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The Sugar Worker, October 2002. News from the Sugar Sector.

Posted to the IUF website 05-Nov-2002

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume IV, Number 9
September 2002

Contents




Sugar Trade: The Challenge on the EU Sugar Regime

In mid October India signed as a "third party" siding with Brazil, in the dispute initiated by Brazil and Australia against EU export subsidies at the World Trade Organization (WTO) on 27 September. As a "third party" India would be entitled to all benefits if the dispute goes in Brazil's favour. Thailand said later it would also support the challenge and, while this is written, Colombia has followed suit and Canada said it is interested to join the fray.

"The Challenge," as some sources call it now, refers to the subsidies on exports of cane and beet sugar, chemically pure sucrose in solid form, molasses, isoglucose (corn syrups), and inulin (manufactured from Jerusalem artichoke). Brazil also questions the EU sugar intervention price system, which, it says, pays a high price for sugar produced under the so-called quotas "A" and "B" (related to domestic consumption) and then allows exports of "C" sugar at prices below the cost of production. (The "C" quota is to be carried over to the following year or exported.) There are also the subsidies on about 1.6 million tonnes of sugar exported in excess of the EU commitments on export with the WTO; and the less favourable treatment to imported sugar because it does not benefit from the intervention price guaranteed by the sugar regime.

Official sources in Brazil and Australia said that the EU sugar regime is the main reason why some of the world's highest-cost producers are the world's largest exporters of (refined) sugar. They also said that the regime closes the EU market to exporters and without it international prices would be much higher.

The "Challenge" may also drag into the dispute the sugar arrangement between the EU and the African, Caribbean and Pacific (ACP) countries. The Australian Minister of Foreign Affairs told a group of Fijian business people (Fiji is an ACP country) that the Cotonou Agreement, under which the ACP/EU sugar arrangement is housed, is "discrete" and the EU should honour its (sugar) obligations, regardless the outcome of the WTO challenge. Australia is not against the preferential access that ACP countries have in the EU sugar market, he said. Most of the ACP sugar suppliers have been vocal in favour of the EU, but Brazilian producers warned them avoiding official backing of the EU or they would request their government to launch a separate challenge against the EU special regime for the ACP countries.

Officials of the EU said that requesting dispute consultations, the first step in a formal WTO dispute, was not the "proper way forward." They said that the EU sugar regimen should not be blamed for the fluctuations in the international prices, which are influenced by several factors, and that the dispute would affect mostly the preferential treatment that developing and least-developed countries have in the ACP/EU sugar protocol and the "Everything but Arms" (EBA) initiative.

In related news, the EU announced a reduction of 862,475 tonnes in the production quotas for the 2002/03 campaign, a 5.71 percent cut on all sweetener segments: 826,988 tonnes of white sugar, 17,173 tonnes of isoglucose, and 18,314 tonnes of inulin. The production quota will be 14.2 million tonnes compared to 15.1 million tonnes last year. The EU needs to reduce production quotas to be in line with its WTO commitments that limit export refunds to USD 492.4 million. Without the reduction, exports would increase and refunds will exceed the agreed limit.

Cuba: Job and Wages Program for Sugar Workers

One aspect of the restructuring of the Cuban sugar industry is a job and wage program offered by the Ministry of Labour and Social Security to workers affected by the closing, merger or downsizing of the entities where they work. The program, said Trabajadores on 30 September, guarantees that no worker will be left without protection or be affected by the loss of wages.

There are two aspects to the program: the relocation of workers to other jobs and a "studies as a job" scheme. The first provides workers with employment in other areas under the Ministry of Sugar, such as urban agriculture, cattle raising, forest activities, other crops, and in mills and related activities. Workers would be hired for an indefinite period. The second initiative enrols workers in educational and training programs and they would be under contract with the provincial agencies of the Ministry of Sugar, until permanently relocated.

A "labour committee" set up in the production units will be in charge of determining the program under which an individual worker will be registered, said Trabajadores. The committee comprises a representative from management, a trade union representative, and three workers of "recognized prestige," who would be approved by the workers' assembly.

Cuban President Fidel Castro launched the educational and retraining program on 21 October, addressing sugar workers in Artemisa, 70 km east of Havana. President Castro said that 84,271 sugar workers in the whole country had enrolled themselves in the program, with 51,000 of them coming from mills that will continue operating. (The program had been originally proposed for workers in the mills to be closed.) The program includes several levels of education: from high school to university and post-graduate studies, and specialized courses to prepare workers for other activities. Local sources quoted the Deputy Minister of Education saying that around 4,500 people from the ranks of the Ministry of Sugar had been trained to become teachers, and another 1,600 teachers would come from the Ministry of Education.
President Castro said that last April a decision was taken to keep in operation the most efficient mills and the best lands, aiming at producing sugar at US 4 cents per pound. (Trabajadores, 23 October 2002.) President Castro also said, as international observers have pointed out, that in the past decade between 40 and 50 mills had not operated regularly, and the 71 mills that will continue in sugar have an installed capacity to produce 4 million tonnes of sugar per year. In the past two harvests Cuba has produced 3.6 million tonnes or less of sugar.

Meanwhile, the trading house SucDen reported on 28 October that Cuba appeared in the white sugar markets, importing mainly from Brazil, to cover domestic needs before the 2002/03 crop starts in December (running through April). Total white imports for 2002/03 are estimated at 100,000 tonnes. Cuba took advantage of firm nearby prices for raw sugar last year to sell in advance and then imported whites for local consumption.

Zimbabwe: Compulsory Land Acquisition Program

In the first week of October the government's land task force moved into the town of Chiredzi, in the southern area of the country, and ordered 72 white cane farmers to vacate their lands. The farmers account for about 18 percent of Zimbabwe's sugar and were within six weeks from beginning this year's harvest, said the sugar cane growers association. Other sources said that army personnel and policemen were stationed in the Lowveld to exert pressure on white farmers, whose properties have been listed in the compulsory land acquisition program, to leave.

Hippo Valley, the country's largest sugar producer with about 300,000 tonnes per year, has some of its lands listed in the acquisition program and has filed a complain. Its operations run the risk of disruption because independent farmers supply about 30 percent of the cane processed by the mill. As a result of the government's land policy, black farmers of scarce resources are replacing white farmers, and both the quality and volume of cane might drop significantly. Hippo Valley said, for instance, that cane-replanting programs are being delayed, which means the risk of cane shortages in the next harvest.

News from Triangle Sugar, a subsidiary of the South African Tongaat-Hulett, was somewhat more optimistic. A high-ranking official of Triangle said the land program should not affect operations and referred to statements by President Mugabe, who assured that the mill would not be expropriated. Triangle's lands have been twice listed for compulsory acquisition, however. Triangle expects to increase production from 262,000 tonnes in 2001 to 280,000 this year.

Meanwhile, the illegal exports and smuggling of sugar continue unabated. The Herald from Harare reported that, even though the government imposed controls on sugar trade and banned exports, some powerful groups routinely evade custom regulations. Estimates on the volume of smuggled of sugar are difficult to obtain but figures quoted are significant. For instance, sources in Harare said that a whopping 75,000 tonnes per month have been smuggled into Zambia and Mozambique in recent months. One important reason for this thriving illegal business is the huge difference between the official foreign exchange rates, kept at 55 Zimbabwe dollars per one US dollar, and the parallel market rates, which surpassed the 1,000 to 1 ratio by late October.

Mexico: Nationalized Mills' Improved Performance

The 2001/02 Mexican sugar crop produced 4.87 million tonnes of sugar, tel quel, about one percent lower than the previous year. The 27 mills nationalized in September 2001, however, improved their performance in comparison to the previous two harvests. The mills reached 2.299 million tonnes of sugar or 47 percent of the national production, based on yields of 11.39 percent of sugar per unit of cane, 2.72 percent above yields in the privately owned mills, according to a congressional report.

The sugar mills expropriation decree, however, is still in the courts. On 30 October a federal judge passed sentence in favour of the Escorpi�n Group (CAZE), which sought protection against the expropriation. The judge said that the Fox Administration had not established that the "public interest" was being served by the September 2001 expropriation nor had it submitted appropriate technical studies to demonstrate that the expropriation would effectively "save" the industry. The judge's decision might favour other groups that also sought protection against the expropriation, among them the Grupo Azucarero Mexico (GAM) and the Grupo Santos.

The secretariat for agriculture, cattle-raising and rural development (Sagarpa) said in a press communiqu� that it will appeal the judge's decision. Sagarpa said that 18 legal suits were initiated around the expropriation, five of them have been dismissed, and the remaining 13, including CAZE's, are still to be resolved.

The CAZE situation is complex because its now fugitive president, Enrique Molina Sobrino, has an arrest warrant on two counts of fraud. One is for 88.6 million Mexican pesos in value-added tax evasion; the other for 2.7 million pesos on income taxes retained from the workers of the Atencingo mill but allegedly not transferred to the government. (The latter implies no-bail and therefore imprisonment during the process.) In addition to these charges, a CAZE top manager has been ordered to pay 103 million pesos, or face a prison term, due to frauds on export subsidies, which were claimed in collusion with a public employee in 1997. (USD 1.00 = MXN 10.16)

Bangladesh: Workers Retrenched, Mills Privatised

News by The Independent on 21 August said that the government has prepared a restructuring program of the industry, which would see the privatisation of four of the 15 state-owned mills and the reduction of employment in the remaining 11 mills. Payments on severance and other benefits for about 4,000 workers in the four mills will be settled in the context of the privatisation process. The mills are the Shetabganj Sugar Mills (Dinajpur), Rangpur Sugar Mills (Gaibandha), Shyampur Sugar Mills (Rangpur) and Zeal Bangla Sugar Mills (Jamalpur).

There are some 19,000 workers in the 11 mills that would remain, for the time being, under state ownership. From these 1,478 workers have been listed for retrenchment, along with 218 employees of the Bangladesh Sugar and Food Industries Corporation (BSFIC), which manages the mills. The government would invest around USD 8.9 million in a "golden handshake benefits" package for the retrenched workers but savings due to the reduction of personnel are said to be USD 2.9 million per year.

In mid August, the Bangladeshi Cabinet took some fiscal decisions to reduce production costs in the industry. The Cabinet removed a road development tax of USD 4 per tonne of sugar, in force since 1979, and the value- added tax of USD 41.6 per tonne of sugar. Workers and employees agreed, according to The Independent, to a cut of USD 4.3 million per year in labour benefits to help reducing costs. As a result of these measures production costs would be reduced from an estimated US 21.2 cents per pound to 20.3 cents. The industry, it is said, is old with obsolete equipment and, from the figures quoted, with high production costs.

In related news the Ministry of Industry discussed with its Thai counterpart the possibility of Thai sugar groups investing in the industry. Bangladesh produced close to 210,000 tonnes of sugar in 2001/02, up from 106,000 tonnes in 2000/01, while local consumption is about 493,000 tonnes per year. Thailand exported 36,000 tonnes of white sugar to Bangladesh in calendar 2001.

Poland: State-owned Polski Cukier Created

On 26 August the Polish Ministry of the Treasury established the Krajowa Sp�lka Cukrowa-Polski Cukier SA ("Polski Cukier") through building up the stock capital of Mazowiecko-Kujawska Sp�lka Cukrowa with the contributing shares of two other holdings, the Lubelsko-Malopolska Sp�lka Cukrowa and Poznansko-Pomorska Sp�lka Cukrowa.

The Polski Cukier, reported the Warsaw Voice, will control 19 sugar factories, with a production capacity of 450,000 tonnes or about 25 percent of the national sugar output. The factories are not in good technical and financial conditions and the government would introduce a rehabilitation program. Other sources said the government need to invest some 300 million Polish zloty (US 75.2 million) for the company to operate.

The Ministry of the Treasury also said that Polski Cukier may be enlarged to include three factories where the government controls 75 percent and 25 percent is owned by employees and farmers, and another five which are currently under dispute with the German group Nordzucker. The fate of the 16 factories owned by the Slaska Sp�lka Cukrowa is still to be decided. The French Saint Louis Sucre Group (now a subsidiary of the German S�dzucker) had a deal to acquire the factories in 2000, but the transaction was not completed because the Ministry of Internal Affairs did not approve the operation, and the sale was halted. If Saint Louis Sucre losses its appeal, the factories may be also included in the new Polski Cukier.

Ghana: Mauritian Groups Interested in Sugar

The governments of Ghana and Mauritius signed a Memorandum of Understanding (MOU) on 7 October to develop feasibility studies on a sugar plantation and mill in Ghana, reported the Accra Mail. The MOU was signed by the Minister of Trade and Industry of Ghana and by the managing director of Nine Stars Impex Company Ltd. (NSICL) on behalf of the government of Mauritius. The NSICL and Fuchsia Limited will carry out the feasibility studies. Ghanaian officials said that, if the studies recommend it, a consortium of four Mauritian companies might develop the project starting in 2003. The government would invest in the sugar project and the local private sector will be invited to participate. The officials added that Mauritian groups are also interested in the hotel and textile sectors in the country.

United States: CCC Sugar Loan Rates for 2002 Crop

On 27 September the Commodity Credit Corporation (CCC) of the Department of Agriculture announced the loan rates for the 2002 crop. The national loan rates will be US 22.90 cents per pound of refined beet sugar and 18 cents per pound of raw cane sugar. The rates apply to the nonrecourse loans available to sugar beet and cane processors as required by the 2002 Farm Bill, readjusted for location and freight differentials. The loan rates for refined beet sugar range from US 22.19 cents per pound in Idaho, Oregon and Washington State to 23.86 cents per pound in northeast Colorado, Nebraska and southern Wyoming. (Other beet growing states are Michigan and Ohio, Minnesota and North Dakota, Montana, and California.) For raw cane sugar, the rates go from US 17.33 cents per pound in Hawaii to 18.44 cents per pound in Louisiana. (Other cane growing states are Florida, Texas and Puerto Rico.)

According to CCC rules, any sugar beet and sugar cane processor receiving a loan should pay a minimum price to beet and cane farmers. Sugar beet prices are those specified in the grower/processor contract, and a sugar cane processor must pay, on average, the following minimum prices, to be adjusted for quality according to contract: In Florida: USD 25 per net tonne of cane, in Hawaii $23.29/net tonne, Louisiana $23.98 per gross tonne, Texas $21.99/gross tonne and Puerto Rico $14.94/gross tonne.

IUF Africa: First Regional Seminar for Sugar Workers

From 25 to 27 October, twenty five delegates from sugar worker unions in East and Southern Africa met at the first regional seminar held in Cairo, in the context of the IUF African Regional Conference. The seminar was the closing activity of the 2002 regional sugar project.

The seminar heard presentations by Sue Longley, coordinator of the IUF Agricultural Workers Trade Union Group, and Hella Alikuru, regional secretary for Africa, on the sugar global and regional work program, respectively. The core of the seminar was devoted to discuss the findings of a research and field visits to the industries and unions in East and Southern Africa implemented in the first part of the year, and to identify main issues of concern for future work. Topics from the research were the basic structures of the sugar industries in the region, which was complemented by country reports by the delegates; regional trade agreements and their impact on the sugar industry, and corporate regional developments. For future work, the unions agreed to focus on a regional network to support their collective bargaining agreement negotiations, in particular in those cases where they negotiate with the same company. Some national activities with regional relevance, such as health and safety issues and HIV/AIDS, were also identified for future work.

Delegates attending the meeting came from unions in Kenya, Uganda, Tanzania, Zambia, Malawi, Zimbabwe, South Africa, Mozambique and Mauritius. Additionally, delegates from Congo (Kinshasa) and Egypt, and observers from Belgium also participated.

Company News

France/Italy: Edison Sells B�ghin-Say

A consortium of cooperatives of French beet growers said it had reached an agreement with Edison, the Italian energy company, to acquire a 54 percent stake in the French sugar group B�ghin-Say for 511 million euros (USD 509.8 million). The consortium includes the cooperatives Union SDA and Union SB. The deal is subject to finalizing documentation and obtaining approval by antitrust authorities, reported Dow Jones International News on 1 November.