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BSI/ASR and the BSCFA yet to come to an agreement, not such a sweet road ahead

As we stated earlier, this year’s sugar cane crop season suffered a major setback due to an impasse between ASR/BSI and the largest sugar cane farmers association, the BSCFA. The impasse resulted in a 3-day blockade of the factory. The governmen intervened and Prime Minister, John Briceno, was able to broker a temporary truce that led to an interim agreement. But now that the crop has ended, so has that interim agreement. The association and the mill are now back in negotiations with the hopes to sign a new agreement as soon as possible. Earlier today, ASR/BSI’s Director of Finance, Shawn Chavarria, said that in the last six months the company has only met twice with the BSCFA. According to Chavarria, the BSCFA’s demands would result in a 20 million dollar transfer of funds from the mill to the association. He says that is something that BSI/ASR simply cannot handle at this time. 

Shawn Chavarria, Director of Finance, BSI/ASR: “I think really what needs to occur is an objective, analysis and assessment of what are the realities. What are the economic arguments? And to also see the benefits that these investments are already having. You know, on farmers, I’ve highlighted the benefit of the DC and Big Creek. That’s $5 per ton of cane and that’s based on ASR’s and BSI’s investment here in the industry so I think if you look at it objectively, there is a way we can move forward. I think there probably needs to be a reset from the BSCFA’s negotiating team to really objectively analyse the situation, analyse the facts that we have presented to show what the impact of their proposals would have. We have presented two proposals. We have looked at their option of a 60:40 value share. We have said that we are prepared to work with that. The only fundamental difference that we have compared to that is that one, they want a higher payment for bagasse which we have explained to them that we can’t do and we have demonstrated why. We have provided them with the audited financial statement from BELCOGEN to show that it is meeting losses and it has cumulative losses. The added step was taken of showing them the power purchase agreement with BEL to show that the tariff that BELCOGEN received does not include a value for bagasse. So we have already shown all the facts that for bagasse that really we can’t pay more. So I think it’s time they move from that argument right? And the other part that is different from what they initially proposed was the treatment of value added. As you may know, they want to move away from net trip value which is the sharing of cost. So we said okay, we are prepared to do that, accept all the cost but when it comes to value added sugar, there is an additional cost to transfer to value added. If you don’t want to share in the cost then we have to treat that as raw sugar then we absorb all the logistics, supply chain costs, the handling costs and the manufacturing cost of that DC sugar. So really, we’ve taken their proposals, worked with it and only made those two changes. Right? And that’s what’s before them at the moment. The other opinion we have offered them too is an opportunity to continue with the existing agreement but to provide them with an audit right of the net trip value. Meaning they could appoint an auditor to audit the working papers of our auditors when the net trip value is being audited because one of their arguments of moving away from the existing is the transparency. So this allows them more transparency and a way to move forward so this allows them more transparency and a way to move forward so there’s two options that they have before them and like I said, it’s up to them to objectively analyse that.”

BSCFA says that R/BSI’s proposal contains several problematic issues such as the duration of the agreement, the payment for the bagasse used by BELCOGEN to produce electricity and the formula ASR/BSI uses to calculate the net value of the sugar. Three weeks ago, BSCFA representatives presented a counter-proposal to BSI/ASR’s first proposed draft for the new agreement and received the mill’s response. Executive Director of the BSCFA, Oscar Alonzo, says the association has already responded but ASR/BSI does not seem to want to budge to the association’s demands included in that proposal.

Oscar Alonzo, Executive Director of the BSCFA: “We have already cut back on some of the things that we wanted. This is the startling situation. In that thing we had a proposal that we should increase the efficiency figure from 88 to 90% since they invest all of this thing right? You assume that the efficiency is supposed to be better. Right? So let’s document it. And we never got any response to all of that. They said no. And we’ve conceded that. We have conceded that okay so we’ve been conceding but hey have not even taken into account what we have been saying. Nothing, nothing. Even clauses that do not have monetary considerations, they have even refused to say look well I agree with that. I accept that and I can move on. Or let us look at it this way. So it’s just that stone walling. That, I don’t want to go so far as to say bullying because we need to treat one another with respect but I know that, we are sure that they have created a stone wall right. They don’t want us to penetrate for the negotiations to proceed right and as I said, the Government has to come in now. The Government needs to come in. Listen. Government has addressed the issue of the investment policy, right, to attract foreign investment. The question is, we ask, we support foreign investment. We want it. But it should be foreign investment that should respect the dignity and the hard work of Belizeans. No foreign company should come here and dictate to the Government how it is that its citizens should conduct their affairs so that they squeeze all the wealth out of our country. There should be fairness in this whole process right? And this is where the Government should come in and play a role. That okay you can’t come in my house and tell me how to run it.”

Alonzo added that one of the major issues the association is dealing with is ASR/BSI’s refusal to share complete information as it relates to the cost of line items such as shipping and local handling of sugar. According to Alonzo, when the association did its own calculations of these services it was lower than what the mill had been charging them.

Oscar Alonzo, Executive Director of the BSCFA: “The other major factor, the other major clause that we need a clear explanation and negotiation too is the manufacturing allowance. They charge a manufacturing allowance on plantation white sugar which is $160 per ton of sugar. Okay? Now that has been, in 2015 when they had the increase in the price of white sugar, you remember that? In December? And that price came into effect in January 2016. Right? In that they tried to consolidate it as legally regulated. We asked them, show us the SI. We want to see the legal SI that allows you to charge that. They have not been able to do it right and they have been charging that since about 2, 20, 30 years. Now they also, now they also began to charge a manufacturing allowance of $150 on the DC sugar. Okay this DC sugar is the sugar that they are saying that they are selling to the EU market. Right? It is another process that is applied to the raw sugar that makes that sugar edible on the tables in restaurants and homes and so on, right? So they’re selling that, different grades, to Europe and also to CARICOM, where they say they are trying to enter the CARICOM market. But, the $150 that they are changing to produce that, when we did our research, it shows that the process of converting that raw sugar to DC sugar is only about $25 per tub. But in negotiations they had mentioned that it costs about 40. Okay. Now why should we be paying the other $110? They have been saying it’s to recover their investment. But, we need to know. We haven’ seen the documentation to really and for how long would you charge that? Their response would be for eternity.”

ASR/BSI has offered the BSCFA the option of hiring an auditor to ensure transparency in how the company does it accounting of the sale of the sugar but the BSCFA negotiators have denied that offer.