On September 22, 2020, veteran Journalist, Julian Rogers, hosted the Caribbean Economic Forum, under the theme “Adjusting to the Post COVID-19 Economy.” The Panellists included Dr. Wendell Samuel, Dr. Peter Blair, Dr. Dillon Alleyne, and Dr. Eric Strobl.
One of the issues raised by the Host was that of diversification of Caribbean economies. The question of which sector or industry can take the place of tourism as the engine of growth for us here in the region, became prominent during the rest of the Forum.
For a long time, your humble servant has been arguing that we in the Caribbean have been wasting a tremendous amount of effort and energies thinking way too narrowly about diversification. We have spent years upon years focusing on across sector diversification. Hence, every time the question of diversification of Caribbean economies emerges, the discussions always proceed along the lines of which sector can take over from tourism as the lead? Wrong focus!
Given the nature and sizes of our economies, we in the region ought to shift our focus from across sector diversification to within sector diversification, if we are really interested in economic transformation that can be sustained for many a years to come.
What does your humble servant mean by within sector diversification?
This article, hopefully, to be published in two parts, addresses the issue of within sector diversification, with special reference to agriculture in Grenada.
DIVERSIFICATION AS AN IMPORTANT DEFENSIVE MEASURE:
Grenada, with only 133 square miles of territory, is a prime example of a Small Island Developing State or SIDS for short. This means that Grenada’s economy, along with the economies of other SIDS, is highly vulnerable in a number of key respects. Vulnerability to natural disasters such as Hurricane Ivan’s devastation of Grenada in 2004 is generally appreciated.
Often neglected from active consideration, especially by the public at large, are two other dangers: agricultural pests, which can wipe out entire crops; and extreme variability in global prices for agricultural products. These factors combined suggest that diversification of Grenada’s agricultural industry has to be seen as a defensive measure.
THE IMPACT OF PESTS
Grenada, many years ago, had to change the specie of banana it produced for export to Britain because of pest-infestation and destruction of its banana crop. This took time and money and resulted in substantial loss of farmer’s income and the country’s foreign exchange earnings.
Jamaica and several other countries lost a great deal of their coconuts in the late sixties and seventies because of lethal yellowing and red ring diseases. Dwarf coconuts were introduced into several islands to deal with this threat.
In just the past two months, Jamaica has discovered a deadly disease wiping out cocoa fields which have so far been infected with it. Given the importance of cocoa in Grenada’s agriculture, this alarming development needs close watching and significant research and development attention.
Perhaps the example freshest in the minds of Grenadians with regard to the destruction of agricultural output by a pest is what happened when the mealy bug attached itself to all local fruits. Consequently, lucrative markets for Grenada’s fruits in nearby Trinidad and Tobago and a growing market for same in the United States of America came to a screeching halt.
What is the significance of these and so many other cases of pest infestation to the issue of agricultural diversification?
Agricultural diversification prevents the sudden, wholesale destruction of rural incomes, rural development, and rural employment opportunities, not to mention the effects on national income, foreign exchange savings and earnings, and on government revenues; should one, or even two, of a country’s agricultural crops face destruction from a pest.
Because pests are usually crop-specific, it means that the destruction of one crop by pests can occur while not affecting other crops grown in the same area.
Indeed, both crop rotation and crop inter-planting are frequently used by farmers in many countries as a means of mitigating the effect of pests without using pesticides, or significantly reducing on their use.
WORLD-PRICES VOLATILITY: GRENADA’S DEPENDENCE ON DEVELOPMENTS IN OTHER COUNTRIES
A problem faced by all countries reliant totally, or heavily, on agricultural exports, as most SIDS have been and still are, is the considerable volatility in the world prices for virtually all agricultural commodities.
This affects a country’s ability to achieve and maintain fiscal balance, to plan, to pay for major projects under construction, to finance its national debt in some years; not to mention its immediate effects on farming communities and on commerce, generally, in a small or micro economy.
Should any factor whatsoever, be it political, industrial or social unrest; climactic factors, pest-related developments, or anything else, cause a significant shortfall in the production of Indonesian nutmegs, Grenadian farmers and the Grenadian economy immediately receive a boost because of a surge in world nutmeg prices caused by Indonesia’s nutmeg production shortfall.
Equally, should Indonesia’s nutmeg production substantially exceed that of its previous year’s supply, Grenada’s farmers and the Grenadian economy receive an unpleasant “hit” – an economic downturn.
This example above with nutmegs can be seen also in the case of Cocoa. Should one of West Africa’s major cocoa producers, say, the Ivory Coast, experiences a major shortfall in output for any reason whatsoever, the Grenadian economy feels the effect in greater income immediately through a positive change in the world price of cocoa.
The opposite occurs, of course, when a bumper crop is produced in one or more of West Africa’s major cocoa producers.
DIVERSIFICATION MEANS CROPS PRODUCED, PROCESSING (UP THE VALUE-CHAIN), CONTROL OF MARKETING, INCLUDING DIVERSIFICATION OF MARKETS CATERED FOR
At the operational level, agricultural diversification means variations in the crops produced and in the processing of them as far up the value-chain as possible, plus the elimination of middlemen in the marketing of these many products.
These are indeed all key elements in any strategy of diversification aimed at maximising and stabilising income from agriculture in Grenada, and for the mitigation of the many negative consequences from the possibilities described earlier.
POSITIVE REASONS FOR AGRICULTURAL DIVERSIFICATION IN GRENADA
Grenada now has the potential to greatly increase its output of fruits and vegetables in the context of growing regional and global demand for these commodities. Its production of Minor Spices can also be expanded for the same reason. These activities can take place simultaneously with a strategy of systematically moving the production of its nutmegs/mace and cocoa up the value-change, as mentioned earlier.
In assessing Grenada’s future with agricultural diversification, it is not sufficient to explore only the defensive reasons for pursuing such a policy; that is, doing it for protection against destruction of any one or two of its crops by pests, and/or having to cope with falls in the world price for its principal crop, and the devastating effect this can have on farmers, rural communities, and the country as a whole from the sudden collapse of the price of its main export crop.
We need to see the genuinely expanding opportunities, on a global scale, for the agricultural commodities which Grenada can offer in the years ahead.
What is the basis for these expanding opportunities? There are several factors at work in converting these ideas into real opportunities:
(a) World population growth is one. While the rate of population growth has slowed in recent decades, there continues to be growth in the absolute number of mouths to feed.
(b) Growth in incomes in most of the world, and especially in huge markets such as China and India. There are now hundreds of millions of people in each of these two countries who have joined the ranks of the middle-class, with thus more income to spend, including on agricultural delicacies and exotic products such as those Grenada can offer.
(c) Decertification in several countries (many parts of Africa are dramatic examples of this) caused by the cutting down of forests, climate change, and the growing loss of arable land for cultivation for other reasons also, have created conditions which could see, shortly, growing shortages in food output in many parts of the world.
(d) The growing trend (especially involving US agribusinesses) towards alienating land from the production of food for humans to use for the production of animal feed.
(e) The trend, also, to use increasing acreages producing wheat and corn for the production of fuel for motor vehicles instead of their use in producing wheat and corn flour (and other products) for human consumption.
What all the above has in common is the effect on global demand and/or supply of agricultural commodities for use by most of the world’s population. The combination of these and other factors creates growing opportunities for modernized and diversified agriculture in Grenada. These opportunities for Grenada, however, require changes in policies and practices, if the country is to maximise its opportunities.
NB: Part 2 of the article will continue next week
Dr. Brian Francis, is a former Permanent Secretary in the ministry of finance and is currently the Chief Executive Officer of the Barbados Agricultural Development and Marketing Corporation