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The Sugar Worker, November 2003. News from the Sugar Sector.

Posted to the IUF website 03-Dec-2003

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume V, Number 11
November 2003

Contents




Brazil: Alagoas Sugar Workers Negotiate New Minimum Wage

On 13 November, Fetaeg, the Alagoas state rural workers federation, reached an agreement with factories and cane growers on a new minimum wage covering some 100,000 cane cutters, said the Gazeta de Alagoas. The new minimum wage is 282.50 reais per month (USD 1.00 = BRL 2.92), which represents a 13 percent increase over the current minimum, and a 23 percent over last year's. (The sugar sector follows a legal clause that does not permit the minimum wage to be less than 10 reais above the legislated minimum, which was used to readjust the minimum earlier this year.) The agreement also includes a 16.15 percent increase on tasks, and a new pay of 2.17 reais for tonne of cut cane.

Fetaeg had announced the possibility of a massive strike in mid November, because wage negotiations were reaching an impasse, result of a difference of 3 reais: the federation had proposed 284 reais per month, while employers offered 281 reais. According to the Gazeta de Alagoas, the rural workers federation in Pernambuco, the second largest cane producer in Northeast Brazil, had agreed to a monthly minimum wage of 272 reais in early November. The Pernambuco settlement influenced the negotiations in Alagoas, the largest producer in the region.

In interesting news from Pernambuco state, around 500 workers formed a cooperative to reactivate the Usina Santa Terezinha in the municipality of �gua Preta, which had been non-operative for 10 years. The cooperative has the support from the alcohol and sugar workers' union and the cane growers association from Pernambuco, and plans to process some 300,000 tonnes of cane 2003/04 harvest, all of which is supplied by independent growers.

In Pernambuco as well, some 140 landless families will benefit from the expropriation of four farms of Engheno Prado, owned by the Jo�o Santos Group. On 26 November, because of social interest and agrarian reform, the government expropriated close to 2,000 hectares of land in enghenos Depend�ncia, Taquara, Papicu and Focos, located in Tracunha�m, about 60 km northwest of Recife. The landless peasants had occupied the lands for about six years, until their eviction in early November. (More information in Sugar Worker, May 2003.)

Meanwhile, in early November, the Agriculture Ministry announced the distribution of the US sugar quota to producers in the Northeast, the country's sole beneficiaries of the US preferential market. The approximately 160,000 tonnes of sugar under quota were allocated to sugar producers only, not to those who produce alcohol as has happened in the past. Alagoas and Pernambuco account for about 85 percent of the total, being the two largest producers. The remaining volume was distributed between Cear�, Maranh�o, Rio Grande do Norte, Para�ba, Sergipe and Baia. The quota allocations were based on the average participation of each state in the previous three harvests. It was added that those producers who did not process cane in their own factories in the 2002/03 harvest would not be included in the distribution of the quota next year.

According to industry sources, the distribution of the US quotas has not followed consistent procedures, and some dispute was witnessed during the negotiations. For instance, some groups were of the opinion that the quota should be distributed according to the volume of production by each state, while others thought that social factors should be taken into consideration, as the largest producers are not always where the sector requires more support. Some groups, however, have commended the Lula Administration for having involved all concerned parties in the distribution of the US quota, expecting that the government would be able to define a clearer and consistent procedure to be followed in the future.

Dominican Republic: Ex-CEA Workers Obtained Payments

Four years after the jobs of 25,536 workers were terminated in the ten sugar mills owned and run by the state-owned Consejo Estatal del Az�car (CEA), in a step towards the privatisation of the sugar industry, the Dominican government has agreed to pay 5.8 million Dominican pesos (USD 1.00= DOP 39.50) to sugar workers and unions, due as economic and social benefits from collective bargaining agreements, and including non-paid overtime and payments to workers' organizations. Additionally, it was reported by union sources, another 36 million pesos would be paid into workers' retirement plans. In addition to the ex-CEA workers, 127 unions and 13 federations and confederations would also benefit from the package. The agreement was signed between the CEA, the privatisation committee CREP and the union of ex-CEA workers, headed by the newly organized FUTRAZUCAR. The latter is a result of a process of unification among Dominican sugar unions.

Colombia: Sugar Sector Interested in Fuel Alcohol

In mid October, the Manuelita Mill, one of the largest groups in the country said it is planning to build a USD 10-12 million fuel alcohol plant in order to diversify its production, which is concentrated in sugar. The Group does not plan to expand its sugar cane growing operations to supply the factory, but would use some of the cane allocated to sugar to produce alcohol. Manuelita's sugar exports account for about 57 percent of the sugar it produces

The company commented about the Colombian government activities to encourage the installation of alcohol factories in the context of a program to sell gasoline mixed with fuel alcohol. According to this plan, the mixture should be sold in four of the country's largest cities beginning in 2005; another four cities would be included in 2006, and then the program would be expanded to the rest of the country. A delegation from Manuelita was to visit Brazil, India, and some European countries to learn about alcohol production technology and assess factory performance.

In related news, Comsul, an alcohol producer, said it would build a 150,000 litres per day ethanol plant in the Caldas department. The project of about USD 20 million is a joint venture with the Brazilian group Biagi, with the Banco do Brasil providing up to 85 percent of the financing. The project would require some 12,000 hectares of cane, according to SmartInfo Ltda., a Colombian consultancy firm, who also said that the partners have estimated total revenues in the order of USD 15-17 million per year.

European Union: Balkan/EU Sugar Frauds Revealed

An investigation by the EU's Anti-Fraud Office (OLAF) has revealed sugar trade frauds estimated at 100 million Euros, whereby businesses in Serbia and Croatia had been buying EU sugar at world prices, only to repackage it for sale in the EU, at prices three times higher. The practice contravenes a 2001 agreement by which the Balkan countries can export duty and quota free to the European Union.

Croatia has admitted to some irregularities in the sugar exports to the EU, saying that a factory in the town of Osijek had mixed small quantities of cane sugar in beet sugar exported to the EU last year. The government said that the exporters had "wrongly" thought that the quantities were too small to be declared. Last June, the OLAF said it had started several investigations into EU imports of sugar from the Balkans, which amounted to 250,000 tonnes in 2001/0; in particular, OLAF was looking closely at Croatian shipments of sugar to Greece.

Suspicions about fraudulent operations, coupled with the inability of the Balkan countries to impose strict trade controls, have been known for some time, soon after the preferential treatment was granted in 2001. The EU had agreed to a trade program with the Balkan states to help their reconstruction after the wars, and political, social and economic turmoil. It was soon discovered, however, that the program was open to abuse: the resale of EU sugar in the same EU by Balkan businesses who bought it at world prices only to resell it at preferential ones, and the mixing cane sugar in what was supposed to be shipments of Balkan beet sugar only.

In May 2003, the EU Commission suspended for three months the duty-free sugar imports from Serbia and Montenegro, because of alleged frauds and imposed a tariff varying between 339 and 419 euros per tonne, which is usual for sugar imported into the EU. In late July, the suspension was extended for another six months, until February 2004, because of the inability of Serbia and Montenegro to ensure that the exported sugar actually originated within the country.

One important element influencing the situation is the difference in custom regulations in Serbia and Montenegro. In May 2002, for instance, it was reported that even though Serbia and Montenegro had parallel systems, they kept different duties, and both suffer from deficient supervisory systems. In these circumstances, some traders were apparently reporting sugar imports into Montenegro, which were in fact destined for Serbia. The practice allowed them to avoid the high import tariffs in Montenegro (a 20 percent duty) and paid the low 1 percent tariff in Serbia. Serbia's role in the sugar trade with the EU has been highlighted: the country had been a sugar importer for most of the 1990s, but, in 2001, it exported close to 350,000 tonnes while importing about 200,000 tonnes. Spokespersons for Serbian customs commented that these figures indicated the probability that imported sugar was being repackaged for re-export. Since 1992, Serbia and Montenegro are officially one country, but they had been increasingly operating as two separate economies since 1998. It is only now when efforts are made to harmonize systems, international sugar sources said.

The EU preferential treatment also includes Albania, Bosnia-Herzegovina, Croatia, and Macedonia, in addition to Serbia and Montenegro. As part of the Balkan program, the EU had also approved export subsidies for EU traders selling sugar to the Balkans. The subsidies have been suspended until June 2004.

Philippines: Exports of Sugar Even at a Loss

The Sugar Regulatory Administration (SRA) said that the Philippines would export some 80,000 tonnes of sugar to the world market by the end of January, even at a loss, in order to prevent stockpiling sugar inventories. The amount represents about four percent of the estimated total production for 2003/04, which the SRA puts at 2.2 million tonnes, up from 2.16 million in 2002/03, and the highest level since 1993/94. The Philippines has been a net importer since 1993, although it has fulfilled its US sugar quota, of about 140,000 tonnes per year.

The SRA has launched an ambitious revitalization program, with a goal to reach some 3.5 million tonnes of sugar by 2015, the so-called "Sugar Master Plan," worth about USD 700 million. The program touches several key aspects of the industry: from the upgrading of 28 mill and refinery facilities to farm mechanization, improvement of sugar cane production and transportation, and research and development. The Sugar Master Plan Foundation added that the plan would be financed by loans from the private sectors, new capital infusion, and government support. The sugar sector provides employment for 556,000 cane farmers and 25,000 workers in mills and refineries.

In related news, it was announced in late August that the Ban Pong Intertrade from Thailand would join the Cotabato Sugar Multipurpose Development Cooperative, in the expansion of the latter's operations in Central Mindanao, south of Manila. It was said that the project would seek financing from the Land Bank of the Philippines of close to USD 16 million, and, once the agreement is finalized, the Ban Pong Intertrade would add another USD 5.3 million. The project will develop about 20,000 hectares and create 20,000 direct jobs.

Sugar Trade: FTAA Meeting Ends Early

A two-day ministerial meeting of the Free Trade Area of the Americas (FTAA) scheduled for 20-21 November in Miami, ended almost as soon as it started, since the proposed text from co-chairs Brazil and the United States allowed countries to select sections of the FTAA agreement in which to want to be involved, and drop those they do not support. In addition, without the agricultural subsidies on the negotiating table - an important issue for the US, which goes to elections in 2004 -, negotiators were left with little to negotiate. The FTAA negotiating committee will meet in early February 2004 in Mexico, and a ministerial meeting will be held in late July or August in Brazil.

Before the negotiations, the Louisiana and Florida sugar groups were aggressively campaigning to remove sugar from the negotiations, a campaign linked to talks for a Central American Free Trade Agreement (CAFTA). In general, the US sugar industry opposes the inclusion of sugar in any bilateral or regional trade talks; it strongly favours the WTO's multilateral negotiations. Nonetheless, the US government is opening free trade talks with six Latin American countries (Peru, Panama, and the Dominican Republic among others), in addition to the five countries in CAFTA.

Days after the FTAA talks ended, Brazil and Argentina, members of the Mercosur trade area (which also includes Uruguay and Paraguay), said that they would seek compensation from FTAA countries, like the United States and Canada, which give advantages to their agricultural sectors through subsidies. An Argentinean spokesperson said that promoting free trade should be accompanied by eliminating the impact of such subsidies within the FTAA. US spokespersons said their country would not consider unilaterally reducing agricultural support, pointing their finger to agricultural policies in Japan and the European Union.

Health and Safety: Nicaragua Sugar Workers' Legal Battle on Kidney Disease

On 11 November, coinciding with the start of the 2003/04 harvest in the Chinandega department, workers of the Monte Rosa sugar mill launched a legal suit against the company, charging that working conditions are the main cause of a chronic deficiency of the kidney, a disease that has taken the life of hundreds of sugar workers in the past.

In early October, lawyers representing some 300 Monte Rosa workers said that, in this case, there is evidence linking the disease with working conditions in the cane fields. More recently, a representative of the workers said that for over a year they have demanded the company to pay 100,000 Nicaraguan c�rdobas (USD 6,500) as compensation. They added that at least 25 workers have died in recent years because of the disease, and the company has given no financial help to the bereaved families.

The chronic kidney deficiency was identified several years ago and is also the subject of another case involving workers of the San Antonio mill, also in Chinandega. According to the local paper La Prensa, the San Antonio might have already compensated an undetermined number of workers suffering from the disease. The paper said also that a recent study in the Occidente region (Leon and Chinandega) found that 10 percent of agricultural workers suffer the kidney deficiency, with the majority of them exposed to chemicals used in pest control and part of a population with high index of alcohol consumption.

Last May, Parliament passed a law defining the chronic kidney deficiency as a professional disease, but the Executive vetoed it. The government's decision might be linked to the lack of information and studies on the disease, which fosters several explanations on its causes, such as the disease being an effect of the significant quantities of agro-toxics used in agriculture (cotton in the past, sugar now), the presence of heavy metals due to volcanic activity in the area, heavy physical activity and high temperatures in agricultural work, and high sugar intake and high consumption of alcohol among the population. Both the San Antonio and the Monte Rosa mills are of the opinion that the chronic kidney deficiency is an endemic disease and not related to working conditions. The current situation is a lethal combination for the workers: the chronic kidney deficiency usually precedes the renal terminal disease, which require dialysis or kidney transplant. In conditions where the latter are not available, as in the case of the sugar workers in Chinandega, the outcome is death.

This situation contrasts with the economic and financial development of the sugar sector in Chinandega: the San Antonio mill, the largest in the country, is property of the powerful Pellas Family, and Monte Rosa was bought in 1998 by the Pantale�n Group, a large sugar company from Guatemala. The Pantale�n said it has invested some USD 50 million since acquiring the Monte Rosa, where is in the process or has already implemented projects in cogeneration of electricity, harvest mechanization in new lands, information technology to network the company with the country base of Guatemala, and sugar packaging in different weights to open markets. Monte Rosa produced around 110,000 tonnes of sugar in the 2002/03 harvest, about 35 percent increase on the year. (For more information, see Sugar Worker, March 2001.)

Company News

Southern Africa: Tongaat Proposes Closing Entumeni in South Africa

In mid November, Tongaat-Hulett Group, the sugar and aluminium South African giant, said it is considering closing Entumeni mill located in KwaZulu-Natal province. The mill provides direct employment to some 120-factory workers and some 3,500 emerging farmers. With 1,680 tonnes of daily processing capacity, about 5 percent of the Group's South African total, the Entumeni is also reported to be the highest cost producer from among the five mills Tongaat owns in the country.

Tongaat said it will consult with workers and farmers on the closing the Entumeni, and has proposed to pay the costs of delivering the cane to other Tongaat mills, which has enough spare capacity to process the Entumeni cane. Closing the mill, said Tongaat's chief executive, would improve the Group's "overall cost profile and competitiveness."

The announcement was not well received by workers and farmers. The 120 workers facing retrenchment have a counterproposal with projects to increase processing capacity and make the mill profitable in two years; while the emerging farmers, responsible for about a quarter of the processed cane, said they had programs to increase cane production by 50 percent in the near future. Local and national governmental agencies also said that they have invested (or are committed to do so) in road infrastructure to facilitate cane transportation. The local press said that, in a situation where one direct job in sugar supports 10 dependants, it is estimated that some 36,000 people would be affected by the closing the Entumeni mill, in a region where unemployment is estimated at 60 percent.

In early June, speaking at the commissioning for the rehabilitation of the Xinavane sugar mill and plantation in Mozambique, the chief executive of Tongaat-Hulett said that the Group has the capacity to invest another USD 500 million over the next three to five years in that country. Xinavane, were Tongaat is reported to own 49 percent, is expected to more than double production, from 30,000 tonnes in 2002 to 70,000 tonnes of sugar by 2006. In a probable second phase of expansion, land under cane would increase to 12,000 hectares and production to 140,000 tonnes of sugar per year. The rehabilitation of Xinavane would create some 4,000 direct jobs in a USD 64 million project, it was added. The chief executive said that the participation in the sugar industry of Mozambique, which also includes the Mafambisse mill, is a significant step for Tongaat-Hulett to become a regional player rather that being "just a KwaZulu-Natal or national (i.e. South Africa) player."