulently kept out of power by the PNC. But accommodation is imperative to alleviate poverty and this will necessitate the PPP making visible and meaningful political concessions to the Afro-Guyanese community, if not the PNC. This may be difficult for the PPP to contemplate but it might, nonetheless, be necessary if the considerable recovery Guyana has witnessed since 1990 is not to be jeopardized.