– as Europe cuts key funding for spirits
The rum producers of the Caribbean, of which Guyana is part of, are protesting the European Commission’s (EC) decision to cut off funds to the region’s spirit manufacturers.
The news was broken of the decision last week by columnist of Kaieteur News, Sir Ronald Sanders.
The industry currently employs 50,000 people and is the fourth largest traditional export, bringing in more than US$260 million a year in foreign exchange.
Under the Cotonou Agreement, the EU and its ACP partners, of which Guyana is a part, signed a Joint Declaration on Rum (XXV) that recognises its value in competing in the global economy and the need to develop the industry further, particularly through modernisation and better marketing.
The EU committed € 70 million to a rum-specific programme. The deal was that the rum producers would spend their own money to carry out the upgrades and marketing projects. The claim would be made to the EC once the projects were complete.
The funding, according to a New Europe article of April 2, started three years late and was scheduled to end in June 2010 – an unrealistic date according to EC project monitors who recommended an 18-month extension to December 2011.
Now the EC is closing down the fund early and refusing to extend it because of a Council regulation, leaving the rum producers in debt, the article said.
Additionally, the EC is removing tariffs from Latin American rum and eroding the time they led Caribbean rum producers to believe they had to upgrade their production and become competitive.
“The EC has formally told the Caribbean that they have already settled liberalised tariffs and quotas with Colombia and Peru and are now talking in similar terms with Central American and Andean countries.”
According to Caribbean business executive and diplomat, Sir Ronald Sanders, the EU agreed to establish a fund of 70 million euros under the Eighth European Development Fund (EDF) to facilitate the adaptation of production facilities by Caribbean rum companies.
“But to access this fund, companies first had to provide at least matching amounts of money, recovering the EDF grant element only when their upgrading or marketing projects are completed.
“Many of the companies borrowed money on commercial terms to undertake the projects. They did so expecting the programme to continue until at least June 2010 when the funding window was scheduled to be closed.”
However, with about 14 million Euros still in the Fund, the EC is closing in March 2010 on the basis that the rules of the 8th EDF demand it. This means that the rum companies cannot get reimbursement for the money they’ve invested on projects that cannot be completed by the cut-off date on which the EC has insisted.
According to Sanders, “Poignantly, the country that will be hardest hit by this EC reversal is Haiti. Its rum producer, Barbancourt, which was devastated by last January’s earthquake, will now have no chance of getting assistance for its recovery from this programme.
“It will also find it well nigh impossible to regain a place in the EU market by the time it is able to limp back into any semblance of export production.”
The West Indies Rum and Spirits Producers Association (WIRSPA) has written to Trade Commissioner, Karel DeGucht, repeating the request for access to the unspent and allocated funds for rum in the 8th EDF and expressing dismay at the dropping of the declaration on rum in the mid-term review of the Cotonou Treaty on March 19.
The letter, which is circulating among ACP circles in Brussels, also pointed out that, in the deals the EC has done and is continuing to do with Latin American countries, two things will happen.
First, on low cost and heavy bulk rum, there is a strong risk that European importers will switch to using lower cost suppliers in Central or South America and immediately make full use of any tariff free quotas which are granted.
“The loss of such major contracts would prove devastating to Caribbean suppliers of bulk rum in Barbados, Guyana, Jamaica and Trinidad and Tobago. And, second, on bottled rum, Central and South American producers will be able to use the reduction in the tariff to further undercut ACP products in the EU market.
“After facing crisis in the region’s sugar and banana industries, people are hoping that the EU will rethink its decision. If not, they fear that Caribbean rum will end its 300 year trade with Europe.”
In Guyana, the largest rum producers are Demerara Distillers and Banks DIH. Kaieteur News was unable to make contact with officials from the two companies to ascertain how hard hit Guyana will be by the developments.
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