SACKED

Latin Trade Magazine
July 2005
 www.latintrade.com

The following article was written by Alex Easdale, HIP’s Transnational Programs Coordinator

Brazilian sugar producers must be grinning. Recent trade rulings should turn it into the global leader running away.

Brazil's sugar rush is driven by several factors. It's the lowest cost producer in the world by far. (Chile and Mexico face costs similar to the United States.) And an April ruling from the World Trade Organization (WTO) upheld a 2004 decision undercutting European subsidies, one that developing countries long argued held down world prices, making it hard for them to compete. (The EU has appealed.) The ruling favors sugar exporters such as Australia and Thailand but it's Brazil - the biggest producer at 25.67 million metric tons annually and by far the biggest exporter, at triple second-place Thailand's foreign sales - that will get the biggest kick.

Cheap sugar is here to stay, says José Antonio Cerro, former executive director of the Latin American and Caribbean Sugar Exporting Countries lobby. Increased supply drove down sugar prices in the second half of the 1970s. During the first half of the 1980s, reduced demand resulting from U.S. import quotas were key, Cerro says. ``From the early 1990s onwards, the determining factor for prices has been Brazil's sugar cane-ethanol policy, which generates a considerable increase in global supply due to a significant increase in production and its subsequent increase in exports,'' he says.

Less clear will be the impact on smaller producers, like El Salvador and Colombia. There's a good chance Brazil will simply become the new Europe, driving prices below the ability of small countries to compete. Regional trade deals, however, uniformly ignore the matter, leaving sugar-market rules to the WTO. Meanwhile, according to the Brazilian Ministry of Agriculture, of 320 million hectares available for sugar cultivation in Brazil, just 53 million are now in production.

-     Alex Easdale