Transition needed for sugar industry to survive – US Embassy deputy

By Shemuel Fanfair

Sugar is a “problematic” enterprise and for it to be sustained, a substantial transition is needed if Government wants to discontinue awarding large subsidies. This is according to Deputy Chief of Mission of the United States Embassy, Brian Hunt, who in an interview with this publication noted that sugar production costs are much higher than what you can “reasonably expect to get” in return on the world market.

US Deputy Chief of Mission Brian Hunt
US Deputy Chief of Mission Brian Hunt
Finance Minister Winston Jordan
Finance Minister Winston Jordan

“The fact is that the cost of production is too high, the mechanisation is too low, the number of people that are being employed for the amount of crop produced is probably much too high; and there is going to have to be radical transformation or there is going to have to be some sort of social agreement that the government is going to continue to bail it out year after year, which becomes increasingly difficult economically over time,” the deputy chief observed.
He pointed out that the European Union (EU) has been pushing for some time for transformation of the sector but stated that he does not believe that the expected transformation was achieved.
“At the end of the day, I think the reality is that there needs to be a much more systematic way in which the government goes about restructuring the industry…the new government did do a very comprehensive study of what was going to be needed and they are moving forward with some of those changes [but] it’s not to say any of this is going to be without pain,” the diplomat further explained.
Hunt pointed out that, “some degree of pain” will befall those who are employed in associated sectors of the sugar industry. He however posited that the industry should be mechanised more in line with neighbouring producer, Brazil:
“I think overall you don’t have a whole lot of choices in sugar; the only way to get the price down so that you can sell competitively with large producers like Brazil is moving in the direction of mechanisation and streamlining the industry.”
When calls were made last month for another bailout to the cash-strapped sugar industry, Finance Minister Winston Jordan opined that the recent challenges have made sugar “not as sweet” as it used to be. Jordan explained that to sustain what he deemed an “expensive industry” the Guyana Sugar Corporation (GuySuCo) would have to undergo “severe structural transformation[s]” for it to be sustained.
Cash-strapped GuySuCo has since the beginning of this year closed the Wales Sugar Estate on West Bank Demerara, putting some 1700 workers out of jobs, as the company does not have the finances to operate, much less refurbish the Wales facility. The Agriculture Ministry had stated that there was a “gloomy outlook” for sugar prices in the foreseeable future and Wales Estate has been projected to make a loss of $1.6 billion to $1.9 billion this year.
The authorities are contending that this coupled with the extent of refurbishment needed renders this estate prohibitively costly to maintain.
GuySuCo said that it will be exploring the feasibility of alternative ventures utilising the Wales lands, while government had outlined that “agricultural workers at Wales will be absorbed by Uitvlugt up to the extent of suitable vacancies on that location. Surplus labour would have to be made redundant. The same principle would apply to the other departments.”
Additionally, the La Bonne Intention (LBI) Sugar Estate, East Coast Demerara, is expected to be closed within this year, possibly placing another 800 employees on the breadline. Some of those workers are expected to be absorbed by the Enmore Estate.
In reference to Wales Estate converting to dairy production, the Finance Minister had said that the government was petitioning the Inter-American Development Bank (IDB) for a loan to aid in agricultural development.
“We are talking to IDB to get an agri development loan that will look at agricultural diversification…this loan is going to target dairy and livestock development,” Jordan explained.
He however cautioned that the loan was still in its formative stages. The country’s finance manager had noted that most of government allocations to the industry has already been expended.
“This year, we put in $9B… today, almost 75 per cent of that has already been transferred… El Niño reduced the first crop by 30,000 tonnes. This obviously means that the sugar industry will be coming to government again for more money…this is the reality, this is not something that government can change overnight,” he had noted.