Guyana’s Sugar Industry: GUYSUCO deep in debt – video

GUYSUCO deep in debt – video by Capitol News

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

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

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

JULY 18, 2014 | BY  |  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.

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. (see letter here) The disclosure was made yesterday (July 17), 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.

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.

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Comments

  • de castro  On 07/19/2014 at 3:22 am

    Wow wow!
    The CEO should be asked to step down “politely” sacked and
    the government nationalise the corporation.
    If the price of sugar in world market is the excuse given
    for non payment of Tax to the government then the government
    might as well own the corporation….then look for a buyer
    in the world market….”privatisation”.
    Goverments are not very good at “managing” but must
    make decisions on “nationalisation” or “privatisation” its
    that simple.
    If you owe me 30% corporation tax 25% income tax and 10%
    NIS…..I MIGHT AS WELL OWN YOU.

    ITS THAT SIMPLE
    no excuses acceptable !
    Kamtan
    Am sure there are local (national) buyers who would wish to buy into
    the sugar industry….even international buyers. Our world is global.

    • Albert  On 07/19/2014 at 3:32 pm

      Is Guysuco not already nationalized?

  • de castro  On 07/19/2014 at 4:39 pm

    If so then divide it and sell it off….let the private sector and multinationals
    take the risk …..without taxpayers subsidy.
    Banks and multinationals have mergers to avoid taxes….
    permitted under corporate law.
    The sugar industry needs some serious re-think on how
    they are managed.
    Also how Guyana s sugar is marketed needs some serious
    Re-think.
    Brazil is now one of the largest world producers of cane sugar
    and have diversified to survive and return to profit…
    Maybe guysco should send their executives to Brazil
    as observers…industrial espionage.ha ha !
    maybe guysco market their sugar via Brazil…
    1. For better price
    2. For better quota on production.
    3. For better ideas on production/marketing.

    Am sure nothing lost by a visit to neighbour sugar producers.

    Kamtan

  • Albert  On 07/19/2014 at 6:40 pm

    You are assuming politicians will make rational business decisions. Guysuco is a major employer of government supporters. Which would be more important to the govt: keep their supporters employed in a losing business by using tax payers money, or sell off the business and put their supporters on the unemployment line.

  • de castro  On 07/20/2014 at 3:25 am

    Interesting point. Political dilemma !
    Devil you do devil you don’t.
    So you carry on “subsidising” a dead duck with tax payers money.
    That is why I am suggesting a re-think.
    The status quo in politics my guess.

    However if the “profitable” parts of the sugar industry were sold off
    surely the tax gain would outweigh the “subsidy”….the economics
    of the situation. Then the issue becomes political not economic.

    Which would you prefer ?
    Bad politics or good economics !

    Is sugar the largest employer in the “failed state” Guyana has become
    If so then there won’t be any change….it will remain a “failed state”
    Sad !
    My heart bleeds for the motherland ….
    Kamtan

  • Norman Tewarie  On 07/21/2014 at 11:38 am

    What happened to all the money? trace the money and you’ll find the culprits.
    Something smells un-sugar-like here. Guyanese wake up and smell the sugar!!!!!

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