Sugar and citrus industries in a financial pickle

The dire state of affairs facing the sugar industry—with the nation’s main processor and exporter in a financial jam that has delayed $3.5 million in routine third payments to thousands of farmers—as well as the recent multi-million-dollar loss in the citrus industry due to Hurricane Richard, were highlighted in the Sitting of the House of Representatives, held in the National Assembly on Friday, November 12.

Corozal Southeast area representative, Florencio Marin, Jr., called the present situation “dangerous,” while urging the government to do something to help the industry.

“It has helped us when sugar was king... this industry is [now] in need of help,” Marin commented.

“It is not just a question of the third payment; it is a question of the survival of the industry, period,” said Prime Minister Dean Barrow, in agreeing with but expanding on Marin’s concerns.

Barrow indicated that if financing does not come through for the industry, this could trigger “the ultimate Armageddon-type catastrophe” for sugar, which, he said, has to be avoided.

If you can’t make the 3rd payment, how can you find the working capital for the next crop? Barrow questioned. “And that is the worst possible conundrum that can face us as a country. Hurricane Richard is as nothing compared to this crisis that is confronting us,” he added.

Marin pointed to an interesting paradox – that even as the industry here is in financial trouble, sugar prices on the world market have never been higher, at 30-33 cents a pound.

He said that next door in Obregon (Mexico), farmers get paid the equivalent of $100 per ton of sugar they produce; in Belize, the farmers are getting about $45 a ton and they can’t even fully complete making the payments, Marin commented.

Belizean farmers also get no part of the revenues earned from the sale of power from the bagasse cogeneration plant.

“Everywhere else in the world where bagasse is being used for electricity generation, the farmers get a share,” said Marin, arguing that this needs to happen in Belize as well.

Barrow said that while he is thankful for Marin’s intervention, Belizeans need to understand how deep the difficulties run in the citrus industry. He said it is no secret that there is a problem with the bank financing for the Belize Sugar Industries (BSI)—the company which receives raw cane to process into market-ready sugar and molasses.

“I believe it is public knowledge that the traditional financiers, the traditional bankers to BSI have decided to opt out; so that BSI needs to find replacement bank finances for what has been lost as a consequence of the traditional bankers opting out. Unless this can be done, you have no industry,” the Prime Minister said.

One of the questions that the Opposition People’s United Party (PUP) has raised is why the financing that had been approved by the Social Security Board (SSB) has not been speedily disbursed.

According to Barrow, while he had personally intervened to ask the SSB chair and SSB Investment Committee chair to urgently consider the BSI application, and the SSB had met very quickly and approved the loan, BSI has had trouble getting a waiver from its banker to take on the new SSB debt.

“Under the arrangements with the bankers who have now pulled the plug, BSI must obtain waivers before they can borrow anywhere else,” the Prime Minister explained, indicating that BSI’s chief executive officer Joey Montalvo has kept him abreast of the efforts.

Barrow noted, however, that BSI will need even more money than the SSB financing: “In order to have a crop next year, the working capital that BSI needs is more than $10 million.... SSB’s $10 million is a critical component, but by itself it is not enough,” Barrow said.

The company is additionally trying to get pre-financing from Tate & Lyle, one of its shareholders, to make up the rest of the money needed for working capital, the Prime Minister indicated, calling the sugar crisis “an extremely complex situation.”

Barrow said that government would find not less than $1 million to help meet payments to farmers in the interim.

He also indicated that if BSI fails to find the financing, the government would then have to look at bilateral sources of financing.

“This is not anything over which Belizeans can play politics,” said Barrow, indicating that the current state of affairs requires a united front.

Another major agricultural pillar, citrus, is expected to face certain financial challenges during this crop year on account of damages caused by Hurricane Richard.

According to Stann Creek area representative Melvin Hulse, minister in charge of the National Emergency Management Organization (NEMO), the citrus industry lost 30% of its crop in the hurricane.

As Amandala had previously reported, official estimates have put the figure around BZ$35 million.

source: amandala