Buffeted by high employment costs, the weak Euro and threats to its markets, the sugar corporation yesterday said it was facing a loss for 2001 - the first time since 1990 - and warned that unaffordable wage hikes could jeopardise expansion and lead to layoffs.

Confirming the dire financial straits it faced, the Guyana Sugar Corporation (GUYSUCO) said it has offered an 8.5% wage increase to workers in current talks. The original demand of the main union GAWU was 20% with a compromise offer of 10%.

The corporation said it did not have the kind of financial resources required to fund a ten per cent increase for sugar workers and would have to borrow to do so.

"If... the corporation is asked to pay, however justifiably, an increase of ten per cent, it would mean finding a prohibitive $1.5 billion to pay and sustain any such increases, which do not even include the usual fringe benefits. The money is just not there," the corporation said in a three-page statement to the media yesterday.

GUYSUCO disclosed that its current employment expense represents 56% of its total production cost. "To most major corporations anywhere this is unacceptable - the normal average being 20% to 25%", GUYSUCO contended.

General Secretary of the Guyana Agricultural and General Workers Union (GAWU), Komal Chand, said yesterday that the union understood the position of the company and the realities which confronted the corporation had to be put to workers.

He acknowledged that the corporation had stayed the demand of the World Bank to have the Demerara Estates closed, saving thousands of jobs and at the same time confronted cutting production costs. He also noted that the corporation had argued that its labour costs were excessive for such an industry.

Chand told Stabroek News that these realities had to be put to the workers for them to decide whether they would be willing to accept the final offer by the corporation of an 8.5% increase. He said the union would have considered accepting a ten per cent hike. Nevertheless, he accepted that the financial difficulties, which confronted the corporation, had to be faced.

GUYSUCO's employment cost at the end of 2000 was $11.7 billion and the corporation said yesterday that every one per cent increase in salary and wages at the current levels, would set it back a further $115 million.

The corporation, the country's single largest employer and foreign exchange earner, pointed out that it faced declining revenues from the Euro, the value of which had been fluctuating. The average exchange rate of the Euro since the start of the first crop this year has been 90 cents to the US$. GUYSUCO needs the Euro to trade at 94 cents to the US$ before it can break even at current production levels.

"An expected sharp recession in the US in the wake of the recent terrorist attacks and current bio-terrorist threats, does not bode well for any improvement in the Euro rate in the near future," the corporation stated.

GUYSUCO further asserted that every one-cent movement against the Euro was equivalent to $170 million, in terms of losses or gains.

"Thus, because the Euro has not improved appreciably, for a prolonged period, from its rate at the beginning of the year, the opportunity did not present itself for the sugar industry to benefit from any appreciation of the exchange rate. The precarious position of the corporation, where its export earnings are concerned, is therefore plain for all to appreciate," the corporation said.

Compounding this, it said, was the serious threat to its traditional markets. It noted the danger of the Everything But Arms initiative to the 30,000-tonne Special Preferential Sugar quota it has in Europe. It also noted that the North American Free Trade Agreement is paving the way for Mexico to sell its sugar on US markets, threatening Guyana's 12,000-tonne quota in this market. This would force the corporation to turn to the open world market to sell the rest of the sugar it produces, but world market prices were very depressed.

As a result of these realities, the corporation said, if it had to borrow to finance pay hikes, the planned new factory for Skeldon would fall through as there would be no retained earnings to partially fund this project and the corporation's ability to self-generate funding would be severely compromised. This, in turn, would force the corporation to mechanise some of its agricultural operations with the likelihood of 2,500 to 3,000 workers being made redundant. And, it said, the closure of the Demerara Estates would become a reluctant reality.

The corporation said it was not overwhelmed by these challenges as it could overcome these with resolve, commitment and corporation.

"But it cannot do it alone. Its workers and their representatives must now be seized by these new realities. Their own future and that of Guyana is at stake," the corporation stated.

The corporation highlighted that in the light of all of the above there was a need to increase all-round productivity with Demerara achieving parity, at the least, with Berbice. It pointed to the need to reduce the unit cost base and all excesses, particularly in Demerara; improve work standards; improve communication and introduce the linking of pay increases to productivity levels.

The corporation said it would provide continuous and transparent updates on its challenges, requirements and plans with all stakeholders.