Mexican Sugar Chamber Pushes U.S. to Meet Import Commitments under North American Free Trade Agreement (Nafta)

SourceMex Economic News & Analysis on Mexico, May 31, 2000 | Go to article overview

Mexican Sugar Chamber Pushes U.S. to Meet Import Commitments under North American Free Trade Agreement (Nafta)


Mexico's sugar industry chamber (Camara Nacional de las Industrias del Azucar y del Alcohol, CNIAA) is urging President Ernesto Zedillo to pressure the US government to meet its obligations to open its market to Mexican sugar. Zedillo is expected to bring up this issue during meetings with US President Bill Clinton in Washington during the first week of June.

The CNIAA said access to the US market could help the Mexican sugar industry emerge from its current crisis, which has forced the Mexican government to take extraordinary measures to rescue the country's sugar millers.

Government announces rescue plan for sugar mills

The crisis forced the government's export-import bank (Banco Nacional de Comercio Exterior (BANCOMEXT) to develop a plan to allocate about US$460 million to help sugar millers store excess inventories, finance exports, and promote increased domestic consumption.

The government's decision to rescue the sugar industry, announced in late May, is a reversal in policy for the Zedillo administration. Earlier this year, the administration had said that no federal funds would be spent to bring Mexico's sugar millers out of crisis (see SourceMex, 2000-03-01).

The crisis among sugar millers--attributed to the combination of excess global inventories, burdensome debt problems, and mismanagement--has forced Mexico's second- largest miller Grupo Azucarero Mexico (GAM) to file for bankruptcy protection (see SourceMex, 2000-05-17).

"Mills as a whole need to reduce output by 6% to 7% to stabilize the market," said GAM majority owner Juan Gallardo Thurlow.

Gallardo said the Mexican sugar-milling industry would benefit from a moderate downsizing.

"Mills need to undergo a process of consolidation so that there are just four or five solidly capitalized players in the market," Gallardo told the daily business newspaper El Financiero.

There are 60 sugar mills in Mexico, of which four are independent and 56 are owned by 14 financial groups.

CNIAA president Carlos Seoane Castro said his organization openly welcomes the government's initiatives. In particular, he praised the export-promotion schemes, which would help bring down the current inventories of about 326,000 metric tons. But Seoane said the export program represents a minor effort unless the Zedillo administration succeeds in convincing the US to comply with its obligations under the North American Free Trade Agreement (NAFTA).

Under original terms of the accord, the US agreed to begin taking Mexico's excess inventories in October 2000. But the US claims that the NAFTA text was superseded by a letter of understanding negotiated by former trade secretary Jaime Serra Puche and former US trade representative Mickey Kantor to limit the increase in the Mexican sugar quota in 2000-2001 to 250,000 MT. …

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