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Identifier
Created
Classification
Origin
06BRIDGETOWN1220
2006-07-13 20:38:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Bridgetown
Cable title:  

BARBADOS SUGAR INDUSTRY - STILL ON LIFE SUPPORT

Tags:   EAGR  ETRD  PGOV  BB  XL 
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VZCZCXRO8428
PP RUEHGR
DE RUEHWN #1220/01 1942038
ZNR UUUUU ZZH
P 132038Z JUL 06
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 2914
INFO RUCNCOM/EC CARICOM COLLECTIVE PRIORITY
RUEHCV/USDAO CARACAS VE PRIORITY
RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL PRIORITY
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL PRIORITY
						UNCLAS SECTION 01 OF 02 BRIDGETOWN 001220 

SIPDIS

SENSITIVE
SIPDIS

SOUTHCOM ALSO FOR POLAD

E.O. 12958: N/A
TAGS: EAGR ETRD PGOV BB XL
SUBJECT: BARBADOS SUGAR INDUSTRY - STILL ON LIFE SUPPORT

REF: BRIDGETOWN 178

UNCLAS SECTION 01 OF 02 BRIDGETOWN 001220

SIPDIS

SENSITIVE
SIPDIS

SOUTHCOM ALSO FOR POLAD

E.O. 12958: N/A
TAGS: EAGR ETRD PGOV BB XL
SUBJECT: BARBADOS SUGAR INDUSTRY - STILL ON LIFE SUPPORT

REF: BRIDGETOWN 178


1. (SBU) Summary: The ailing Barbados sugar industry is a
large drain on government resources. In 2004, the country
lost US$498 on each ton of sugar exported, for a total loss
of US$17,136,360. Instead of shutting down this incredible
drain on resources, the government plans to invest US$150
million in ethanol, biomass power generation, and branded
sugar to save the industry. There is no longer any economic
reason for Barbados to continue producing sugar, but an
historic emotional attachment to the crop causes the
government to keep the industry alive at considerable
taxpayer expense. End Summary.

--------------
Black Hole for Government Funds
--------------


2. (SBU) According to Barbados government statistics, it cost
US$1,181 in 2004 to produce one ton of export-ready raw sugar
in Barbados. Given the US$683 average export price (all
exports went to the European Union), Barbados lost US$498 on
every ton of sugar it exported. The country exported 34,400
tons of sugar in 2004 for a total loss of US$17,136,360 or
nearly US$35,000 for each of the roughly 500 sugar workers.
A government corporation, the Barbados Agricultural
Management Company (BAMC), runs the sugar factories and
handles all exports of the commodity. According to Executive
Director of the Barbados Employers' Confederation, Harry
Husbands, the sugar industry in Barbados is a partnership
between the BAMC and private landowners, but the government
bears most of the financial losses. Husbands shared his
belief, echoed by others, that the only reason the government
keeps the sugar industry going is because the cane looks nice
for tourists.

--------------
Ethanol and Branded Sugar to the Rescue?
--------------


3. (U) Barbados Prime Minister Owen Arthur, in his January
budget address (reftel), announced plans to invest US$150
million in a new multi-purpose sugar factory. The facility
includes a 30 megawatt power plant and a sugar cane
processing plant to annually produce 12,000 tons of refined
sugar for the domestic market, 10,000 tons of branded sugar
for the export market, 5,000 tons of branded sugar for the
local market, and 14 million liters of ethanol for the
domestic market. (Note: Branded sugar is simply raw sugar
repackaged and sold for a higher price than if it were sold
in bulk. End Note.) This facility is supposed to save the
industry by ending the bulk export of sugar to the European
Union (EU). (Note: The EU is dropping its subsidized sugar
price by 36.0 percent over the next two years, from 523.7
Euros/ton to 335 Euros/ton. End Note.)


4. (SBU) Concrete information on the economics of this new
plan, however, has been difficult to obtain. Carl Simpson,
head of the BAMC, spoke positively of the plan in several
public fora, citing a feasibility study showing ethanol
production to be a viable option for Barbados. Simpson
refused to pass a copy of the study to EconOff, however, and
several prominent landowners (who lease their land for sugar
production to the BAMC) also complained publicly that they
were only given an executive summary of the study, done by
Louisiana-based Shaffer and Associates. Explaining part of
the island's high production cost, the Minister of
Agriculture, Erskine Griffith, revealed that the Barbados
yield ratio of 21 tons of sugar per acre of sugar cane is,
"the lowest of any sugar producing nation." Griffith went on
to say that producers in Brazil get up to 80 tons per acre.

--------------
Comment
--------------


5. (SBU) The fact that the feasibility study is under lock
and key probably means the results are not what the
government had hoped. Given the immense losses in the sugar
industry, there is no valid economic reason to keep it alive,
especially not for tourists, most of whom have no interest in
sugar cane. Barbadians have an emotional attachment to the
crop, however, that prevents politicians from rationally
approaching the sugar issue. Their verdant waves of cane are
like to our amber waves of grain.


6. (SBU) It is ironic in a country that endured hundreds of

BRIDGETOWN 00001220 002 OF 002


years of slavery, most of it doing the hot, brutal, work of
farming cane and making sugar, that there would be such love
for the crop. Nevertheless, sugar is so deeply imbedded in
the Barbadian identity that successive generations of
politicians have preferred to subsidize sugar rather than end
its production. Thus far, Barbados has been able to afford
the luxury of a sugar industry but that could change if the
country's debt to GDP ratio, currently near 90 percent, keeps
creeping upward.
KRAMER