Empty PetroCaribe fund forces $23B allocation to rice farmers

– Former Govt. misused GEA to make payments

Government has allocated $23B to pay rice farmers as the PetroCaribe is empty, Finance Minister Winston Jordan says.

The previous administration appeared to have been in a bad way with its management of the PetroCaribe Fund. With little monies in the account, it reportedly ordered the Guyana Energy Authority (GEA), a state agency tasked with monitoring the oil trade, to make payments to rice farmers. This disclosure was made by Finance Minister Winston Jordan yesterday during his presentation of 2015 National Budget. The management of the lucrative rice-for-oil deal with neighbouring Venezuela has been under fire by the new administration which said it found little in the bank accounts when it took office in May. The fund was established almost a decade ago when Venezuela introduced an oil sale arrangement where Guyana and a number of CARICOM and Latin America countries take oil at concessionary rates, paying a percentage in advance and the balance over a 20-year period. The PetroCaribe Fund was supposed to hold millions in US dollars. According to Jordan yesterday, the “hardworking” rice farmers, who have toiled to return record production for the past three years, were confronted with uncertainty as to payment for rice shipped to Venezuela under the PetroCaribe barter arrangement. “Unknowing to them, the PPP/C Government had mismanaged the PetroCaribe Fund, with only a small balance of US$0.8M in the fund at the end of May 2015, whereas outstanding payments to farmers was in excess of US$17M. Worse yet, and this is only now being disclosed to the public, the Guyana Energy Agency (GEA), under pressure from the PPP/C administration, was forced to offset the cash amounts due to PDVSA (PetrÓleos de Venezuela) against future shipments, in order to ensure that current payments to rice farmers were made at the due dates.” The new Government was forced to step in and give over $5B to the Guyana Rice Development Board (GRDB) so that farmers could be paid. A forensic audit has been launched into the PetroCaribe Fund and a new Board of Directors named. Jordan said that unlike sugar, rice has been an amazing success story. The industry has recorded consistently higher levels of output, breaking the 400,000-tonne mark, in 2011, and the 500,000-tonne bar, in 2013. This year, some $23B has been allocated in the budget to support further payments to over 7,000 rice farmers. “This is in the context of the current inability of the PetroCaribe Fund to meet these payments.” He urged that all stops be pulled out to find new markets, to reduce the dependence on Venezuela. “Even without the fore-knowledge of the ending of the contractual arrangements with Venezuela, in mid-November, 2015 it is imperative that the rice market be sufficiently diversified so as to reduce the dependence and vulnerability implied in the concentration of a large share of our rice exports to one market. We are actively searching for new markets for our rice.” The minister pointed to “productive discussions” during a recent national conference held with rice farmers and millers, and by the proactive response of those who have already begun to source additional markets. “We will encourage research to develop new rice varieties and support the use of improved technology within the sector. We will provide incentives to producers who add value to rice, for a diversified industry will adequately accommodate the increased production anticipated from higher yields.” Last year, rice output attained 635,238 tonnes, an increase of 18.6 percent over 2013. However, he warned, as buoyant as this new record-breaking output appeared, the warning bells were being rung of the industry’s inability to align output with domestic and external demand, resulting in the buildup of significant paddy stocks in the system. This situation was compounded by unresolved issues such as outstanding payments to rice farmers. In 2014, rice exports earned US$249.5M, a four percent increase. This was due to a 26.9 percent increase in export volume, to 501,209 tonnes. He recognized that the biggest problem for the industry remains the lack of diversification in its export and product markets. “This vulnerability has become an increasing liability to the sector, given recent developments in the Venezuelan market, which accounts for 30 percent of total production and approximately 38 percent, by volume, of rice exported.” With respect to rice, the previous administration had targeted a 1.6 percent decline in production relative to the 635,238 tonnes achieved last year. “Indeed, the half-year outturn revealed production to be in line with this rationale, since the output of 300,569 tonnes was 3.8 percent less than the first half of 2014. Based on the latest reports, however, a record second crop is anticipated, resulting in a revised production target of 703,462 tonnes of rice in 2015, an increase of 10.7 percent,” the minister disclosed. With the recently revealed information that the Venezuelan market would not be extended beyond November, and the more recent disclosure that Venezuela has halted, until further notice, further rice shipments from Guyana, resulting in over 200 containers of rice being stranded at a local port, this record rice output comes as bittersweet, he said.