Sugar cane harvest time in Veracruz. Sugar cane harvest time in Veracruz.

Sugar deal not great for Mexico: refinery

Accord signed with United States could cost US $543 million annually

The Mexican sugar industry stands to lose almost US $543 million annually as a result of a trade pact Mexico signed with the United States, according to an estimate by the CEO of a domestic sugar refinery.

The two countries reached an agreement last June that on one hand avoided punishing tariffs but on the other reduced the quota of refined sugar that Mexico can export to its northern trade partner.

The general director of Sucroliq said the quota requirement, coupled with a provision that requires sugar producers to export their unrefined product to refineries by sea instead of directly over the border to end users, will have a significant impact on growers’ bottom lines.

“Both measures are damaging, they incur higher costs to the industry and [result in] lower prices because there is less quality product [to export],” Enrique Bojórquez said.

He added that the deal signed by Mexico wasn’t a good one because negotiators caved in to conditions that favored the United States.

While the total amount of sugar exported to the U.S. this year is expected to match the 1.1 million tonnes shipped last year, the 2017 agreement stipulates that only 30% of the total can be made up of refined sugar.

That figure is down from a previous limit of 53%, meaning that unrefined sugar exports consequently have to increase from 47% to 70%.

“What does this agreement represent for a sugarcane producer? It represents a decrease in income of [US] $700 per hectare per year, it’s a lot of money,” Bojórquez said.

The president of the National Union of Sugarcane Growers, Carlos Blackaller, agreed that the 70% unrefined sugar export requirement was detrimental to the local industry.

However, in explaining the extent of the damage, he arrived at a significantly lower monetary figure although he didn’t factor in increased transportation costs.

“Let’s say that unrefined sugar is sold in the range of maybe 10,000 to 11,000 pesos per tonne when we could place already refined sugar in a price range of between 13,000 and 15,000 pesos . . . if we’re talking about 1.15 million tonnes, of which 70% has to be unrefined . . . [that’s] about 3.5 billion pesos [US $186 million] that we don’t receive,” he said.

The sugar industry union chief was also critical that there is a restriction on Mexican sugar in the U.S. market while high-fructose corn syrup is allowed to flow into the local market from north of the border unimpeded and at dumping-level prices.

Given the negative consequences of the deal for Mexican sugar, both Bojórquez and Blackaller said that it was important to reach a modernized trade agreement with the European Union (EU) that will allow the sugar industry to export to an untapped European market.

Negotiations to update the agreement started in May 2016 but its conclusion has been hindered by a lack of consensus on some issues, including a push by the EU to ban the use of European names for Mexican-made cheeses.

Source: Milenio (sp)

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