The extent of Guyana's economic decline in the 1980s was
clearly reflected in the performance of the sugar sector.
Production levels were halved, from 324,000 tons in 1978 to 168,000
tons in 1988.
A number of factors contributed to the shrinking harvests. The
first factor was nationalization. The rapid nationalization of the
sugar industry in the mid-1970s led to severe management
difficulties and an emigration of talent. The Guyana Sugar
Corporation (Guysuco), which took over the sugar plantations,
lacked needed experience. Perhaps more important, Guysuco did not
have access to the reserves of foreign capital required to maintain
sugar plantations and processing mills during economically
difficult periods. When production fell, Guysuco became
increasingly dependent on state support to pay the salaries of its
20,000 workers. Second, the industry was hard-hit by labor unrest
directed at the government of Guyana. A four-week strike in early
1988 and a seven-week strike in 1989 contributed to the low
harvests. Third, plant diseases and adverse weather plagued sugar
crops. After disease wiped out much of the sugarcane crop in the
early 1980s, farmers switched to a disease-resistant but less
productive variety. Extreme weather in the form of both droughts
and floods, especially in 1988, also led to smaller harvests.
Guyana exported about 85 percent of its annual sugar output,
making sugar the largest source of foreign exchange. But the
prospects for sugar exports grew less favorable during the 1980s.
Rising production costs after nationalization, along with falling
world sugar prices since the late 1970s, placed Guyana in an
increasingly uncompetitive position. A 1989 Financial Times
report estimated production costs in Guyana at almost US$400 per
ton, roughly the same as world sugar prices at that time. By early
1991, world sugar prices had declined sharply to under US$200 per
ton. Prices were expected to continue decreasing as China,
Thailand, and India boosted sugar supplies to record high levels.
In the face of such keen international competition, Guyana grew
increasingly dependent on its access to the subsidized markets of
Europe and the United States. The bulk of sugar exports (about
160,000 tons per year in the late 1980s) went to the European
Economic Community (EEC) under the
Lomé Convention (see Glossary),
a special quota arrangement. The benefits of the quota were
unmistakable: in 1987, for example, the EEC price of sugar was
about US$460 per ton, whereas the world price was only US$154 per
ton. (The gap between the two prices was not so dramatic in other
years, but it was significant.) Guyana was allowed to sell a much
smaller amount of sugar (about 18,000 tons per year in 1989, down
from 102,000 tons in 1974) in the United States market at prices
comparable to those in the EEC under another quota arrangement, the
Caribbean Basin Initiative
(see Appendix D).
preferential access to the European market was a priority in
Guyana; in 1988 and 1989, production levels were too low to satisfy
the EEC quota, so Guyana imported sugar at low prices and
reexported it to the lucrative European market. Even so, Guyana
fell 35,000 tons short of filling the quota in 1989 and 13,000 tons
short in 1990.
The government of Guyana restructured the sugar industry in the
mid-1980s to restore its profitability. The area dedicated to sugar
production was reduced from 50,000 hectares to under 40,000
hectares, and two of ten sugarcane-processing mills were closed.
Guysuco also diversified into production of dairy products,
livestock, citrus, and other items. Profitability improved, but
production levels and export earnings remained well below target.
In mid-1990, the government took an important step toward long-term
reform of the sugar industry--and a symbolically important step
toward opening the economy--when Guysuco signed a management
contract with the British firms Booker and Tate & Lyle. The Booker
company owned most sugar plantations in Guyana until the industry
was nationalized in 1976. A study by the two companies reportedly
estimated that US$20 million would be needed to rehabilitate
Guyana's sugar industry.
Data as of January 1992