Wednesday, November 24, 2010

Prime Minister to loan $10 million to sugar industry.


The traditional BANK financing a collapsing sugar industry has withdrawn from future sugar industry loans. Atlantic Bank is rumored to have offered to do some financing at big commercial interest rates. The sugar industry no longer has any security to offer for bank loans. The last factory piece of land that is not mortgaged is to be offered by the sugar industry to government for a loan that has increased from $1 million to $10 million. The land the PM said is alleged to be worth $4 million. There is some doubt about that and skeptics claim more like a $140,000 valuation.

Taxpayers look at the speech of the Prime Minister with horror! Essentially, the fishing industry, the banana industry, the tourist industry, the citrus industry, the cacao industry, the cattle industry and other industries of the nation have to pour their tax money into a losing proposition with the sugar cane industry. The industry participants have been unable, to make their industry profitable in a year of the highest world prices ever.
The Prime Minister Dean Barrow, qualified his decision making process that the North of Belize constitutes 3600 families in the sugar business and if it is at all humanly possible, we should try to keep them going. Considering Edmund Castro, of his political party, blew $5 million building a dirt road across a lagoon, and in the previous administration Ralph Fonseca blew another $5 million of taxpayers money on an idiotic government hedging operation, while trying to experiment and learn finance while dealing with sharks in the outside financial world. The claim of the Prime Minister is not without reason. Compassion and the desire to turn around the sugar industry is a desirable objective. We did elect the Prime Minister to make such decisions.

There are reservations though. The Prime Minister has not insisted that the monies being loaned with insufficient security, with enough safeguards or direction, or rules to change the behavior pattern of the 3600 families growing sugar cane, to make a difference. His speech justifying the loan was based on wishful thinking and HOPE. A gamblers decision!

Is this the last season of the sugar industry in Belize? Probably, but if not it surely is close to the end.

The problems in a nutshell, are quality of a) cane sugar content. b) The amount of mud the farmers are delivering with the sugar cane and c) the delivery times, as an outsider like me listens to the stories and explanations on the news.

As taxpayers we spend considerable millions in maintaining the infra-structure of roads, so farmers can deliver their cane. We in turn as a government and a people borrow money from abroad to do so in scarce foreign exchange. I could more see the Agriculture Department being given the $10 million to produce a pilot plot of 10 acres in properly irrigated and fertilized cane field to prove or disprove the outside experts claim that the crop production total can be increased by 1200 % on the same land, if done properly according to their advice.

The story of sugar and citrus is closely parallel, to do with the way small farmer associations operate, and the way they bleed off money from their centralized factories, making both their factory and the associations bankrupt, both factory and association, by making their industry unprofitable through greed and incompetence. While the citrus factory is currently seperated by company investment rules from the CGA and the profitability can only be guaranteed by a foreign investor by buying, or by having raised capital through sales of SHARES in the factory. It would seem the sugar industry has no similar system. If the Citrus Growers Association get control of the citrus factory, you can kiss that foreign investment goodbye too! They will revert to bankruptcy loan borrowing policies to satisfy short term needs. The cane farmers need to form share holding companies, putting up their land and production in a joint effort to raise the capital they need, instead of continuously operating under a cloud of bank loan debt system. Capital is there for the taking, but you have to restructure how the cane industry and small grower associations work and turn them from small farmer feeding frenzies based on immediate need and gratification to a profit orientated motive. It can be done, but $10 million with no strings attached is not going to do it. ( just my opinion )

1 comment:

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