US punishes Mexican sugar producers

A day laborer cutting sugar cane in Chetumal. / ELIZABETH RUIZ  (EFE)

Department of Commerce has accused government of unfairly subsidizing sweetener production

Sonia Corona Mexico City

Mexican sugar is going through bitter times in the United States. The US Department of Commerce has imposed cash duty deposits ranging from 2.99 percent to 17.01 percent on sweeteners imported from Mexico, saying that the Latin American government is unfairly subsidizing its sugar production. These sanctions come as a result of an investigation requested by the American Sugar Coalition and its members, who complained that exporters from Mexico competed unfairly with domestic producers. The preliminary ruling will be reviewed at the conclusion of the investigation and a final decision will be made on January 7, 2015.

“The Department of Commerce’s finding validates our claim that the flood of Mexican sugar, which is harming America’s sugar producers and workers, is subsidized by the Mexican government,” Phillip Hayes, the coalition's spokesman, stated in a press release. The organization is also accusing the Mexican government of propping up the sugar industry through subsidies to prevent its bankruptcy.

The United States produces 70 percent of the sugar it consumes and imports the rest. Mexico covers 18 percent of America’s demand and it profits from the sweetener industry through the North American Free Trade Agreement (NAFTA), which spares farmers tariffs on trade between Mexico, Canada and the United States. During the last harvest, Mexico produced almost 6.6 million tons of sugar and it exported 1.9 million tons to the United States.

The American Sugar Coalition is accusing the government of propping up the industry to prevent its bankruptcy

The Mexican government has said the sanctions were “a step backwards in free trade.” Economy Minister Ildefonso Guajardo said both countries were in talks to remove these compensatory rates. “This is not right, not in the context of NAFTA or for the integration of the sweetener markets. We are working with our domestic industry, which has asked us to maintain a steady dialogue so that we can move forward and reach an agreement that benefits all parties involved.”

Guajardo said that if the duty deposits continue, the supply of sugar on the domestic market will rise. Though sugar prices in Mexico would drop at first, the business would not be viable for certain producers and the situation would lead to an unemployment crisis in the sugar industry. Undersecretary of Foreign Trade Francisco de Rosenzweig admitted that Mexico subsidizes its sugar producers. But he said the government only engages in stimulus efforts when prices fall below a certain range.

The future of Mexico’s sugar cane industry is not promising. In 2012, production reached almost seven million tons, and one year later it had fallen to 6.6 million. Producers have complained that while sugar prices in Mexico are falling, the cost of raw materials for production is on the rise.