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Falkland Islands economy and Brexit…how tough will it be?

The issue said MLA Spink is the Loligo - this involves Falklands companies having Joint Ventures with Spanish Companies and the exports go to Europe

Last week Penguin News reported on the uncertainty surrounding Brexit causing a slump in meat sales from the Falkland Islands Meat Company and lower prices.

Following on from this MLA Roger Spink spoke to the Editor of Penguin News about the potential wider impact of Brexit on the Falkland Islands fishery (lucrative Loligo squid is sold into the EU) and in turn the Falklands economy and asked what is being done to mitigate the impact.

MLA Spink began by putting in context the situation surrounding the Meat Company.

He said: “This was just a reaction of buyers over there; it’s a short-term thing. From the Falklands ‘big picture’ situation it’s a big deal for FIMCO but it’s not a big deal for the Falkland Islands Government.”

He said even if FIMCO had greater problems in the future “we’ll be able to sort it out.” He acknowledged, “it’s a greater issue with the Loligo. But what we also have to remember is not all of our revenue comes from that.”

He explained that Illex goes to the Far East and Toothfish to the US (“so that’s in dollars”).

“We also get a large amount of our revenue from our reserves and the interest and capital gains on that money. So the Government has a broad range of places where it obtains its revenue.”

Loligo

The issue said MLA Spink is the Loligo - this involves Falklands companies having Joint Ventures with Spanish Companies and the exports go to Europe “and that is where we could get between 6 and 18% of a tariff on those exports.” (Meat has a much higher tariff).

He reminded however: “If a Spanish vessel catches fish here it doesn’t pay a tariff to enter Europe; if it is a Falklands flagged vessel it will pay a tariff direct to Europe. So there are various ways people may choose to mitigate the impact of any tariff.”

He said the best-case scenario of course would be an agreement where the Falklands would be tariff free.

What about a worse-case scenario, we asked. The highest possible tariffs are imposed. To what extent will that impact on the fishing industry and FIG?

“Even the worst case is very difficult to quantify,” said MLA Spink, “it depends on how much it does affect us and how much the market will absorb and how much of that tariff will be paid by the European consumer and how much is taken up by our industry.

“But I don’t think it is anything we need to panic about now; I think we need to work hard at making sure we minimize any tariffs that are introduced but at the same time look at ways of mitigating that.”

He also noted that the UK government had “expressed a willingness to try and assist us get over any short term differences.”

In any case, he said, “if the UK comes out of the EU in October we’ve probably still got a year’s worth of leeway for the next season which is January to March; we’ve got some time to try and put in place some measures.”

But it looks like a ‘no deal’ might be a reality? MLA Spink said: “Well it will be great if there’s a deal that could include us continuing to have a tariff-free access. But if it doesn’t have that in there we need to jump up and down and follow up on the contacts we’ve already made – very good contacts to try and maintain that tariff-free entry.”

Penguin News asked, so there’s not going to be a situation in a worst-case scenario where the Falkland Islands Government has to start thinking about things as serious as redundancies, as has happened in the past?

No, said MLA Spink, “as a Government we’ve been fairly prudent over the years. We have our two and a half times reserves and that’s what it is meant for.

Hopefully this will be a short-term issue and that is what we have the reserves for; we are not expecting to have to make any knee-jerk reactions.

But tariffs are not a short-term problem, commented PN MLA Spink said: “No but there are various things you can do to mitigate the tariffs. And we would expect to have to do that.”

He indicated that re-flagging might be one move but said he did not know what all of the actions would be that would be taken by the fishing industry “but the government and the industry would work hard together to make sure they minimise the effect on the economy.”

He added: “Also if you are a Spanish consumer do you want the price of your fish going up? “And you can look at the blackest side of this but when it comes down to it, is it in their interests [the EU’s]? The industry has Falklands’ partners and Spanish partners and the Spanish partners own the largest part of those companies. So actually, it is in their interests not to have tariffs.”

The partnership

The Falklands has had a partnership with the EU since the UK entered in 1973 which is formalized through the Overseas Association Decision (OAD) allowing the Islands to benefit from tariff and quota free access for fish and meat exported to the EU. In 2017 the EU27 was the destination for 94% of the Falklands fisheries exports and one third of the Falklands meat exports.

In an information paper from FIG on the subject of Brexit it notes: “FIG does not question Brexit; we respect the right of the people of the UK to determine their own future. However it is vitally important that our current access to EU markets is retained.

Anything less could have a detrimental impact on the Falkland Islands’ economy and on government revenues.”

MLAs and other FIG officials and representatives have spent time in the UK raising awareness and building support for the Falkland Islands position. (Penguin News)