Search

 

Cablegate: Jamaican Cocoa Industry: Reform Needed, but Opportunity

VZCZCXRO4526
RR RUEHGR
DE RUEHKG #0772/01 2471809
ZNR UUUUU ZZH
R 031809Z SEP 08
FM AMEMBASSY KINGSTON
TO RUEHC/SECSTATE WASHDC 6728
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 KINGSTON 000772

SENSITIVE
SIPDIS

STATE FOR WHA/CAR (ACADIEUX)(VDEPIRRO)
WHA/EPSC (MROONEY)
SANTO DOMINGO FOR FCS AND FAS

E.O. 12958: N/A
TAGS: EAGR ECON SENV EINV AID ETRD JM XL
SUBJECT: JAMAICAN COCOA INDUSTRY: REFORM NEEDED, BUT OPPORTUNITY
EXISTS

SUMMARY
-------

1. (SBU) On August 20, 2008 USAID in association with the Ministry
of Agriculture held a workshop to present findings from a 2008
USAID-funded assessment of the Jamaican cocoa industry. The
assessment found that Jamaica's cocoa beans are some of the finest
in the world and are in high demand as a flavor in premium cocoa
products. Although there are significant economic opportunities to
be derived from cocoa production, Jamaica's cocoa industry continues
to languish under the stranglehold of its rent-seeking national
cocoa board, with production on a downward trajectory. Given the
underlying political imperatives, there appears to be reluctance to
change the board arrangement; appointments to these boards are often
extended as a reward for years of commitment to party politics.
However, for the industry to be resuscitated there is immediate need
for restructuring of the entire industry, to include devolution of
the pricing mechanism from the board. In closing comments, Minister
of Agriculture Christopher Tufton indicated he was willing to do
whatever is needed turn the sector around; hopefully this will
include doing away with the board -- a precondition for any future
USG, and probably private sector, investment. End summary.

USAID Assessment of Cocoa Industry
----------------------------------

2. (SBU) The USAID funded assessment indicates that even though
there are attractive international prices, local production
continues on a downward trajectory. Output of cocoa beans plunged
from a one-time peak of 2,500 metric tons in 1993 to 800 metric tons
in 2007. At this level, Jamaica is producing far below its capacity
and missing opportunities in the international market for its high
quality beans. It is also a little known fact that Jamaica's cocoa
beans have a premium quality status similar to that of world famous
Blue Mountain coffee. Jamaican cocoa is some of the finest in the
world and commands a high price for use in premium products. Like
coffee, the quality is attributed to sound genetic selection, ideal
climatic conditions, and meticulous fermentation, drying, and
polishing. With almost 15,000 farmers involved in the industry,
output per person is negligible, suggesting production has been
relegated to subsistence level. It is little surprise that current
yields are just about one quarter of the economically feasible level
of 400 kilograms per acre per year. The low yields are attributable
to: 1) very low prices; 2) recurrent hurricane damage; 3) farm
neglect; 4) pest and diseases; and, 5) generally poor agronomic
practices influenced by high input cost and inadequate extension
services.

Cocoa Board, A Major Bottleneck
-------------------------------

3. (SBU) Jamaica's cocoa industry fails to realize the economic
opportunities that exist in the export market because the sector
continues to languish under the stranglehold of its rent seeking
cocoa board. With the exception of primary production, the board, a
relic of Jamaica's 1970s failed socialist experiment, continues to
control every other aspect of the industry --- from collection and
transportation to processing and international marketing. This
heavy involvement in the non-regulatory aspects of the industry is
largely driven by the board's desire to control the pricing
mechanism and by extension extract economic rent. This control is
even more paramount in the current environment, given that
international prices, on which Jamaica fetches a premium, are at an
all time high. But this windfall has not trickled down to the
farmers who shoulder the weight of production. In fact, farmers
complained during the workshop that they felt "shafted" by the
board, which now allocates only 40 percent of the total revenues to
them. Remarkably, this is actually a dramatic increase of 50
percent on the previous pay out.

4. (SBU) One farmer told emboffs that his return on his last cocoa
crop was a mere USD 40. At such modest profit levels, it is
virtually impossible for coca fields to be resuscitated and
production levels to increase. The price signal to farmers acts as
a disincentive to new investment, further suppressing production and
productivity levels. There are also indications that the board
falls short on managerial and technical competencies as evidenced by
comments made by senior board representatives during the workshop.
The board spent a significant amount of time trying to defend their
role and value to the industry even in the face of strong evidence
to the contrary. In particular, with the exception of the board, it
was generally accepted that there was a clear conflict between the
regulatory and commercial aspects of board functions, a potential
avenue for corruption.

Ministry of Agriculture Unwilling to Curb the Board
--------------------------------------------- -------

5. (SBU) Although the Ministry of Agriculture (MOA) is a partner in
the assessment, the top echelon of the ministry was visibly absent
for the technical discussions and the technocrats in attendance
remained silent on the continuing value of the cocoa board. MOA
officials voiced criticism of the board to emboffs and USAID staff,
but are reticent to make their concerns public. The reluctance of
the MOA to address the issues of the cocoa board is understandable,
given the underlying political imperatives, with appointments to
these boards often serving as a reward for years of commitment to
party politics. And this scenario is not unique to the cocoa
industry, but is consistent with all commodity boards, including
citrus, banana, coffee and sugar. This systemic approach to
commodity board appointments is a means of institutionalizing
patronage and firming up political support.

Farmers Lose in the End
-----------------------

6. (SBU) While political actors extract rewards from the industry,
the cocoa farmers remain on the economic fringe and future
investment in the sector is hindered. The declining benefits to
primary producers also have precipitated an exodus of farmers from
the industry. The few that remain must supplement their income with
other economic activities. When asked about the payout required to
achieve financial viability, farmers told emboffs that 60 percent of
current market price would be a good starting point. And while this
might appear to be a major premium on the existing price, it is
still well below the 80 percent paid to Caribbean neighbors and
recommended in the cocoa assessment. A common concern expressed by
farmers was the desire to end the cocoa board's stranglehold on
marketing and processing and act solely as a regulator. Farmers
told emboffs that this move not only would strengthen cash flows,
but also would lead to an influx of new investors along the value
chain.

Good Regional Alternatives Exist
--------------------------------

7. (SBU) The recommendation to revise the role of the board appears
to be in sync with the picture painted by a leading Caribbean
industry expert Ken Mortin Whiteman of JHB International Trade and
Finance, who attended the work shop. He explained that across the
Caribbean and Latin America the cocoa industry largely has been
deregulated, with the board assuming a purely regulatory function.
He dismissed the position of the Jamaican board, when they argued
that farmers had to produce at least 300 metric tons for direct
export to be viable. In fact, there are farmers in Trinidad and
Tobago who produce and export as little as 30 metric tons allowing
them to realize the entire gains from the export trade. However, he
did agree that independent quality control was pivotal to the
integrity of the industry and in particular to export trade.

Comment
-------

8. (SBU) Although challenges loom, they are largely board- created,
and the potential economic benefits to be gained from a de-regulated
cocoa industry are significant. International cocoa prices are
projected to remain high, and Jamaica already benefits from positive
branding for premium coffee that could be used to market premium
cocoa. It is an imperative that the GOJ moves swiftly to create an
enabling structure, shifting the balance of power from the board to
producers. But this is easier said than done, and any move in this
direction will require a willingness to challenge those with
political strength on the board. Given the GOJ's history of
appeasement, it is not likely that any radical departure from the
existing structure will take place, although Minister Tufton has
indicated he is willing to take the issue head-on. Embassy/USAID
agree that privatization of the sector by eliminating the control of
the board is a precondition to USG, and probably, private sector
investment. At best, the GOJ might agree to decrease the board's
influence on the pricing mechanism, but this may not be enough to
reinvigorate the sector and attract new investment. End Comment.
HEG

© Scoop Media

 
 
 
 
 
World Headlines

 

Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>

ALSO:

Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>

ALSO:

Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>

ALSO:

 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC