Guyana Moves To Corner Caricom Sugar Markets
...as the region's high-cost producers face cutbacks, closure
July 19, 2002
By Raffique Shah
AS Trinidad and Tobago's sugar industry faces an uncertain future and government moves to restructure Caroni Limited, Guyana is positioning itself to become the major, if not sole, supplier of the commodity to the Eastern Caribbean. To this end, that country's State owned Guysuco, which is being managed by England's Booker Tate, has announced that it is proceeding with the establishment of a new sugar factory and refinery at a cost of US$110 million. When the Skeldon factory comes on stream in 2005, it will take Guyana's annual sugar production to an estimated 400,000 tonnes, almost 100,000 tonnes more than its current level of 321,000 tonnes. Caroni's sugar production this year was 101,000 tonnes.
Guysuco's CEO, Brian Webb, speaking with Stabroek News last May, said he was "banking on an aggressive marketing strategy set to place it (Guysuco) as the lead supplier of the region's sugar". Currently, Caroni Limited's refinery at Ste Madeleine is the sole manufacturer of refined (white or granulated) sugar in the Caribbean. But because of Caricom's CET rules on refined sugar, most members of the regional trade organisation import their refined sugar from outside of Caricom. Webb is insisting that a refinery be attached to the new Skeldon factory in order to grab the white and bagged brown sugar markets in the entire region. In this regard, Guysuco has refused to sell Caroni 4,600 tonnes of bagged sugar this year because it has committed itself to a private importer here, Gopaul and Company, which imports approximately 1,200 tonnes of brown sugar a month from Guysuco. Gopaul is also moving to import "plantation white", which is an inferior grade of "white" sugar, from Belize.
The machinations of Guysuco to capitalize on the presumed demise of sugar in Trinidad and Tobago, Barbados and St Kitts could have serious implications for trade relations among Caricom countries. Guyana's Agriculture Minister Navin Chandarpal announced in mid-May that his government had already secured US$46 million for the construction of the Skeldon factory, and that approaches had been made to three other international agencies for funding the project. Booker Tate was awarded the project management contract and has already begun to mobilise staff to oversee the project. Chandarpal boasted to the media: "Sales to Caricom have increased steadily over the years from 29,792 tonnes in 1999 to 44,681 tonnes last year." Projected sales this year to the region, including some 12,000 tonnes of bagged sugar to Gopaul that will effectively undermine Caroni's control of this market, is expected to be around 58,000 tonnes.
Guyana's new thrust in sugar has been given a fillip because the Trinidad and Tobago government is in the process of restructuring the industry. In its "worst case" scenario, T&T's government's proposal is to scale down the industry to a level of 80,000 tonnes to meet local consumption. It also hopes to penetrate the white sugar market in the Caribbean, since Caroni has the only sugar refinery in the region. The local industry stands to lose some or all of its European Union quota of 46,000 tonnes while Guyana and Belize, which are considered among the "less developed countries" (LDCs), are likely to retain their quotas (165,000 tonnes a year in the case of Guyana).
Guyana currently imports around 10,000 tonnes of refined sugar at an average cost of US$350 a tonne; Caroni sells its refined sugar at US$390 a tonne, so it's unable to compete there. Webb said with the introduction of a US$10 million refinery attached to the Skeldon factory, Guyana would be in a position to produce refined sugar at US$240 a tonne. Webb told Stabroek News that the imposition of a common external tariff (CET) of 40 per cent on refined sugar from outside Caricom added to the fact that "Caroni's sugar is not of an international grade" would give Guysuco "a comfortable lead in that market". The regional market for refined sugar, he said, stands at around 110,000 tonnes. Caroni's CEO, William Washington, disputed Webb's claim about his company's quality of sugar. "We meet and exceed international standards," he said.
But Webb advised the Guyana government: "It makes a lot of sense to go into white sugar and sell refined sugar in the Caricom market rather than sell raw sugar into (sic) the world market." As ACP/EU negotiations get underway soon for a new sugar protocol, big players on the world market like Brazil and South Africa are lobbying for the EU to drop its "preferential" status that ex-colonies enjoy and open up its huge market to all countries. This is reminiscent of the "banana war" waged between Central American producers and the EU, which resulted in small Eastern Caribbean countries losing their quotas to these low cost producers.
This time around, though, it will be a "dog eat dog" situation among Caricom partners, since Guyana (and possibly Belize) is moving with aggression to perform the last rites on T&T, Barbados and St Kitts' sugar industries. "With such expressed aims," said a Caroni manager, "it is clear that they are hovering over us like cobos, waiting to feast on our corpses. And this even as the union (All Trinidad) is resisting attempts to lower our costs of production. We really are facing the sword, in more ways than one."
Contacted for comment, Trade Minister Kenneth Valley said that the sugar issue did not come up for discussions during the recent Heads of Governments meeting in Guyana. "There's a perennial problem regarding the imbalance of trade between Trinidad and Tobago and the rest of our Caricom partners. What we did agree to was to set up a committee to look at this question, and to seek ways to resolve it. Ambassador (Jerry) Narace heads that committee." Valley said little could be done to prevent Guyana from aspiring to control the regional sugar market "if they are a low cost producer". "We must either be able to compete with them on a level playing field, or allow them to do what they think is best for their country."
Copyright © Raffique Shah