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

Posted to the IUF website 01-Apr-2003

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume V, Number 3
March 2003

Contents




IUF Solidarity: Trinidad

In mid-March, the IUF launched an international solidarity campaign with the All Trinidad Sugar and General Workers Trade Union (ATSGWTU) asking unions to send messages to the Prime Minister of Trinidad requesting a phased-in and negotiated restructuring of Caroni (1975) Ltd. Unions in Austria, Belize, Canada, Colombia, Guyana, Nicaragua, Norway, the United Kingdom, the United States and St. Kitts, and the IUF regional offices in Europe and Latin America and the general secretariat have already expressed their concerns with the way the government is conducting Caroni's restructuring.

More information is available at: http://www.iuf.org.uk/cgi-bin/dbman/db.cgi?db=default&uid=default&ID=761&view_records=1&ww=1&en=1

Update: On 28 March, the Industrial Court granted the All Trinidad an injunction on the Voluntary Separation of Employment Programme (VSEP), which the government has introduced as a first step in the restructuring of the State-owned sugar company Caroni (1975) Ltd.

The injunction orders Caroni to stop the implementation of the VSEP that in practice, says the All Trinidad, makes the whole process null and void. The Industrial Court also orders Caroni to restrain from attempting to persuade its employees to sign the VSEP, in a clear reference to the massive public relations campaign that the government launched in mid February. Caroni has to refrain from issuing letters of acceptance to the employees under the VSEP, which have been scheduled for 11 April, and will not consider employees who have signed the VSEP as having terminated or agreed to terminate their employment with the company. The Industrial Court will see the matter on 7 May.

The All Trinidad obtained the injunction based on the company's failure to recognise the union as representing the majority of employees and to negotiate the VSEP before offering it to the employees.

By the week ending on 28 March, company sources said that some 4,000 employees, out of 9,200, had accepted the VSEP offer. All Trinidad sources said that a significant number of daily-paid employees signed under duress, referring to the several occasions when the minister of Agriculture said workers should take the VSEP or be retrenched. The board of Caroni (1975) Ltd. had publicly asked the government to re-examine the VSEP, particularly in what concerns to the daily-paid employees.

A troubling incident happened in the early hours of 29 March, when arsonists set fire to Caroni's Human Resources offices in Sevilla, Cuova. Newspapers said that employees sent their VSEP information to that office, but the information itself is stored in another location and there was no loss of important records.

Meanwhile, the 2003 crop continues facing severe difficulties, including a four-week delayed start. Spokespersons for the cane farmers said that Caroni has bought less than half the cane they usually deliver and blamed the minister of Agriculture for creating instability during the crop. In addition, both Caroni factories have experienced work stoppages: the Usine St. Madeleine, when employees demanded more information on the VSEP and in Brechin Castle due to technical breakdowns. In the latter's Forres Park weighing station, reported the Trinidad Express on 23 March, a cable of a crane snapped nearly injuring two workers. The workers blamed the company for the accident, saying it is not giving proper maintenance to the equipment. By the end of March as well, Caroni's chief executive officer and the Human Resources manager left the company on a pre-retirement leave. Right in the middle of the "most traumatic time" in its history, the company losses two top officials.

In related news, a High Court injunction granted to two Caroni employees prevents the company from disposing or transferring any of its assets, including the 77,000 acres of land. The workers argued that the company has under-funded the employees' pension fund. The Court will see the matter on 2 May. The government said that the new Caroni would stop growing cane and lands would be transferred to the State to be managed by a newly created governmental agency.

Kenya: Drivers Strike at Mumias Sugar

A 17-day strike by drivers at Mumias Sugar ended on 22 March, after they conquered their right to join the union of their choice, the Kenya Union of Sugar Plantation Workers (KUSPW). A related work stoppage occurred on 20 January, when the drivers complained of poor working conditions and the refusal of employers to allow them to unionise. After a two-day negotiation, the parties reached an agreement, including the drivers' right to join a union of their choice, ratified in a meeting with the Provincial Labour Officer on 28 January. Representatives of the drivers met with the KUSPW to ask for its support, and over 700 drivers signed a KUSPW membership form.

The KUSPW and the employers were to sign a Recognition Agreement on 4 March, but the employers informed the Provincial Labour Officer that they would not recognize KUSPW and would deal with another organisation. The Labour Officer told the drivers that they should join the union chosen by the employers. The drivers went on strike on 5 March. A week later, the drivers asked the KUSPW to meet with them and their employers to discuss the strike but, again, the employers refused to talk with the KUSPW.

The employers' opposition prompted the KUSPW to initiate a dispute at the Ministry of Labour, according to the Trade Dispute Act. The KUSPW said that unions in the country are industry-based and not craft-based, and drivers who transport cane belong in the sugar industry. The KUSPW's constitution allows the union to organise all employees working in the sugar industry and related activities. Additionally, more than a simple majority of drivers expressed their intention to join the KUSPW.

To end the strike, the employers agreed that drivers would resume work without conditions, they will not lose any benefits and will not be victimised because of their participation in the strike, and that they would join the union of their choice. (In 2000, Mumias Sugar outsourced the cane transport operations.)

According to local papers, the strike was the fourth in three months in Mumias, indicating the level of frustration among employees and the poor state of industrial relations in sugar overall.

Although the drivers' strike ended, Mumias was unable to resume normal operations because farmers refused to deliver cane. They demanded the company restore the old price of 2,015 Kenyan shillings per tonne of cane (USD 26.24), which it unilaterally cut by about 15 percent (to USD 22.79). The company said it would use their own cane, but farmers dismissed such notion saying the company does not own enough cane to sustain its milling operations. Cane prices continue to be one of the major problems in the sugar industry, with millers deciding to cut prices, citing increasing costs. (With reports from Francis Wangara, KUSPW)

India: Insurance for Cane Cutters

A report by the United News of India said that the United India Insurance Company, through its Ahmednagar office, completed what might be the country's largest insurance policy in the sugar industry, covering around 1 million cane cutters in over 150 sugar factories in the state of Maharashtra.

The workers will be covered in the next three years by a policy worth USD 2.09 million, which came into force on 15 January, when an agreement was signed between the Sugarcane Cutters' Association, the Maharashtra Tajya Sakhar Hakhana Sangh and the insurer, the United India.

The insurance scheme comprises three areas: personal accidents, including a USD 2,090 for accidental death; USD 104 in "hutment" coverage (temporary housing facilities), and death of bullocks for USD 419 a pair. (Hindu Business Line, 21 January 2003).

Mexico: Government to Retain Expropriated Mills

When the Mexican government expropriated 27 mills in September 2001, it offered to rehabilitate them and prepare a new sale by March 2003. The process had encountered several problems, however, and it now appears that the government will maintain control of the mills until 2006.

Local sources said that the main obstacle for the re-privatization appears to be the legal challenges to the expropriation. The outcome of some of the legal suits has favoured the expropriated owners rather than the government, and without a favourable decision, the government cannot sell the mills. In addition, there were changes in the state agency managing the mills, the fund of expropriated enterprises in the sugar sector (FEESA by its Spanish acronym), and there is no clear directive on the rehabilitation and new investments in the mills.

For many Mexicans, the expropriation was ill-designed and had in fact benefited the owners: the government, they said, has assumed the responsibility for investing in the mills, the expropriation freed the previous owners from their multimillion dollar debts and, quite probably, the government would have to return the mills already rehabilitated, if the suits do not favour it.

In related news, the House of Representatives voted on 10 December to keep the 20 percent tax on soft drinks using high fructose corn syrup (HFCS). The tax was introduced on 1 January 2002 to protect the domestic sugar industry from competition by HFCS imported from the United States. The Executive, however, suspended the tax on 5 March the same year. Mexico has one of the largest soft drink markets in the world, consuming between 1.2-1.4 million tonnes of sugar per year. HFCS is a substitute for sugar in this industry. The vote of the House adds to the difficulties of reaching a negotiated solution to the five-year old sugar and sweetener trade dispute between the U.S. and Mexico, in the context of the North American Free Trade Agreement (NAFTA).

Poland: Saint Louis Sucre Acquires Largest Sugar Company

Saint Louis Sucre (SLS), the second largest French sugar group, finally cleared obstacles for the acquisition of 95 percent shares of Poland's biggest sugar company, the Slaska Spolka Cukrowa.

Two years ago, the Saint Louis - bought by the German S�dzucker in 2001 - had agreed to acquire Slaska for a 250.5 million zlotys (USD 61.6 million). The Polish government, however, started a lengthy dispute on the basis that the SLS had failed to obtain permits for purchasing land. In March 2003, the courts ruled that there was no legal grounds to bloc the sale and the Treasury approved it. The French group had also agreed to invest 155 million zlotys (USD 38.1 million) to modernize factories and promised to give a 40-month employment guarantee. The remaining 5 percent of Slaska would be transferred to Polski Cukier, a national sugar company created in 2002, but the Saint Louis Sucre has the opportunity to acquire the stake in the future. Slaska comprises 16 beet factories, with a listed capacity of 300,000 tonnes of sugar per year, about one fifth of the national sugar output.

In related news, the German Nordzucker demanded a USD 24.5-million compensation from the Polish government, claiming that the Treasure has not finalised the already-negotiated privatisation of two sugar groups and, instead, has stalled it. Last December, there were reports that these two groups might become part of Polski Cukier. Nordzucker says the government had initially given assurances that it would be allowed to acquire four sugar groups, to boost its participation to 20 percent of the domestic market, up from the current 9 percent.

Pfeifer und Langen, another German company, has requested arbitration in its dispute with the Polish Treasury to change some conditions in the privatisation of the Krajowa Sp�lka Cukrowa, a sugar holding. Pfeifer und Langen wants more time to carry out promised investments in several plants, to change the form of investment from assets to capital increase, and avoid a 6-million euros fine (USD 6.45 million) according to the contract signed in 2001. A spokesperson for the company said that they missed the deadline for investments, because they had been waiting for the changes to the contract to which the Treasury had already agreed.

Cuba: Bracing for a 90-year Low Record Production

In mid March, government sources said that only five of 13 sugar-producing provinces had reached the 100,000-tonne mark, and only one was close to 200,000 tonnes of sugar, in the very difficult crop 2002/03. By this time last year, 11 provinces had surpassed 100,000 tonnes, which six of them reaching more that 200,000 and three close to 300,000 tonnes. And, yet, last year, Cuba struggled to produce 3.61 million tonnes of sugar, one of the lowest levels in the past 50 years. This year, no province has produced 200,000 tonnes yet. Industry sources said that a late start of the harvest because the lack of fuel, parts, and financing is partly to blame.

With these statistics, and the optimum harvest period about to end - by mid April -, local observers said that production could be as low as 2 million tonnes, tel quel, comparable to the early 1910s. The rainy season usually starts in late April-early May, harvest operations become difficult, the quality of cane declines and costs increase. (Because of rains, it is difficult to use machinery in the fields and a high proportion of Cuba's cane is mechanically harvested.) Last September, the government had estimated a production similar to 2001/02 but, in December, when the harvest started, it lowered projections to 2.7 million tonnes.

In 1988/89, Cuba produced 8.1 million tonnes of sugar, but the collapse of the Soviet Union and the loss of markets created an extremely difficult environment for sugar. Analysts said that the decision to restructure the industry (by closing about half of the 156 sugar mills) was correct but the pace of the changes was not. In part, they argued, the restructuring had been delayed for too long, only to be rushed in without preparation. Sources with the Ministry of Sugar said they had suggested in 2002 to phase-in the restructuring in a two- or three-year period, but the government ordered to close the mills at once.

Sugar and Ethanol: Volkswagen's Flex-fuel Engine in Brazil; India's Ethanol Programme

On 24 March, Volkswagen presented to the industry and the press, its new flex-fuel engine powered by either cane-based ethanol or gasoline. The flex-fuel engine was developed over four years and, although still has starting problems in cold weather, Volkswagen thinks it would replace all other engines in the medium term. This could represent 27,000 to 28,000 new vehicles per month, said a Reuters report. The new engine would boost ethanol demand and contribute to consolidate the Brazilian sugar & alcohol complex.

A spokeswoman for Volkswagen said the company is seeking to export the flex-fuel cars to China. Brazil has the expertise to help countries to adapt to the Kyoto protocol on greenhouse emissions, she added. "We have the world at our feet," commented representatives of the Sao Paulo Agroindustry Association (UNICA), on the public presentation of the new flex-fuel car.

In closely related news, Mitsui & Co. from Japan and the Brazilian group Cosan had agreed to set up an ethanol plant for exports to Japan. According to The Japan Times, Mitsui is shipping USD 1.5 million worth of equipment to assemble a pilot plant in Piracicaba (Sao Paulo), next to Cosan's Costa Pinto mill. Initial production is estimated at 2,000 litres per month. Mitsui plans to import from Brazil close to 500 million litres in the second half of 2003. The Japanese government, on the other hand, is studying the blending of 3 to 10 percent ethanol in gasoline for cars.

Meanwhile, the federal government in India introduced a regulation mandating a five percent ethanol-petrol mix. The programme has two phases. In the early part of 2003, four major sugar-producing states (Maharashtra, Andhra Pradesh, Punjab and Uttar Pradesh) would sell the blending; and by mid 2003, five more states (Goa, Gujarat, Haryana, Karnataka and Tamil Nadu) and four territories would follow suit. A second phase will see the blending introduced in the rest of the country. According to the siliconindia.com site, the government estimates ethanol demand at around 320-350 million litres per year in the first phase (the nine states and four territories).

The Indian sugar industry warmly received the news on the ethanol programme. The industry, however, expects a slow start because lack of infrastructure and limited supplies. Only Uttar Pradesh, with 120 million litres, and Maharashtra, with 100 million litres, are reported surplus ethanol producers. Andhra Prasdesh's production is about 60 percent of its ethanol requirements, and Karnataka's about 80 percent of its demand.

Industry sources said that some of the 118 sugar factories with distilleries started to produce ethanol, while most are awaiting the release of funds from the Sugar Development Fund to modernise facilities or set new plants. Oil companies agreed to a 17 rupees per litre (US 36 cents) in the first quarter of 2003, substantially lower than imported ethanol, mostly from Brazil.

European Union: Cuts in Support Prices and Production Quotas Recommended

In the process of reform of the Common Agricultural Policy (CAP), the European Union commissioned two studies on its sugar regime, one of which has been completed by the European Center for Agricultural, Regional and Environmental Policy Research (EuroCARE), a Bonn-based group. EuroCARE examined several possibilities of reform and adjustments to the sugar industry, and favoured reducing the sugar intervention price - the guaranteed minimum price - by 54 percent, eliminating production quotas, and introducing direct payment to farmers. The reforms would favour consumers, but farmers and processors would see their income reduced. Processors would need to streamline operations, probably closing some facilities, while farmers would receive direct payments. The second study, commissioned to a Dutch university, will look into competition within the sugar industry of the European Union. Results from the study are expected in April. These two studies, in addition to EU's internal reports, will be the basis to reform the sugar regime.

Company News

Germany - Hungary: Nordzucker Closes One Factory, Buys Other Three

Citing overcapacity, Nordzucker, Germany's second largest sugar refiner, announced on 20 March it would close the Scheleswig factory (9,000 tonnes of daily capacity - tdc) by the end of 2003. The company has a European Union quota of 1.15 million tonnes of sugar per year. An analysis of its facilities indicates a 12,000-tdc surplus capacity, which the company attempts to cut. One hundred and twenty-one jobs will be lost.

Meanwhile, the Competition Office in Hungary approved a transaction by which Nordzucker acquired a majority stake in three sugar factories: 51 per cent in the M�travid�ki Cukorgy�r Rt (5,400 tdc) and the Szerencsi Cukorgy�r Rt (6,500 tdc), and 68 percent in the Szolnoki Cukorgy�r Rt (8,000 tdc). These three plants account for 37 percent of the Hungarian sugar production of about 470,000 tonnes per year (against consumption of 370,000 tonnes). A spokesperson for Nordzucker said that the face value of the company's shares in the factories is USD 26.2 million and it would like to buy the remaining stake, now in government hands. (In 2002, the French consortium Origny-Naples, comprising beet farmer cooperatives, acquired the French operations of B�ghin-Say, the previous owner of the three factories. At that time, the consortium said it would sell the Hungarian concerns.)