“We believe there is a very good rationale, why there needs to be a price adjustment for sugar,” Shawn Chavarria, Director of Finance at BSI, said.

by Marco Lopez

BELIZE CITY, Thurs. Oct. 5, 2023

Reports of a sugar shortage in some parts of the country have led the Ministry of Agriculture to send queries to the Belize Sugar Industries Ltd. (BSI). A press release issued by the company yesterday informed the public that they have responded to those requests, and it pointed to a 21% increase in demand for Plantation White Sugar that has been recorded so far this year. The company explained that this significant domestic demand is partially the result of a disparity between the price of sugar in Belize and prices of the Plantation White Sugar in neighboring countries.

Shawn Chavarria, Director of Finance at BSI, believes that the low prices in Belize have driven illegal actors to move significant quantities of sugar into Guatemalan and Mexican markets, where they can collect two to three times the profits that they would receive from sales in Belize.

“We know, for example, in Mexico, sugar, particularly plantation white equivalent, is selling for two and a half the price that it is being sold for in Belize; and we feel that that is perhaps creating that pressure here in our domestic markets for our product. So, people can buy it cheaper here, sell it across the border, and make a profit; and we believe that might be the cause for the apparent shortage of sugar on the shelves,” Chavarria shared.

He noted that the BSI mill produced sufficient sugar to meet domestic demand until January 2024. How much sugar is crossing the border is still unclear, Chavarria admitted, but they have estimated that it could be as much as 1,500 tons thus far.

“We have a guesstimate. For example, comparing to last year, we sold approximately 10K tons of plantation white sugar in the domestic market between the period of October 2021 – September 2022; and when we compare it to the period of October 2022 to September 2023, we sold just over 12,000 tons of plantation white sugar. So, that’s an increase of 2,000 tons for the 20% that I mentioned,” he outlined.

He speculated that domestic demand may very well have increased by 15 – 20 %.

“But we believe that perhaps maybe 1,500 tons of that is really making its way across the border; but without being on the ground and being able to verify that, it’s really just our guesstimate,” Chavarria pointed out.

And while these illegal exporters are taking advantage of the higher mark-up that is possible through sales of Belizean sugar to our neighbors, persons from border districts have reported a shortage on the shelves in those areas.

While increasing the presence of customs personnel and police on the border could help to prevent illegal exportation, BSI believes that adjusting the price of sugar locally is the primary, and most effective, mitigation measure that can be taken.

Chavarria revealed that this suggestion from the company has been received by Cabinet. He said that it is something that is still out there for consideration, since no rejection of the proposed price increase has been handed down by GoB.

“It’s really simple economics. If you have a product that you can source cheaper, and be able to source that and sell it in your own market at a significant markup, then that tends to indicate that you are underselling your product,” he said.

He noted that the price of brown sugar has not increased on the domestic market for at least 20 years. It is also sold below the world market price.

“And when you compare to regional markets, the prices are two to three times higher in these markets; so that creates an incentive for traders to come here, source the product, take it back, and make a significant markup,” he explained.

The low prices on the Belizean market encourage the backdoor trading, he concluded. In addition to this, the high import duty set by Mexico and Guatemala drives those involved in the illegal sale of sugar in those countries to avoid formal channels of trade and to simply utilize the porous borders.