$19b sugar project: IDB weighs financing for modernisation programme
The Inter-American Development Bank (IDB) is looking at funding a US$160-million ($19.3 billion) project aimed at modernising the sugar industry in Jamaica, which has struggled to find a profitable footing.
Details of the project, for which financing is now being prepared, were not fully disclosed, but the IDB said on its website that it seeks to provide "an A-loan of up to US$53.5 million with a tenor of up to 10 years, including two-year grace period, and is exploring to mobilise funding of up to US$26.5 million".
Funding would be geared towards upgrading equipment and factories, expanding cane planting, and lending to small sugar cane farmers.
"The factories will be ultimately equipped with appropriate technologies to meet international health and safety standards," said the IDB website.
The Jamaican Government already provides credit to the cane-farming sector via the Cane Expansion Fund, which totals around $2.4 billion. What's more, it has spent some J$10 billion supporting the sector, building about 300 houses in Clarendon and St Thomas, and rehabilitating over 100 kilometres of cane roads, among other things, since it privatised its sugar factories over five years ago.
The owners of the privatised factories have themselves pumped around $20 billion into modernising operations. Chinese-owned Pan Caribbean Sugar company (PCFS), which took over Bernard Lodge, Frome and Monymusk in 2010, spent the lion's share approximately $15 billion, or US$150 million followed by Seprod, which runs the sugar factory located in St Thomas, with around J$3 billion. Everglades, which runs Hampden and Long Pond in Trelawny, says it spent $2 billion.
However, they all have had difficulties achieving profitability. Both PCFS and Seprod have outsourced farming operations to a private management firm, Sankar Group, while Everglades shut down sugar production for the current crop year which began in December.
The companies cited falling sugar prices, increasing costs and a regulatory regime which requires pooling and selling raw sugar to Jamaica Cane Products Sales for distribution to international buyers as major impediment to improving their bottom lines.
PCFS secured its licence as a marketing agent four years ago, allowing it to focus on the local market. But that did not translate into profit. Seprod acquired a licence as a marketing agent - which gives it control over the distribution of Golden Grove's sugar - last November, and has since entered the retail sugar market.