Short-term plan needed to relieve rice debt burden

To the Editor
Guyana Chronicle
August 24, 2001

I REFER to a letter in the Guyana Chronicle of Wednesday from a rice farmer, headed `Counter proposal for the rice industry'.

The original proposal for the rice industry was premised on the fact that rice is one of the three legs that the economy stands on and it is in the national interest to address this issue now.

The industry is experiencing severe difficulties with farmers crying out every day about the banks seizing their assets and putting them out of work. The banks are also not providing working capital and some of them have adopted a policy of not lending to the industry at all.

Rice is also a major food staple and the role of rice in food security cannot be overlooked.

The Director General of the International Rice Research Institute in a speech this year put it like this: "The international rice market should be developed but not while ignoring rice's importance as a staple food to millions of poor in the developing world. To ensure the poor do not become victims, instead of beneficiaries, of open markets and globalisation, reliable supplies of cheap food must be protected Science has contributed much to previous increases in rice production that have helped keep the poor fed and so ensured stability.

"However, the opening of international markets will require sound policies as well as good science if the poor rice eaters of the world are to truly benefit from such changes."

Turning to the questions asked:

Q. Is this a proposal to take care of the banks?

A. The proposal indicates that the banks are willing to write off G$8 billion or almost half of the burden of debt. This indicates that the proposal is designed to help the industry and not the banks.

Q. What about all the others who have been lending to the industry?

A. If the industry is returned to profitability then the help from others will no longer be required and can even be paid back.

Q. How many bankers have fortified themselves?

A. Bankers cannot fortify themselves form the lending activities of the bank. They are merely employees and cannot profit from the loans disbursed. Had they not eagerly facilitated the loans in 1996 the industry would not have grown and they would have been accused of not wanting to help.

Q. How many more will benefit from the proposal?

A. All of Guyana knows that when rice prospers the entire nation prospers. Farmers can earn a living, millers can operate their mills, truckers get work transporting paddy and rice, the shipping company earns from storing and preparing shipments. The RPA and GRDB earn on each bag of paddy produced and each ton of rice exported, business prospers from the cash flow generated and the Government gets revenue.

Q. How much of the debt is owed by whom?

A. Approximately half of the debt is to millers. The other half is to farmers. The banks have not provided a breakdown of the debt by size even though this was requested but one can assume that close to 20% of the debt is held by small farmers.

The point is that one cannot help the small farmers without helping the millers as well because the industry is an integrated one. Let us assume that help is doled out to the small farmers only and the mills close down.

Where is he going to sell his paddy? The mills possess the drying, shortage and processing facilities and they are the ones who convert the paddy to rice for local consumption and export; without them there is no market as quality cannot be assured and prices cannot be sustained.

Q. Why do the banks need the Government in on this?

A. The banks cannot offer a rice bond. They are willing to forgive G$8 billion worth of debt; they have done half of the work and it is now up to the Government to do their half. Additionally the banks will also buy the rice bond so the Government will not have to put up the money themselves.

Q. $20 billion in collateral.

A. This is true. No one is missing the fact that the collateral held by the banks is enormous. If they were to try to realise this security, property prices in this country would plummet to an all time low. Since the local business community does not have the money to buy up all this property, the country would be invaded by foreigners who will only be interested in speculating on property prices.

Q. Why not concentrate on D&I etc?

A. Who is going to use the facilities mentioned if farmers couldn't keep their lands and sell their paddy? Will the international donor agencies still provide funds for D&I etc if there is no rice industry?

Q. Not GA 2000, not Globe Trust, why these banks?

A. The former two are bankrupt, the banks are not. They are willing to contribute as equal partners with the Government to resuscitate the rice industry in the national interest. Surely there is a difference here.

Q. Will the industry suddenly prosper and what about the next crop?

A. The industry will be relieved of the burden of debt. This alone is enough to ensure short-term viability, as the banks will no longer be breathing down the farmers backs and taking away their livelihood. This would provide a window of relief, which should ensure the industry continues to operate until the measures for securing our export markets kick in by the year 2003.

Q. Would it not be better for the banks to sit down with the debtors?

A. The banks are precluded from doing this because of the FIA. Loans can only be rescheduled twice over their lifetimes and believe me the banks have sat down with all of these people form time to time. The point is the burden of debt has grown too large and the only way for the industry to recover is to relieve the burden.

It is with relief that we note the farmers saying that the industry needs help and we are just as convinced that it does. The original proposal makes this exact point and managed to secure the commitment of the banks to provide $8 billion worth of immediate relief.

We have also examined the viability of the industry and project an increase in world prices by the year 2002. This means that the industry will be profitable once again by the year 2003.

What is needed is a short-term plan to relieve the burden of debt and provide working capital to sustain the efforts of the industry until the export prices recover.

Finally, as regards the counter proposal, it is acknowledged that the two-pronged approach is desirable as the industry is naturally split into farmers and millers/marketers.

The assistance proposed for farmers is good and should be pursued as indicated in the original proposal.

However, the industry is an integrated one and it would do no good to boost production of paddy without maintaining the infrastructure to process and mill the paddy into an exportable commodity. The rice industry in Guyana exports almost 70% of its production and the maintenance of export markets depends on the assurance of quality.

The millers are the ones who contribute to this by selling low quality on the local market and exporting the higher quality.

If they are cut out of the loop and we loose the markets it would be very difficult to regain them.

The end result would be a surplus of paddy which would lead to spoilage and a drop in prices making it unprofitable for farmers to plant rice.

This would mean that all the money spent on infrastructure, D&I etc., would be wasted and the loss of jobs increase in poverty etc., would eventually affect us all.

For the world rice deserves special attention and so it should get special attention from us as well.