Dear Editor,
This country is having an interesting and necessary debate on sugar and the future of sugar in Guyana. However, in the debate, some essential factors in assessing the viability of the sugar industry seem to be missing. Firstly, the government should get out of the sugar business where possible and should privatize, if feasible. Every sugar producing country producing at a lower cost of production than Guyana happens to be privatized. We cannot begin to contemplate shutting down sugar before giving privatization an opportunity. If privatization fails, then sugar should be exterminated. Secondly, there is already a private cane farming industry in Guyanam particularly in the Wales area. Give them a shot first before closing the government-run operation. Third, private cane farmers at Wales produce cane at a lower cost than the government-run sugar corporation. This phenomenon probably applies to private farmers in other sugar producing areas. Before any government makes a decision on closure, it must consider this fact that a cost advantage already exists. It should give this group an opportunity to prove themselves first before slamming the door shut. It would be irresponsible not to do so.
Fourth, every sugar industry in every sugar producing country enjoys governmental subsidies. Sugar in Guyana is as entitled to subsidies as sugar in every other sugar-producing nation. If we diversify from sugar to anything else, whether crops or livestock or tilapia, it will require governmental subsidies to compete on the international market. This is a fact of life. No country produces sugar at its world price (currently US 16 cents per pound). The true price of world sugar sans subsidies is about US 32 cents per pound. Massive subsidies in some major sugar producing countries lead to the dumping of sugar on the world market, which in turn distorts the price. So, from these factors alone we cannot begin to have a debate about sugar, or any other replacement agricultural industry in Guyana, without accepting the need for some form of subsidization and without factoring in a subsidization cost to the overall cost of the product.
Fifth, diversification is the new catchword. Replacing a government-run industry with another government-run industry in Guyana is going to face the same financial ruin. GuySuCo and previous PNC and PPP attempted diversification efforts had lacklustre results. To diversify to replace sugar would require massive diversification on a scale for which Guyana has proven it has the desire, expertise, money, population, capital, low enough borrowing costs and entrepreneurship to accomplish. Propping up start-up diversified industries could cost more over the next decade than the cost of subsidizing privatized sugar. It isn’t cheap to create entire industries largely from scratch and to do so on a humongous scale to replace a major industry in terms of replacement revenue and jobs. Even sale of the sugar industry to foreign mega farming corporations will require massive concessions and subsidies to these entities. Sixth, if government is planning on diversifying into other crops on a private model, which private farmer is going to trust this government after its treatment of private cane farmers in Wales?
I am in favour of diversification but it cannot be pursued at the expense of giving the private sugar industry a shot at producing sugar. Give private players a shot at proving themselves before making a wholesale massive switch to an entirely new industry or industries. Assuming the private cane farmers currently produce cane that equates to a 20% reduction in the cost per pound of sugar, Guyana’s per pound cost of production effectively falls from US 42 cents to US 33.6 cents if private farmers produce all the cane in this country. If incentives for mechanization for private farmers lead to an additional 20% reduction in per pound cost, Guyana’s overall cost per pound is at US 25.2 cents. Brazil is the world’s largest sugar producer. Its non-subsidized per pound cost of production is about US 20-24 cents per pound, primarily due to its ethanol mandate which forces Brazilian consumers to use sugar-produced ethanol even when oil is cheaper. We will be ahead of most producers at a US 25.2 cents per pound before subsidies. Government will not need to subsidise production at this cost as heavily as it subsidized GuySuCo. Plus, when sugar prices inevitably rise on increasing demand over the long term, we could be in far better shape with a viable industry. Again, we still attempt diversification but given diversification’s listless past, not at the expense of an existing industry. If the private sugar industry fails, at least they were given a legitimate shot at performing and those successful areas of diversification can move seamlessly into the gaps.
Yours faithfully,
M Maxwell
