Mexico Plans Sale of Govt-Controlled Sugar Mill

Mexico plans to sell a sugar mill under government control in the hopes private owners can increase refining capacity as sugar prices hit record highs, sources at the agriculture ministry said on Friday.

The government recently published the terms of a tender to sell the La Joya refinery in the southern state of Campeche and is waiting for bids from buyers.

In 2001 the Mexican government took control of 27 of the country's 57 sugar refineries that were too heavily indebted to operate.

Since then, about half have been returned to their original owners or sold in a bidding process, but 11 are still held by the government. In the last harvest the government-controlled mills produced around 1.35 million tonnes of sugar.

The Mexican government has pledged to sell off the remaining refineries before the end of President Felipe Calderon's term in 2012, the sources said, asking not to be named.

The government set a base price for the sale of the small La Joya refinery at around 29 million pesos ($2.26 million), according to the tender announcement published by the branch of the finance ministry in charge of selling government assets.

La Joya produced 42,600 tonnes of sugar in the 2008/09 season.

Guatemalan, Brazilian and Colombian companies have expressed interest, as well as Mexican companies linked to the beverage industry, the Agriculture Ministry sources said.

Production from the group of government-controlled mills fell 5.3 percent in 2008/09 compared with the previous cycle and the hope is that private owners will be able to boost output.

Mexico's harvest is seen falling short of estimates on bad weather and aging cane fields.

"It's not justified for the government to maintain state control of refineries. They will not invest in new technologies or have a vision for how to expand the business," Rene Martinez from the National Sugar Industry Chamber told Reuters.

Sugar prices soared to a 29-year high earlier this year and are expected to stay strong on short global supplies, encouraging Mexico to try to increase production capacity.

In a good year, the country can produce more than 5 million tonnes of sugar, which covers local demand but last year the harvest slipped to 4.96 million tonnes and this season could fall to as low as 4.5 million tonnes, the Agriculture Minister Francisco Mayorga has said.

The shortfall forced Mexico to open a 250,000-tonne import quota this month and the food industry says the government needs to import more as the harvest -- which began in November -- progresses.

Nine of the government-controlled refineries, including one of the country's largest, which is known as San Cristobal, were formerly held by Consorcio Azucarero Escorpion, or Grupo CAZE, but have been tied up in legal battles and cannot yet be sold, said Martinez.

source: flex-news