The government has no alternative but to divest itself of sugar

The government has no alternative but to divest itself of sugar - price of sugar


Back in the seventies, King Sugar was considered a vital leg (together with bauxite and rice) of the tripod on which the economy stood, primarily because of the high demand and high price paid by foreign buyers for sugar. I am talking of over US$460 a ton for sugar in the late 1980s, and of over 150,000 tons of sugar being exported almost every year from Guyana.

Beside the positive financial and economic impact, sugar also had a huge impact on Guyana politically because the industry was once staffed by 20,000 employees, most of whom who were members of the then parliamentary opposition PPP-controlled union, GAWU. Debatable reports had it that, since the PPP could not stop the PNC at the ballot box or in Parliament, the PPP allowed GAWU to undertake sporadic industrial unrests. Some also believed the burning of cane fields was a form of economic sabotage.

And so, history has it that the PPP and the sugar industry were deemed married on the political, economic and social levels.

For that reason, many of us who lived through the seventies and eighties in Guyana, thought that once the PPP assumed power in 1992 it would conjure up a viable plan to set the sugar industry on a path to long-term sustainability, given that by 1991, the price of sugar had dropped below US$200 per ton.

As the decade of the ʼ90s advanced, the PPP government initiated long-term reforms of the sugar industry when it had GuySuCo sign a management contract with the British firms Booker and Tate & Lyle, both of whom reportedly estimated that around US$20 million would be needed to rehabilitate Guyana’s sugar industry. That initiative failed.

By 2004, as part of another strategic plan to reduce costs and improve productivity, the PPP government had GuySuCo sign a $110 million agreement, partly funded by the World Bank, IMF and Exim Bank of China to build a new factory, which would include the Skeldon Sugar cogeneration plant, a distillery and a refinery. In November 2007, some GuySuCo workers were even trained in South Africa to become familiar with the new technology, whose overall costs were later said to be US$200 million. That initiative also failed.

By November 2005, when EU agriculture ministers reached agreement on contentious reforms of their sugar hierarchy, it was the first sign of the harsh consequential changes to come for Guyana as sugar prices for exports to Europe were drastically cut. Nevertheless, to help Guyana and other regional sugar suppliers cushion the impact of the financial and economic loss, Europe entered into a structured financial compensation arrangement with the PPP government from 2006 to keep GuySuCo viable. Billions of dollars were actually given to the PPP regime for GuySuCo.

Editor, I gave that brief recap to show readers, some of whom are not fully apprised of the contemporary contours of sugar’s true financial dealings, that when now Opposition Leader Bharrat Jagdeo gets up and says, as per your Thursday (June 15) lead story, “Jagdeo warns sugar workers of tough times ahead -at commemoration of Enmore martyrs,” it begs for clarity to be brought to bear on the present dilemma of sugar, which cannot be attributed to the coalition government of Granger-Nagamootoo.

It was never for the lack of trying to save sugar, either by the PPP or the APNU+AFC, that sugar is now facing its bleakest days, but let us make no mistake that we expected a lot better from the PPP, which helmed the government for almost 23 years, to actually turn around the industry instead of turning it into a welfare company for political and economic reasons.

The US$200M Skeldon Modernization Plant, which Mr Jagdeo hardly ever talks about these days, remains the silent elephant in the room. In fact, before he demitted office in 2011, Mr Jagdeo promised a gaggle of reporters that he personally would intervene to fix the Skeldon factory and help turn the industry around. One of many promises he never kept.

Another sticking point had to do with the whereabouts of the European annual subventions for GuySuCo. In the August 19, 2013 Stabroek News article, ‘GAWU wants full info on EU support given for sugar,’ the PPP-controlled union literally demanded the PPP regime give account for the “€114 million ($31.1b) inclusive of the 2012 provision of €23.35 million which will be distributed this year (2013). The funding was a result of the accompanying measures agreed by the European Parliament to ease the pain of EU sugar regime reforms on countries like Guyana”.

President of the Guyana Agricultural and General Workers Union, Komal Chand told Stabroek News, “I would like to see that every cent that comes from the EU as budgetary support to the government of Guyana” intended for the sugar industry, and “…should go to assist the sugar industry to make it competitive.” I don’t think the PPP regime ever gave a full accounting of the billions received.

Editor, even though countries like Belize, Barbados, St Kitts and Trinidad and Tobago had essentially abandoned sugar, and Jamaica had scaled back, Guyana kept sugar on a life support machine hooked up to the national treasury for purely political reasons. Some PPP supporters equate this taxpayer-funded welfare system to subventions for electricity supply in Linden, even though the annual figures do not match up. Others even argue it is the better option to retain given that the other option is to watch a major socioeconomic decline in sugar communities, and possible political implications for APNU+AFC in 2020.

I close by urging Guyanese to understand that Mr Jagdeo, President of Guyana for 12 years when GuySuCo collapsed, still has no economic viability plan for the sugar industry and is merely playing to the gallery of traditional supporters for their 2020 votes.

The coalition, itself, has no alternative than to divest itself of sugar the same way the PPP regime divested itself of bauxite, forcing bauxite communities to adjust to survive with a reduced bauxite workforce and with electricity subventions. By now, Guyanese have mastered survival skills.

Yours faithfully,

Emile Mervin