US Ambassador to Barbados, 2006: Owen Arthur’s sugar decision “defies logic and sours prudent budget”

“Instead of pouring more money into sugar, the Government of Barbados would be better served letting the industry die a peaceful death, as St. Kitts did in 2005.”

“This massive investment in the sugar industry defies logic and sours an otherwise prudent budget.”

“Sugar is so intrinsic to their national identity, however, that Barbadian taxpayers apparently support this fiscal profligacy.”

Mary Kramer, US Ambassador to Barbados, January 27, 2006

WikiLeaks just released a massive new treasure trove of US Embassy Bridgetown previously secret cables.

We’re looking at many of them in our article WikiLeaks: Massive release of Barbados US Embassy documents. You can help too by going to WikiLeaks Embassy Bridgetown page and digging in!

But we’re going to post this cable on its own because it makes for very interesting reading.

Considering our current economic situation, Barbados Labour Party supporters will jump right on this cable as vindication for Owen Arthur’s financial expertise. Aside from the sugar criticism, Ambassador Kramer gives a glowing report of Prime Minister Owen Arthur.

I don’t know about you, but I think that Ambassador Kramer was correct about our sugar industry: we might as well throw money into the sea than to keep flogging that dead horse.

Some quotes and then the full cable after the break…

What US Ambassador Kramer thought of Owen S. Arthur and his January 16, 2006 budget

“1. (SBU) Summary:  Barbados Prime Minister Owen Arthur presented his government’s 2006 economic and financial policies in a January 16 speech to parliament.  PM Arthur pledged to lower energy costs, cut taxes, boost pensions, and prop up manufacturing.  Most of the budget seems practical and will not greatly increase the country’s debt (around 88.0 percent of GDP).  The only major imprudent expenditure is a US$150 million investment into the island’s unprofitable sugar industry.  End Summary.”

With the parliamentary opposition in disarray (septel), a confident PM Arthur announced tax cuts, incentives to reduce energy costs, increased government investment in the sugar industry, loosened foreign exchange controls, and investment incentives.”

“4. (U) Barbados has prudently kept its government spending in check over the past few years, and Arthur said the fiscal deficit for the 2005-2006 fiscal year (ending in March 2006) will likely be just 1.7 percent of GDP, less than the target of 2.5 percent of GDP.”

“7. (SBU) According to a senior Bajan official, PM Arthur, an economist by training, cloisters himself away from his officefor several weeks to focus on the national budget, even refusing to meet high level visitors.  (Note:  General Craddock of SOUTHCOM visited during Arthur’s budget preparations and the Prime Minister declined to meet with the General.  End Note.)

8. (SBU) At the Embassy’s Martin Luther King Jr. reception, Dr. Marion Williams, Governor of the Central Bank, hinted to EconOff that she did not agree with many of the Prime Minister’s measures to liberalize foreign exchange controls.”

“Wasting Money on Sugar
———————-

9. (U) PM Arthur announced plans for a US$150 million facility including a 30 megawatt power plant and sugar cane processing facilities…

… Even at 523.7 Euros/ton, Barbados loses money on every ton of sugar it exports.  According to Erskine Griffith, the Barbados Minister of Agriculture, the Barbados yield ratio of 21 tons of sugar per acre of sugar cane is, “the lowest of any sugar producing nation.”  Griffith went on to say that producers in Brazil get up to 80 tons per acre…

…(Note: Guyanese sugar products are also imported in large quantities
to produce “Barbadian” rum.  End Note.)  Barbados cannot protect its local sugar market from CARICOM competition, given the free movement of goods provisions of the CARICOM Single Market and Economy.  The government apparently will depend on nationalism to induce people to pay twice as much for local sugar as imported sugar…

11. (SBU) This massive investment in the sugar industry defies logic and sours an otherwise prudent budget.  The cost of producing sugar on a small island with high labor costs and limited mechanization is astronomically higher than in Brazil or other major sugar producers.  Barbados is probably
one of the least efficient sugar producers in the world and cannot compete within CARICOM, much less on the world market.”

“Instead of exporting bulk sugar to the European Union at inflated prices, Barbados will be selling its sugar domestically at inflated prices.  Sugar is so intrinsic to their national identity, however, that Barbadian taxpayers apparently support this fiscal profligacy.

12. (SBU) The true purpose of the US$150 million investment is not to protect the environment or to reduce energy costs, but to give sugar a future.  If Barbados were serious about protecting the environment and reducing its energy import bill, then the country could more cheaply accomplish both these goals by importing sugar cane ethanol from Brazil.

No matter what use for sugar cane Barbados comes up with, almost every other sugar producing country can grow it cheaper, harvest it cheaper, and process it cheaper.  Instead of pouring more money into sugar, the Government of Barbados would be better served letting the industry die a peaceful death, as St. Kitts did in 2005.  End Comment.”

FULL CABLE

January 27, 2006: BARBADOS BUDGET – PM PLEDGES TAX CUTS AND ENERGY SAVINGS (link)

http://wikileaks.org/cable/2006/01/06BRIDGETOWN178.html

VZCZCXRO4689
PP RUEHGR
DE RUEHWN #0178/01 0271812
ZNR UUUUU ZZH
P 271812Z JAN 06
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 1750
INFO RUCNCOM/EC CARICOM COLLECTIVE PRIORITY
RUEHDG/AMEMBASSY SANTO DOMINGO PRIORITY 5786
RUEHCV/USDAO CARACAS VE PRIORITY
RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL PRIORITY
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
UNCLAS SECTION 01 OF 03 BRIDGETOWN 000178

SIPDIS

SENSITIVE
SIPDIS

SANTO DOMINGO FOR FCS
TREASURY FOR FRANSICSO PARODI
SOUTHCOM ALSO FOR POLAD

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EIND ECPS SENV ENRG PINR BB
SUBJECT: BARBADOS BUDGET – PM PLEDGES TAX CUTS AND ENERGY
SAVINGS

REF: 05 BRIDGETOWN 149

¶1. (SBU) Summary:  Barbados Prime Minister Owen Arthur
presented his government’s 2006 economic and financial
policies in a January 16 speech to parliament.  PM Arthur
pledged to lower energy costs, cut taxes, boost pensions, and
prop up manufacturing.  Most of the budget seems practical
and will not greatly increase the country’s debt (around 88.0
percent of GDP).  The only major imprudent expenditure is a
US$150 million investment into the island’s unprofitable
sugar industry.  End Summary.

¶2. (U) In front of the full parliament and a packed gallery
(EconOff and PolOff attended), Prime Minister Owen Arthur
delivered a two and a half hour speech outlining his
government’s economic and financial policies for 2006.  With
the parliamentary opposition in disarray (septel), a
confident PM Arthur announced tax cuts, incentives to reduce
energy costs, increased government investment in the sugar
industry, loosened foreign exchange controls, and investment
incentives.  He also promised to increase subsidies to dairy
farmers, improve education, better manage the risks of
natural disasters, and prepare the nation for Cricket World
Cup 2007.

————————-
2005 Economic Performance
————————-

¶3. (U) Arthur began his speech with good news on the
country’s 2005 economic performance.  Gross Domestic Product
(GDP) grew by 4.1 percent, compared to 4.8 percent in 2004.
Inflation was 4.0 percent, up from 1.7 percent in 2004, and
unemployment reached a record low of 8.5 percent.  The
country’s growth is remarkable because the economy expanded
despite a drop in tourism.  Cruise ship arrivals slid around
20.0 percent from 534,136 in 2004 to 425,933 in 2005 (January
– October figures), while long stay visitor numbers stayed
more or less constant.  Sugar, manufacturing, and
construction output rose 10.3 percent, 3.0 percent, and 17.6
percent, respectively.  Exports and domestic investment also
grew, while foreign exchange reserves slightly increased – in
contrast to the sharp drop in reserves in 2004.

——————-
Government Finances
——————-

¶4. (U) Barbados has prudently kept its government spending in
check over the past few years, and Arthur said the fiscal
deficit for the 2005-2006 fiscal year (ending in March 2006)
will likely be just 1.7 percent of GDP, less than the target
of 2.5 percent of GDP.  Total government spending is US$1.04
billion, or around 33.0 percent of GDP.

——–
Tax Cuts
——–

¶5. (U) Currently, Barbadians making less than US$10,000 per
year pay no income tax.  PM Arthur proposed raising this
threshold to US$11,250, meaning an additional 6,159 citizens
would pay no income tax.  This politically savvy measure will
probably only cost the government US$2-3 million, while
exempting an additional 2.0 percent of the population from
income taxes.  Arthur also proposed several other tax cuts,
including reduced income taxes for international
businesspeople and a reduction in property taxes.  The Prime
Minister introduced a temporary tax on non-CARICOM imports in
September 2005, and he plans to raise this tax from 3.0 to
6.0 percent to help curb imports and pay for the tax cuts.

————–
Energy Savings
————–

¶6. (SBU) As one of two Caribbean leaders (PM Patrick Manning
in Trinidad is the other) to publicly reject Venezuela’s
PetroCaribe concessionary oil financing offer, PM Arthur
faces pressure to reduce his country’s nearly US$200 million

BRIDGETOWN 00000178  002 OF 003

annual fuel import bill.  His solution is a slew of tax
incentives on everything from diesel cars to fluorescent
bulbs to home energy audits.  In addition, the government
plans to increase domestic oil production by 50.0 percent (up
from 1,000 to 1,500 barrels per day) and use more natural
gas.  Arthur announced that the electric company, Barbados
Light and Power, will construct a wind farm capable of
producing 26 million kilowatt hours (KWh) of electricity
annually, and a sugar cane-powered 30 megawatt plant (see
paragraph 8).

——————–
BioNote – PM Arthur
——————–

¶7. (SBU) According to a senior Bajan official, PM Arthur, an
economist by training, cloisters himself away from his office
for several weeks to focus on the national budget, even
refusing to meet high level visitors.  (Note:  General
Craddock of SOUTHCOM visited during Arthur’s budget
preparations and the Prime Minister declined to meet with the
General.  End Note.)

¶8. (SBU) At the Embassy’s Martin Luther King Jr. reception,
Dr. Marion Williams, Governor of the Central Bank, hinted to
EconOff that she did not agree with many of the Prime
Minister’s measures to liberalize foreign exchange controls.
(Comment:  Unlike the Federal Reserve in the United States,
the Central Bank of Barbados is not independent from
political control.  If this private difference of opinion
results in public sparring, the opposition could use the
well-respected Central Bank Governor’s words to cast doubt on
the sagacity of the Prime Minister’s economic policies.  End
Comment.)

———————-
Wasting Money on Sugar
———————-

¶9. (U) PM Arthur announced plans for a US$150 million
facility including a 30 megawatt power plant and sugar cane
processing facilities to annually produce 12,000 tons of
refined sugar for the domestic market, 10,000 tons of
specialty sugar for the export market, 5,000 tons of
specialty sugar for the local market, and 14 million liters
of ethanol for the domestic market.  The Prime Minister has
presented the facility, scheduled for completion in 2008, as
the salvation of the local sugar industry, now that the
European Union is dropping its subsidized sugar price by 36.0
percent over the next two years, from 523.7 Euros/ton to 335
Euros/ton.  Even at 523.7 Euros/ton, Barbados loses money on
every ton of sugar it exports.  According to Erskine
Griffith, the Barbados Minister of Agriculture, the Barbados
yield ratio of 21 tons of sugar per acre of sugar cane is,
“the lowest of any sugar producing nation.”  Griffith went on
to say that producers in Brazil get up to 80 tons per acre.

¶10. (U) The sugar for the local market is to be called
“Muscovado Gold” and will retail for US$1.46 per kg, compared
to US$.77 for imported sugar (usually from Guyana).  (Note:
Guyanese sugar products are also imported in large quantities
to produce “Barbadian” rum.  End Note.)  Barbados cannot
protect its local sugar market from CARICOM competition,
given the free movement of goods provisions of the CARICOM
Single Market and Economy.  The government apparently will
depend on nationalism to induce people to pay twice as much
for local sugar as imported sugar.

——-
Comment
——-

¶11. (SBU) This massive investment in the sugar industry
defies logic and sours an otherwise prudent budget.  The cost
of producing sugar on a small island with high labor costs
and limited mechanization is astronomically higher than in
Brazil or other major sugar producers.  Barbados is probably
one of the least efficient sugar producers in the world and
cannot compete within CARICOM, much less on the world market.

BRIDGETOWN 00000178  003 OF 003

Instead of exporting bulk sugar to the European Union at
inflated prices, Barbados will be selling its sugar
domestically at inflated prices.  Sugar is so intrinsic to
their national identity, however, that Barbadian taxpayers
apparently support this fiscal profligacy.

¶12. (SBU) The true purpose of the US$150 million investment
is not to protect the environment or to reduce energy costs,
but to give sugar a future.  If Barbados were serious about
protecting the environment and reducing its energy import
bill, then the country could more cheaply accomplish both
these goals by importing sugar cane ethanol from Brazil.  No
matter what use for sugar cane Barbados comes up with, almost
every other sugar producing country can grow it cheaper,
harvest it cheaper, and process it cheaper.  Instead of
pouring more money into sugar, the Government of Barbados
would be better served letting the industry die a peaceful
death, as St. Kitts did in 2005.  End Comment.
KRAMER

6 Comments

Filed under Barbados, Politics, Sugar

6 responses to “US Ambassador to Barbados, 2006: Owen Arthur’s sugar decision “defies logic and sours prudent budget”

  1. 167

    I agree 100 % with what was expressed. I just cannot understand why we need to keep subsidizing sugar. The cost to society is too high. Better to give the money to other aspects of agriculture that have a chance of success.

  2. My thing is if we must have local sugar, export none of it – let it stay home?

  3. Pingback: You can’t make a meal out of Barbados sugar. What fools we are. | Barbados Free Press

  4. Pingback: You can’t make a meal out of Barbados sugar. What fools we are. | Barbados Free Press

  5. Owen Bitter Because Sinckler’s Success Can Determine Arthur’s Political Future

    Based on the advice from Prime Minister Stuart, it is better to explain a man than to waste time criticising him. Politics in Barbados has become predictable. You can expect Owen Arthur to give the impression that only he can run the Barbados economy. You can expect him to repeat himself over and over, even as he alleges that the economy is worsening. He can be expected to criticise Finance Minister Christopher Sinckler, who is merely trying to fix some of the very problems, which were manufactured during Owen Arthur’s tenure. And, you can expect Owen Arthur to spend every passing day trying to give the impression that Minister Sinckler does not know what he is doing.

    This is understandable, even though a colossal waste of effort and energy but Arthur knows that if Sinckler gets it right, as Minister of Finance, especially coming out of what many regard as the second worst global economic crisis in history – then Owen Arthur’s allege grip loosens and he immediately becomes even more irrelevant to a rapidly changing Barbados. The reason is simple: Arthur’s campaign to become Prime Minister more times than Errol Barrow – is that he alone can manage Barbados and its economy. In essence, the success of Christopher Sinckler can determine Owen Arthur’s political future. Talk about making yourself vulnerable! That is a very serious predicament but nevertheless, one which accurately describes Owen Arthur’s reality.

    Barbadians will never forget that during his budget reply on Tuesday, August 16th 2011 (exactly two months before the first anniversary of him and four others having snatched power from the former Leader of the Opposition) that Owen Arthur launched (what might have been intended as a missile) which failed to have the desire effect. In fact, it back-fired! But at least he is consistent because, about three years ago, Owen Arthur also called a Media Conference at the University of the West Indies (UWI) Cave Hill (on the very morning that Parliament was meeting) and launched an ugly attack on Barbados’ first female Leader of the Opposition and begged Barbadians to find her “unacceptable.”

    No one expects that worse could come. But when the health of the late Prime Minister began to deteriorate, a meeting was held at Prior Park; five signatures were attached to a letter, which was addressed to the Governor General and the former female Opposition Leader was charged by the five; tried and sentenced and then invited the next day to a trial. Since that day, while the five that remove her seem to be obsessed with gaining State power and blaming the DLP for the current recession – in a humble and dignified way – the ousted former Opposition Leader continues to do positive things all across Barbados, in the interest of the people.

    t is crystal clear that her motivation is not a desire for power but a life dedicated to service and making the problems of the ordinary people, her problem. In January, perhaps when it was realised that things could get even tougher for the people of Barbados, the Hon. Mia Amor Mottley, Q.C., M.P., launched an “Adopt a Family,” initiative and encouraged those with the financial capacity to make a difference – to help at least one family cope during this challenging period.

    Busted on Camera

    But what could have caused Arthur to give the impression to the entire country that he was not at Cabinet the day/s when the issue of VECO and the Prison was discussed? In case you missed it, here is what Owen Arthur said in his reply: “And Sir you know I, I sometimes wish I was at Cabinet when that came, but I accept responsibility for it.”

    The impression was also given that Senator Darcy Boyce was the head of the Technical Committee. But, a check with page 3, paragraph 4 of the Ministerial Statement laid by the then Attorney General, Dale Marshall, in Parliament on October 16, 2007 – does not support this other “horrible allegation” that Darcy Boyce headed that Technical Committee.

    PM Stuart and Minister Sinckler defend the honour of the former BLP Cabinet

    It was only when Prime Minister Stuart gave the actual dates and also, during his wrap-up, when Finance Minister Sinckler gave the dates when the matter was discussed by the Cabinet (which showed beyond doubt that contrary to what Owen Arthur had told the House, he had in fact, Chaired those meetings) that he (Owen Arthur) contradicted what he had told the House on Tuesday. Barbadians again saw the worse of a leader who has fallen from grace and were reminded why he was dumped by them in 2008.

    Even more damaging, is page 4, paragraph 2 of the same Ministerial Statement laid by the then Attorney General, Dale Marshall, in Parliament on October 16, 2007, which reads: “The Cabinet at its meeting of May 26, 2005 accepted the recommendation of the Technical Committee and agreed that negotiations with VECO USA Inc. should commence in order to conclude an agreement for the construction and financing of the new prisons at Dodd, St. Philip under a Public-Private Partnership agreement.”

    No one has so far called on Owen Arthur to resign and perhaps, given the event of October 18th 2010 and the terms of the “Prior Park Accord,” no one will. Owen Arthur once said that a leader should be feared. But it gets even most horrible! He is now telling the country that he alone prepared past budgets and that members of his Cabinet only saw them or even heard what they contained, when he was presenting them in the House. Barbados is a democracy, and the pattern of behaviour Arthur described is clearly not ‘good governance.’

    Owen Arthur alleges that Barbadians are suffering badly but does not seem to have any ideas how to help them, ‘at this defining moment.’ Becoming Prime Minister of Barbados, again and for a period longer than Errol Barrow seems to be his priority and motivation. He does not seem to realise that his lack of effort to do things to help, even people in his Constituency, “now” – when it matters most – is crystal clear confirmation that he is totally irrelevant to the needs and immediate circumstance of even the people of St. Peter!

  6. BFP

    Reblogged this on Barbados Free Press and commented:

    With the recent revelation that the Government-owned Barbados Agricultural Management Company left 1000 acres of cane to rot in the fields – and that our country’s total 2015 sugar harvest might not reach even 10,000 tonnes, BFP re-blogs this post.

    It’s time to leave sugar behind folks. It is a deep, dark hole that sucks money and energy from this nation. None of our children will cut cane or pick cotton, and the cost of Barbados sugar production is the highest in the world.

    It’s over folks. It’s over.