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Posted to the IUF website 09-May-2005

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume VII, Number 4
April 2005


WTO: European Union Loses Appeal on Sugar Subsidies

On 28 April, the WTO Appellate Body confirmed that the European Union illegally subsidises sugar exports, upholding the WTO ruling of October 2004.The Appellate Body's decision is final and no appeal is possible.

The WTO Appellate Body gives the EU up to 15 months to comply with global trade rules; and, at the same time, the panel rejected requests by Australia, Brazil, and Thailand, which filed the original complaint, for a shorter, 90-day deadline for the EU to comply. EU officials said that they would take the ruling into account when drafting the proposals for reform of the EU sugar regime, which are to be published by 22 June, according to Mariann Fischer Boel, European commissioner for agriculture.
Last October, the WTO found that the EU illegally subsidises exports over and above its export commitments in the WTO, that it re-exports with subsidies some 1.6 million tonnes of ACP sugar imported under the EU/ACP Sugar Protocol, and that "C" sugar benefits from high prices on "A" and "B" sugar. (More information in Sugar Worker, October 2004.)

Uganda: Kinyara Privatization Resumed

Three years after failing to sell Kinyara Sugar Works, the government has resumed the privatisation process with the proposal to sell a 51 percent stake of the company to a core investor, 20 percent to growers and employees, 10 percent to the Bunyoro Kingdom, and 19 percent through an Initial Public Offer (IPO). The latter would be also floated in the stock exchange.

The company has a value of some 70 billion Ugandan shillings (USD 38.9 million), and the government wanted to privatise it in 2002. At that moment, groups in the general public and the Bunyoro Kingdom, where the sugar plantation is located, opposed the proposed selling of 51 percent stake to only one investor, with the remaining 49 percent sold through an IPO and listings on the stock exchange.
In a pre-2002 privatisation scheme, the government had proposed that 51 percent would have been sold to the public, and would have decided on the remaining 49 percent at a later date. The Bunyoro said that in the pre-2002 scheme, the growers and the Bunyoro would have become majority stakeholders, preventing one economic group from taking control of the company.

After the 2002 failed attempt to privatise Kinyara, the government launched a process to create consensus among stakeholders, and it appears ready to resume the privatisation process by the end of April. As local commentators have pointed out, however, the current model still gives a core investor control over the company. They also underlined some difficult relations between Booker Tate, Kinyara's management, and the growers, with the latter complaining from low cane prices to overcharging in transportation costs and the company's refusal to advance credits. Last January, a tripartite committee (management, farmers and the company's board) was set up to deal with some of these issues.

A report from the committee was expected sometime in April.
Kinyara produces some 64,000 tonnes of sugar per year and has plans to increase production to 92,000 tonnes. It was established in 1964 as the National Sugar Works Ltd., it survived the chaotic 1970s and 1980s, and was incorporated as Kinyara Sugar Works Ltd. in 1990. It currently employs some 3,000 workers, and controls a nucleus estate of 11,000 hectares, and some additional 5,000 hectares under farmers.

Kakira Expansion Program

In the 2002 privatisation of Kinyara, it was mentioned that Kakira Sugar Works Ltd. was interested in becoming the core investor, something that some groups in the country opposed. Kakira is now engaged in an aggressive expansion program.

A study conducted by the French company SOFRECO and sponsored by the ADB and the governmental agency for Agricultural Development Options in South Bugosa, identified cane as the most remunerative crop for farmers in Bugosa, and recommended Kakira to expand the factory's capacity from 3,500 to 5,000 tonnes of cane per day, expand lands under farmers to more than 10,000 hectares, and increase the capacity of its co-generation plant accordingly. At present, Kakira controls a nucleus estate of 8,700 hectares, with an additional 3,600 hectares from farmers. Current production is about 87,000 tonnes of sugar per year.

Kakira management said that the expansion program has a USD 30 million value, with financing from the East African Development Bank and other sources. The expansion of the co-generation plant would benefit from a grant under the country's Energy for Rural Transformation Programme, which receives support from the World Bank and the government.

Kakira also said that, in coordination with the Bugosa Sugar Cane Growers' Association (BSCGA), it has established the Kakira Outgrower Rural Development Fund (KORD), which would support infrastructure projects and financial services to communities within a 25 km radius of Kakira. Initially, the KORD would focus on providing loans to farmers and investing in roads and health care facilities.
Kakira Sugar, the largest sugar producer in the country, is part of the Madhvani Group of Companies. The latter is reckoned as one of the most diversified economic groups in East Africa, and also has investments in the Middle East, India and North America. In Uganda, the Madhvani Group has concerns in tea and cut flowers, and in the tourism, insurance, communications and construction sectors, among others.

India: Maharashtra Sugar Package in Preparation

On 26 April, the Maharashtra state minister for cooperation said that an assistance package for the sugar industry would be submitted to the central government by the end of June. The package would include the rescheduling of loans, readjusting interest rates to reduce liability, and providing financial assistance to factories to clear arrears in wages and cane payments.

According to the Times of India, the financial assistance would be available for those factories that operated in the 2002/03 harvest, and will consist of a first instalment of 3 billion Indian rupees (about USD 69 million), while the central government is considering a second instalment of 3.2 billion rupees (USD 73 million). The daily added that factories have to clear some USD 73 million in cane payments for the 2003/04 harvest, and USD 36.5 million in fixed costs of those factories that did not operate last season.

Maharashtra sugar factories are reported to carry USD 124.2 million in wage arrears, while, according to the Times of India, loans to be restructured amount to USD 2.2 billion. The package would give factories 12 years to repay loans, with the first two years as a grace period.

Brazil: Mechanical Harvest on the Rise

High environmental and labour costs, labour issues, and the pressure to reduce production costs are among the factors supporting a new "boom" in the sales of equipment to mechanise agricultural operations in the Brazilian sugar cane industry, said industrial manufacturers. Sugar mills are expected to buy some 140 new combines or cane harvesters in 2005, twice as many as in 2004.

"The tendency is that new factories begin operations with most of its activities mechanized, from planting to harvesting," said a spokesperson of the Group Motomecaniza��o of the Sector Sucroalcooleiro. The new investments are concentrated in western S�o Paulo, which is ready to become the country's largest cane growing area.

According to some industry sources, the cost of manual cane cutting in the S�o Paulo western region is 6.00 reais per tonne (USD 1.00 = BRL 2.63), which is 33 percent higher than the estimated cost of 4.50 reais per tonne in mechanized harvesting.

Each combine, it was reported, can replace up to 80 cane cutters, with the companies avoiding some labour costs. On the other hand, factories in S�o Paulo have to comply with environmental legislation that limits the burning of cane fields. According to legislation, 30 percent of the areas possible to be mechanized (i.e., fields with slopes of less than 12 percent) will not be burned by 2006. By 2021, all areas possible to be mechanized will not be burned; and by 2031 there will be no more burning of cane fields in S�o Paulo.

According to CNH of Brazil, there are some 1,200 harvesters in the country, reaping an average of 80,000 tonnes of cane per machine per season, and representing about 20-25 percent of the cane harvested in the country. (This news first appeared on the IUF web site on 6 April 2005.)

Indonesia: Antiquated Mills Challenge for Industry

Reaching self-sufficiency in sugar by 2008 might not be possible for Indonesia, as factory capacity is limited and equipment antiquated said a Dow Jones report, dated 27 April. In 2002, the government launched a sugar self-sufficiency program, which included the replanting of fields, updating the state-owned factories, and developing cane plantations and establishing sugar mills outside Java. Dow Jones said that only the replanting program has been implemented, with some 85,000 hectares in Java. Results are positive, with agricultural yields increasing from 67.4 to close to 78 tonnes per hectare.
A major challenge is the upgrading of the antiquated equipment in the state-owned factories. Fifty-two of the 58 sugar mills in Indonesia are state-owned, and most of them date from the Dutch colonial times. Although cane supply seems to be on the rise, processing capacity will remain a limiting factor. Industry sources said that the upgrading of mills requires some 1.9 trillion Indonesian rupees (about USD 200 million), out of which only one third may be available.

Important as well is the proposal to move the industry from the densely populated and land scarce Java to other areas. The Ministry of Agriculture has identified 286,000 hectares of land in Lampung (Sumatra) and Merauke (Papua province) as adequate to develop cane fields and establish sugar factories. Currently, only 12 mills are located outer Java, compared to 46 in Java.

In mid March, the Jakarta Post reported that the provincial administration of West Java plans to open an 18,000-hectare sugar cane plantation and create some 20,000 jobs in the Garut regency. Planting is expected in 2006, with the first harvest in 2007.

Meanwhile, Indonesia continues importing sugar. In the 2004/05 season, the government planned to allow the importation of some 500,000 tonnes of white sugar, half of which was reported as delivered by December last year.

Trinidad: Further Production Decline Expected

The 2005 sugar harvest in Trinidad may see a shortfall of about 10,000 tonnes from the proposed goal of 50,000 tonnes as a result of low agricultural yields, said a cane farmer organisation in late April. The shortfall would represent losses of some 42 million Trinidadian dollars (USD 7 million) in sales to the European Union.

Actual production, however, might be lower that the readjusted estimation of 40,000 tonnes, as one cane farmer representative told an IUF/All Trinidad sugar meeting on 22 April (see article elsewhere in this issue). Production might fall to 30,000 tonnes as a result of a combination of factors. In a surprising - and almost unreal - statement, the farmer told the meeting that in some cases the cane takes "weeks" to be delivered to the St Madeleine Usine, the only factory in operation, after the Brechin Castle was closed two years ago. The long delays in delivering the cane have a well-know damaging effect on its quality, and represent a breakdown in the organisation of the industry. Last season, for instance, agricultural inputs were not available on time: in some cases, fertilisers were available six months after their proper application time had passed; not surprise that low yields are becoming the norm. The weighing of cane (before its transportation to the mill) has become a bottleneck as the government - in the process of dismantling Caroni - transferred the management of the scales to individual farmers, who seem unable to ensure a steady flow of cane (and usually take their and their closest allies' canes first). Frequent breakdowns in factory operations - despite recent investments - disrupt milling operations, and managerial problems are compounded by the short-term contracts offered to workers and staff: the IUF/All Trinidad meeting heard that all of the operations of the Sugar Manufacturing Co. Ltd. (SMCL), which replaced Caroni (1975) Ltd., have been contracted out.

The 2005 harvest, which would probably see an early end by mid May, may achieve less than half of the 75,000 tonnes production goal set by the government when it dismantled Caroni in 2003.
Officials of the SMCL, however, said that the company would develop alternative products from the cane, such as ethanol, and that production of cane would increase next year. Whether the sugar cane sector in Trinidad would be able to recover the time lost, overcome political influences, and satisfactorily resolve the market challenges remains to be seen.

IUF Caribbean: Meetings in Guyana and Trinidad

In the context of the English-speaking Caribbean agriculture project in 2005, the IUF held two sugar meetings: Guyana, 18-20 April, and Trinidad on 22 April.

The Guyana meeting was held in collaboration with the affiliated unions GAWU and NAACIE, and was attended by 28 participants, 16 of them women. The seminar focused on health and safety issues, including a thorough presentation on the HIV/AIDS national program, and a one-day workshop on Gender Perspectives. The delegates also heard a presentation on the Jamaica sugar industry by a Jamaican delegate participating in an IUF-sponsored trade union exchange, and an update on the regional and international sugar work of the IUF.

The creation of gender awareness was a key issue in the second day of the seminar, devoted to Gender Perspectives. A presentation by Ms Patrice La Fleur under the theme "Using a gender lens in the development processes," made a distinction between sex and gender, and stressed the socialization process that create gender roles. Participants were asked to identify some roles they expect a man and a woman to play, and then discussed the reasons to brand them as male or female roles. Ms Anoopwattie Vereen in her presentation "Promoting Gender Awareness in Local Decision Making Bodies," focussed on the exclusion of women from decision-making processes and underlined the need to empower women through education. In "Gender and Labour," former minister and Member of Parliament Ms Indra Chanderpaul discussed the unwaged work in which women are engaged and conditions in the working place that present difficulties for women to perform family obligations, like attending their small children. The discussion recommended including special clauses for women under collective bargaining agreements.
Delegates recommended continue holding workshops on Gender Perspectives and Health and Safety issues, reach a larger number of delegates and grass-root members, and broaden women participation. (With reports from Taruna Ramesar, GAWU Research Dept.)

The Trinidad event was co-organised by the All Trinidad Sugar & General Workers Trade Union, an IUF affiliate. Given the current situation in the heavily (and unfairly) battered sugar industry, after the dismantling of Caroni and the several problems that 2005 harvest faces (see article above), the meeting focused on the negotiations between the European Union and Cariforum, and the proposed "Action Plan" on accompanying measures to the reform of the EU sugar regime. Present at the meeting were the executive members of the All Trinidad, and representatives from the Agricultural Association of Trinidad and Tobago, cane farmers, and the political Opposition. The discussion, facilitated by a presentation on the EU/Cariforum negotiations by the IUF, identified possible actions that the stakeholders may take to produce a common position on the future of sugar cane sector in the island. The participants felt that the Trinidadian government is negotiating with the EU without allowing a meaningful participation of all stakeholders. Such participation is an explicit recommendation made in the proposed EU Action Plan.

A second part of the IUF/All Trinidad work was a meeting between the union executive and the IUF sugar coordinator to discuss future work, important as the union fights for successorship rights in the industry. The discussion also focused on improving service to and expanding membership.

Sugar Trade

United States: Congressional Discussion on CAFTA Starts

On 13 April, congressional discussions on the Central American Free Trade Agreement (CAFTA-DR) started with hearings in the Senate Finance Committee. A presentation by the US Trade Representative (USTR) office, which thinks that CAFTA would have a minimal impact on the domestic sugar industry, was met with scepticism on the part of several senators from both the Republican and the Democratic parties, Dyergram reported on 14 April. The USTR downplayed the impact of CAFTA by stressing the provision for cash compensation to the Central American countries in lieu of increased market access. The Senators, among other matters, repeated an argument put forward when CAFTA was under negotiations: that the agreement would set a precedent for negotiating free trade agreements with other sugar producing countries, further opening what domestic producers considered an already saturated market.

The debate on CAFTA, even before the text reached the Congress, had groups taking a firm position either in favour or against it. Industrial sugar users, such Mars and Hershey, and some commodities groups have expressed their support to CAFTA, while the American Sugar Alliance (sugar and corn sweeteners producers), labour organisations, and the textile industry oppose it.

An interesting debate appears to be unfolding in Louisiana, which is seen as pivotal to the approval of CAFTA. The Port of New Orleans supports the agreement, as they understand it would increase business, but Louisiana's sugar industry, as reported in several news sources, opposes it, saying that CAFTA would be the death of Louisiana's 200-year old sugar industry. Out of the nine members of Louisiana's congressional delegation, only one representative has spoken in favour of CAFTA. It would be an interesting exercise in the coming months to see the powerful "sugar lobby" in Washington influencing the CAFTA discussion.

Meanwhile, in Central America, the national legislatures of Guatemala, Honduras, and El Salvador have passed CAFTA, not without facing popular demonstrations against it, which in the case of Guatemala resulted in at least two people dead.

Health and Safety

Jamaica: Deaths in Appleton and Long Pond

On 21 April, Lloyd Campbell, a 29-year old machinist at Appleton factory died after falling into a large storage bin and being covered by about 30 tonnes of sugar, reported The Observer. According to police investigations, Campbell and two other workers were cleaning a 55-foot sugar storage bin when he and one of the other workers fell into the bin. The third worker was able to pull one of them, quickly lowering a spade into the bin. Lloyd Campbell body was recovered shortly after.

The newspaper said that Appleton senior management discussed the incident and said the company would do a thorough investigation. A company's spokeswoman added that the company is "looking at processes to see how we can improve on safety, to ensure (they) don't have a recurrence of what happened." (The Observer, 21 April 2005.)

Less than a month before this fatal incident, Kagel Insang, a 23-year old machinist at the Long Pond Sugar Estate was killed when a turbine exploded in the Trelawny sugar factory. The incident occurred on 31 March.

According to preliminary investigations, it appeared that a gearbox that drives the cane knife disintegrated, and the explosion send pieces of metal flying, hitting workers in the factory. Mr Insang died in the factory, and two other workers were taken to Falmouth Hospital. (The Observer, 1 April 2005.)

Commenting on the Long Pond fatal incident, the University and Allied Workers Union (UAWU) said the government should review the matter quickly through its trade union laws. "If a prison warder dies on the job, the beneficiary is guaranteed JMD 4 million," said the union. "However, if a sugar worker dies, the beneficiary will get less than $50,000." (The news first appeared on the IUF sugar web site at http://www.iufdocuments.org/sugar/)

Australia: Growers Reject Cuts on Diuron Use

Representatives of cane farmers rejected a call to cut back the use of the chemical herbicide Diuron, after the Australian Pesticide and Veterinary Medicine Authority said the chemical is causing "unacceptable risk to the environment," and suggested a 75 percent cut in its use. Canegrowers, an association of farmers in Queensland, said that they would research the matter and will not accept "at face value" the recommendation. A spokesperson for DuPont Australia, manufacturer of the product, said that limiting Diuron use would be costly to the industry, as production costs would rise. A decision on the proposed cut is expected by late June.

The Pesticide Action Network classifies Diuron as a "Bad Actor," which refers to a chemical that falls in at least one of the following categories: known or probable carcinogen, known ground water pollutant, known reproductive or developmental toxin, highly acutely toxic, and cholinesterase inhibitor. In a web site that reports on Diuron use in California, the product appears as toxic in the first three categories.