Merger:  The Route to Liberalization

1. Merger of the Nutmeg and Cocoa Associations:
2. Nutmeg and Cocoa Industry Bill, 2020:  Over the last two weeks, stories pertaining to the Nutmeg and Cocoa Industry Bill, a government bill to  MERGE  the Grenada Co-operative Nutmeg Association and the Grenada Cocoa Association, have featured prominently in the media. 
3. Distraction:   Discussion on merger is merely a DISTRACTION  from the examination of the   real intent of the proposed bill – LIBERALISATION of the cocoa and nutmeg sectors.   
4. Liberalization:  Both the Government’s representatives and  the farmers’  representatives seem to be AVOIDING the L-word, preferring instead the merger word.
5. Dismantle Monopoly Rights:  Currently the Associations have the legal right to be the sole purchaser and exporter of nutmegs, mace and  cocoa respectively.  The focus of liberalization is to dismantle the monopoly buyer and exporter position of both associations.  Merger is the route to liberalization.  The Rt. Hon. Prime Minister confirmed this in his national address of June 28, 2020.

• National Address, Rt. Hon. Prime Minister, June 28, 2020:

The following are extracts from the most recent national address by the Rt. Hon. Prime Minister on June 28, 2020.

• Opportunity to  Liberalize the Market:  “It is said that in every crisis there are opportunities; this pandemic has provided a crucial opportunity to modernise the operation of our commodity boards, to strengthen the institutional capacity and viability of the governance  structure, LIBERALISE the market and improve the global competitiveness of our traditional crops. A  successful merger will accomplish this and most importantly, will allow farmers to be at the forefront, another longstanding recommendation that Government will seek to implement.”
• Merger of the Associations/Liberalisation of the Sector:  “We expect the merger of the associations and liberalisation of the sector to lead to better prices  for cocoa and nutmeg farmers while also allowing them a chance of real ownership and shareholding in the commodity board. “
• Empowering the Cocoa and Nutmegs Farmers:  “As it is now, farmers do not own shares in the Grenada  Cocoa Association or the Grenada Cooperative Nutmeg Association. Government has no intention to take over the affairs of the associations but rather, we seek to empower the country’s  cocoa and nutmeg farmers and to improve their financial returns.”

• Liberalisation and the Structural Adjustment Programme 2014-2017::

In 2014, when the Government of Grenada was forced to turn to IMF and impose a structural adjustment programme   to address the PUBLIC DEBT  situation, it  agreed as follows with the IMF[1]–  “The Government will support the liberalization of the nutmeg and cocoa sectors, so as to encourage increased efficiency, and boost farmers’ incomes.”   It also agreed to liberalize the electricity sector.

• Support from Compete Caribbean :
• In a  Beyond the Headlines Programme on June 29^th, the Hon. Minister of Agriculture advised that merger has been on the table a long time and that it was a recommendation of  Compete  Caribbean. 
• Modernization of the Nutmeg and Cocoa Sectors:  The first IMF Review[2] re the implementation of the Structural Adjustment Porgramme made reference  to the support of the Compete Caribbean project through which the Government was  “also working to modernize the key nutmeg and cocoa sectors, with a view to enhancing their investment environment, competitiveness and productivity.    The focus would be on “reforming the 1947 legal and administrative framework governing the sectors, strengthening their governance and institutional capacity, and introducing export quality standards for the sectors.”

• Terms of Reference Compete Caribbean Consultancies:

The consultancies conducted by Compete Caribbean seem to have been conducted between 2014 and 2017.  The following information from the background provided by the Terms of  Reference re the consultancies is instructive:-

• Bottom Up:  Any improvements in Association governance must come from the “bottom up”  rather than be imposed by the Board of Directors or management – especially since prior attempts to   improve governance without the members’ (i.e. farmers) knowledge or consent have been firmly resisted.

• :  The objective in establishing the GCNA was “to eliminate price competition between exporters, to stabilize prices and to enhance export quality. In recent times, this Ordinance, that created the association’s monopoly export rights, had been a point of contention and had been unsuccessfully challenged three times.”

• Recommendations of Compete Caribbean Presented to Special Meeting of Committee of Social Partners:
• Invitation to Special Meeting:  An  invitation to a special, expanded  meeting of the Committee of Social Partners on January 5th, 2017,  chaired by the Rt. Hon. Prime Minister, advised as follows:-  “the meeting has been called to discuss the recommendations made by Compete Caribbean  (consultants) with respect to the Commodity Boards (GCNA and GCA) with the view of making a firm decision on the way forward.” 
• Absence of Representation Farmers and Commodity Associations:  Concern was expressed about the absence of farmers’ representatives or representatives of the three spice associations – Grenada Co-operative Nutmeg Assn, Grenada Cocoa Assn. or the Minor Spices Co-operative.    The Permanent Secretary advised that the meetings with the Spice Associations and farmers would take place AFTER this meeting with the Committee of Social Partners.

• Recommendations:  Strengthening Export Competitiveness in the Grenada Agriculture Sector

The then Permanent Secretary in the Ministry of Agriculture presented recommendations made by Compete Caribbean.  She advised:-

• Objective of Recommendations:  The specific objective  of   the recommendations  was to strengthen the legal and administrative framework for agriculture in Grenada and to increase investment into the sector, specifically in the nutmeg and cocoa sub-sectors.
• Accepted by the Government:  The government had reviewed the recommendations and those being presented were the recommendations it intended to accept.    These recommendations were in respect of:-  Review of the Investment Incentives for Agriculture; the Governance and Business Models for the Boards; Review of Legislation governing the Commodity Associations

Among recommendations presented by the Permanent Secretary were:-

• Adoption of the investment incentive model recently introduced in Jamaica[3].
• Legislative Framework to Support the Recommended Model: a revised Incentive Framework for Grenada.The framework should consider Act 2013 Income Tax Relief (Large Scale Projects and Pioneer Industries) Jamaica – this Act stipulates and defines qualifying incentives based on monetary value and specifically provide for capital allowances as one of the incentives to be granted
• Introduction of Free Zone Legislation – to promote and facilitate export development and foreign investment projects.
  • Enact a Special Development Area Act – to encourage investments in designated/targeted areas throughout the island.
  • Amendments to the GCNA Ordinance:  Among the amendments proposed and accepted  were:- provisions for GCNA to participate in joint ventures; issuance of different classes of shares to members and non-members;  to oblige the GCNA to grant permits to persons/entities wishing to purchase /export; distribution of assets  and setting up of a regulatory board to deal with quality re export.

• Observation:
• Mergers:  The were NO recommendations pertaining to mergers.  A review of the excerpts of the report that was circulated did not any identify any recommendations pertaining to a merger.
• Free Trade Zone and Processing Act:  It is unclear whether or not there is any connection but it is useful to note that Act 25 of 2015, A Free Trade Zone and Processing Act  was passed in October 2015 – an act to facilitate the establishment of a free trade  and free zone area operated by Urbaniza Incorpoiacoes Participacoes Ltda.  Activities in the Free Zone includes exports and export processing
• West India Spices Export Development[4]:   In the Budget Estimates of 2017, there  was an allocation of loan $421,615 for export  development re West India Spices (project no. 0109514),  It is useful to note that West India Spices is/was also an approved agricultural project under the Citizenship by Investment Programme and that in 2016  there was expenditure $267,000 under the allocation of the Director of Economic and Technical Corporation.
• Revised Incentive Framework[5] was already in place by time of presentation. 
• Enhancing Competitiveness and the Investment Environment:
  • Equity in/Establishment of Value Added Enterprises:    Worthy of note and concern is a suggestion/recommendation contained in the Compete Caribbean consultancy[6] report that seemed to discourage the GCA and the GCNA from having equity in or establishing downstream value added enterprises.
  • Benefits to Farmers:  A key question to be answered is how do the farmers, the pillar of the nutmeg and cocoa sectors have a stake in and benefit from value added along the nutmeg value chain.    What is the best mechanism and structure that will assure this?  Did the proposed amendments respond to this challenge? 
  • Telecoms and Liberalizaton:  The current state of Grenada’s telecommunications sector is an example of Grenada’s experience of “enhancing competitiveness and investment environment” – mergers between global companies, increased prices to consumers, loss of decent jobs and less choice in terms of service providers and the service/product offered.”

• IMF Sixth Report, May 2017, Liberalizing Slightly the Monopoly of the GCNA and the GCA:

Grenada’s Structural Adjustment Programme concluded in mid-2017.  The report of the IMF sixth, end of programme review[7]  noted as follows:

“………… The authorities are taking steps to boost private sector participation and capacity in agriculture, including commercializing remaining estates,………, and passing amendments to liberalize slightly the monopoly marketing boards for nutmeg and cocoa. Staff encourages the government to continue in that direction……… that deeper reforms are needed to promote investment and employment in this sector.”

• Observation:

What does Liberalizing Slightly the Monopoly of the GCNA and the GCA  mean?

• Embassy of Grenada to the Russian Federation, My Caribbean, GCNA and Chimera:

Sometime in late 2017, we the people became aware of an entity called My Caribbean, a trading house –  established in 2017 under the supervision of the Embassy of Grenada to the Russian Federation with offices in Grenada and Russia – to promote bilateral trade among the Caribbean, Russian and Eurasian markets.  It traded principally in food products from the Caribbean.  Listed among its partners were:-

• Grenada Co-operative Nutmeg Association
• Chimera – a company trading principally in cocoa and nutmegs, registered in the Netherlands, whose Managing Director was/is Mr. Olinga Mitchell, the son of the Rt. Hon. Prime Minister.
• Star Capital:  a private investment and advisory firm; Grenada’s Ambassador to the Russian Federation , H.E. Oleg Firer is the Managing Partner and Chairman.

• Observation:
• Promoting Trade:  Promoting trade is among the functions of  an embassy promoting and securing the national interests of a country.   From the period of the People’s Revolution Government, we the know that the people of  the then Soviet Union were interested in being able to experience our spices.  That is good news for the country, especially for our farmers and their associations.
• Transparency:  Were nutmeg producers advised of this partnership between GCNA and Chimera in any of their annual general meetings? 
• Private Interests or Public Interests:  How are the public interests protected and promoted?  The arrangements pertaining to My Caribbean are rather opaque.  Is it about promoting the private interests of H.E. Oleg Firer’s Star Capital and Chimera?   
• Chimera Owing GCNA:  The fact that Chimera, in 2020, STILL OWES  the GCNA is bad news!!   In response to queries from various sources, a very high level representative of GCNA advised that Chimera is still owing the Assn.  $144,000.  It was unclear whether this sum was in USD or local currency but in either currency this is very significant amount to a cash-strapped commercial entity.

• 2018 Budget Debate:  Presentation by Minister of Agriculture
  • Management Amalgamation:

In her presentation during the debate on Budget 2018, the Minister for Agriculture, Hon. Yolande Bain-Horsford, noted the following:-

• Amalgamation of the GCNA-GCA Management:  GCNA-GCA management amalgamation had resulted in administrative savings of  $0.5 mill. 
  • Observation:  Some persons who were paying attention had noted that the GCNA appeared to be without a Manager for an extended period and were advised by persons who should be “in the know”  that the GCA Manager was “keeping an eye on things”.  Why was there this “mystery” about what should be a straight-forward explanation?  Were the farmers advised that this was a policy decision on the part of both Boards?   Were farmers requested to endorse this decision at any of their general meetings?  Was there a functional co-operation agreement?  Or was this a DIRECTIVE from an “authority” outside of the GCNA and GCA?
• Amendments to the Nutmeg Ordinance Legislation:  The Hon. Minister advised that Amendments to the Nutmeg Ordinance were to be presented during the first quarter of  2018.  Among other things, these amendments would provide for: –  
  • Liberalization of Sector:  Ways to LIBERALIZE the sector
  • Ownership:  Options to facilitate share ownership by farmers
  • Attracting Investors:  Attracting investors to the sector
  • Aging Farmers:  How to deal with the issue of aging farmers
• Observation:  At that time, the Hon. Minister did NOT make any explicit reference to  a proposed MERGER of both Associations. 

High level representatives of the Ministry of Agriculture – Hon. Minister of Agriculture and the Permanent Secretary in the Ministry – and the Hon. Minister of Trade were guests of   GBN’s Beyond the Headlines Programme of June 29^th.  It would appear that the intended objective of the programme was to hear from the government’s representatives about the intent of the Nutmeg and Cocoa Industry Bill2020 and government’s plans re the commodity associations.   

•   Instead, the representatives declared ignorance They admitted that a bill was being drafted.  However, this bill had not yet been brought before Cabinet and they were not aware of its contents.  The Bill was work in progress and liable to have significant changes.
•   For a bill to be drafted, directions have to be given to the drafters.  What is the intent of the bill?  What objective(s) is/are to be achieved?   Is it that the representatives who belong to the “House that makes laws” do not understand  the process of law-making?
•   The belligerence of the three guests was evident. It seemed as if they were waging war!!  And the butt of that belligerence was the GCNA and the GCA. They, particularly the Hon. Minister of Trade, made many disparaging remarks about the GCNA and the GCA including accusations of bad management.    Wisdom of the elders counsels us “those who live in glass house should not throw stones”!!  On the subject of bad management, where would the esteemed guests wish to begin?  But this subject requires treatment under separate cover.
•  All three guests studiously avoided reference to the L-word, liberalization.

•   Since the Beyond the Headlines programme, another version of the Bill has emerged and the Ministry of Agriculture has gone on the offensive, holding meetings with farmers, presenting the case for merger.  There has been an absence of broad based engagement and public debate in respect of amendments to the Ordinances of both associations.  It appears as if all “authorities” are AVOIDING broader stakeholder engagement and if so, WHY? 
• Whose Agenda/Whose Timeline:   Why is there this apparent RUSH to an official merger?   There is already significant, ongoing CO-OPERATION between the two Commodity Associations so this co-operation can grow and evolve towards an official merger.
• Where is the Evidence?  On what basis are the Rt. Hon. Prime Minister and the Hon. Ministers making claims such as “We expect the merger of the associations and liberalisation of the sector to lead to better prices for cocoa and nutmeg farmers while also allowing them a chance of real ownership and shareholding in the commodity board.”  There is plenty  evidence  that liberalization and structural adjustment in developing countries have destroyed the livelihoods of small agricultural producers.   Haiti’s rice producers and Jamaica’s dairy producers are two such examples.  Imported powdered milkhas replaced fresh cow’s milk in Jamaica while Haiti now imports rice.
• Unequal Treatment of Commodity Associations vis-à-vis MNIB:  It is noteworthy that while Government of Grenada committed to liberalization of the cocoa and nutmeg sectors, it  created  regulations[8]  to make the Marketing and National Importing Board the sole purchaser, processor, handler, seller and exporter of soursop (outside of CARICOM markets).  Incidentally these regulations were made under the hand of Hon. Oliver Joseph, Minister of Trade.  The MNIB received World Bank loans to contribute to “Improving the Productivity and Competitiveness of the Agribusiness Sector”.     What were the results?  This also requires separate treatment.

1. Related Developments:
   1. Blue Growth and Climate Smart Agriculture :

In April 2014 , at a Blue Growth Conference in the Netherlands, the Rt. Hon. Prime Minister signed two Memoranda of Understanding with the Dutch Government. 

• Funding of EC$5 Million:   Under the MOU arrangements, the Netherlands committed to  providing EC$5million to Grenada and the Netherlands would  also work with Grenada to attract a further $5 million from the Dutch private sector banks and businesses.     
  • Attracting Private Investors:  This seems to be clearly about attracting the interest of private investors in the sector.
• International Spice Institute:  The co-operation agreement envisages the establishment of an International Spice Institute, to be co-located in Grenada and the Netherlands and also the establishment of a Blue Growth and Ocean Governance Institute.  The institutes will help Grenada grow its economy through more value-added agri-business projects and through the development of an ocean-based economy.

1. Observation:
2. Attracting Private Foreign Investment:  These arrangements  seem to be about attracting private sector businesses and investments in respect of value added agri-businesses.
3. Stakeholders Unaware:  Key stakeholders in the sector seemed to be blissfully unaware of this agreement. 
4. Potential for Trading in Carbon Credits:  Does this arrangement have the potential for trading in carbon credits?  How does the GCA and GCNA fit into these arrangements?  Are there opportunities for the GCA and GCNA to earn extra revenue flows which can then be distributed to the farmers?

1. Land Degradation Neutrality Transformative Project
2. Focus on Nutmeg and Cocoa Subsectors:  In her recent national address on June 17^th to mark World Day to Combat Desertification, the Hon. Minister of Agriculture announced that her Ministry was preparing a “Land Degradation Neutrality Transformative Project that will focus on the cocoa, nutmeg and forestry subsectors, thus re-cultivating thousands of acres that have been left abandoned, since the passage of hurricanes Ivan and Emily”. 
3. Leverage Innovative Financing:  Courtesy Google and the UNCCD website, we the people have learned that “ the Global Mechanism (GM) of the UNCCD[9] supports countries to develop LDN transformative projects and programmes ……and leverage innovative finance by tapping into multiple sources of finance, both public and private.” (Our emphasis)

1. Observation:

Might this recent rush on the part of the Minister of agriculture to COMMANDEER  the management and control of the assets of the Commodity Associations be linked to this project in the making  re“leveraging innovative financing from multiple sources of finance from public and private”.

1. Concluding Observations:
2. 2014 IMF Conditionalities:  Liberalization of the GCA and GCNA, along with liberalisation of the electricity sector, was part of the IMF conditionalities to which the Government of Grenada committed in 2014.  Liberalization of the electricity sector in the manner in which the Government of Grenada went about it has cost Grenada dearly – a bill of USD65 million and what else we still do not know.
3. Previous Unsuccessful Challenges re GCNA Monopoly Rights:  Dismantling the monopoly buyer and exporter rights of the GCNA has been UNSUCCESSFULLY challenged in a court of law THREE  times.  
4. :  The Nutmeg and Cocoa Industry Bill 2020  is the instrument that the Government intends to use in its attempt to break the  monopoly rights of the GCA and the GCNA, thus liberalizing the sectors.
5. Shifting Responsibility:  Shifting the conversation from liberalization to a merger proposed by the Government and agreed by the Boards of Management of the Commodity Associations “ kills two birds with one stone” and shifts responsibility from the Government to the Boards.

Protecting Grenada/Farmers’ Interest:  The proposed bill does not respond to the real issue of protecting Grenada’s and the farmers’ interests, protecting the livelihoods of small producers and ensuring that they can have a stake and share in the benefits of value added industries. 

[1] 2014, June 12, Letter of Intent and Memorandum of Economic and Financial Policies – June 12th, 2014:   Economic and Financial Programme:  Measures to Boost Growth and Social Protection: Ref. para. 11, pg. 19:

[2] 2014, December, Letter of Intent and Memorandum of Economic and Financial Policies, Ref. para.6 pg.55

[3] According to the presentation, “Grenada like Jamaica is presently in a 3-year extended credit financing arrangement with the IMF.  As such, the reforms which the IMF expects of Grenada are similar to the ones Jamaica is currently implementing.”

[4]  Budget 2017 Estimate of Revenue and Expenses Division of Technical and Economic Co-operation, pg. 335:

[5] December 2015, IMF Report Third Review, Annex III:   Grenada’s Tax Incentive Reform, pg. 47

[6] “This does not  mean that the GCA or the GCNA must establish or gain equity in all downstream enterprises” Summary:  Governance and Institutional Capacity Recommendations, pg. 6. 

[7] May 2017, IMF Country Report No. 17/131:  para. 31. Pg.15 

[8] Statutory Rules and Orders No. 1 Of 2015

[9]https://www.unccd.int/actionsldn-programme/ldn-transformative-projects-and-programmes