Venezuela halts all rice, paddy shipments

Jul 11, 2015 News

…270 containers of rice stuck on wharf, over US$5M in limbo
By Jarryl Bryan

Rice shipments bound for Venezuela

As the fallout from the collapse of the Guyana/Venezuela rice deal continues, Venezuela yesterday issued a directive for Guyana to cease all paddy and rice shipments to the neighbouring country with immediate effect.
This comes four months before the PetroCaribe agreement was scheduled to come to an end.
With some 270 containers of rice worth over US$5M left stranded on the wharves, and a further surplus crop expected to come by next month, this latest move by the oil producing giant, leaves Guyana with a more urgent need than ever to find an alternative market to Venezuela, which was responsible for 34 percent of rice exports under the PetroCaribe oil for rice deal.
The cancellation is reported to have been first communicated to the Guyana Rice Development Board (GRDB) by Venezuelan rice counterparts through a phone call. The news was subsequently conveyed to the Guyana Rice Millers Association in a meeting yesterday.
Kaieteur News understands that while the directive goes into immediate effect, vessels already loaded and bound for Venezuela will be allowed to complete their shipment run. This will include the paddy vessel for this week, which is said to be currently on its way to the Spanish-speaking country and is slated to return to Guyana on July 18.
According to a senior official of the GRDB, the decision will leave Guyana with no alternative but to hasten its search for other markets. He stated, however, that a legal challenge from the Guyana Government against the early termination of the agreement was still on the cards.
Contacted yesterday, Minister of Agriculture Noel Holder confirmed that Venezuela pulling out of the agreement prematurely, sought the effect of embarrassing the Guyana Government and endangering the Guyana economy.
According to Holder, this was something the Government had not expected, but would nevertheless have to adjust to and find markets for the unshipped rice.
On what course the Government would take, Holder described the early termination of the contract as an international incident, whereby one country had broken its commitment to another. According to the Minister, seeking legal redress was definitely an option.
Prominent miller and former Chief Executive Officer of Alesie Group, Dr. Turhane Doerga, described the development as devastating, since some 270 containers, filled with rice and originally bound for Venezuela, were still sitting on the wharf. Before the paddy vessel left, it had been expected that on its return the containers would have been loaded and shipped.
At US$780 per tonne, this represents over US$5M in rice. According to Doerga, this was rice that millers had not been paid for as yet. Kaieteur News understands that the rice had already been packaged and fumigated.
Contacted yesterday, Co-Chairman of the Rice Action Committee, Jinnah Rahman made it clear that with some 120,000 people, including farmers and their families, dependant on the rice industry, Guyana could ill afford the present conflict and the concurrent fall out it has resulted in, whereby the shipments have been canceled.
He also said that this has come at a time when the country was trying to get out the backlog of approximately 100,000 tonnes of paddy and rice still in the system. He also stated that should alternate markets not be found by the next crop (late August-early September) the industry would be left with a major crisis on its hands.
Reminded of the Panama market, which Guyana commenced shipments to earlier in the year; Rahman said that Guyana has only received payments for one of four shipments. According to him, the new Panama Government has not indicated any intentions on clearing payments to Guyana, as the rice deal was derived from the previous Panamian administration, which is under fire over corruption allegations.
Finance Minister, Winston Jordan, had said earlier in the week that while visiting Venezuela, he was told in no uncertain terms that the South American neighbour would no longer be interested in renewing the oil for rice barter under the PetroCaribe deal which was originally slated to come to an end on November 16, next.
He said that Guyana was told to find new markets for its rice.
Venezuela’s decision regarding the rice deal comes at a time when it is claiming sovereignty over Guyana’s waters since the significant oil find by American oil giant, Exxon Mobil just 100 miles off of the Stabroek Block.
The issue is one which has seen the Government displaying complete resistance to Venezuela’s declaration and even its rhetoric over the past few weeks.
Jordan had said last Wednesday that Venezuela claimed it had hinted to the past administration as well as to top officials in the Guyana Rice Development Board that Guyana needs to start looking at other markets.
Based on records over the past two to three years, Jordan had said that it would show that Venezuela was scaling back on the volume of rice it was taking from Guyana.
It has been reported that the oil-rich country has even entered into new rice deals with rice-producing giants like Uruguay. That South American country has agreed to provide Venezuela with 120,000 tonnes of rice by the end of this year. This deal was struck so that Uruguay can clear its US$400M debt it accumulated from taking Venezuela’s oil at concessionary prices.
According to El Pais, a leading newspaper in Colombia, this is the first time that the Government of Uruguay has participated in a rice export agreement which will be officially signed on July 17.
Economic time bomb
It was only on June 14; last, that Presidential Advisor on Sustainable Development, Dr. Clive Thomas, predicted that like the ailing sugar industry, the booming rice industry could be sitting on another economic time bomb. He had said that certain factors affecting the rice sector leave it poised for a dispiriting future.
Dr. Thomas said, “The ticking time bomb that rice is perched” on is due to three factors. He listed these to be explosive growth of output, increasing difficulty in finding lucrative markets and the level of unit production costs.
The economist noted that rice output has grown explosively in the 2010s; rising by more than 100,000 tonnes annually since 2012. He said that much of this expansion has been fuelled by Government support to both supply (production) and demand (finding lucrative markets).
He had said, “As is common knowledge, the Venezuelan market is at great risk generating a potential demand/supply market imbalance. This imbalance risks a collapse of rice and paddy prices later this year, thereby impairing livelihoods, in contrast to what prevailed in the first half of the 2010s.”
The economist had opined that should Guyana fail to deal with the aforementioned factors with great haste, then the sustainability of the rice industry could prove to give the new government, a similar kind of hell it is facing in trying to nurse the ailing sugar industry back to good health.