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The Sugar Worker, July - August 2003. News from the Sugar Sector.

Posted to the IUF website 07-Sep-2003

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume V, Number 7 & 8
July - August 2003

Contents




Trinidad: Caroni Closes

All 9,000 employees of the state-owned and managed Caroni (1975) Ltd. signed a Voluntary Separation of Employment Programme (VSEP) offered by the government in the process of restructuring the local sugar industry. Caroni ceased operations as of 31 July and a new sugar company, the Sugar Manufacturing Co. Ltd. (SMCL), was born. The SMCL would be responsible for manufacturing sugar using cane supplied by independent farmers, and would operate the factory and refinery in Ste Madeleine as well as the shipping operations.

After 23 years of operations, Caroni's end came after the Industrial Court had granted the All Trinidad Sugar and General Workers Trade Union (ATSGWTU) an injunction to stop the VSEP process to some 8,000 "daily-paid" workers. Also, the Court had ordered Caroni to negotiate the VSEP with the union, and the parties to reach an agreement by mid July. Although the Court's injunction was a vindication of the union's claim that the VSEP had not been negotiated before being offered to the workers, the negotiations ordered by the Industrial Court developed under a tense environment: government officials said that if the workers did not take the VSEP, they would be retrenched and lose all benefits offered. The union then recommended the daily-paid workers to accept the VSEP. The VSEP financial conditions did not change: workers receive severance payments according to their collective agreement plus an additional lump sum. The latter is a percentage of the severance determined by the age of the individual worker that varies from zero for workers in the 61-65 years bracket to 50 percent for those in the 46-50 years group.

The VSEP offer has four other aspects: access to agricultural land on long-term leases, access to housing lots, training programs, and counselling. The All Trinidad is to appoint representatives to the committees overseeing these programs to ensure that workers' rights are respected throughout the process. The union also advised all workers to enrol themselves in the agricultural land and housing lots programs.

On 1 August, Caroni started the VSEP payments and, according to union sources, problems appeared: many workers complained that the company does not have a complete record of their years of service on which to calculate the VSEP and pension payments. The training programs for daily-paid workers were to start at the end of August and two offices had been established where the workers receive information and can arrange training.

The union sources also said the new SMCL is hiring personnel on 2-month contracts and with terms and conditions quite different from the ones in Caroni. The union has approached the SMCL and the Rum Distillers seeking representation rights. (Besides the SMCL, two other companies have appeared: the Estate Development and Management Co. (EDMC) created last year to manage Caroni's 77,000 acres of land, and the Rum Distillers of Trinidad and Tobago Ltd., which takes over Caroni's Rum Division.)

The post-Caroni era appears to have had a rough start. Farmers insist that they do not have the necessary means to switch to a quality-based payment system by next crop, in addition to the confusion around VSEP payments to workers. As well, an employee association demanded the freezing of Caroni assets because the company failed to make contributions to their pension fund. In this context, the Minister of Agriculture said that there is no guarantee that the sugar industry would survive in Trinidad, even with the new SMCL. Survival depends on farmers providing good quality cane in order to improve the tonnes of cane/tonnes of sugar ratio and all groups "doing what is expected from them," said the Minister in statements quoted by the Trinidad Express on 30 August. The Minister added that the government plans to upgrade the Ste Madeleine factory to make it more efficient but no details were offered.

Jamaica: Redevelopment Plan for Hampden

After closing the Hampden factory last December, the Sugar Company of Jamaica (SCJ) recently unveiled a redevelopment plan for Hampden Estate, at a cost of 370 million Jamaican dollars (USD 1.00 = JMD 56.00) over the next three years. The plan, to start in September, includes the planting of 1,300 hectares of cane; refurbishing and modernising the distillery; the cultivation of 200 hectares with crops other than cane; building a bottling plant, and developing a "heritage tourism" attraction in the estate.

The plan also calls for the termination of some 450 jobs in the estate, in addition to the 200 jobs lost when the factory was closed last year. By the end of August, workers would receive 22 million Jamaica dollars in lieu of notice, and 68 million dollars in redundancy payments by the end of 2003. The redevelopment plan was presented to the sugar workers and unions in a meeting in late July, who accepted it.

Union leaders said this is the first time that a redevelopment plan accompanies the closure of a sugar factory, and promised workers to closely examine the calculation of payments to ensure their rights are respected. They also said that workers hired in the new activities should receive better wages than Hampden, while the SCJ said that about 150 workers would be hired in multi-skilled and permanent jobs.

Meanwhile, a spokesperson for the Jamaica Cane Products Sales Ltd. said the 2002/03 crop ended on 31 July, with some 153,000 tonnes of sugar, about 22,000 tonnes less than in the previous year, and a 60-year low. Jamaica is expected to import 34,000 tonnes in 2003, with 24,000 tonnes already bought from Belize and Guyana, in comparison with the 16,335 tonnes imported last year. These imports allowed Jamaica to fill her 126,000-tonne quota in the European Union, but fell 2,000 tonnes short in her 11,580-tonne quota in the United States.

Mexico: Court Rules Government to Return Mills to GAM

A judge in a district court ruled that the government must return three mills to the Grupo Azucarero M�xico (GAM), because the condition of "public interest" stated for the expropriation of September 2001 should have not applied to them. The mills are the Benito Ju�rez (6,000 tonnes of daily capacity - tdc - in Tabasco), L�zaro C�rdenas (2,000 tdc, Michoac�n) and Jos� Mar�a Mart�nez (12,000 tdc, Jalisco). Two other mills, the San Pedro (10,500 tdc) and San Francisco (6,000 tdc), both in Veracruz, were not included in the ruling because the GAM decided in November 2002 not to reclaim them, leaving them with the government to pay debts held with different agencies, including the national bank for foreign trade, Bancomext. The Ministry of Agriculture, it was reported, would appeal the court's ruling.

According to local papers, the GAM said in mid August that they were about to win their case, which would oblige the government to pay USD 80 million in compensation and that debts up to USD 40 million would be condoned. Other three groups, the Grupo Santos, the Grupo Machado and the Consorcio Azucarero Escorpi�n (CAZE), have also won initial cases against the expropriation.

Reaching a solution to the mills' expropriation case would demand more than a legal process. The September 2001 expropriation took place in the midst of a tense situation, with mills well behind in cane payments and protests from sugar workers and cane farmers. Later on, charges of fraud were brought against the Consorcio Azucarero Escorpi�n (CAZE) in cases that involved government officials and the company's top management. In early 2003, officials said that it should be expected that the government would keep the expropriated mills until 2006, even when March 2003 had been initially set as date for a new privatisation process, and, in the previous harvest, some political groups hailed a supposedly good performance of the expropriated mills.

At present, political factors continue being important. Commenting the district court's decision, the cane farmers union UNC said that the GAM had little chance of getting back the mills because the conditions of public interest applied to them and, it added, there is evidence that the expropriation has been successful and achieved the goals that farmers "had been expecting." On the other hand, the recent congressional elections favoured the PRI political party, and the Fox Administration now faces a stronger political opposition.

European Union: WTO Panel to Look Into Sugar Subsidies

On 29 August, the World Trade Organisation (WTO) agreed to set up a panel of experts to look into allegations of illegal subsidies to sugar exports of the European Union (EU), a case brought by Australia, Brazil and Thailand. The three countries claim the EU export subsidies depress world prices and have a negative impact on their earnings. Brazil has said, for instance, that it losses about USD 900 million per year in sugar exports because of the EU regime.

In July, the EU blocked a request to set the expert panel but a second request, according to WTO rules, necessarily sets the process in motion. The WTO expert panel might take a year to produce a first report, and, with possible appeals, a final decision might come at the end of 2004. On related news, the EU sugar regime may come under criticism by some EU country members as well: the Copenhagen Post reported on 24 July that a majority of the Danish parliament would ask the government to elaborate a five-year program to phase out sugar subsidies and allow poor countries unrestrictive access to the EU sugar market.

The future of the EU sugar regime is important for the Africa, Caribbean and Pacific (ACP) countries because of their dependency on the EU sugar protocol, although the protocol itself is not a part of the regime. The ACP sugar suppliers fear that their preferential treatment they benefit from would be severely undermined by a revision or elimination of the regime. The EU has said, for instance, that challenges to the regime would have a negative impact on the ACP exports. In replying, Australia said its complains refer to export subsidies on sugar produced in the EU, adding that the EU spends some USD 10 billion on price supports and USD 2.7 billion on export subsidies. Earlier in the year, official Brazilian sources said that the EU should continue honouring its commitments with the ACP countries, regardless of the challenge to the sugar regime.

The ministerial sugar conference of the ACP countries held in Fiji in July 21-24, discussed the perspectives in the EU sugar market. The meeting was aware that current developments will have a negative impact on their trade arrangements with the EU, among them: the WTO challenge by Australia, Brazil and Thailand; the reform of the Common Agricultural Policy (CAP) and the review of the sugar regime; the future negotiations on Economic Partnership Agreements (EPA); the process of EU enlargement, and trade initiatives such as the Everything But Arms (EBA). The conference agreed that it was crucial for the ACP countries to maintain the value of the EU-ACP trade agreements and find ways to make them WTO compatible.

The EU sugar regime is also pressed by the negotiations to reform the European Common Agricultural Policy (CAP) that have agreed to direct assistance to farmers, independently from production. In the past, the link between subsidies and production led, according to analysts, to overproduction in several agricultural EU sectors.

The EU is also considering proposals for sugar reform. Studies done by independent groups and the Commission's own experts outline a future with substantial cuts in support prices and the elimination of production quotas. Goldman Sachs, an investment bank, made some interesting comments that were quoted by Reuters on 21 August. The bank said that radical changes to the regime would "dent" profits of EU sugar companies, mentioning specifically the Associated British Food (ABF), which owns British Sugar; the Danish group Danisco; and the sugar and sweetener conglomerate, Tate & Lyle. Danisco's top management had previously commented that certain changes in the regime could mean a 30 percent reduction in prices and 10 percent reduction in beet production. If this scenario develops, Goldman Sachs forecasts a 60 percent decline in profits for ABF and 40 percent in Danisco.

Vietnam: Three State-owned Factories to Close

In early July, the Vietnamese Ministry of Agriculture and Rural Development (MARD) said that three state-owned mills would be closed at the end of the current harvest because of losses that totalled USD 100 million in 2002. The three factories are the Viet Tri in northern Phu Tho province, Son Duong in northern Tuyen Quang province and Quang Binh in central Quang Binh province, which have been operating at less than half their production capacity. Last year, the MARD had planned to close or merge between 5 and 10 unprofitable factories.

Vietnam has 44 operating factories, six of which are foreign-owned. It is estimated that in 2002 production was 1.2 million tonnes of sugar, a 20 percent increase on the year. The industry, however, appears to suffer from lack of capital and illegal imports mainly originating in Thailand. In April this year, international sources reported that a new sugar policy then under discussion would allow government support to interest rates on offshore loans contracted to build new factories. Mills would also be able to retain the value-added tax in the 2001-2005 period and to access soft loans to develop cane areas, but all mills that after 2005 produce losses would be closed.

Syria: Plans for New Sugar Refinery

According to Xinhua, the Chinese state agency news, investors from Syria, Kuwait and Brazil would build a refinery with capacity to produce 1 million tonnes of sugar per year, at a cost of USD 180 million. The project would end the state monopoly in the sugar sector that, at present, has six factories run by the General Organisation for Sugar (GOFS), a subsidiary of the Ministry of Industry.

Meanwhile, it was reported that Syria signed a deal with the Sugar and Integrated Industries Co. from Egypt to increase the processing capacity in the al-Ghab sugar factory to 600 tonnes of beet per day (tdc), up from the current 340 tdc. The project is worth USD 75 million and would be completed in 26 months.

Syria's annual sugar production is about 100,000 tonnes, against an estimated consumption of over 600,000 tonnes, which are mostly covered with refined sugar imports from the European Union.

Company News

United States: Brooklyn Refinery to Close

American Sugar Refining Co. announced it would close the 147-year old Brooklyn refinery in February 2004. There are some 190 jobs, out of which some 60 will remain in packaging operations. The company said that it needs to rationalize production to adjust to market conditions, and the Baltimore refinery, which it also owns, would take most of production from Brooklyn.

The Brooklyn refinery has an annual production capacity close to 430,000 tonnes of sugar, but last year it produced less than half. Baltimore, said American Sugar, has a capacity of 680,000 tonnes and is equipped to process the extra production from Brooklyn without hiring more labour than its current 300 hourly workers. Baltimore "will be more effectively utilized," said a company spokesperson.

The Brooklyn refinery was the scenario of a bitter struggle that lasted 20 months in 1999-2001, when the U.K.-based Tate & Lyle was the owner of Domino Sugars. When the strike ended in February 2001, terms and conditions had dramatically deteriorated; a profound division appeared between workers who had honoured the picket line and those who crossed it; and 110 jobs were lost. Five months later, American Sugar, a company formed by Florida-based sugar groups acquired Brooklyn and also Baltimore and Chalmette (Louisiana), the other two Domino refineries. The Florida groups already owned a refinery in Yonkers, New York.

Meanwhile, the state of Louisiana gave a USD 1 million tax break over five years to Imperial Sugar, in exchange for 25 packaging jobs in the Gramercy refinery, in addition to the 345 jobs of the plant, reported the Associated Press. The company, which was under bankruptcy protection in 2001, said that the jobs might have gone to Houston, Texas, if Louisiana would not have come with the "incentives." It was reported that the tax credits are against income, franchise and sales taxes. Imperial Sugar closed its 160-year old refinery in Sugar Land, Texas, last December.

Zambia: Zambia Sugar New Profit Record

Zambia Sugar, a subsidiary of the South African Illovo Sugar, reached an after-tax net profit record of 67 billion Zambian kwachas (USD 1.00 = ZMK 4,730) in the 2002 financial year, up from 32.4 billion kwachas the previous year. The company said that it achieved a record production of 232,765 tonnes of sugar in 2002, of which 220,106 tonnes were sold. A total of 111,178 tonnes were sold into the domestic market, which provided remunerative income in spite of difficult economic conditions in the country. The company added that in the future it intends to cover remote areas of the country as well. Another 108,928 tonnes were exported taking advantage of the preferential markets in the European Union and the Southern African Development Community (SADC), but problems in the Common Market for Eastern and Southern Africa (COMESA), which prompted the introduction of trade restrictions in some countries, did not allow the company to take full advantage of the trade agreement.