Robert BuddanIN NOVEMBER, Europe will make a final decision about what it will pay for Caribbean sugar, a decision that could see the end of sugar production as the mainstay of Jamaica's agricultural sector.
The problem with the sugar industry is that it has depended on artificially high market prices, constant government loans, Jamaican dollar devaluations, and old-fashioned factories.
Since artificial market prices are on the way out, government cannot afford further loans (after all, we now have to secure US$200 million for Air Jamaica), the dollar has stabilised, and no one wants to pay to modernise the factories. Therefore, the future of sugar might already be a done deal.
We should make up our minds one way or another to establish a new foundation for the cane industry and if our diplomacy with Europe has run into a dead-end, we might wish to turn to our southern neighbours namely, Brazil, Mexico and Venezuela.
THE PLAN FOR SUGAR CANE
There is a plan prepared by the Planning Institute of Jamaica (PIOJ) for the Cabinet to consider. It calls for divestment of government-owned estates and diversification into cane by-products. The options are not really new since it was the intention of government to re-privatise the estates it was forced to take back in 1998. As for diversification, that had started in the 1980s. The attraction of these two options today, however, is that we might be able to partner with big players like Brazil in making large estates like Monymusk and Frome viable for ethanol production.
As for diversification, an energy-related sugar industry can take us from an industry of the past into one for the future. Furthermore, we should put some cane lands into other forms of agriculture. Edward Seaga suggests that some of this land could be used to grow the versatile and multi-purpose leucaena plant. That is certainly one possibility. Mexico is experienced with this. This means that we might be able to harness big players like Venezuela (oil), Brazil (ethanol) and Mexico (leucaena) for the economic transformation we need to emancipate agriculture. The industry has been in decline in the Caribbean for 40 years. The peak year of Caribbean sugar production was 1965. Jamaica was the leading Caribbean sugar producer and Tate and Lyle caught the wave of high post-war demand and strong world prices.
DECLINE IN PRODUCTION
Production has drastically declined among the six leading CARICOM sugar producers since. In Barbados, it fell from 191,000 tonnes in the peak year of 1950 to 36,000 tonnes in 2002/03.
The same precipitous decline afflicted Trinidad where production nose-dived from 222,000 tonnes in 1970 to 67,000 tonnes in 2002/03. In St. Kitts, the third oldest British sugar producing colony, the struggling sugar industry was finally closed down in 2005, and Barbados, the first sugar exporter in the Caribbean might soon bow out of sugar completely.
Caribbean production fell from 1.3 million tonnes in 1965 to 1.1 million tonnes in 1972 and sank to 650,000 in 1989.
It has really been strong lobbies that have kept the humbled industry going in Jamaica. Trade unions protecting 40,000 jobs; cane farmers' associations serving 15,000 growers; and governments protecting exports to preferential markets, have doggedly backed the industry. MPs on both sides who represent over 20 'sugar constituencies' in which as many as 250,000 have some connection to sugar, hoped that the sugar economy would somehow resurrect their communities.
The time has now come for Jamaica to make up its mind once and for all. Of the five CARICOM producers remaining, Guyana and Jamaica remain the two largest, accounting for two-thirds of total production, and along with Belize, these three account for 80 per cent. In 2004, these three countries earned two-thirds of the foreign exchange earned by sugar in the region. However, Guyana and Belize have much unused land and can expand to get better economies of scale. Already Guyana is taking up the slack, producing much more competitively than Jamaica and is now CARICOM's biggest producer. It also earns more foreign exchange from sugar than Jamaica does.
JAMAICA'S DECISION
The question for CARICOM is really what will Guyana, Jamaica and Belize do with sugar? The stark fact is that CARICOM today accounts for less than one per cent of world production of sugar. As very small producers, we are price-takers. This is why Europe's decision to reduce what it pays for our sugar by two-fifths immediately causes a
crisis.
Despite this, the sugar lobbies continue to bat for the industry or at least for a compromise with Europe to give the industry time for a soft landing. Dr. Ian McDonald, chief executive
officer of the Caribbean Sugar Association, makes the case for staying with sugar. He says sugar contributes US$300 million to Caribbean economies, supports 125,000 people directly, provides stability to rural communities, allows regional producers to control the CSME market and protect themselves against dumped sugar, and cites a CARICOM report of 2004 that says, "Experience and countless feasibility studies have shown that sugar is irreplaceable by any other crop."
But it was reported last week that the Government of Jamaica has provided $10 billion to the industry over the last 10 years. This is more than the industry has earned in foreign exchange over this time. Furthermore, the CARICOM market takes only about 100,000 tonnes of the 700,000 to 900,000 tonnes the region can realistically expect to produce. CARICOM cannot absorb all of the sugar it produces. Jamaica would still need to go to the international
market and for that we will have to be competitive.
SUGAR DIPLOMACY
Sugar takes up about 40,000 hectares of 145,000 hectares of the most fertile lands in the plains of Jamaica. Jamaica?s emerging plan recommends divesting the government factories and diversifying into sugar cane by-products. Probably the Brazilians will be interested in taking on estates like Monymusk and Frome for the production of cane for ethanol.
The Brazilians might not need to be reminded that they were party to the challenge of the preferential European agreement at the WTO and that Jamaica commands influence over votes vital to Brazil?s hemispheric ambitions in the OAS and among the FTAA negotiating countries. Probably we should be concentrating our sugar diplomacy on our partners in the South rather than on the unwieldy countries of a European bloc in some disarray over its own future.
The president of Mexico was recently in Jamaica trying to make up lost grounds in the Caribbean, and Hugo Chavez in Venezuela will rely on Jamaica to keep his PetroCaribe alliance in CARICOM intact considering the defection of leading countries like Trinidad and Tobago and Barbados.
MILLIONS TO DIVERSIFY
INDUSTRY
Derrick Heaven says it will cost US$200 million to diversify the industry towards ethanol,
refinery, bagasse co-generation and the production of industrial chemicals. It seems more likely that we can get this money from our southern neighbours if we decide to diversify into sugar by-products.
We don't seem to know where the US$250-US$500
million is going to come from if we are to make the sugar
industry twice as competitive than it is at present. Even the privately owned companies don't believe they can compete under the new European regime. Government cannot afford to keep bailing out the industry and the private sector shows no stomach for the challenge.
Let us revisit the National Industrial Policy and identify a new agro-industry, thoroughly modern, competitive and diverse and one that can attract the capital that will put sugar cane on a new basis that can face globalization without the patronage of Europe.
Robert Buddan lectures in the Department of Government, UWI. Email:
Robert. Buddan@uwimona.edu.jm or infocus@gleanerjm.com
