National Development Strategy (Guyana) − Chapters 9−20 CHAPTER 9 SUGAR 9.IBASIC FEATURES 9.I.1Guyana’s sugar is produced by a state−owned enterprise, the Guyana Sugar Corporation (GUYSUCO). Although a parastatal, the corporation has been managed since 1990, under a management contract, by a privately owned British Company, Booker−Tate. 9.I.2The company’s mission statement reads as follows: "To establish world−class standards in agricultural practices, sugar factory efficiencies, environmental protection and the productive use of human resources − in order to achieve sustained profitability in any foreseeable marketing environment − so that the sugar industry can make a full contribution to the economic, technological and social progress of Guyana." 9.I.3The sugar sector, which is export−oriented, contributes immensely to Guyana’s socio−economic development: 16 percent of the country’s total GDP and 30 percent of its agricultural GDP are derived from this commodity; it is the largest net earner of foreign exchange in the country; and it is the biggest corporate contributor to public revenue. Moreover, it directly employs 25,000 people or about 10 percent of Guyana’s labour force; indirectly, it absorbs a further 10 percent of the country’s citizens. 9.I.4Perhaps of as great importance are the services which GUYSUCO provides to the communities in which it operates, in the areas of education, training, health, housing, water and recreation. Indeed, distinct sugar communities exist in Guyana, with all the characteristics of company towns. 9.I.5Although Guyana had produced 395,000 tonnes of sugar in 1971, output had dropped to about 130,000 tonnes by 1990. Since then, however, production has steadily increased to over 300,000 tonnes in 1999. 9.I.6GUYSUCO holds 164,000 acres of Guyana’s lands, all on the crowded coastland. Indeed, it is the largest agricultural entity in the country. On average, depending upon cultivation practices, and the disposition of land for human settlement, services and recreation, it occupies between 90,000 and 100,000 acres. It is estimated that about 50,000 acres of GUYSUCO’s land holdings are either lands which are not under cane, or lands which have been permanently abandoned. 9.I.7GUYSUCO is a relatively high−cost producer of sugar. Its cost of production was US$0.23 per pound in 1995/96 and 1996/97, and US$0.22 in 1997/98. It is estimated that in 1998/99 the production cost was also US$0.22 per pound. This compared unfavourably with the production costs of the U.S.A., North East Brazil, Mauritius, India, Fiji, Australia, Guatemala, and Malawi, for example. 9.I.8These production costs are not evenly distributed across Guyana. They are highest in the western regions of the country: in Wales, Uitvlugt, LBI and Enmore − the Demerara estates; and lowest in the other four of the eight estates which exist in Guyana: Skeldon, Albion, Rose Hall and Blairmont. The differences in productivity between these two groups of estates are partly due to agro−climatic conditions and, it is sometimes claimed, to contrasting management practices. 9.I.9Despite its comparatively high production costs, GUYSUCO is able to sell almost all its production in Europe, the U.S.A. and in CARICOM countries. This is because of the EU/ACP Sugar Protocol; the EU/SPS programme; the USA sugar programme; and the Common External Tariff (CET) which CARICOM countries apply. These various agreements and arrangements give preference to the entry of Guyana’s sugar at prices National Development Strategy (Guyana) − Chapters 9−20 that are usually higher than the so−called "world−market" price, or more properly, the price of sugar in the non−preferential market. 9.I.10The fact that the value of the Guyana dollar has depreciated somewhat over the years has assisted GUYSUCO in the payment of local costs, such as salaries and wages, simply because the foreign exchange which it earns abroad realises more Guyana dollars and stretches farther. 9.I.11Although some of the sugar−cane that is grown in Guyana is produced by farmers, as opposed to GUYSUCO’s estates, the country has the lowest farmer/estate cane ratio among CARICOM sugar producers. Thus, in the crop year 1997/98 the farmer/estate ratio in Barbados was 66:34; in Belize, and St. Kitts and Nevis 100:0; in Jamaica 53:47; and in Trinidad and Tobago 58:42. In Guyana, however, the farmer/estate cane ratio was 10:90, quite the reverse of that obtaining in the other countries. 9.I.12Cane farmers in Guyana receive a higher proportion of the returns that are obtained from the sale of sugar than in any other country in the Caribbean region. 9.I.13Even though extensive repairs have been undertaken in recent years, the eight sugar mills in Guyana are generally not only old, but obsolescent. Moreover, the small capacity of these mills does not permit GUYSUCO to benefit from the scale−economies that are inherent in modern mills, and that are necessary if the industry is to become competitive. 9.I.14Much of the old farm machinery, with which GUYSUCO operated until the mid 1990s, has been replaced. However, the industry’s field operations are not as modernised and mechanised as they might be. 9.IIGUYSUCO’S FUTURE PLANS 9.II.1As has been noted, sugar production in Guyana is basically uncompetitive. In other words, were it not for the preferential treatment which it now receives, GUYSUCO would find it difficult to survive. In order to overcome this difficulty, GUYSUCO has formulated a plan which it claims, if implemented, will enable it to become "an entrepreneurial, customer driven, retail market oriented producer of top−quality sugar and associated value−added by−products, at a cost which will enable it to compete in any foreseeable market environment." 9.II.2The objectives of the plan are to increase production to 435,000 tons per annum; reduce the costs of production to US 10 to 11 cents per pound; sell to more countries in CARICOM than they now do; increase the total volume of sugar exports to these territories; develop more regional markets; add value to the basic output through the production of special sugars, and the introduction of new pack sizes and packaging; establish a distillery, if this proves feasible; build a sugar refinery; and develop an intra−Caribbean market for refined sugar. 9.II.3The implementation of the plan is to be phased. It includes, however, the following elements:− −the construction of a new 350 tch factory at Skeldon (111,000 tonnes) from an expanded cane area; −the designation of new lands for mechanisation; −the closure of the Rose Hall factory, and the concomitant expansion of the Albion facilities to 415 tch (153,000 tonnes); National Development Strategy (Guyana) − Chapters 9−20 −the utilisation of diffusion technology at both the Skeldon and Albion factories; −an increase of sugar production at other factories in order to secure another 171,000 tonnes of sugar per annum; −the upgrading of agricultural practices, and the introduction of new varieties; and −the co−generation of power from both the Guyana Power and Light Company and GUYSUCO’s own bagasse, for use in the new and expanded factories. 9.II.4The company asserts that, if its plan were implemented, the benefits which would accrue to Guyana would, inter alia be as follows: an increase in gross foreign exchange earnings to a minimum of US$145 million per year, and net earnings of US$80 million; the generation of cash resources sufficient to pay dividends from the year 2006; a more equitable distribution of income; and the enhancement of rural wealth through, for example, an expansion in the utilisation of cane produced by private farmers, and increased levels of other economic activity. 9.II.5The plan assumes that the current preferential markets will remain, albeit at reduced prices; that Guyana will retain its SPS/SP allocation; that this allocation would be augmented by amounts accruing from those CARICOM countries in which sugar production has declined and will decline and therefore fail to meet their preferential targets; and that sugar sales from Guyana to other CARICOM countries would increase to 80,000 tonnes. This last assumption is based on two considerations. First, that CARICOM, at present, imports 120,000 tonnes from outside the region; and second, that the imposition of its Common External Tariff would enable Guyana to be more competitive in CARICOM markets than producers from outside the regional arrangement. 9.II.6Other measures which would be taken to improve productivity encompass the restructuring of the administration and management both on the estates and at the corporation’s head office; the amalgamation of contiguous estates; the out−sourcing of a range of activities and services wherever these prove to be cost−effective; the mechanisation of cane loading; and the introduction of modern processing technology into existing factories. 9.II.7The new plan envisages, for the Skeldon expansion, the addition of 2,120 hectares of new land at Manarabisi, and a further 6,000 hectares between Skeldon and the Canje river. Thirty percent of the production from this increased area will be derived from cane farmers. 9.II.8For the Albion/Rosehall consolidation, 2,476 hectares of new land, south of the 43 Koker expansion, will be taken over. There will also be an expansion of cane farmers' land at Blairmont. Moreover, temporarily abandoned land in the East Demerara area will be brought back into cultivation. 9.II.9The total costs to be incurred would be US$200 million: US$87 million for the new Skeldon operations; US$64 million for the expanded facilities at Albion; and US$49 million for the refurbishing of other estates.