$540 million write-offGovernment forgives debt owed by sugar cane farmers
Observer ReporterThursday, December 20, 2001
FINANCE minister, Omar Davies, yesterday announced a write-off of more than half a billion dollars owed by sugar cane farmers to the government, as well as the provision of $150 million in new credit to finance their replanting of cane fields.
At the same time, sugar industry officials disclosed yesterday that the administration has hired two American firms, Arkel Sugar Inc, a sugar industry consulting firm from Louisiana and Inter-American Transport Equipment of Florida to conduct a comprehensive review of the island's sugar factories and to make recommendations for their rehabilitation.
Industry officials said, too that Arkel/Inter-American Transport review could lead to the construction of a modern sugar factory in Trelawny, capable of also producing sugar products and generating its own energy.
Davies disclosed the debt forgiveness at yesterday's annual meeting of the All Island Jamaica Cane Farmers Association and said the new loans, at lower costs, were part of the administration's effort to revitalise the sugar industry.
"It is an investment in a very critical industry which has tremendous potential," Davies declared.
The debt write-off was unveiled a day after Parliament's formal approval of a government loan guarantee of $3.5 billion to the Sugar Company of Jamaica (SCJ) from the Bank of Nova Scotia, to be used to write down debt and provide just over $250 million in working capital.
The state-owned SCJ operates the Frome, Monymusk and Bernard Lodge sugar factories and estates and accounts for about 65 per cent of Jamaica's sugar production. The Scotiabank loan is for seven years at an initial interest rate of 18 per cent. However, the interest is open to review.
These latest initiatives for the sugar sector come in the face of efforts by the Jamaican government to create an industry capable of competing with other sugar producing countries after the elimination of its preferences in the European market by 2008. Jamaica produces sugar at over 30 US cents a pound and experts say that this price needs to be halved to give the industry a fighting chance of survival.
Improved efficiency by farmers, including a better yield per acre of cane and an improved rate of cane to sugar are seen as critical elements of any transformation.
It was in this context that Davies announced the write-off of $540 million in arrears by cane farmers, which relate to loans made in 1997 as part of a replanting programme.
Interest on the old loans were between 13 and 15 per cent, but Davies said that this will fall to 9.5 per cent on the new credit.
"For Jamaica to turn around the industry on a profitable and viable path innovative changes will have to be made," Davies said. "There is a very, very bright future for sugar and we (the government) are totally committed to its viability and should we get your full support sugar cane can rise to its full potential."
Added agriculture minister, Roger Clarke: "We are getting the opportunity, we must go out there and grasp this opportunity."