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….company’s indebtedness as of August stands at $72.5B
By Svetlana Marshall
The Guyana Sugar Corporation (GuySuCo), over the last 10 years, produced one ton of sugar at an average cost of US$747.38 at a time when the world market price for sugar stood at US$388.57, the Government disclosed, in response to a series of questions posed by the Opposition in the National Assembly. Based on the information provided, the sugar corporation has been operating at a loss when its total indebtedness as of August stood at $72.5B.
In his response to a series of questions posed by A Partnership for National Unity + Alliance For Change (APNU+AFC) Member of Parliament, Jermaine Figueira, Minister of Agriculture, Zulfikar Mustapha said that while the average world market price for sugar for the last 10 years was US$388.57, Guyana’s sugar was sold at various prices based on the market.
He explained that GuySuCo sold one ton of sugar to the European Union (EU) at a cost of US$445.23; the USA, US$593.05; the Caribbean Community (CARICOM), US$581.30; Regional Non-CARICOM States, US$741.04; Australia, US$623.90; Italy, US$488.27; the Middle East, US$708.24 and the United Kingdom (UK), US$540.05.
Renowned Guyanese Economist, Dr. Clive Thomas, in an interview with Village Voice News recently, said at the heart of the plethora of challenges facing the Sugar Industry is the high cost of producing sugar. While the People’s Progressive Party/Civic (PPP/C) Administration is adamant that with the right investment, GuySuCo could return to profitability, Dr Thomas, who served as Chairman of GuySuCo’s Board of Directors (2015-2018), is not so optimistic. He told Village Voice News that GuySuCo will never be viable unless a number of structural limitations are addressed.
“The gap between [the production] cost and [selling] price is so wide it can’t be just a simple issue of investing in this estate and that estate. It has to do with the scale of the industry, the structure of the industry,” he submitted.
However, according to the International Sugar Organisation (ISO), as of October 8, 2020, sugar was sold on the world market at cost of approximately 13 US cents a pound. Here in Guyana, sugar is produced at approximately 40 US cents a pound.
In an effort to keep the industry afloat, governments, over the years, have pumped billions of dollars into the corporation. According to the Agriculture Minister, between 2010 and 2014, GuySuCo received a total of $20B in government subventions. However, Minister Mustapha said he was unable to indicate how much state funds were injected into the industry during the period 2015 to July, 2020. “This was a murky period of which we are uncertain about since NICIL, SPU and other agencies would have received and collected monies that is not reflected in the records,” he said.
MP Figueira, in his written questions, also sought to get an understanding of the corporation’s indebtedness, inclusive of bank loans, and monies owed to the Guyana Revenue Authority (GRA), and the National Insurance Scheme (NIS). That figure, the Minister disclose, stood at $72.5B as of August 31, 2020.
“A large percentage of this indebtedness is owed to GRA an$30B was borrowed from commercial banks by GuySuCo/NICIL/SPU,” the Agriculture Minister told the House in his written response.
In an attempt to justify the continuous injection of state funds into the sugar corporation, the Agriculture Minister told the Hose that GuySuCo’s contribution to the Agriculture Sector must be considered.
“In tabulating the Cost of Production and subventions, consideration must be given to the contributions GuySuCo was making in areas such as drainage and irrigation for immediate communities, rice and other crops as well as residential areas, community health care services and sports facilities. It’s also very important to note that over the last three years, the former government placed more than seven thousand (7000) sugar workers on the breadline and this caused severe disruptions in their families and killed the village economies in the areas of the closed estates,” Minister Mustapha said.
Based on the information provided to the House, 71% of GuySuCo’s income is employment cost while 2.5% of GuySuCo’s income is debt servicing.
Dr. Thomas, in the interview with Village Voice News, had warned that with billions of US dollars to flow from the more than 8 billion barrels of oil equivalent resources already discovered in the country’s Stabroek Block, Guyana could be tempted to invest large portions of its finances to resuscitate the ailing sugar industry, but such a move could land the country in a vicious economic cycle and set its developmental agenda back.
“So one of the main dangers down the line, is that a lot of the funds generated from oil…will be pumped directly into the [Sugar] Sector; and instead of being used to develop and diversify Guyana, it becomes the means of sustaining an industry, which in turn is exporting a product and subsidising rich countries because of the gap between [the production] cost and [selling] price,” He warned that the country could find itself in a vicious economic cycle due to the existing state of the sugar industry, and in particular, the extremely high cost associated with the production of sugar.