No turnaround for sugar industry…GuySuCo produces sugar at double world market price

- owes over US$170M in debts  
- employees’ contributions not paid, benefits in jeopardy

As concerns continue to grow over the viability of the country’s sugar industry, Government yesterday said that it is seriously considering other alternatives, including going the route of producing ethanol.

Agriculture Minister, Dr. Leslie Ramsammy, and GuySuCo top executives yesterday.

The disclosure was made yesterday by Agriculture Minister, Dr. Leslie Ramsammy, as the Guyana Sugar Corporation (GuySuCo) appeared for the second time in less than a week before the Parliamentary Sectoral Committee on Economic Services.
But Dr Ramsammy’s comments seemed to echo those made by Anthony Vieira, a former sugar producer, in a letter published in the Kaieteur News, yesterday.
The industry is in a deep trouble with no immediate end in sight.
According to Minister Ramsammy, Government believes that GuySuCo’s future lies in mechanization and diversification. He pointed to an ethanol pilot project ongoing at Albion Estate in Berbice which will determine how GuySuCo proceeds in the future.
GuySuCo’s option of going the ethanol route is one that the Opposition has indicated a willingness to back.
But it is not only the Opposition that has been flaying Government over GuySuCo.
The letter pages in the daily newspapers have been filled with protests from local analysts, including Professor Clive Thomas and former sugar executive, Tony Vieira, among others.
In a stinging letter yesterday, Vieira, a former Member of Parliament, said that since September 2013, the world market price for sugar was fluctuating between US$0.16 a pound and US$0.19 a pound. He argued that the long term outlook for sugar, as far as price is concerned, is not good.
With GuySuCo admitting that production costs will only drop to around US$0.25 at best, it will only mean that taxpayers will have to consistently bail the industry out.
Vieira also slammed the US$200M expansion of Skeldon, calling it “a monstrous mistake by itself.”
“They are reluctant to admit that they created a white elephant and are now making a second mistake by turning to the production of packaged sugar instead of ethanol, which is what they should have done once they had made this disastrous decision to expand the Guyana industry when everyone else was downgrading/abandoning theirs. Trinidad, Jamaica, St Kitts and Barbados are good examples, due to the loss of the EU subsidy.”
Not only does GuySuCo owe US$170M in both short and long term debts, including for the troubled flagship Skeldon factory, but it is producing sugar at an unrealistic US$0.35 per pound and selling for a worrying loss of an average US$0.25 per pound.
According to GuySuCo’s outgoing Finance Director, Paul Bhim, GuySuCo owes banks – both local and foreign, suppliers, the Guyana Revenue Authority, the National Insurance Scheme (NIS) and the Sugar Industry Labour Welfare Fund Committee (SILWFC) some $58B.
With regards to NIS payments, there have been repeated claims of non-payment of contributions, and there are now fears over how this will affect workers who are claiming benefits.
It also owes another US$112M loaned to the Guyana Government for the New Skeldon Sugar Factory by the World Bank, China EXIM Bank and Caribbean Development Bank.
GuySuCo is asking for patience, saying that Guyana will have to wait until 2017, as part of its strategy to turn the fortunes of the industry around, to bring production prices to about US$0.27 per pound. Between last year and now, Parliament approved US$50M. GuySuCo now wants another US$30M to help the industry.
But there is still no guarantee what will happen in 2017 as already sugar prices have plunged from over US$700 per tonne in December to below US$500 per tonne. To realistically compete with the rest of the world, Guyana must bring down its production costs to below US$0.20 per pound.
Industry experts are forecasting that sugar prices will remain depressed for some time as neighbouring Brazil and Thailand have increased their output, helping to flood the world market. GuySuCo itself has said that there is glut in the world market of almost two million tonnes. This has driven prices down.
The Skeldon expansion project is the most expensive project to date in Guyana. Shortly before he left office in 2011, former President Bharrat Jagdeo said he would have personally made it his duty to ensure the problematic Skeldon factory is fixed.