St. Vincent and the Grenadines
Statistical Appendix

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Abstract

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

I. Medium Term Prospects of the Banana Industry in St. Vincent and the Grenadines1

A. Introduction

1. The banana industry of St Vincent and the Grenadines (VCT) has been facing tremendous challenges in recent years as competition in the international market intensifies. Banana output has declined from a peak of some 80,000 tons in the early 1990s to the current level of 31,000 tons. While the government and development partners (e.g., the European Union (EU)) have assisted in restructuring the industry, the elimination of existing preferential arrangements in the EU market by the end of 2005 poses questions to the viability of the industry.

2. This note reviews the experience of the banana industry in recent years, especially recent efforts in restructuring the Banana Growers Association (BGA), and discusses the prospects and options for the industry to stay viable post 2005. It also discusses the social impact of a further decline of the banana industry on the rest of the economy.

B. Decline of the Banana Sector in the 1990s

3. The banana industry has been a vital sector to the VCT economy. Latest available estimates show that about 40 percent of land-holding farmers grow bananas and about 50 percent of agricultural land that grows permanent crops is used for banana production.2 Banana exports account for about half of total exports and 90 percent of exports to EU. Some also estimate that about 60 percent of the population is dependent on banana production.

4. Banana production has been in decline in most of the 1990s. Banana production peaked in 1990 at around 80,000 tons from around 18,000 tons in 1980 (Fig. 1 and Table 1). This was mainly achieved by more intensive use of fertilizers and an increase in plantation acreage. However, production has dropped steadily from 1993 after a common marketing structure was established in the single European market. The Windward Islands banana industry (including St. Lucia, St. Vincent and the Grenadines, Dominica, and Grenada) has historically relied on guaranteed market access in the UK which paid above free market prices before 1993, and in the EU market through preferential trade arrangements of the so called EU Banana Regime after 1993. The EU Banana Regime was challenged both inside and outside the EU after 1993 (see box).3 The increased competition from Latin American producers4 and the uncertainty caused by the trade disputes have clearly contributed to the decline of the banana industry as both output and acreage declined. In 2000, plantation acreages for banana were 2,576 acres, compared to 4,100 acres in 1986 when the last census was carried out.

Figure I.1
Figure I.1

St. Vincent and the Grenadines: Banana Production (1980-2001)

Citation: IMF Staff Country Reports 2003, 029; 10.5089/9781451839982.002.A001

Table I.1.

Windwards’ Banana Production by Country, 1980 – 2001

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Source: Windward Islands Banana Development and Exporting Company (WIBDECO)

5. The banana industry has responded to increased competition by efforts to increase yield, to improve quality of the fruit, and to restructure the organization of the industry in recent years. These efforts are spearheaded by the government and are assisted by the EU. The increase in irrigated areas has helped in leveling out production especially in the drier months, and also contributed to the improvement in the fruit quality and consistency. Banana production seemed to have stabilized around a core group of farmers as the number of banana farmers declined from 5,667 in 1996 by about half to around 2,600 in 2000. One of the main initiatives to improve quality is the certification program where farmers who meet certain production conditions are certified to produce higher quality bananas. Currently certified farmers account for about 90 percent of production.

6. As an integral part of the government’s strategy to restructure the banana industry, the Banana Growers’ Association (BGA) was restructured in 2001. The BGA is an industry cooperative with the government and banana farmers as its main shareholders. The BGA has traditionally provided many services to banana farmers including providing inputs, credit for inputs, disease control, extension service and other production support, reception, loading and selling to the marketing agency—Windward Island Banana Development and Exporting Company (WIBDECO) etc. BGA’s restructuring is aimed at increasing the efficiency of the association through reducing administrative costs and providing better services to banana farmers by streamlining services offered by the BGA. After the restructuring, the BGA now focuses on production management, certification, pest control, price negotiations with the WIBDECO and distribution of inputs to farmers on a cash basis—farmers secure credit from financial institutions by themselves—and has relinquished other functions to the WIBDECO. The latter is responsible for reception, loading, marketing (both regionally and internationally) of banana and non-banana products, bulk purchasing of inputs on behalf of the BGA to be passed on to the farmers. For its reduced services, BGA’s fee has been reduced. The Ministry of Agriculture is responsible for extension services.

7. BGA’s restructuring has begun to bear some fruits. The restructuring has allowed the farmers to be more involved in commercial activities such as securing credits for inputs, arranging the transportation of their produce etc. Through a mechanism of distributing quotas for premium grade bananas, the BGA has also increased incentives for farmers to improve the quality and consistency of their produce. Preliminary results showed that the BGA has improved its financial status since the restructuring. However, there is still scope to further commercialize many of its functions.

C. Prospects of the Banana Industry post-2005

8. The protection afforded to the African, Caribbean, and Pacific (ACP) banana producers in the EU market is set to expire by the end of 2005 at the latest. The quota will be replaced with a tariff only system in 2006. While the current EU commitment has, reduced the uncertainty caused by the trade disputes, the viability of the industry is now in serious question post-2005.

9. The loss of preferential trade arrangements will deal a serious blow to the banana industry in the Windward Islands. It will face a direct loss of subsidies and more intense competition from Latin American producers (so called “dollar producers”). It is estimated that the subsidy element implicit in the EU guaranteed market represents about one-fifth of the total value of banana exports.5 Competition from Latin American producers will be a major threat to the Windward Island banana industry (including St. Vincent). Low production yields (average six to eight tons per acre per year) and high wage costs (USS11 per day) of Windward Island producers compare very unfavorably with the Latin American producers who have much higher yields (15 tons per acre per year) and lower wages (US$4 per day).6 It is expected that Windward Islands bananas would only retain a niche market share in the EU from its traditional customers. The VCT producers will have to compete with producers from the other islands for a share of this reduced market.

10. The options available to the industry to remain viable are very limited and difficult. One option is to increase the yield to the Latin American producers’ level.7 Currently only a very small number of farmers who have access to irrigation manage to have an average yield above 15 tons per acre. For example, in the Langley Park Irrigation Project, only about 6 percent of the farmers managed to have an average yield above 15 tons per acre in 1999.8 To almost double the yield in the next few years is going to be a very tough challenge. The potential to create demand through banana products (such as banana cakes, chips etc.) remains to be realized.

11. Another option is to diversify into organic banana production. Demand for organic bananas has grown rapidly in recent years and organic bananas fetch higher prices than conventional bananas. However, there are stringent production requirement that growers have to meet. For example, the land has to be free of pesticides. In cases where chemicals such as fertilizers and pesticides have been applied to the land, it will require 3 to 5 years for the residues to decompose. During this period, the land would have to be fallow. Given that most of the country’s agricultural land—particularly land used for banana production—has some degree of pesticide usage, to meet this requirement would be very difficult economically without large-scale financial support in the transition period. Also, bananas are susceptible to disease. While the BGA has started a small project for organic banana production, wide-scale adoption of organic banana production in the next 3-5 years is unfeasible.

12. In the next few years, banana production is most likely going to revolve around a core group of farmers if the industry is to remain viable. A sizable group of farmers—mostly small scale—will either not be able to increase the yield level sufficiently to remain competitive or have the financial resources to tide themselves in the transition period to meet the requirements for organic production. Recent trends have already suggested that a large number of farmers have left the banana sector, and a core group of producers is emerging as evidenced by the certification program. How this process will continue to evolve remains to be seen. Many successful farmers out of this process are expected to be able to deal directly with the marketing organization such as the WIBDECO as in many other developed countries. The role of the BGA will further evolve as the need for its intermediary and supporting function diminishes.

D. Economic and Social Impact of a Declining Banana Sector

13. The decline of the banana sector will have a serious adverse economic and social impact. The banana sector, although much diminished now compared to its peak in the early 1990s, continues to be a socially and economically important sector to the economy. Its further decline will most likely increase unemployment and poverty—especially in the rural areas—and put pressure on the social safety net. The prospect of a large-scale increase in rural unemployment (though most likely hidden) and rural poverty will be of great concern to policy makers and development partners.

E. Conclusion

14. The medium term prospects of the banana industry of St. Vincent and the Grenadines remain bleak. A vital sector to the economy, which has experienced significant decline in the 1990s, the viability of the banana industry is now threatened by the loss of preferential trade arrangements and increased competition. The options available to the industry are limited and pose difficult challenges. It is likely that the sector, to be viable post 2005, would revolve around a core group of competitive producers on a much smaller scale. The further decline of the banana sector will likely increase unemployment and poverty. Hopefully, as the experiences of the 1990s show, this painful process could be mitigated by further development of other sectors, including tourism.

The EU Banana Regime—A Timeline

  • 1. Before 1993, the UK had provided preferential access for bananas from its traditional suppliers in the Commonwealth Caribbean. Certain other Commonwealth countries also operated restricted national markets for the benefit of domestic producers or their own traditional suppliers in African, Caribbean and Pacific (ACP) countries.

  • 2. On July 1993, the Single Market in bananas was established in the EU, replacing these national arrangements, completing and fulfilling the EU’s obligation to ACP countries under Protocol 5 of the Lome Convention. The internal regime for the banana sector consists of quality standards, compensatory aid for EU production and restructuring incentives. External trade arrangements, based on a tariff quota system, were introduced at the same time as the internal regime. Following a ruling by the World Trade Organization in 1997 that certain aspects of the external regime were incompatible with world trade rules, an amended regime was introduced from January 1, 1999.

  • 3. However, the revised arrangements were also challenged in the WTO, by Ecuador and the US. The WTO Panel ruled in their favor on 12 April 1999, and also authorized US trade retaliation totaling $191.4 million. The WTO Dispute Settlement Panel ruled in March 2000 that Ecuador may also impose sanctions on the EU, worth $201.6 million a year.

  • 4. The European Commission issued a further proposal in November 1999 and continued its negotiations with interested parties to find a satisfactory solution. In October 2000, the Commission put forward a proposal for transitional quota regime and indicated that the quotas would be managed by the First Come, First Served (FCFS) system. The European Parliament adopted its opinion on December 14, 2000.

  • 5. On April 11, 2001, an understanding was reached between the Commission and the US, which would allow the quotas to be managed on the basis of historical reference periods. This was followed by a similar understanding with Ecuador (the largest supplier of bananas to the EU). On the basis of these understandings, new arrangements are to be introduced in two phases. Phase 1 commenced on July 1, with the quotas as set out in the Council Regulation. Phase II (commenced on January 1, 2002) will transfer 100,000 tones from Quota C to Quota B and will make Quota C exclusive to the ACP; the Commission’s new proposal would bring Phase JJ into effect. The waivers to Articles I and XIII of the GATT to implement Phase II were agreed by members of the WTO on November 14.

  • 6. The new arrangements are due to last until no later than 2006, when the banana regime is due to move to a tariff only arrangement.

Source: UK Government Briefing on Agriculture and Rural Development Committee, November 30, 2001.

II. St. Vincent and the Grenadines: Legislation Governing the Offshore Financial sector9

The first offshore laws establishing St. Vincent and the Grenadines as an offshore financial center were passed in 1976. In 1996, a new and comprehensive legislative package was introduced to govern the operations of the offshore financial sector in St. Vincent and the Grenadines. Against a backdrop of growing international concerns about the use of offshore financial centers (OFCs) as a haven for money laundering and the financing of terrorism, St. Vincent and the Grenadines has moved expeditiously since end-2000 to strengthen the legislative framework governing the offshore financial sector in an effort to comply with international best practices. The main Acts that have been passed or amended within the past year in respect of money laundering and the financing of terrorism are the International Banking Act, the International Business Companies Act, the International Trust Act, the Proceeds of Crime and Money Laundering (Prevention) Act, the Financial Intelligence Unit Act, the Exchange of Information Act, and the United Nations (Anti-Terrorism) Act.

  • The International Banks Amendment Act No. 30,2002, provides for all banking applications as well as applications for the transfer of shares to be forwarded by the Offshore Finance Authority (OFA) to the ECCB for a recommendation. This amendment provides also that no companies with bearer shares may be eligible to own banks.

  • The International Banks Amendment Regulations No. 31, 2002, Section 4 requires the identification of the beneficial owners of all accounts, while Section 10 requires that the beneficial owners of all existing anonymous accounts be disclosed by January 21, 2003.

  • The International Business Companies Amendment Act, No. 26, 2002 provides for the registration of bearer shares.

  • The International Trust Amendment Act, No. 27,2002 makes it an obligation of the Registered Trustee to know and keep a record of the beneficial owner(s), the other trustees, the protector (if any), and the settlor of the Trust. Under this amendment, also the Registrar of Trusts is empowered to require any information from the Registered Trustee about a Trust at any time.

  • The Proceeds of Crime and Money Laundering (Prevention) Act, No. 39, 2001 criminalizes the laundering of the proceeds of serious crimes, and creates an obligation to report suspicious transactions to the Financial Intelligence Unit. Under this Act, amended in 2002, the definition of suspicious activity was broadened, and the list of regulated institutions was significantly expanded to include a wide range of financial and nonfinancial institutions, and relevant business entities. The PCML(P) Act offers protection against civil and criminal liability in respect of the reporting of suspicious transitions, and makes provision for the freezing, seizing, and confiscation of cash proceeds of crime.

  • The Financial Intelligence Unit Act 2001, amended in 2002 (Act No. 24 of 2002), provided for the setting up of the Financial Intelligence Unit (FIU), which is responsible, inter alia, for informing all regulated institutions of their obligations under the PCML(P) Act, and for supervising the standards imposed by the PCML(P). Under subsequent amendments in 2002, the FIU is empowered to request information from financial institutions or relevant businesses for the purposes of investigating an offence, a suspected offence, or a suspicious transaction report. The FIU may also share such information with foreign FIUs.

  • The Exchange of Information Act No. 29 of 2001 repealed the Confidential Relationships Preservation Act, which was regarded as an obstacle to international cooperation. Under amendment No. 29 of 2002, mechanisms are put in place for the sharing of information between regulators locally, and with foreign regulatory authorities.

The offshore financial sector has contracted significantly over the years as the regulatory and supervisory environment tightened in line with international standards. This notwithstanding, the authorities are of the view that the medium term prospects for the sector are good, and are looking at other niche areas with potential for growth, such as, offshore insurance. On prospects for the removal of St. Vincent and the Grenadines from the FATF’s list of noncooperative countries and territories in the fight against money laundering, the authorities remain hopeful. A plan for the implementation of new and amended legislation has been submitted to the FATF, in accordance with standard procedures, and the government is working closely with the FATF with a view to addressing satisfactorily any and all outstanding issues.

Table II.2

St. Vincent and the Grenadines: Summary of International Concerns and Actions Taken Relative to the Offshore Financial Sector10

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Source: Offshore Finance Authority (OFA).

STATISTICAL APPENDIX

Table 1.

St. Vincent and the Grenadines: Selected Price and Production Indicators

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Sources: Ministry of Finance and Planning; and Fund staff estimates and projections.
Table 2.

St. Vincent and the Grenadines: GDP by Type of Expenditure at Current Prices

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Sources: Ministry of Finance and Planning; and Fund staff estimates and projections.
Table 3.

St. Vincent and the Grenadines: GDP by Economic Activity at Current Prices

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Sources: Ministry of Finance and Planning; and fund staff estimates and projections.

See Table 5 on the generation and consumption of electricity.

Table 4.

St. Vincent and the Grenadines: Selected Data on Banana Prices and Production

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Sources: Banana Growers Association; the Central Statistical Office; and Fund staff estimates and projections.

Volume data according to the Central Statistical Office.

Gross c.i.f. price received by shippers for bananas in the U.K. market.

Percentage units within specification.

Table 5.

St. Vincent and the Grenadines: Electricity Consumption

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Source: St. Vincent Electricity Services Limited (VTNLEC).
Table 6.

St Vincent and the Grenadines: Petroleum Consumption and Retail Prices 1/

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Source: Ministry of Finance and Planning.

Prices at end of period.

Table 7.

St. Vincent and the Grenadines: Prices and Wages

(Annual percentage change)

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Sources: Ministry of Finance and Planning; Labor Commission; Ministryof Agriculture, Industry, and Labor; and various public enterprises.

CPI prices for 1998-2000 are based on 1981 prices and 2001-2002 are based on 2001 prices.

Represents range of wage adjustments in four major public enterprises.

Table 8.

St. Vincent and the Grenadines: Consumer Price Index

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Source: Statistical Office, Central Planning Division.

Including medical, education, recreation, personal, and miscellaneous.

Table 9.

St. Vincent and the Grenadines: Summary of Consolidated Public Sector Operations

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Sources: Ministry of Finance and Planning; and Fund staff estimates and projections.

Interest payments are based on accrual accounting. The government: has sought a moratorium on Ottley hall shipyard debt pentting an amicable settlement on issues under dispute with the creditors.

Table 10.

St. Vincent and the Grenadines: Summary of Central Government Operations

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Sources: Ministry of Finance and Planning; and Fund staff estimates and projections.

Including employer’s contribution to the National Insurance Scheme (NIS).

Interest payments are based on accrual accounting. The government has sought a moratorium on Ottley hall shipyard debt pending an amicable settlement on issues under dispute with the creditors.

Including bond issues purchased by the private sector and the change in sinking fund holdings.

Other net domestic financing figures are a residual, because domestic debt amortization figures are not accurate.

Table 11.

St. Vincent and the Grenadines: Central Government Revenues and Grants

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Sources: Ministry of Finance and Planning; and Fund staff estimates and projections.

Including revenues from the offshore sector.

Land sales.

Table 12.

St. Vincent and the Grenadines: Central Government Expenditures

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Sources: Ministry of Finance and Planning; and Fund staff estimates and projections.

Salaries and allowances including social security contributions, commissions, rewards and incentives.

Interest payments are based on accrual accounting. The government has sought a moratorium on Ottley hall shipyard debt pending an amicable settlement on issues under dispute with the creditors.