Exchange Debate in an Unsettled Industry: Mexican Sugar

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Sugar stick generation is packed in the hotter territories of Central Mexico ...

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Slide 1

Exchange Disputes in an Unsettled Industry: Mexican Sugar

Slide 2

Sugar stick creation is gathered in the hotter territories of Central Mexico Source: Rabobank from SAGARPA information

Slide 3

Consumption of sugar by real utilize categories:2000

Slide 4

Background to struggle Private administration and government mediation Early endeavors to direct market Growth from WWII to the 1960's Price controls Decreto ca ñero Contrato Ley Government administration of the plants (1970 – 1988) Profits pressed Government salvages factories control goes from19 to 49 out of an aggregate 66 Productivity falls in factories and campo (4.1 ha.) Subsidies develop Mexico shifts from net exporter to net merchant

Slide 5

Background to strife Government offers the plants (1988 - 1992) Policy moves to more market introduction Budgetary concerns likewise drives offers of state resources Mills sold in exceedingly utilized operations – up to 80% Implicit understanding that tight controls over household costs Yet, imports developed discouraging plants sending them once more into emergency Government support to plants to pay ca ñeros Interest rates taking after monetary emergency and obligation develops

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NAFTA Mexico arranges auxiliary change U.S. what's more, Canada arrange exchange assention Mexico transactions sugar part U.S. Arranges sweetner division Mexico net shipper of sugar U.S.net merchant of sugar Mexico and U.S. secure residential markets Low level of HFCS exchange

Slide 7

Mexico's remote exchange sugar (million dollars)

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NAFTA from consent to confustion Net creation overflow – the side letters English definition "might incorporate utilization of high fructose corn syrup accommodated in… " Spanish "la determinaci ón de'excedente de producción neto'incluirá para efectos de Sección A del Anexo 703.2, fructosa de maíz, descrita...¨ NPS U.S. = P sugar – (Consumption sug + Consumption HFCS ) Mexico = (P sugar +P HFCS ) – (Consumption sug + Consumption HFCS ) Letter not endorsed by Mexican senate Mexico's share en years 7 – 14 settled at 250,000 MT or "up to" 250,00 Similar to corn dialogs Mexico goes to board

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NAFTA from consent to conf rontation: HFCS U.S. surplus corn maker Government underpins (otherwise known as sponsorships) for corn HFCS limit develops Displaces sugar in carbonated refreshments Limited open doors for HFCS in other nourishment items Lacks shimmer Excess limit searches for new markets Did it develop looking to Mexico? Mexico starts dumping request U.S. loses and goes to board

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Mexico's imports of HFCS Imports of HFCS (55) ('000 mt) Source: Rabobank with information from the Secretaria de Economia

Slide 11

Sugar stick zone ('000 ha.)

Slide 12

Sugar stick yields (tons per ha.)

Slide 13

Sugar stick generation (Million mt)

Slide 14

Sugar creation (Million mt)

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Sugar generation per hectare (Million mt)

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Efficiency differs enormously from organization to organization: Time lost in plants Average

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Recent occasions Consolidation of the processing area of the business GAM goes into default 2001 found the household showcase in confuse Low residential costs "Dumping of sugar on local market" SAGARPA under condition of attack by stick producers and dangers by plant laborers Mills of four organizations seized Government sets up office to run processes and to in the long run privatize them

Slide 18

2001 Mexican sugar costs

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Seasonal nature of Mexico's sugar collect (mt every week)

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Recent occasions (cont.) Congress institutes extract impose on HFCS utilized as a part of pop Congress utilizing muscle Frustrated with moderate pace is determining question Upset with SE choice to arrange Cañeros quality in Congress National Sugar Policy (Feb. 2002) Bring request to the market Mixed capital fare organization Inventory financing Modernize advertise Contrato Ley Decreto cañero Temporary suspension of HFCS expense Steel for HFCS? Until Sep. 30 Criticized by industry and Congress

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The future: 2 and level duties Allows with the expectation of complimentary imports of sugar paying declining levies U.S. WTO sugar amount Trade strategy, outside approach or appropriations for holders of standards Imports of sugar paying levies will dislodge portion sugar USDA pattern projection archive brings up issue of dumping of Mexican sugar

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Over share taxes for imports of Mexican sugar into the U.S. (pennies per pound)

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NAFTA high-level Mexican sugar fares to the U.S. Source: Rabobank from USDA benchmark projections

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NAFTA high-level Mexican sugar fares to the U.S. U.S. WTO import responsibility Source: Rabobank from USDA pattern projections

Slide 25

U.S. sugar costs (pennies per pound)

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The future: 3 situations U.S.opens market to sugar imports As Mexican imports develops U.S. perceives that they can't contend Abandons all backings instead of bolster Mexican industry 3 rd party nations dislodge Mexican makers Creation of NAFTA sugar advertise Mexico sugar uproots share sugar U.S. holders, and others, put resources into Mexican factories Minimal residential torment HCFS south and sugar north – glad corn cultivators and share holders U.S. declines to open fringe

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The future: Spoilers Cuba Life after Castro FTAA Brazil assumes control over the market (4 pennies lbs. earn back the original investment)

Slide 28

U.S. furthermore, Mexican refined sugar costs (pennies per pound)

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