global F&A conference
Export dispute
Big scope
Q&A
Blurred boundaries
Community focus
Q&A
8 What'sNewS
Issue 7 November 2000
Russian government has imposed a tar-
iff quota on imports to raise prices on the
domestic market, tlius stimulating growth
in home production. (We'll be reporting
on what RI is doing in Russia next issue.)
Next up was Florida Crystals' CFO Luis
Fernandez. America's proverhial sweet
tooth gave hint a backdrop to describe the
rationalization of the industry in the US
since the early 1980s. But the main thrust
of his presentation is whether globaliza-
tion is compatible with the kind of re-
gional free trade agreements that are be-
conting a feature on most maps. The crisis
in the US' sugar policy and the dispute
with NAFTA partner Mexico on how
much the latter can export northwards
over the next seven years forrn classic ex-
amples of issues that can arise. Fernandez'
point was that the dispute between the US
and Mexico relates primarily to the transi-
tion period to a common market and bor
der which runs front 2001 to 2008. This
leads hint to surmise that, in view of the
dispute, reaching acceptable transition pe-
riods may be as difficult as reaching clo-
sure on the objectives of a free trade
agreement.
Moving on to globalization, Fernandez
pointed out that even where trade liberal-
ization and agreements have been reached,
disputes appear to continue regarding
sugar. 'You have to ask why,' he said, not-
ing that many complex issues and interests
are at work in attempts at globalizing in
dustry. These include food security, em-
ployment, rural policies, tradition and his-
tory, and energy policies. The fact that all
these factors are at work in the sugar in
dustry was more than confirmed by Dhruv
Sawhney, chairman of India's Triveni En
gineering Industries. Presenting a study
of the Indian sugar industry compiled
specially for the conference (you can get a
copy from Maarten van den Bergh at
Marketing RI), the story of India's
potential is staggering in both size and
scope. Last year, India produced around
I 8.2 million tonnes, consumed 15.5 mil-
lion tonnes and used 350 MW of co-gen-
erated power.
One of the main points of his
presentation focused on India's potential
as an exporter.
Participants were quick to piek up on Fer-
nandez's reference to crisis in the US sugar
policy. In recent months, no less than I
million surplus tonnes have been pur-
chased by the US government from grow-
ers. The question of whether there would
be another million
next season was al-
most inevitable.
Coupled with the
query on whether
US sugar production
would survive
NAFTA and WTO,
the response from
Fernandez was
measured and even
tactful. Reiterating
that US production
was not only world-
class, but also highly
efficiënt, he argued
that the industry
would survive in
any market place.
'Basically,' he said,
'what we need is a
little border control
until real globaliza
tion arrivés.'
The issue of foreign
investment into In
dia arose for Dhruv Sawhney. How diffi
cult is it to attract funding from else-
where? Sawhney believes there are two
factors which would impact negatively on
foreign investment. One is the risk factor
involved in dealing with a huge number of
growers. The second is strong government
intervention, which continues to exist in
India, although liberalization is ongoing.
Infrastructure is also a huge problem for
the subcontinent.
'Sugar or HFCS, quo vadis?' was Eridania
Beghin Say president Stefano Meloni's
topic. Running through the HFCS share in
emerging markets, he pointed out that
China is the only one with a large syn-
thetic sweetener sector. 'It would seem,' he
said, 'that any country which can produce
Beautiful reception: site of the confer
ence dinner, Gaudi's Casa Batlló
sugar will opt for that route before focus
ing on building an HFCS business. At the
same time, a greater WTO would make it
harder on emerging markets to protect a
budding sugar industry.' Responding to
questions on expansion of the EU, he
noted that the prospective new members
had been preparing for entry for quite a
long time. 'One criteria has been to de-
velop quasi-quotas, as they try - quite
rightly - to build maximum possible pro
duction, thus achieving
top quotas. Some coun-
tries have already intro-
duced these quasi-quo-
tas; as a system, it
appears to be working
well for them.'
The inroads being made
by alternative sweeteners
was one of Jonathan
Kingsman's points. Al
though use is increasing,
the CEO of Kingsman
Commodities argued that
sugar consumption con
tinues to grow and with
it world trade. Kingsman
also argues that the dis-
tinction between traders
and banks will blur even
further and that the in-
formation revolution will
hit players at their weak-
est, though usually most
profitable point.
From the world in general, to a specific re-
gion, as John Russell of Illova Sugar ex-
plored both the trouble and the potential
of southern Africa. The importance of em-
ployment, but perhaps more crucially of
land redistribution, means southern
African players are moving away from the
notion of rationalization so prevalent in,
for example, the US. Aids is a true disaster
in southern Africa. 'It is terrible in human
terms,' Russell said, 'but also for eco
nomie development. We have to make
continuous investment in training while
remaining globally competitive.'
Is the situation in Zimbabwe, where white
farmers are being dispossessed of land,