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Friday December 9th, 2022

Wild times as Madagascar rides vanilla price bubble

(MADAGASCAR) Hit by rampant speculation and a collapse in production following cyclone Enawo, the price of vanilla — Madagascar’s largest export — has surged in recent months.

Ice cream, aromatherapy, perfume and haute cuisine: all use the spice sourced from the Indian Ocean island which accounts for about 80 percent of global production.

The sudden cash bonanza has threatened to fuel crime and slash quality.

On the single paved road in Ampanefena, a rural community in the northeast of Madagascar, youths pass the time doing wheelies on their high-powered Japanese motorbikes.

"It cost 200 million Malagasy ariary (12,00 euros, $14,000)," claimed Akman Mat-hon, 17, atop a Kawasaki too large for his frame. His father is "in vanilla" and bought the bike as a gift.

Business is booming: since 2015 the price of the spice has soared relentlessly to "a never-before seen peak of between $600 and $750 a kilo,"(510 and 640 euros) according to Georges Geeraerts, president of Madagascar’s Group of Vanilla Exporters.

Since the market was liberalised in 1989, the price has fluctuated wildly — from $400 a kilo in 2003 to $30 in 2005, where it stayed for roughly a decade.

But demand eventually outstripped the supply of around 1,800 tonnes-a-year, spurred on by resurgent calls for organic products, speculation by financiers — and by tropical cyclone Enawo which ravaged part of the production zone.

Markets in the vanilla-producing Sava region were saturated almost overnight with motorbikes, smartphones, solar panels, generators, flat-screen televisions and gaudy home furnishings.

– ‘It’s a free-for-all’ –

"The banks struggled to keep up with the pace," said a French trader speaking on condition of anonymity.

"Money no longer has any meaning, people think it’s a free-for-all, it’s becoming anarchy," added Vittorio John, a vanilla grower in his 40s.

The price explosion has led to increased thefts from vanilla plantations.

Some growers sleep in their fields to guard their precious crop and several thieves have been beaten, imprisoned or even killed.

"We pay two police to secure the village," said Patrick Razafiarivo, 42, an intermediary between the farmers and the exporters who admits to hiding vanilla underneath his mattress.

"The police made us pay for their 4X4s," said a French exporter.

The authorities admit that they were caught unprepared for the boom.

"The root of all the problems is insecurity caused by a lack of capacity, staff, and force discipline," said Teddy Seramila, the Sava region’s development director.

Fear of thefts in the plantations has also forced some growers to pick their pods prematurely, resulting in declining standards.

"People are doing all sorts. They’re vacuum packing vanilla that can go bad. Non-experts can be misled over the quality," said an exporter from Madagascar.

"Nothing distinguishes a good pod from a bad pod, you can’t tell the difference," exporter Lucia Ranja Salvetat told AFP.

– ‘Tearing ourselves apart’ –

The vanilla trade remains largely unregulated in Madagascar, and the scant rules are seldom enforced.

Each buyer can freely tour villages and negotiate prices directly with the farmers or call intermediaries to get a quote.

"There should be a law applied to everyone but instead people do as they please," said one of the exporters from Madagascar.

"Barely any of the local authorities levy any taxes," said Seramila — even though vanilla makes up five percent of the country’s gross domestic product.

Just 21 percent of people in the region have access to drinking water and only six communities out of 86 are electrified.

"Honestly, we can’t succeed in this job. Everybody is manoeuvering and it’s the big exporters that are setting the example," said Razafiarivo.

Madagascar’s bourbon vanilla is a product of expertise handed down from generation to generation and has been considered the best in the world.

But concerns over quality could deter buyers, handing a victory to the country’s main vanilla exporting rivals — Indonesia and Uganda.

"Everything must come to an end and it’s almost certain that there will be a price fall," predicted Geeraerts, the export association chief.

"Vanilla enabled me to go to school, it’s a noble commodity. When the price falls, the opportunists will leave — but we will always be here," said Salvetat.

"We are the old-guard who have forged our future and our children’s future with vanilla — but we are in the process of tearing ourselves apart." (AFP)

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Sri Lanka bond yields end higher, kerb dollar Rs370/371

ECONOMYNEXT – Sri Lanka bonds yields ended up and the T-bills eased on active trade on Friday, dealers said.

The US dollar was 370/371 rupees in the kerb.

“The bond rates went up, however more interest was seen in the short term bills by the investors” dealers said.

A bond maturing on 01.05.2024 closed at 31.90/32.20 percent on Friday, up from 31.25/70 percent at Thursday’s close.

A bond maturing on 15.05.2026 closed at 30.30/31.30 percent steady from 30.30/31.00 percent.

The three-month T-bills closed at 30.75/31.30 percent, down from 32.00/32.25 percent.

The Central Bank’s guidance peg for interbank transactions was at 363.18 rupees against the US dollar unchanged.

Commercial banks offered dollars for telegraphic transfers between 371.78 and 372.00 for small transactions, data showed.

Buying rates are between 361.78 – 362.00 rupees. (Colombo/Dec 09/2022)

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Foreign minister, US ambassador discuss future assistance to crisis-hit Sri Lanka

ECONOMYNEXT — In a meeting in Colombo, Sri Lanka Foreign Minister Ali Sabry and US Ambassador to Sri Lanka Julie Chung discussed ways in which the United States can continue to support Sri Lanka going forward, the Ambassador said.

Chung tweeted Friday December 09 afternoon that the two officials had reflected on the “twists and turns” of 2022, at the meeting.

Minister Sabry was recently in Washington D.C. where he US Secretary of State Antony Blinken.

A foreign ministry statement said the two officials held productive discussions at the Department of State on December 02 on further elevating bilateral relations in diverse spheres, including the 75th anniversary of diplomatic relations which will be marked in 2023.

Incidentally, Sri Lanka also celebrates the 75th anniversary of its independence from the British in 2023, and President Ranil Wickremesinghe has given himself and all parties that represent parliament a deadline to find a permanent solution to Sri Lanka’s decades-long ethnic issue.

The US has been vocal about Sri Lanka addressing concerns about its human rights record since the end of the civil war in 2009 and was a sponsor of the latest resolution on Sri Lanka passed by the United Nations Human Rights Council. Unlike previous resolutions, this year’s iteration makes specific reference to the country’s prevailing currency crisis and calls for investigations on corruption allegations.

In the lead up to the UNHRC sessions in Geneva, Minister Sabry Sri Lanka’s government under then new president Wickremesinghe does not want any confrontation with any international partner but will oppose any anti-constitutional move forced upon the country.

On the eve of the sessions on October 06, Sabry said countries such as the United States and the United Kingdom, who led the UNHRC core group on Sri Lanka, are greatly influenced by domestic-level lobbying by pressure groups from the Sri Lankan Tamil diaspora.

These pronouncements notwithstanding, the Wickremesnghe government has been making inroads to the West as well as India and Japan, eager to obtain their assistance in seeing Sri Lanka through the ongoing crisis.

The island nation has entered into a preliminary agreement with the International Monetary Fund (IMF) for an extended fund facility of 2.9 billion dollars to be disbursed over a period of four years, subject to a successful debt restructure programme and structural reforms.

Much depends on whether or not China agrees to restructure Sri Lanka’s 7.4 billion dollar outstanding debt to the emerging superpower. Beijing’s apparent hesitance to go for a swift restructure prompted Tamil National Alliance MP Shanakiyan Rasamanickam to warn of possible “go home, China” protests in Colombo, similar to the wave of protests that forced the exit of former pro-China President Gotabaya Rajapaksa.

The TNA will be a key player in upcoming talks with the Wickremesinghe government on a solution to Sri Lanka’s ethnic issue. (Colombo/Dec09/2022)

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India smogs out Sri Lanka’s China tower observers


ECONOMYNEXT – Sri Lanka’s Chinese-built Lotus Tower has halved visitors to its observation deck an official said as dirty air flowing from India triggered air quality warnings and schools in the capital closed.

“Masks are mandatory at the observation deck and roughly around 50 to 60 can go up to the observation deck at a time, time limits have not been altered and still persists at 20 minutes for observation,” the official told EconomyNext.

Prior to the smog, 120 observers were permitted at once to the deck.

However, even after limitations the Lotus Tower has continued to draw visitors, and revenues are coming in, the official said.

The tower built with a Chinese loan by the cash rich Telecom Regulatory Commission has been described by critics as a white elephant that eats the money earned from telecom operators mainly as spectrum fees.

Sri Lanka’s National Building Research Organization (NBRO) said India air heavily polluted with particulate matter was flowing across the island into a depression in the South West Bengal Bay. (Colombo/Dec09/2022)



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