VZCZCXYZ0008
OO RUEHWEB

DE RUEHTG #0007/01 0072014
ZNR UUUUU ZZH
O 072014Z JAN 10
FM AMEMBASSY TEGUCIGALPA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1419
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE USD WASHDC PRIORITY

UNCLAS TEGUCIGALPA 000007 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ENRG ETRD HO
SUBJECT: SUGAR ASSOCIATION SEEKS CHANGE IN U.S. SUGAR QUOTA 
 
REF: A. 09 STATE 106302 
     ¶B. 09 TEGUCIGALPA 289 
     ¶C. 09 STATE 31013 
 
¶1.  (U)  Summary: In a meeting with economic officers, a 
representative of the Honduran Sugar Producers Association 
expressed deep concern over a recent reduction of import 
quotas by USTR, and said that the association will seek to 
correct data from the Honduran de facto government that was 
used to determine these figures.  The sugar association 
representative also provided information about the economic 
and environmental impact of the industry.  End summary. 
 
-------------------------- 
CONCERNS ABOUT SUGAR QUOTA 
-------------------------- 
 
¶2.  (SBU)  After receiving notification from the office of 
the U.S. Trade Representative (USTR) that the aggregate 
quantity of sugar products that may be entered duty-free from 
Honduras would be reduced by 2,477 metric tons from what was 
expected for 2010, Carlos Melara, Executive Director of the 
Honduras Sugar Producers Association, requested a meeting 
with Embassy officers.  In the December 23 meeting, Melara 
told Econ Counselor, Econ Officer, and U.S. Department of 
Agriculture (USDA) assistant that the negotiated CAFTA-DR 
quota was for 8,640 metric tons, but that the trade surplus, 
calculated using figures from the Honduran Central Bank, was 
6,163 metric tons.  The sugar association representative 
expressed surprise that USTR uses the lesser of the two 
figures, and more importantly, skepticism about the validity 
of the numbers cited.  Melara said that the Central Bank 
often publishes preliminary data from the previous year, and 
that this is likely where the information that was used to 
determine the net surplus came from.  He asserted that 
figures from the sugar association or from USDA would have 
been more accurate.  Melara said that he had raised his 
concerns with USTR. 
 
---------------------------- 
BACKGROUND ON SUGAR INDUSTRY 
---------------------------- 
 
¶3.  (U)  Melara provided an overview of Honduras's sugar 
industry, stressing its importance within the Honduran 
agricultural sector.  Sixty-eight percent of the sugar 
produced is sold locally.  Selling through commodity traders 
as raw sugar and molasses, 5 percent of Honduran sugar 
products are exported to the U.S., with the rest being sold 
on the world market.  With half of the cane coming from 
independent growers, and the other half coming from 
plantations run by the sugar mills, approximately 200,000 
workers depend directly or indirectly on sugar production. 
While the Honduran sugar industry currently enjoys success in 
domestic and foreign markets, its share of the market is 
small compared to other CAFTA-DR countries such as the 
Dominican Republic and Guatemala. 
 
¶4.  (U)  Melara said that sugar producers have been working 
to increase social responsibility within the industry.  This 
has included bearing the expense to fortify local sugar with 
vitamin A, participating in nutrition campaigns, and striving 
to eliminate child labor.  In addition, all sugar workers are 
paid above the minimum wage.  The larger mills are unionized. 
 When the minimum wage was increased 60 percent early in 
2009, there were no resulting layoffs, as other industries 
experienced. 
 
¶5.  (U)  Melara noted that environmental concerns and local 
regulations prohibit burning cane fields as part of the 
harvest near airports and population centers.  These and a 
few other fields are cut mechanically.  While only 15 percent 
of the cane is currently harvested this way, the percentage 
may increase as more equipment is purchased and as growers 
find that the improved practices which allow them to avoid 
burning fields can also increase yields. 
 
¶6.  (U)  Melara added that the environmental impact of the 
sugar industry can also be seen in renewable energy projects. 
 Some of the large sugar mills are also big producers of 
energy, generating a total of 120 megawatts from biogas.  The 
mills use approximately 40 percent of this electricity and 
sell the rest to the grid.  On the other hand, ethanol 
projects that were in the planning stages prior to the June 
28 coup have been put on hold mostly for financial reasons. 
Lower gasoline prices in 2009 from 2008 diminished the 
urgency for alternative fuels.  At the same time, high prices 
for sugar have outpaced the expected return on producing 
ethanol.  (Note: A recent Bloomberg survey anticipates 
another rise in prices as supplies tighten in the first half 
of 2010.  End note.)  Melara attributed much of the rise in 
prices to increasing demand in India and China.  He said that 
prices are expected to drop in 2011 due to a planned increase 
in production in Brazil, the world's largest sugar producer. 
 
¶7.  (SBU)  Comment: We will provide updated sales figures as 
soon as they are made available by the Central Bank. 
LLORENS