Dear Editor,
Worldwide there is deep concern over rising food prices. Caricom is no exception. This concern is linked to fears of rising commodity prices generally and that of oil in particular. The Caricom Summit scheduled for Guyana today is testament to this concern being shared by all Heads of Government.
How much of this, however, is legitimate or simply grandstanding by the political heads? While as a recent phenomenon the rise in food prices is portrayed negatively because it adversely affects urban and non-rural consumers in the region, the effect on poor farmers and other rural folk may well turn out to be positive. The likelihood of a shift in the terms of trade in favour of the rural poor is being uncritically presented as an unmitigated curse on all the peoples of Caricom and Heads of Governments are asked to mobilize against this. WPA asks: must it always be the case that the poor and the powerless lose out where national issues are concerned and the region is asked to take a stand on these?
Surprisingly, Guyana, which is aiming to become the “bread basket” of the region is hosting the Conference of Heads without any clear guidance given by the government to the people of Guyana and the region on this matter. From reports in the Stabroek News the government seems to have fallen in line with this so-called “Caricom position”.
Several common factors clearly operate to produce rising prices in the region. Among these are: firstly, depreciating exchange rates, as all Caricom countries tie their national currencies to the US dollar. The US dollar, as we are aware, has been depreciating steadily against other key currencies important to the region, like the UK pound, the Euro and the Canadian dollar. The reality is, however, that the reasons for this depreciation are unique to the US and not Caricom.
Secondly, rising oil prices have raised the prices of many food items because of the basic fact that oil-based energy provides the bulk of the energy requirements for producing, processing and distributing food.
Third, most if not all Caricom countries have underfunded and neglected their domestic food sectors by giving preference to others. The present regional under-supply of food reflects this neglect.
However, apart from such common factors each member country has its own domestic policy configuration that compounds the basic upward pressures on food prices. Here in Guyana, the key policy variable at issue is the recent VAT legislation. As the Minister of Finance has revealed, this tax has yielded a whopping $17 billion plus for the first six months of this year.
Everyone knows that by far the most retail expenditures take place at the year end holidays. If the tax is already running at about 19 percent above the projections for January to June, one can therefore imagine what it will do for the last half of the year, July-December.
The facts are incontrovertible and the WPA demands are clear: The tax is hugely regressive, burdening the small farmers, housewives, those on fixed incomes, children, pensioners and all those who are poor and powerless. We therefore demand that:
The VAT rate be reduced and the list of exemptions etc, increased. This demand is in keeping with the government’s solemn promise to the country that the tax would be budget neutral.
Finally, we wish to point out that if the VAT is applied to energy, transport and other such services that make up business costs it is bound to affect all prices. One has to be a real economic dunce not to be aware of this.
Yours faithfully,
Desmond Trotman
Centre Manager
Walter Rodney House
Working People’s Alliance
