Sweet or sour?

Changes to world trading rules and to the European Union’s common Agricultural Policy have raised questions about the future of the Caribbean’s sugar

Bagging Guyana Demerara sugar. Photograph courtesy the Guyana Sugar Corporation (Guysuco)Caribbean sugar packaged in sachets. Photograph courtesy the Guyana Sugar Corporation (Guysuco)Photograph courtesy the Guyana Sugar Corporation (Guysuco)Photograph courtesy the Guyana Sugar Corporation (Guysuco)

Sugar has been a mainstay of the Caribbean economy for four hundred years. It was the foundation of a slave trade that brought slaves and indentured servants to the Caribbean — and wealth and prosperity to Europe.

Sugar was one of the main drivers of Europe’s commercial development. It remains the most important agricultural product in the Caribbean Community (Caricom), the regional economic and political grouping comprising 15 Caribbean states (Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St Lucia, St Kitts and Nevis, St Vincent and the Grenadines, Suriname, and Trinidad and Tobago).

Caricom’s sugar industry accounts for US$300 million in foreign exchange earnings each year, and it is estimated that it creates direct and indirect employment for 125,000 people. Speaking at the University of Guyana late last year, Ian McDonald, chairman of the Sugar Association of the Caribbean (SAC), said: “Given that an average of four persons (and this may be an underestimate in these developing countries) depend on one employed person, no less than 625,000 persons depend on the sugar industry in Caricom, out of a population of five million in the countries involved.”

McDonald added: “Sugar is by far the largest agricultural enterprise in the region. The wealth sugar has created, the jobs it generates, the foreign exchange it earns, the infrastructure it has built up, the world-class research it fosters, the skills it teaches and shares, the industrial and small-business developments that have grown around it, the community services it supports (including health, pure water supply, education, and sports), the rural stability it provides, the long-term role it has played in preserving the environment — all give the industry a significance that goes far beyond simple profit and loss calculations.”

However, the re-gion’s sugar industry faces an uncertain future, to say the least, and some question whether it has any future at all on some islands. St Kitts and Nevis, for instance, has announced that this year’s sugar harvest will be the country’s last. According to reports, a rise in the cost of production and declining revenues have left the state-owned sugar company owing US$117 million to local banks. In Barbados, whose whole economy once depended on sugar, the industry is finding it increasingly difficult to meet its agreed EU quotas because of declining production — although this year’s harvest was expected to be better because of an improvement in yields.

But there are longer-term and more fundamental threats to the industry across the whole Caribbean. The World Trade Organization (WTO) has ruled in favour of a challenge by Brazil, Australia, and Thailand to the EU rules that govern its sugar industry, which the complainants say is adversely affecting the world’s, and their own, sugar trade. The WTO decision, and changes the EU intends to make to its sugar regime as a result of reforms to its Common Agricultural Policy, will significantly affect the sugar industry in the developing states of Africa, the Caribbean, and the Pacific (the so-called ACP group, whose members receive special considerations on trade from the EU). These changes will mean an erosion of trade preferences for sugar that will result in a 37 per cent reduction in the price paid by the EU for Caribbean sugar by 2007. This would represent a loss of US$90 million in annual earnings for Caricom.

Nisa Surujbally, marketing director of the Guyana Sugar Corporation (Guysuco), a major Caribbean sugar producer, says: “The [EU] price cuts are too deep, too sharp, and too soon, and certainly not a requirement for compliance with their WTO commitments.” This view is reflected in the fact that Caricom has rejected the EU reform and looks upon entering into detailed discussions on an EU “action plan” (to provide assistance in making the industry more competitive and to assist Caribbean economies to diversify into other sectors), as “secondary to the main objective of mitigating the unacceptable proposals for price cuts”, Surujbally added.

The EU Commissioner for Development and Humanitarian Aid, Louis Michel, said in January this year: “We are well aware of the challenges imposed by the EU sugar reform on our ACP partners, and we are committed to using development and trade policies to work with them in their adaptation process . . . Their access to the EU market represents around 70 per cent of the revenue of their sugar sectors.” But Caribbean sugar producers point out that as many as 12 EU member states are themselves against the proposed changes, and the European Parliament has also expressed genuine concern as it relates to displacement of beet production and the impact of the proposals on the ACP sugar-supplying states.

Sugar is not the only Caribbean industry under threat if the EU changes become a reality. The sugar industry also underpins the region’s rum industry. Rum is made from molasses, a by-product of sugar cane, and the region’s rum manufacturers export their high quality products to almost every corner of the world. Guyana, for instance, sells molasses to the country’s Demerara Distillers Ltd and exports molasses to Barbados, St Lucia, St Vincent, Antigua, Grenada, and Martinique. The other Caribbean nations’ industries also supply their respective distilleries. These distilleries, many of which produce world-renowned brands of rum, and all of which are an important source of much needed foreign exchange, are also in turn under threat from the EU reforms.

Most worrying of all, a damaged sugar industry and the consequent loss of foreign exchange earnings mean heavy job losses and a loss of funding for social and economic development, and, ultimately, pose a threat to the very social fabric of nations such as Guyana and Jamaica, to name but two.

But the Caribbean sugar industry is not standing by waiting for assistance, or allowing its competitors and the larger nations to simply decide matters on its behalf. In Guyana, for instance, Guysuco is focusing heavily on product marketing, putting great emphasis on improving quality even further and on branding its products. The country has increased production from 130,000 tonnes in 1990 to 330,000 tonnes, with yields improving dramatically during the past few years. Guyana’s products are ranked among the higher-quality ACP suppliers.

Guyana is the original home of highly prized Demerara sugar, and in 2003 the country launched a branded sugar called Demerara Gold. Another branded sugar is expected to come onto the market this year. Branded sugars and value-adding are just two ways in which the industry can increase its profitability.

The region’s rum producers, too, are working to strengthen brand awareness and become significant players in the global drinks industry. And the Caribbean is also aiming at self-sufficiency in refined sugar, supplying its own markets with a product it can provide for itself. Guyana, Jamaica, and Trinidad (which already has a refinery) are at the forefront of the move to make the region self-sufficient in refined sugar.

But there are other, quite new opportunities that may transform the sugar industry in the Caribbean; they have nothing to do with sweetness, and everything to do with energy. “Might we be seeing the development of a closer connection between oil and sugar?” Ian McDonald asked last year. “Demand for, and interest in [sugar] cane as a fuel [in the form of ethanol] . . . is now playing a bigger role in energy calculations, and this role is likely to increase rapidly.”

During his presentation at the University of Guyana, McDonald quoted a report that said, “Today there are a large number of countries that are developing fledgling ethanol programmes, partly in response to low sugar prices during 2003, but also as a result of the rise in oil prices. Sugar exporting countries such as Colombia and Thailand are developing programmes that could potentially divert cane away from their sugar export programmes, while in Europe the Biofuels Directive could potentially open up a new market for Brazilian ethanol exports.”

Brazil, the world’s largest cane sugar producer, already uses approximately 50 per cent of its cane to produce ethanol, for which demand is growing in the country itself and internationally. The growth in demand is being driven by the difference in price between oil and ethanol. In Brazil, this has resulted in the appearance of “flex-fuel” motor vehicles, which can run on ethanol.

Flex-fuel vehicles were expected to “capture between 25 and 30 per cent of new car sales in Brazil during 2004” — around 400,000 vehicles — and “some manufacturers are even suggesting that by 2006 the flex-fuel engine will dominate the Brazilian market”.

In the Caribbean, both Guyana and Belize have already entered into co-generation projects that use bagasse (a product of sugar) as a source of energy to fuel their nations’ electricity generation systems. The rising cost of oil, an increased awareness of the threat to the Earth’s health of burning oil, and the now accepted need to find alternative, more environmentally friendly sources of fuel, make it very likely that the use of biofuels will grow worldwide in years to come — in which case, the future of the Caribbean sugar industry may be brighter than expected.

Sugar, always valued for its sweetness and for its ability to give human beings an energy boost, may soon be powering more than our bodies. It may give a boost to our planet’s health. This would be good news for us and good news for the Caribbean.

But make no mistake: the threat to the Caribbean’s oldest industry and most important agricultural product remains grave.