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The Sugar Worker, May 2004. News from the Sugar Sector.

Posted to the IUF website 01-Jun-2004

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume VI, Number 5
May 2004

IUF: Global Sugar Conference

Over 110 participants from 38 unions, in addition to speakers and guests, met in the trade union centre BZO in Oberjosbach, near Frankfurt, for the IUF Global Sugar Conference from 19-21 May. Working in 11 languages, the conference heard and discussed presentations by trade union delegates, government officials, and representatives from sugar groups and companies, on the fundamental aspects of the industry, market and policies issues, and, more importantly, explored the social conditions in which sugar is produced, what is required to make it sustainable in the long term, and the role of the unions.

Introducing the conference, Franz-Joseph M�llenberg, NGG president, said that unions are concerned with the long-term sustainability of the sugar industry, which requires that social and environmental considerations guide its development in the context of the globalisation and liberalisation. Fair working conditions for workers and protection for the environment are combined in the trade union perspective, which set the tone for the discussions.

Given the developments within the European Union, their impact on several sugar industries around the world and their influence on international trade talks, the conference discussed the current situation and perspectives of reform of the EU sugar regimen and, by extension, the future of the preferential market available to African, Caribbean and Pacific (ACP) countries and the Least Developed Countries (LDCs). A highlight in this discussion was the presentations by EU Agricultural Commissioner Franz Fischler, who spoke of the need to reform the EU sugar regime but did not venture a clear outline for a reform program, which probably would be tabled by July. Fischler said, however, that the European sugar industry should be more competitive, and in the process jobs would be lost. The German federal minister for Consumer Affairs and Agriculture Renate K�nast said that reforming the EU sugar regime is not a simple task, and interests of workers and concerns of developing countries have to be taken into consideration when proposing reforms.

A key moment of the conference was the review of seven national/regional situations that are relevant to union work in the international sugar industry, with presentations by union delegates. The first was about low costs in the Brazilian sugar and alcohol complex, the world's largest, with the Brazilian delegation making a crucial connection between low costs and limited rights for workers, impact of technology in displacing labour, and aggression to the environment. The presentation questioned the common acceptance that low costs represent an efficient production, as social and environmental costs are obscure in favour of economic considerations.

A presentation on the Caribbean women sugar workers described their disadvantages experienced, including lower wages (tasks that they are unable to complete) and sexual harassment in a male-dominated sector. From the Caribbean as well, the experience of Guyana showed how unions supported the recovery of the industry and its subsequent expansion. Guyana has more than tripled production in the past decade.

A review of the restructured sugar sector of East Germany after reunification showed the consolidation of production and the expansion of West Germany companies; while a presentation on Social Corporate Responsibility in the European sugar sector pointed to the extensive and long-term efforts made by unions to bring the partners (employers and employees) to work together. The situation in Eastern Europe was introduced with a presentation on the sugar industry in Ukraine, once one of the largest beet sugar industries in the world, but currently experiencing severe problems because of the inability to recover the industry and resolve policy matters, such as prices and foreign trade. Employment in sugar has dramatically declined, and working conditions and wages for workers have deteriorated.

The difficulties and challenges of unionisation were discussed in a presentation on the Indian sugar sector, where a harsh economic environment and political influence present serious obstacles for the organisation of workers, in particular the agricultural and migrant workers.

Another important aspect of the conference was the recommendations from delegates for future work in sugar, a sector that should continue as a priority area for the IUF. In their conclusions, the delegates reaffirmed that the strength of a union depends on organising and representing workers in the work place, and, in sugar, particular attention should be given to field, seasonal and migrant workers, groups that are more vulnerable to exploitation. The delegates recommended that the IUF support building trade union capacities to deal with restructuring, especially from a gender perspective, as women are the group hardest hit by it. A related recommendation was to assist affiliates to work on international, regional and sub-regional trade agreements, where a key element is the inclusion of compliance with ILO Core Labour Standards in the agreements. (Core Labour Standards are eight ILO conventions deemed to be "fundamental to the rights of human beings at work, irrespective of levels of development of individual (ILO) member States." They are freedom of association (right to organize and collective bargaining), against forced labour, on equality (no discrimination at work and equal remuneration) and against Child Labour.) Also, the delegates recommended establishing negotiations with transnational corporations for the implementation of labour standards throughout the company. On the other hand, the conference called affiliates to document and share information on the restructuring of their industries, develop capacity to work on trade negotiations, and campaign for the ratification and implementation of Core Labour Standards and the ILO Convention 184 on safety and health in agriculture.

A working session with regional secretaries from Africa, Asia/Pacific, English-speaking Caribbean, CIS-Moscow, and Latin America, and the Agricultural Workers Trade Group and the global sugar coordination was held after the conference. The meeting decided on practical ways to integrate the conference recommendations in the sugar work as well as to improve the coordination between the global work and the regional programs.

The conference received a generous support from the IUF German affiliate NGG. Two web sites carry documents and photos of the conference: http://www.bzo.de/ (background documents available in six languages) and http://www.ngg.net/

Poland: Closures under Restructuring

S�dzucker, the German sugar giant, plans to close the Przeworsk sugar factory as part of its restructuring-merger program, but employees claim that the closure goes against the company's commitments made at the moment of privatisation. According to reports by the Warsaw Business Journal quoted by international sources, S�dzucker offered to keep the factory in operation for at least 36 months after the takeover or the workers would receive compensation. Sources at S�dzucker Poland said the company never made such promise, and it is offering a severance payment of 2,000 Polish zloty per worker (USD 527), while the employees demand 6,000 zloty (USD 1,581). The company also said that it is ready to give 100,000 zloty (USD 26,300) for retraining programs.

The closing of the Przeworsk factory (2,000 tdc) follows the merger of S�dzucker Garb�w with Cukier Malopolski. The latter is to consolidate five other factories owned by the German company.

In related news, the Polish Sugar Company (KSC) decided to close only three of the six sugar factories scheduled for closure during 2004, because of pressure from unions and political groups. It was said that closing factories under the national conglomerate KSC has become a heavy political issue, because there is no alternative sources of employment for workers, while attempts to find new investors to take over the factories have been unsuccessful.

Last year, the US Department of Agriculture (USDA) reported that about 20 refineries would be closed due to the restructuring of the Polish industry, most of them owned by foreign companies. For instance, the USDA said, British Sugar Overseas would close 5 refineries (in Michalowie, Ciechanow, Guzow, Ketrzyn and Swiecie, in addition, it is likely that Peplin will be closed in 2004). The German Nordzucker would close 3 refineries (in Melno, Szamotuly and Wschowa), Sudzucker will close a refinery in Wlostowo and two more in 2004 (in Garbow and Przeworsk), and Pfeifer und Langen will eliminate 3 refineries (in Gniezno, Witaszyce and Garbow) and possibly refineries in Zduny and Zbiersk. The French company Saint Louis Sucre (a Sudzucker subsidiary) would close 4 refineries (in Ziebice, Pastuchow, Baborowo and in Wielun), while the Krajowa Sp�lka Cukrowa (Polish Sugar Company) would close 3 refineries (in Rejowiec, Pruszcz Gdanski and possibly in Szczecin). The USDA said that companies prefer to close less efficient refineries and use their sugar production allocation in more efficient plants.

Ukraine: Ban On Sugar Tolling Expected

Ukrainian sugar producers said that the government is planning to ban all sugar tolling by 1 June because of problems with determining the final use of the refined sugar. With tolling operations, widely used in Ukraine according to a Reuters report, importers of raw cane sugar contract the refining to local factories for re-export of refined sugar. It seems, however, that an important portion of the refined sugar remains in the country to be sold as beet sugar, contributing to depress domestic prices.

According to import regulations, raw sugar for domestic use pays a 50 percent custom value or not less that 300 euros per tonne, but importers who re-export refined sugar, pay no duties. By abusing the tolling scheme, raw sugar importers avoid paying the high duties on imports, take advantage of duty-free imports, and do not pay the 20 percent value added tax. It was added that part of the refined sugar is given to the factories as payment for the refining, contributing to the lack of transparency in the business.

In an effort to control sugar tolling, the government said in April that the time allowed for tolling operations - i.e. between importing raws and re-exporting refined - would be reduced from 180 to 90 days.

In 2003, Ukraine produced 2.3 million tonnes of refined sugar, compared with 1.6 million tonnes in 2002. According to international trade sources, the total include some 880,000 tonnes of refined sugar made from raw imports in 2003, in comparison to 190,000 tonnes obtained the same way in 2002. Beet sugar production in 2003 was 1.45 million tonnes against 1.42 million tonnes in 2002. For the 2004 harvest, it is estimated that production would reach 1.46 million tonnes, readjusted from a previous estimate of 1.8 million, because of adverse weather. The government would allow the importation of 125,000 tonnes of raw cane sugar under an import duty of 30 euros per tonne for imports before 15 September 2004. Ukraine domestic consumption is estimated at about 2 million tonnes per year.

Sugar Trade: US-Central America CAFTA Deal Signed

On 28 May, the United States and five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) signed the Central American Free Trade Agreement (CAFTA), subject to approval by Congress and national legislatures. The CAFTA has a "companion pact" on a FTA between the US and the Dominican Republic.

In an election year, CAFTA has become part of the political debate. The Bush Administration said that CAFTA goes much further than previous pacts on the areas of labour and environment (two key areas in the political debate), while the Democrat presidential candidate, John Kerry, said that CAFTA does not strengthen the rights of workers in Central America and vowed to renegotiate it if elected. It is expected that the US Congress will vote on CAFTA only after the November elections. (The Congress can accept or reject but not modify the text.)

The CAFTA includes a section on the "protection and promotion of workers rights," with commitments by the CAFTA countries to ensure effective enforcement of labour laws, work with the International Labour Organisation to improve existing labour laws, and building local capacity to improve workers' rights. On the latter, Chapter Sixteen of CAFTA says that countries "shall consider views of its worker and employer representatives, as well as views of other members of the public" when identifying areas of cooperation and capacity building, and implementing activities. Additionally, the US Department of Labor has allocated USD 6.7 million to educate Central Americans on basic labour standards and "to improve the administrative capacity of the CAFTA countries in labor matters," said the US Trade Representative.

As CAFTA timidly opens a door for the participation of "worker organisations" in the implementation of the agreement, the challenge is to make the process as democratic as possible, with effective and independent participation of unions. Already, in response to unfavourable comments to CAFTA by US groups, Central American officials said that CAFTA "is about anchoring our (Central American) economic reforms and democratic transformations," while the Minister of Economy of El Salvador stated that CAFTA "has already produced a boost to labor rights of our region."

CAFTA Chapter Sixteen on Labour is available at the US Trade Representative web site: http://www.ustr.gov/new/fta/Cafta/text/16-labor.pdf

Cane and Ethanol: Brazil Continue Developing International Markets

The state of Sao Paulo and the Guangdong province in China are discussing an agreement that would allow Brazil to export sugar, ethanol, and biofuel vehicles to Guangdong, China's largest sugar and ethanol producer. The Sugar and Ethanol Sector of the Ministry of Agriculture of Brazil developed the initial contacts, after a visit by officials from the Sao Paulo state government and sugar sector representatives to China.

In related news, Brazil and Germany are discussing the importation of Brazil ethanol for mixing with gasoline (at 2 percent) in the German market. Ethanol imports is one of the main points for discussion in the next Brazil-Germany meeting scheduled for 18 June in Berlin. It was added that, in the context of the EU-Mercosur free trade talks, the EU has proposed buying one billion litres of Brazilian ethanol per year, although Brazil aims at selling as much as 3 billion litres annually in the European market.

These efforts are only the most recent ones in a large list of international contacts that Brazilians, both government and industry, are developing in the cane-based ethanol production, either by discussing contracts for the transfer of technology, ethanol exports and/or the setting up of ethanol production facilities. For instance, in late 2003, President Lula said that Bolivia, Colombia and Venezuela were interested in setting up ethanol production facilities, as they are considering adding ethanol to gasoline in the domestic markets, and Brazil would be able to finance such projects. Last year as well, India expressed interests in producing ethanol from cane using Brazilian technology.

In the domestic front, the industry continues to build infrastructure related to ethanol exports. Early in 2004, a group of millers announced their plans to build an ethanol terminal in the port of Vitoria, in Espirito Santo state, for exporting ethanol produced in Minas Gerais. The group comprises the Joao Lyra, Tercio Wanderley and Coinbra, a subsidiary of the French trading house Louis Dreyfus. The partners are already exporting ethanol from the Northeastern state of Alagoas, and look for establishing facilities in the Centre-South region. The Vitoria terminal would have a storage capacity of between 30 and 50 million litres of ethanol, and would export some 200 million litres annually. The total cost of the project is USD 7.5 million.

Meanwhile, millers and the state government of Parana are planning an ethanol terminal in the port of Paranagua. Negotiations have been going for almost one year and a "political" decision was announced in early April. The parties need to work on technical details of the project, and decide on investment.

Company News

South Africa: Illovo Sugar Sells Mill to Black Empowerment group

In mid May, Illovo Sugar announced the sale of the Gledhow mill, refinery, and attached cane growing estates to Grand Bridge Trading 40 (Pty) Ltd., a black empowerment group, in line with government efforts to transfer more of the country's wealth to the black majority.

The Gledhow mill is located in the KwaZulu-Natal region, it processes some 1.4 million tonnes of cane and produces 150,000 tonnes of sugar per year. Using additional raw sugar from other sources, said Illovo, the refinery produces about 160,000 tonnes of white sugar per year. The estate produces some 300,000 tonnes of cane on 6,900 hectares of land. The Gledhow employs some 540 people in agricultural and manufacturing operations, and accounts for about 6 percent of the national sugar output. Illovo will continue managing the business for a 5-year period starting on 1 June 2004, when the deal becomes effective. The transaction was worth 335 million South African rands (USD 49 million); it was financed by the Land Bank and had the support of the ministries of Trade, Industry and Agriculture.

Gledhow is the first mill sold to a black empowerment group, an operation that has to comply with certain conditions: the majority of shares in Grand Bridge have to be drawn from previously politically disadvantaged people; not less than 20 percent of equity in Grand Bridge must be held by its employees; and the majority of the cane lands would be sold as medium and small-scale farms to previously politically disadvantaged people.

At the end of April, Illovo Sugar offered to sell its wholly owned subsidiary Monitor Sugar (in the US) to some 600 farmers who supply the factory. Monitor operates an 8,000-tonne beet processing plant located in Bay City, Michigan. It employs some 80 permanent employees and 300 seasonal workers.

In financial news, for the year ending in March 2004, Illovo reported a 42 percent decline in headline earnings and cut dividends per share in 32 percent, from 68 cents to 46 cents. The company said it was mainly because of the strengthening of the South African rand against the US dollar, which negatively affected revenues. Illovo said that 58 percent of operating profits came from sugar manufacturing, 33 percent from cane growing and 9 percent from downstream products. In geographic terms, Malawi accounted for 34 percent of profits, Zambia 26, South Africa 18, Tanzania 15, Swaziland 9 and 1 percent from each Mauritius and the United States.

Illovo produced some 2.2 million tonnes of sugar and 5.64 million tonnes of cane, slightly below the previous year's levels. Production records were achieved in Swaziland, Tanzania and Mozambique, while Malawi and Zambia registered a marginal decline.

India: Bajaj Hindusthan Bid for 24 Cooperative Mills in Uttar Pradesh

The Bajaj Hindusthan, a subsidiary of the Shishir Bajaj Group, appeared as the probable winner in the privatisation of 24 cooperative mills launched by the Uttar Pradesh government to transfer the mills on 30-year management contracts to the private sector. The Bajaj Hindusthan submitted a bid of 2 billion Indian rupees (USD 44 million), according to the Business Standard on its edition of 3 May.

According to the rules of the privatisation process, the mills will not be allowed to retrench workers, but those employees wiling to take a voluntary retirement scheme, would be able to do so. About eleven of the 24 mills are said to be in working condition, eight are "sick units," and five have stopped operations. The 24 mills have a combined crushing capacity of 38,000 tonnes of cane per day, and would make the Bajaj Hindusthan by far the largest sugar company in India with a daily crushing capacity of 69,000 tonnes of cane.

The privatisation process started in November 2003. Last December, the UP government said that the mills had incurred in massive debts, estimated at over USD 400 million, and that they were about to be closed.

The Bajaj Hindusthan is also setting up a 7,000 tdc new mill in Meerut (UP), which would come on line in December 2004. It is reported that the KK Birla Group, with 30,000 tdc, and the Balrampur Chini, with 26,000 tdc, are the second and third largest companies in India's sugar sector.

Meanwhile, the Indian sugar industry is expecting a significant hike in prices. Drought in cane growing areas and the subsequent shortage of cane mean a further decline in sugar production. Local sources said that production fell from 20 million tonnes in the 2002/03 harvest to 15 million last year, and expect 13 to 14 million tonnes this year. The result would be a deficit of between 4 to 5 million tonnes, which would push domestic prices up.