Cocoa Board strangling industry - US Embassy cable

 

Officials of the United States Embassy were very disappointed in the operations of Jamaica's Cocoa Industry Board and blamed it for the demise of the sector.

The embassy also issued a dire warning to the Jamaican Government that it would not encourage any American investment in the potentially valuable sector until it was privatised and the control of the board eliminated.

Following an August 2008 USAID-funded workshop with Ministry of Agriculture officials and farmers, the embassy fired off a scathing diplomatic cable in which it warned that the board was killing the goose that could lay the golden egg.

"The assessment found that Jamaica's cocoa beans are some of the finest in the world and are in high demand as a flavour in premium cocoa products," the cable noted.

"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," said the cable.

The embassy noted that Jamaica's output of cocoa beans plunged from a peak of 2,500 metric tons in 1993 to 800 metric tons in 2007.

It further noted that with almost 15,000 farmers involved in the industry, output per person was negligible.

The cable charged that at the then production level, Jamaica was producing far below its capacity and missing opportunities in the international market for its high-quality beans which the embassy said "were of premium quality status similar to that of the world-famous Blue Mountain coffee".

In the cable, embassy officials charged that 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".

The cable charged: "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."

According to the cable: "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."

The cable stated that Agriculture Minister Dr Christopher Tufton did indicate that he was willing to do whatever was needed to turn the sector around.

"Hopefully, this will include doing away with the board - a precondition for any future USG, and probably private sector, investment," the cable stated.

All was not well

This week, Tufton told The Gleaner that he agreed that all was not well at the time the cable was sent in 2008.

But Tufton said many changes have been implemented since the cable was dispatched, including a restructuring of the board's control over the sector.

According to Tufton, 2008 would have been at the early stages of the discussion and since that time, the industry has benefited from a European Union grant, which has helped in a pruning and replanting programme to expand the industry.

"A number of things have been done over the past two years to address structurally the issue of commodity boards in general and the Cocoa Board in particular. Among them, the board's control over the marketing of the product, where a decision was taken to allow for producers to directly market," Tufton told The Gleaner.

He said the Bruce Golding-led Cabinet had concluded that commodity boards had lost their relevance and they were now under review.

Tufton said some commodity boards are to be phased out, while others will be scaled down to focus primarily on core functions of regulation, with the commercial aspects being divested to private-sector interests.

"It is fair to say that structurally, the sector, with the board having dominant control, has lost its relevance and does not sufficiently motivate the upgrading and the capacity expansion of the sector," he said.

"However it is a work in progress, you don't just dismantle something that existed for such a long time. These are legacy issues that we have inherited and it will take time for us to deal with it," added Tufton.

He accepts the US criticisms that the Cocoa Industry Board's control over critical functions of marketing and processing has stifled opportunities for growth, but there were other issues that undermined the industry.

He said the Government was looking to change the whole structure of the cocoa industry.

New vision for cocoa

Agriculture Minister Dr Christopher Tufton is determined to reorganise the cocoa industry to ensure that Jamaica reaps the full benefits.

"The vision of the future for the industry is that if the industry is to be sustainable, it is not just a matter of finding new markets to export the beans," Tufton told The Gleaner recently.

The policy of the Government is not just to grow more beans for exporting for others to create value in their country of origin and benefit from higher returns along the value chain," added Tufton.

He argued that the ministry is also looking at the secondary production of the high-quality cocoa beans grown in Jamaica.

"Right now, most of the beans go to Europe. If we shift that and send the beans to North America to Hershey's and Mars, as opposed to Valrhona, it will maintain a scenario where Jamaica is a producer of beans, which is the most vulnerable segment of the market in which to compete," Tufton said.