GENEVA: Switzerland risks sending commodity traders scurrying for the exit when voters cast ballots on Sunday for an initiative seeking to ban speculation on food commodities.
The youth wing of the Social Democratic Party gathered more than 100,000 signatures to force a vote under the nation’s system of direct democracy on a proposal it says will reduce world hunger. Using derivatives and other instruments to trade agricultural commodities leads to spikes in food prices, causing famine and malnutrition, according to the party.
The Swiss government and trading houses clustered around Geneva say the initiative to ban investments in such instruments would damage an industry that has created 10,000 jobs and accounts for 4 percent of the economy. Cargill Inc., one of the world’s four largest agricultural firms, said the proposal won’t achieve its goal of food security, but by preventing hedging it would push traders out of Switzerland.
“We would expect it to have a significant impact on the volume of our operations in Geneva,” said Louis de Schorlemer, a spokesman for Cargill, which employs about 550 people in the city. “It will not keep food prices low; it might merely push the merchant activities outside of Switzerland.”
Louis Dreyfus Commodities BV, the 165-year-old trading house controlled by Russian-born billionaire Margarita Louis-Dreyfus, also said the initiative could cause traders to leave.
“The most significant impact of a yes vote will be the loss of both employment as well as revenue for Switzerland,” the company with trading operations in Geneva said in a statement. “Globally, the initiative would fail to offer an appropriate solution to the grave problem of food scarcity.”
Swiss President Johann Schneider-Ammann said last month the link between rising prices and speculation in food commodity derivatives hadn’t been established. If passed, the initiative would be “very problematic” for Switzerland, he said, according to a report by national broadcaster SRF.
A Feb. 17 poll by gfs.bern for SRF showed 54 percent of voters are against the ban on companies speculating on foodstuffs, while 31 percent were in favor. Of the 1,411 people surveyed, 15 percent were undecided.
The Feb. 28 plebiscite will also see the Swiss vote on whether authorities should be required to expel foreigners found guilty of offenses such as murder, rape and armed robbery, an initiative sponsored by the anti-immigrant Swiss People’s Party. The Swiss will also vote on whether to build a second automobile tunnel under the St. Gotthard pass.
The Swiss Trade and Shipping Association, which represents most commodity traders in Switzerland with the exception of Glencore Plc, didn’t mount a major campaign to sway public opinion against the proposal. Stephane Graber, secretary general of the STSA, declined requests for an interview.
While Patrick Odier, chairman of the Swiss Bankers Association, called on commodity traders to explain their businesses more clearly to defeat the Social Democratic Party proposal, opponents of a ban seem to think they can win without a big campaign, according to Georg Lutz, a politics professor at the University of Lausanne.
That nonchalance, he said, belies the grave consequences an unexpected yes vote to ban food-commodity speculation would have on the Lake Geneva region, the world’s largest grain-trading hub.
“It is rather easy to take the trade abroad,” said Lutz. “Those big companies in Geneva, they might be gone quite quickly.”
