GuySuCo, Manufacturers in bitter dispute over white sugar and import tariff
The Guyana Sugar Corporation (GuySuCo) on Friday defended its ability to produce white sugar suitable for local manufacturers and in the amount they need; this comes as a bitter dispute grows over a campaign, supported by the Sugar Association of the Caribbean, to have a 40% tariff imposed on sugar imported outside of the Caribbean by local and regional manufacturers.
“From GuySuCo’s perspective, the ability of local manufacturers, as well as the country to save much needed foreign exchange, will be greatly enhanced since the local demand of 20,000 tonnes of white sugar can be supplied by GuySuCo.
“The other 30,000 tonnes of GuySuCo’s planned annual white sugar production of 50,000 tonnes will be supplied to the regional market which will also save foreign exchange regionally.”
GuySuCo’s statement comes in direct respond to the rejection of the 40% Common External Tariff (CET) on refined sugar coming into the Caribbean by the Guyana Manufacturing and Services Association (GMSA).
The GMSA this week said that to apply CET on a product that is not manufactured in the region will increase cost and make regional manufacturers unable to compete with extra-regional products coming into the region.
Further, the Association said will also mitigate against its competitiveness in extra-regional markets.
“Most regional manufacturers operate under small margins and loss of markets and increased cost will jeopardize the viability of these manufacturers.
“Many of these manufacturers that made many sacrifices and fought hard and long to survive will be forced to close their manufacturing lines,” the GMSA had stated.
GuySuCo, in a statement, said the Association’s rejection of the tariff reflects a lack of depth of understanding of the market requirements and classification of a range of sugars that are refined by annexing or standalone systems to sugar factories.
The Corporation pointed to the “Substitutability of Plantation White Sugar for Refined White in Industrial Processes” which was done by LMC International on behalf of the Sugar Association of the Caribbean (SAC) in January, 2019.
“It is clear that a CET is required to sustain the sugar industry in the Caribbean.
“The current situation where the CET is applied to brown sugar only, has distorted the market encouraging end users to demand duty-free refined sugar even if it is not strictly required for their product,” GuySuCo quoted the study as saying.
The GMSA had expressed concern about the type of white sugar that is produced by the Caribbean and implications this could have for its products.
“Plantation white sugar and refined sugar are NOT the same.
“The processes to produce them are substantially different and the end products are similarly different,” GMSA stated.
Manufacturers argued, for example, that the colour of the sugar is very critical in icing sugar and clear beverages.
“If the sugar is not of required whiteness, the product appears discoloured and is unacceptable to consumers,” the GMSA stated.
Another critical quality, the manufacturers say, is the level of insoluble solids, colloquially termed “grumbs” when the sugar is dissolved.
“Not only is this unacceptable to consumers when noted in products, it also causes other quality defects, including graining in sweets, and loss of the structure in ice-cream that could lead to the ice-cream not being ‘fluffy’ or adequately aerated.
“It can further cause damage to expensive processing equipment due to its abrasiveness. Conductivity Ash in sugar can cause foaming and loss in sensory quality in beverages and ‘bubbles’ with sharp edges in hard candy that can cause cuts in the mouth when eaten.
“From a safety perspective, Sulphur dioxide at certain levels is known to cause hypersensitivity or allergenic reactions in some persons and must be declared as an allergen in many countries when the level reaches 10ppm or above,” the GMSA stated.
GuySuCo argued that the plantation white sugar it proposes to produce is an acceptable consumer quality sugar, and, like refined sugar, because of its high purity and microbiological stability, is one of the safest products on the market.
In fact, GuySuCo stated, most of the white sugar that is deemed “refined sugar” imported extra-regionally from Guatemala and Columbia, and used by local and regional manufacturers, is actually Plantation White.
GuySuCo stated that neither sulphitation nor bleaching will be involved in the process for producing white sugar by GuySuCo.
Rather, the Corporation said it would employ a re-melting process of sugar produced, that involves successive boiling and recrystallisation with Plantation White Sugar boiled from the highest purity of available ‘A’ remelts.
“This is essentially the same process followed in refineries. A process that enhances the quality of sugar with the resultant product having a colour value of 100 – 150 Icumsa (ICU),” GuySuCo stated.
Another key point, GuySuCo stated is that bottlers’ standards (Coca-Cola and PepsiCola for example) are different but not elusive, and the Corporation said it will work with soft drink producers on the requirements of including in its processing, a declorisation plant and corresponding equipment to meet those requirements.
“There is already a precedent from a successful collaboration with the Belize Sugar Industry Limited and the Coca Cola franchise in that country,” GuySuCo stated.
The Corporation said while appreciates the underlying factors, as well as the anxious tone of the GMSA in its statements to the press, members of the manufacturing association can be assured that GuySuCo and other Caribbean sugar producers have been addressing opportunities for the requirements of the region’s industries in response to the major market adjustments that have arisen since the European Union (EU) announced the repudiation of the Sugar Protocol, which from October, 2009, removed price guarantees which impacted adversely on the sugar industry and markets of African Caribbean and Pacific (ACP) States.
“As shifts continue in the global, regional and local markets, GuySuCo has to become more and more flexible and agile and place more emphasis on the demands of the domestic industry. The Corporation appreciates that the white sugar it produces will have to satisfy the quality requirements of all of its customers,” the Corporation stated.
GuySuCo stated that grades of sugar are produced in response to market requirements.
“Substitutes in the food industry have universally dominated market thrust, with the not so recent corn sweeteners which have been treated as replacements for sugar.
“This has not caused a reduction of quality of consumer food products,” GuySuCo stated.
To bolster its case, GuySuCo quoted the the Inter-American Development Bank’s 2017 document “Latin America and Caribbean – Macroeconomic Report – Routes to Growth in the New Trade World” which stated that “…Latin America and the Caribbean has been hit by negative external shocks including declines in commodity prices and the rise in global interest rates. As negative external shocks reduce net income earned from abroad, countries …attempt to find new sources of foreign income, or rebalance their spending towards domestic production to maintain the same level of consumption…”.
The report, GuySuCo noted, further stated that “…Import Substitution Exchange rate depreciation may also open up opportunities for local industry to substitute for foreign suppliers…”.
As a result, the Corporation said its decision to pursue the production of white sugar (Plantation White) is also premised on the fact that as one of the largest businesses in Guyana, it is essential for the Corporation to include into its reorganization programme, factors to mitigate external shocks.
Accordingly, GuySuCo stated, import substitution is appropriate.