Walk into most supermarkets in America and you can pick up 10lbs of chicken leg quarters for about $8.00 or 80 cents per lb. Those same ten lbs in Guyana will cost a consumer from $4000 to $4500 or about US$2.20 cents per lb. This is in a country with a minimum wage about 1/7th that of America’s. In the hinterland chicken sells for as high as $800 per lb.
The government has for decades protected the poultry industry with a tariff of 100% on imported chicken as well as following consultations with producers a restriction on the amount of chicken that could be imported through a licensing system. This was intended to encourage the growth of the sector and create jobs, but in the end it is the local consumer who has paid and continues to pay a higher price for what is a vital protein source. The tariff is the opposite of a subsidy as it results in higher prices to consumers. On the supply side because the industry is dominated by a handful of processors it also means that farmers must accept the conditions and prices that they rear and are paid for their chickens. Rampant smuggling from Suriname is just a symptom of a distorted market.
This is one example of several oligopolies that operate in Guyana. In the rice industry two millers control some 70% of the market meaning they can dictate the price for paddy, decide on grades and on terms of payment. Moreover because of geographical considerations, it often means there is only one miller for some farmers to take their paddy to. Guess who decides the price?
In the banking sector, six main banks enjoy high interest spreads between what they pay on deposits and what they charge for loans. World Bank Data shows it at 8.1% although in the past this has been as high as 12.5% (2011). This is reflected in the comfortable profits for the sector as was pointed out by Winston Brassington in a presentation last year in which he lamented that the “Banking sector returns are lopsided at the expense of the private sector borrowers. Too much of the nation’s savings are not being injected back into the economy and serving as a drag on growth.”
Banks also set their own fees in the absence of any regulation, have a reputation for poor and slow customer service and still use triplicate forms and carbon paper in the 21st century. One indication of the lack of competition in the sector is the government’s current quandary over what to do with the Bank of Nova Scotia which has been blocked for almost four years from selling its Guyana operations. Originally Republic Financial Holding Limited (RFHL) was the buyer but the government blocked the takeover on the grounds that with Republic Bank currently holding 35.4% of the banking systems assets and 36.8% of deposits, its acquisition would push its stake to 51% of both assets and deposits. And we do not need to remind of the fear the local private sector has towards their Trinidadian counterparts! The government is holding out for a major international bank to take it over but the minute market size and the costs and risks of regulating money laundering make that unlikely.
Then there is the notorious case involving the terminal operators that make up the Shipping Association of Guyana Muneshwers Limited, Demerara Shipping Limited, John Fernandes Limited, the Guyana National Industrial Company Inc. and the Guyana National Shipping Corporation. In 2019 the Competition and Consumer Affairs Commission (CCAC) ruled unanimously that SAG engaged in anti-competitive behaviour by agreeing to collude to fix rates for the haulage of containers from terminals operated by its membership, with the intention of disrupting the natural market flow to the advantage of the SAG. “Evidence presented showed that the terminal operators imposed handling fees for the private haulers that are not charged by the SAG members and which gave them “a price advantage visa vis the private hauler, to the extent of the handling fees.” The SAG members were ordered to pay $3.4M each. It was a landmark and progressive ruling that should put all on notice to desist from anti competitive practices.
Other oligopolies exist, for example in telecommunications with GTT, Digicel and newcomer E-Networks. At least this is a better situation than the GTT monopoly which saw small competitors, such as CTL and CelStar, driven out by prohibitively high interconnection costs. Guyanese consumers still pay high rates and generally receive poor and unreliable service as the Prime Minister lamented recently in a letter to the Public Utilities Commission. One impediment is the failure to agree to number portability (if you want to switch from one operator to another you can keep your existing number) which means customers are often forced to stick with their provider no matter how unhappy they are. That is anti competitive and it is high time the government insists on this facility. It must also insist the companies offer full coverage across the country and not just in the lucrative areas.
Finally there is also concern that the recently passed local content legislation which requires the oil sector to use up to 100% local suppliers for various products and services is creating the perfect conditions for anti competitive duopoly and oligopoly scenarios. Exactly how many local logistics, catering or pest control firms are there in Guyana? So while this legislation might deliver windfall profits to certain businesses it would directly mean higher costs to the offshore projects and therefore lower government revenues. Once again less money for the people and more for the business class.
The Competition and Fair Trading Act which was passed in 2006 is intended “to promote, maintain and encourage competition and to prohibit the prevention, restriction or distortion of competition and the abuse of dominant positions in trade; (and) to promote the welfare and interests of consumers.” Sadly in the current context of a government whose overwhelming priority is towards the private sector and to discredited trickle down economics these words sound particularly hollow. As for overpriced chicken, perhaps it is time the government finally takes the tariff training wheels off the industry and let it show how competitive it can be whilst giving the consumer cheaper chicken. The people can only eat slogans for so long…
