sugaronline.com

With no laws in place to promote ethanol development for domestic use, Guatemalan officials are wasting the best potential ethanol production in Central America that hasn't been capitalized on yet, given the country's region-leading production of sugarcane.

Guatemala's sugarcane harvest will start around November 10, when the rainy season ends on the southern coast, and run through April 2012. Canegrowers expanded cropland for this coming harvest in the areas of Escuintla, Santa Rosa, Retalhuleu and Suchitepéquez. It was one of the first significant crop expansions in years for Guatemala's canegrowers, who were driven by attractive global prices for sugar.

Commodity reports from the National Sugar Association, Asazgua, noted recently that the average price per pound for export sugar being offered to Guatemalan producers is around US$0.28-US$0.32. This 2011/12 cane harvest is expected to be much better than last year's, if only that the country will likely avoid a repeat of dreaded tropical storms that hit Guatemala last year in September and caused severe damage to the cane crop.

The latest forecasts project Guatemala to produce around 51 million quintals of sugar this season, more or less matching the country's production in 2009/10 of 50.8 million quintals. The progress has been slow but steady for Guatemala's cane sector, which has crept up from 46 million quintals in 2007/08, and 47.8 million quintals in 2008/09.

But what this country's cane industry has missed the boat on for more than five years is its potential as an ethanol export hub for Central America. According to Guatemala's Renewable Fuels Association (ACR), the country's ethanol exports have dropped 26% between 2008 and 2010, from 145.6 million litres down to 107.7 million litres last year.

The country's ethanol production is of course tied to its cane harvest and molasses production, both of which have also declined in the last few years. There's optimism that the industry could get back on track this year, though, based on new crop investment.

Expanded cultivation area has generated more investment in agriculture, employment and farming technology for productivity gains this year than in maybe the last five years put together.

There's a growing demand for land along the south coast for planting sugarcane and oil palm in particular, both of which are considered key growth crops for Guatemala that have demonstrated multi-year price gains for producers.

With an estimated 850,000 litres per day, Guatemala is the top ethanol producer in Central America, followed by Costa Rica with 360,000 litres per day, Panama at 160,000 litres, El Salvador with 120,000, and Nicaragua with 80,000 litres per day. Five distilleries currently produce ethanol in the country (out of 14 total), and have an installed capacity of 250 million litres per year.

More than 90% of that ethanol is exported to Europe, the United States and Mexico. The remainder is used by Guatemalan liquor companies.

Why Guatemalan officials haven't already established an ethanol mix mandate in the nation's gasoline was the topic of debate at a renewable energy forum held in late September, and sponsored by Guatemala's Ministry of Mines and Energy, varied renewable fuels associations and the US Embassy, among others.

With the installed capacity of those distilleries now in operation, national sugarcane production could easily support at least a 10% ethanol mix rate now, according to speakers quoted from the forum and country analysis by the US Department of Agriculture. The USDA thinks the market could even support such a blend rate for the entire Central American region with its production potential.

Guatemala apparently has a wealth of untapped potential for renewable energy generation. On top of cane ethanol, the country has the capacity to produce 7,800 MW of windpower, 1,000 MW of geothermal energy, and 10,900 MW of hydropower, say industry analysts that attended the September energy forum. Despite that potential, most of Guatemala's electricity today is generated in petrol-powered thermal energy plants.

To continue focusing solely on boosting sugar production is going to be an uphill battle at best for Guatemala's millers, and foolhardy at worst based on recent smuggling activity there. As of the first quarter of this year, Guatemala was losing around 40,000 tonnes of sugar per annum to smugglers. They were taking the sweetener across the border to Mexico to sell at a higher price.

Establishing a local ethanol demand is the easiest step Guatemalan policymakers could take to rapidly strengthen and develop one of the country's most valuable economic sectors going forward.