SUGAR PRICES TOO LOW TO BOOST LATIN OUTPUT

  Latin American sugar producers
  are awaiting further rises in world market prices before moving
  to boost production, official and trade sources said.
      Although prices have risen to around eight from five U.S.
  Cents per lb in the past six months, they are still below the
  region's nine to ten cents per lb average production cost.
      The recent rise in prices has placed producers on the
  alert, Manuel Rico, a consultant with the Group of Latin
  American and Caribbean Sugar Exporting Countries (GEPLACEA),
  told Reuters.
      However, Rico said, it would require another five to seven
  cents to stimulate notable increases in output.
      "Producers are taking measures for increasing their
  production when the prices are profitable," he said.
      Officials in Mexico, Guatemala and Ecuador said a continued
  rise in prices would stimulate production, but industry leaders
  in Panama and Costa Rica said there was still a long way to go.
      "The prices are ridiculous," said Julian Mateo, vice
  president of Costa Rica's Sugar Cane Industrial-Agricultural
  League. "At current prices nobody is going to consider
  increasing production."
      Other producers are wary of committing funds to increasing
  output, given the instability of world markets.
      An official at Colombia's National Association of Sugar
  Cane Growers said they had no plans to raise export targets.
  "The market is very unstable. What is happening is not yet
  giving way to a pattern and so there is no reason to modify
  anything."
      In 1985, the latest year for which full figures are
  available, Central and South American nations produced 28 mln
  tonnes, raw value, of sugar of which 12.3 mln were exported. A
  year earlier, they had produced and exported about 800,000
  more, according to the London-based International Sugar
  Organization.
      Years of continuous low prices have plunged the sugar
  industry in many countries in the region into a recession from
  which it will be hard to recover.
      Miguel Guerrero, director of the Dominican Republic's
  National Sugar Institute, said it would be difficult to boost
  production even if prices recovered sharply.
      Output had slumped to under 450,000 tonnes a year from
  900,000 in the late 1970s. Obsolete refineries, poor transport
  and badly maintained plantations were barriers to any short
  term recovery in output, he added.
      Plans of nearby Cuba, the world's largest cane sugar
  exporter, to increase output to 10 mln tonnes a year by the end
  of the decade seem ambitious, trade sources said. Output is
  running well below the record 8.6 mln produced in 1970.
      Cuba suffers from run down plantations, harvesting problems
  and poor processing facilities more than from low world prices,
  since much of its output is sold to Eastern Bloc countries
  under special deals. Last year, bad weather added to its
  troubles, and output fell to 7.2 mln tonnes from 8.2 mln in
  1985.
      The low world prices of recent years have led many
  countries in the region to cut exportable production to levels
  where they barely cover U.S. And, in the case of some Caribbean
  countries, European Community (EC) import quotas, for which
  they receive prices well above free market levels.
      Progressive reductions in the U.S. Quotas have led to
  production stagnating or falling rather than being shifted to
  the free world market.
      Peru, for example, shipped 96,000 tonnes to the U.S. In
  both 1983 and 1984. This fell to 76,000 in 1986 and this year
  its quota is only 37,000.
      A national cooperative official said that, as long as world
  market levels continue at around half of Peru's production
  cost, the future of the industry is uncertain.
      At a meeting of GEPLACEA in Brazil last October officials
  stressed the need to find alternative uses for sugar cane
  which, according to the group's executive-secretary Eduardo
  Latorre, "grows like a weed" throughout the region.
      Brazil, the largest cane producer with output of around 240
  mln tonnes, uses over half to produce alcohol fuel. Cane in
  excess of internal demand for alcohol and sugar is refined into
  sugar for sale abroad to earn much needed foreign currency.
      The difference in the price the state-run Sugar and Alcohol
  Institute (IAA) pays local industry and what it receives from
  foreign buyers costs the government some 350 mln dlrs a year.
      Soaring domestic demand for both alcohol and sugar over the
  past year, coupled with a drought-reduced cane crop, has meant
  Brazil will have difficulties in meeting export commitments in
  1987, trade sources said. Negotiations to delay shipments to
  next year have been indecisive so far, the main sticking point
  being how Brazil should compensate buyers for non-delivery of
  sugar it had sold at around five cents per lb and which would
  cost eight cents to replace.
      Brazilian sugar industry sources said new sugar export
  sales were expected to be extremely low for the next year, with
  the Institute wary of exposing itself to domestic shortages of
  either alcohol or sugar and because of the need to rebuild
  depleted reserve stockpiles.
      However, the situation could change dramatically if the
  economy goes into recession and internal demand slumps.
      Sources within Latin America and the Caribbean hold little
  hope for the region's sugar industry to return to profitability
  unless the U.S. And EC change their policies.
      "The agricultural policies of the European Community and of
  the United States have caused our economies incalculable harm
  by closing their markets, by price deterioration in
  international commerce and furthermore by the unfair
  competition in third countries," Brazil's Trade and Industry
  Minister Jose Hugo Castelo Branco told the October GEPLACEA
  meeting.
      The EC has come under prolonged attack from GEPLACEA for
  what the group charges is its continued dumping of excess
  output on world markets. GEPLACEA officials say this is the
  main cause of low prices.
      GEPLACEA sees a new International Sugar Agreement which
  would regulate prices as one of the few chances of pulling the
  region's industry out of steady decline. Such an agreement
  would have to have both U.S. And EC backing and industrialised
  countries would have to see it as a political rather than a
  merely economic pact.
      "They have to realise that the more our economies suffer,
  the less capcity we have to buy their goods and repay the
  region's 360 billion dollar foreign debt," GEPLACEA's Latorre
  said.
  

