Cassava plans needed devaluation
Finance Minister Dr Peter Phillips said the failure of the previous government to make the Jamaican dollar more competitive through negatively impacted the possibility of earning more from non-traditional crops such as cassava.
The parliamentary opposition has been hammering the Government over its policy to allow the dollar to devalue, but Phillips said this has resulted in local companies such as Red Stripe logging on to the potential to use local inputs rather than relying on imports.
Jeered by members of the opposition that he was not supportive of former Agriculture Minister Dr Christopher Tufton cassava expansion doctrine, Phillips said the effort was not successful because the critical policy support of having a competitive exchange rate was not in place.
"Where he didn't get the support is in the adjustments you should have made to make it more competitive at the time, and that is why possibilities are coming into view now of cassava in beer, cassava in animal feeds, cassava flour replacing imported wheat," Phillips said.
Local brewing company Red Stripe has said that it will invest US$10 million over the next five years to set up a cassava supply chain, as it moves to use the tuber to offset barley imports utilised in beer production. The company plans to put 2,500 acres of cassava under production to meet its own demand.
Richard Byles, chairman of Red Stripe, said the imported raw material is 24 per cent more expensive than two years ago because of the devaluation and that the locally produced cassava has an advantage because the price has not moved 24 per cent.
"It was a happy coincidence that we discovered it at the time that the exchange rate was making local agriculture more competitive," Byles said as he explained how Red Stripe came to its decision to use cassava in its beers.
He said it had come to the attention of Red Stripe that the method was being done, quite successfully, in some parts of Africa.
Phillips said that given the structure of the economy, the devaluation should not be frowned on.
a major development
"It is a major thing because your balance-of-payments deficit over many years, which we have borrowed to compensate for, is driven in large measure because we have incentivised production in North America or elsewhere, rather than creating the conditions where our own farmers can get the production," Phillips said.
Audley Shaw, opposition spokesman on finance, noted that devaluation is projected to result in a $162-billion increase in the debt stock. He said the Government needs to rethink the policy.
"The fiscal policy paper reported that as a result of devaluation, we had to pay out an extra $108 billion and the fiscal policy paper is now reporting that as a result of devaluation, the debt has increased by another $54 billion this year," Shaw said.
"On the other side, we are told that devaluation is supposed to make us competitive and so, let us produce and export and earn foreign exchange. But when we look on the trade account on the other side, what we find is that we are not exporting anymore. Yes, we are importing less ... but if you look at what we are importing less of, it is not just consumer goods. We are also importing less capital goods and we are importing less raw material," he added.
But Phillips said that the issue of exchange-rate competitiveness is not simply to correct a cyclical downturn in the Jamaican economy.
"We have, over the years, imported the bulk of our food stuff. We are seeing, for the first time, a pattern of import substitution and our farmers have answered the call," the minister said.