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Inclement Weather and Rising Retail Prices - November 21, 2005

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Inclement Weather and Rising Retail Prices

Good Day, Ladies and Gentlemen


Let me start off by extending my sympathies to those persons who suffered losses or discomfort as a result of the heavy, persistent rains that we experienced last week. The inclement weather also took its toll on our national infrastructure and we are still assessing the extent of the damage. I want to take this opportunity to commend the many public officers who worked long hours to restore conditions on our roads, in particular the employees of the Ministry of Communications, Works, Transport and Public Utilities. Also, I want to thank you, the members of the public, for the patience and understanding that you have exhibited during this period. I am aware that because of the ongoing flood mitigation works, particularly in Castries and Anse La Raye, vehicular and pedestrian traffic have been made more challenging, but these works are necessary to ensure that in the future we will have greater capacity to deal with the weather that we experienced last week.


Last week’s weather was another sober reminder, although I suspect that by now none is required, of the need for us to always be prepared during the hurricane season. Although we are into what officially is the last month of the season, this has not spared us from bad weather. This hurricane season has been a record-breaking one. Never before in the history of the Atlantic Hurricane season have we exhausted the English alphabet and had to resort to the Greek alphabet for storm names.

This year we have had thirteen (13) hurricanes, which breaks the previous record of twelve that was set in 1969. Also, there have been three (3) Category Five hurricanes this year - Katrina, Rita, and Wilma, another record, and Wilma, with its pressure of 882 millibars broke the old record set by Gilbert in 1988, to make it the strongest hurricane ever recorded in the Atlantic Ocean.


We must remember, however, that our own actions continue to contribute to the severity of the impact of these weather systems on our lives. The indiscriminate disposal of plastics and other non biodegradable material, poor land use practices, and non-adherence to acceptable land development and building standards, among other factors, cause our rivers and drains to clog, our slopes to become more vulnerable, and our dwelling houses to be compromised. We must stop taking a short-term, live-for-today approach to the way we live our lives. Every action that we take today has a consequence that extends into tomorrow. NEMO, the Ministry of Works, the Solid Waste Management Authority and the Ministry of Physical Development can only do so much. There are only so many laws that we can pass to deter action that can lead to national disasters. The onus has to be on each and every resident of Saint Lucia to take responsibility for our environment and our country. If we don’t, then we will continue to suffer the sort of discomfort and inconvenience that we lived through last week, and it will only get worse.


This week, I want to touch on a matter that I am certain has been occupying the attention of most Saint Lucians, and that is the rising cost of certain items on our super market shelves. One product which comes to mind is Carnation Milk. For several years a tin of Carnation Milk was sold at $1.99. Now, the price has gone up to $2.36 a tin. As usual, the Government is blamed for the increase. I have done a little research on this product and my findings suggest that the supplier of Carnation Milk has infact increased the price at which the milk is sold to importers and retailers. I am told that suppliers have increased the cost of a carton of Carnation by 17.3%. Carnation Milk is a price controlled item and the new price of $2.36 is the price calculated by the Ministry of Commerce and Consumer Affairs.

Before I say a little more on this subject, please allow me to put to rest another rumour that appears to be making the rounds, which is that it is a Government-imposed increase in the Consumption Tax that has caused prices to increase in the supermarkets and in retail stores. This is simply not true. I repeat, nothing can be further from the truth. The last adjustment in the Consumption Tax structure took place in July, 2003, and there has been no change since that date. Frankly, I have no idea why some brokers insist on telling importers and purchasers that increases are due to increases in Consumption Taxes.

But, why the recent increases on these items?

Much of what we consume in Saint Lucia has to be imported into our country. When a product lands in Saint Lucia, whether the mode of transportation is by air or sea, the importer has to meet three unavoidable costs: the cost of the product, the cost of insuring the product during transportation from the source to Saint Lucia, and the cost of freight, that is the cost of transporting the product. Customs charges are then applied to the value of the product, and as I have said, these charges have not increased in the last twenty nine (29) months. What have increased, however, are in some instances, the cost of producing the item, and in most instances, the cost of transporting the item. Both of these increases are a direct result of the increase in the cost of fuel. The Government does not have to interfere with Consumption Taxes for prices to rise. The Consumption Taxes may remain the same for years, but prices will rise simply because importers have to pay more for buying and transporting goods from overseas. Take this example. The Government has waived Duty and Consumption Taxes on agricultural inputs such as fertilizers. Yet, the prices of fertilizers to farmers continue to increase because we have to pay more to buy overseas whether we import from Trinidad and Tobago, The Dominican Republic or Holland.


I want to explain further.
Many manufacturing processes depend on the use of fuel during the production system. It stands to reason, therefore, that if the cost of fuel, which is a unit of production, increases, then the cost of production is also likely to increase. Additionally, the manufacture of the packaging material used for the product in question often depends on the use of fuel, and this is particularly the case for plastics, which are very fuel-dependent. So, you can understand why the cost of the product would have increased even before it is shipped to Saint Lucia. But that is not the only cause for the increased cost. To get a product from its point of origin, be that point the United States, the United Kingdom, or Trinidad, to Saint Lucia, the product has to be transported either via airplane or ship. Both of these forms of transportation depend heavily on the use of fuel. When fuel prices go up, then the shipping costs also increase. Therefore, on top of the increase in what is called the FOB cost of the product, or the cost minus insurance and shipping, there has also been an increase in the cost of freight. The result is an increase in the cost of the product when it arrives in Saint Lucia, or what is called the landed cost.


This, therefore, is the effect that the volatile and ever-increasing price of fuel is having on our economy. Our Government understands this and has tried, as best we can, to cushion Saint Lucians from the full effect of this increase on some commodities. This is why, for example, Government continues to lose revenue from the sale of kerosene and Liquid Petroleum Gas (LPG), or what we call cooking gas, because we want to provide a buffer, particularly for the more vulnerable and disadvantaged among us. This is also why the prices of basic commodities like rice, flour and sugar have remained the same since 1997. That is what we are, a Government of all Saint Lucians for all Saint Lucians, which is particularly sensitive to the plight of the poor and the vulnerable among us.


All of this is not to say, however, that we should not be on the look-out for price gouging and for those who would seek to capitalize on the increase in fuel prices to impose unreasonable increases in the retail prices of commodities. This is an imperfect world, and there will always be those who seek to profit at the expense of others. I want to encourage the Department of Consumer Affairs and the National Consumer Association to be extra watchful during this period to ensure that our people are not exploited by unscrupulous and dishonest merchants, traders and retailers. Our Government will have no patience or sympathy for those persons.


In closing, I want to inform you that I will be away for nine days while I lead a CARICOM delegation to a meeting with Prime Minister Tony Blair of England, and then proceed to attend a meeting of Commonwealth Heads of Government in Malta. Both of these meetings are extremely important, especially as we seek to ensure that small island states like ours are not consumed and destroyed by the waves of trade liberalization and globalization. So, you will not hear from me until Monday, December 05, 2005, God willing.

Until we next meet, please take care of yourselves, stay safe, and protect our environment.


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