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Productivity, Social Responsibility Drive Guatemalan Export Profits
The Washington Diplomat / September 2013

By Larry Luxner

ESCUITLA, Guatemala — It’s a 30-minute helicopter ride from the shiny glass skyscrapers of Guatemala City to the sprawling La Unión sugar mill in Guatemala’s department of Escuintla, not far from the country’s Pacific coast.

Recently, I got the chance to take such a trip, as a guest of two powerful organizations — the Guatemalan Sugar Producers Association [Asociación de Azucareros de Guatemala, or ASAZGUA] and its social welfare arm, Fundazucar.

Upon arrival at La Unión, I fully expected to find dozens of cane-cutters working the fields, filling containers with caña and maybe later eating lunch in a communal cafeteria.

I did not expect to see colorful Spanish-language cartoons on the walls of their army-like barracks, telling these campesinos how to go to the bathroom and use toilet paper. Or posters convincing them why they should be grateful to have the jobs they have. Or a social worker in the nearby town of Santa Lucia Cotzumalguapa using handmade puppets to teach expectant single mothers how to care for their new babies.

But I did see all that, and more, in the company of Fundazucar’s assistant director, Griseldo Say López, and ASAZGUA spokesman Otto René Estrada.

What became clear to me after a morning tour of Guatemala’s third-largest sugar operation, followed by a presentation by the Centro Guatemalteco de Investigación y Capacitación de la Caña (Cengicana) and a late afternoon meeting with ASAZGUA’s president, Armando Boesche, is that when it comes to efficiency and productivity in the sugar industry, the rest of Central America has a lot to learn.

“Our industry’s competitiveness is based on three elements: productivity, R&D and technology. We offer the best working conditions possible, because this translates into better productivity,” said Estrada, whose organization was founded in 1957 to represent Guatemala’s sugar interests. “All this is based on social responsibility. In an industry as competitive as sugar, we have to respect our workers. This is fundamental.”

Fernando Letona should know. As human resources manager at La Unión, he’s in charge of the well-being of 2,800 sugar workers.

“They’re very graphic,” Letona said as we gazed at the huge banners tacked on the walls of Tehuantepec barracks, which are home to some 400 cane-cutters, known in Spanish as cortadores de caña. La Unión has four more barracks just like Tehuantepec, each with their own dormitories, clinics, dining rooms and exercise areas.

“All these workers have come from the altiplano.” he said. “Work hours are 6:30 a.m. until 3 p.m., with a 15-minute rest in the morning and half an hour for lunch. Breakfast and dinner are served in the comedor, while lunch is served in the field, from food trucks.”

Letona said that feeding workers well results in higher yields.

“Before we invested in all this, each cortador was cutting 2.5 tons per day. Now they cut six to seven tons, and some up to 12 tons,” he explained. “It’s evident that this investment has had positive effects on productivity.”

Workers normally earn 3,800 quetzals ($485) per month, which translates into Q21.60 or around $2.75 per hour, he said. That doesn’t include fringe benefits, which come to 42 percent of wages. After taxes and social security, workers keep an average of Q3,500 ($450).

“Something elemental we’ve done is to give workers dignified, decent jobs so that they’ll feel content with what they’re doing,” said Letona. “You’ll see the same at any sugar mill. Here, workers have the possibility of improving their standard of living.”

Guatemala has seen similar success with its coffee, banana and winter vegetable exports. It is also now becoming a major exporter of African palm oil, an edible oil which is also used to manufacture biofuels.

Francis W. Bruderer is president of the Asociación de Productores Independientes de Banano (APIB), which represents 82 packing houses employing 25,000 banana workers along Guatemala’s fertile south coast.

“You might have the best rainfall, soil, sunlight and fertilizer, but it’s the people who make the bananas grow,” he said. “It’s the men and women who work in the banana industry and have made Guatemala the most productive banana exporter in the world.”

Bruderer insists “there is no intimidation in the banana business,” despite widespread documentation of worker abuses that go back more than a century — and a recent spate of killings of labor leaders who were trying to organize their fellow campesinos.

“Many of the labor leaders here participate in political movements and are exposed to daily and regular violent circumstances as we all are,” he told us. “Our judicial system is not capable of following up these investigations to determine if the killings were related to labor issues, as they claim to be, or just regular violence.”

Violence is rampant in Guatemala, which saw 5,681 homicides in 2011, according to the United Nations — just over 15 killings a day. With the highest proportion of indigenous people of any country in the Western Hemisphere, Guatemala also ranks as one of Latin America’s poorest. Its 15 million inhabitants have been ravaged by civil war, and much of Guatemala’s wealth is concentrated in the hands of relatively few families.

Under Guatemalan law, all workers have the right to form unions — as long as a minimum of 28 workers petition for one — but so far, only one of ASAZGUA’s member companies, Palo Gordo, is unionized.

This is one factor, but only one, that explains how Guatemala has become the largest sugar exporter in Central America and the third-most productive sugar producer in the world after Colombia and Swaziland.

In the 2011-12 sugar harvest, Guatemala exported 1.65 million metric tons of sugar, more than Cuba’s entire sugar crop, and more than the sugar exports of El Salvador, Nicaragua, Honduras, Costa Rica and Panama combined.

Guatemala now ranks as the world’s fourth-largest sugar exporter (after Brazil, Thailand and Australia), according to the International Sugar Organization, while Cuba ranks seventh, just ahead of Colombia.

But when it comes to productivity, Guatemala’s performance is even more impressive. In 2008, according to ASAZGUA figures, Colombia led the world in productivity, with 14.6 tons of sugar per hectare under cultivation, followed by tiny Swaziland (13.9) and then Guatemala (12.2).

The next nine countries, in descending rank for productivity, were Australia, Sudan, China, Brazil, Mexico, United States, India, Thailand and South Africa. Cuba wasn’t even on the chart.

In 2012, sugar exports to the United States, Canada, South Korea, Mexico, Chile, China, Taiwan, Bangladesh and other customers generated $843.7 million in foreign exchange for Guatemala and employed 350,000 people, 73,000 of them directly. That ranks just behind coffee ($955.9 million) in terms of importance for the country, but well ahead of Guatemala’s two other key agricultural exports: bananas ($469.9 million) and cardamom ($250.3 million).

Sugar today represents 14.4 percent of Guatemala’s total exports, 27.1 percent of its agricultural exports and 3 percent of its GDP.

Armando Boesche is general manager of ASAZGUA. In the last 27 years he’s headed the organization, Guatemala’s area under cultivation has tripled, while yield has jumped from 66.3 tons per hectare in 1984-85 to 95.4 tons/ha today.

Daily milling capacity, meanwhile, has nearly tripled from 53,093 tons in the 1984-85 season to 151,673 tons in 2011-12.

“Guatemala is a small country, not like Brazil or Colombia, so productivity for us is very important,” said Boesche, 73, interviewed at his wood-paneled office on the 19th floor of the swanky Euro Plaza skyscraper. “With what we export, we could supply all of Central America including Panama.”

Mario Melgar is director-general of the Centro Guatemalteco de Investigación y Capacitación de la Caña (Cengicaña), a sugar research institute. He partly credits the 1992 establishment of Cengicaña, which has 75 employees and operates on a $2 million annual budget.

“Before that, each mill did its own R&D,” he said, noting that Cengicaña is one of only six sugar research centers financed by the private sector (the others are in Australia, Brazil, Colombia and Ecuador). “Each sugar producer pays a quota depending on its production.”

In the 21 years since Cengicaña’s creation, it’s introduced 1,875 sugar varieties to Guatemala, which now cultivates 235,000 hectares of sugar cane.

Like sugar, palm oil is a commodity that’s very much affected by world prices.

Felipe Molina, owner of Grupo Olmeca, is among the country’s largest exporters of palm oil. His company controls 46,000 hectares cultivated with African palms and employs 22,000 people.

While Molina declined to say how much his conglomerate has invested in palm oil or how much it earns, he did estimate that Guatemala’s production costs come to between $550 and $600 per metric ton — less than Colombia’s $700 per ton but more than Asian producers such as Malaysia ($520), Indonesia ($480) and Thailand ($510).

“In my 23 years in this industry, I’ve sold the same ton of crude palm oil for $250 and $1,200, so how profitable it is depends on commodity prices. You cannot do much about the price.”

But one thing Guatemala does have is land — and vast tracts of scrubland and otherwise unproductive empty space in the departments of Alta Verapaz and Petén are now planted with African palms.

“In Guatemala, there’s a lot of land that is not being used. Planting palms generates income and jobs,” said Alfonso Portugues, agricultural manager at Palmas del Ixcan, which employs 1,500 people in the peak season between June and September, and around 600 during the rest of the year. He says it costs twice as much to produce palm oil in his native Costa Rica as it does in Guatemala.

Portugues, who has a degree in agronomy from the University of Costa Rica and who worked in the banana industry for 20 years, said Guatemala has a potential 650,000 hectares to use for palm oil. Workers earn an average 85 to 95 quetzals per day (equivalent to about $1.25 an hour) for backbreaking work that requires standing long hours in the sun — often without protection — lifting heavy bunches of palm-oil berries known as racimos and exposure to thorny leaves and undergrowth.

Even so, Molina criticizes those at home and abroad who say his industry exploits workers.

“If you go talk to the people who live in these communities, ask them if they’re better off than they were 10 or 15 years ago. They will all tell you they appreciate their jobs compared to when there was nothing,” said Molina, discounting critics such as the Ford Foundation for waging intellectual warfare against the country’s business elite.

“We in the agricultural industry are focused on what we can do well, and how we can exploit this potential if only the politicians would allow us to work,” he said. “But you have to be mature and understand that things are not going to change from one day to the next.”

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