Mr Michael Boast, the Chief Executive Officer of the Guyana Sugar Corporation (Guysuco), has offered his conviction that the sugar industry in Guyana will survive. In a detailed interview in the October issue of Stabroek Business he has linked this to the modern factory being erected at Skeldon at a cost of US$70 million and a possible US$24 million refinery to be financed by China’s Exim Bank.

Mr Boast said that the new factory’s cost of production will be around US 8-9 cents per pound, the expected price at which the world raw sugar market will settle if barriers to trade and subsidies are eventually removed. The plan is that the new factory’s output of 120,000 tons will be refined and sold competitively in the Caribbean. It is also planned that field operations at Skeldon will be highly mechanised to allow that estate to remain competitive.

Mr Boast said he expected the price obtained from the European Union (EU) now US 25 cents per pound, to decline but did not expect it to reflect world market prices (now as low as US$6.5 cents a pound) “for a long, long time to come” as many of Europe’s beet sugar producers would not survive low prices. He said the market in Europe might become less attractive but he did not see Guyana losing access.

It is hoped to continue to sell 160,000 tons of raw sugar to the EU, 100,000 tons to the regional market, up from 30,000-40,000 tons over the last five years, 12,000 tons to the USA, 25,000 tons to the domestic market and the surplus of 150,000 tons (with the new factory) will be refined for the regional market which has a capacity in excess of 3,000,000 tons for refined sugar. The much lower cost of transportation to the region compared to overseas suppliers makes Guysuco highly competitive in this market.

The Exim Bank of China has offered to provide concessional financing to install a refinery with the capacity to produce 160,000 tons of refined sugar a year and the design for the new factory take into account a refinery as a future possibility. It is also offering to fund a US $16 million co-generation project subject to a feasibility study.

The new Skeldon factory is clearly crucial for the survival of the industry. It is also essential to make the Demerara estates more efficient. Bell loaders have been introduced to increase cane cutters’ output. It is planned to use a different kind of cutlass that will allow cane cutters to keep their spine erect which will be less back breaking. But some analysts have questioned whether these estates can be made sufficiently efficient to be competitive. As for the other Berbice estates, it is hoped to use concessional funds of US$25 million from the Indian government to upgrade Albion, Rose Hall and Blairmont.

Employment costs are at the moment US 10 cents per pound of sugar out of total production costs of US17 cents per pound. It is hoped to reduce the permanent staff of 17,500 by 3% per annum by a process of attrition, that is by not replacing workers who leave the industry, and to reduce labour costs to US5.5 cents a pound. The annual production incentive has been linked to profitability rather than production.

Guysuco is also hoping to raise US$35 million by land sales.

The sugar industry faces massive challenges. After pension plan adjustments it has lost substantial sums for the last three years. Though the scenario outlined by Mr Boast seems feasible a lot of things will have to go right and some tough subsidiary decisions will have to be made on issues that involve employment and other factors. It is hoped that the new factory to be built by CNTC Trading of China will be operational by the second crop of 2005 and the refinery, if it goes ahead, will be in production in 2006. Sugar is still a huge contributor to the economy and a great deal will depend on the success of this venture.