MECAS(10)07 - Central American/Caribbean Sugar and Ethanol Prospects
The Central America and Caribbean (CAC) region, which comprises 8 countries in continental Central America and 10 countries in the Caribbean Sea, is the world’s second largest net sugar exporting region after South America. This study is the first ISO paper dedicated to the CAC region and provides an overview of key developments in the regional sugar and ethanol markets, aiming at a better understanding of their potential impact on production and future export availability. The region has several of the world’s top raw sugar exporters as well as fast rising producers and exporters like Guatemala, El Salvador and Nicaragua. The main drivers of the short to medium term growth of the regional industry are the integration of the Mexican and the US sweeteners markets under NAFTA, as well as a vast array of sugar and ethanol preferential trade agreements with the US - under the TRQ, the CBI and DR-CAFTA schemes- and the European Union under the recently launched EPAs. Of interest, over the past decade, the share of CAC’s exports going to preferential markets has increased significantly. Over 65% of the region’s sugar exports currently go to preferential markets. Developments in the region suggest that production expansion will continue over the coming years, at least in a number of key countries in continental Central America. The smaller Caribbean producers, particularly those in the ACP group, are likely to streamline sugar production and continue to export almost exclusively to the EU or focus on ethanol dehydration activities. Indeed, the CAC region is a large player in the fledgling world trade of fuel ethanol, with a 25% share in global exports achieved through the dehydration of imported ethanol and re-exports to the United States. CAC is very diverse in sugar terms, with a very distinct set of industry characteristics, policy framework, sugarcane farming and pricing structure, sugar trade arrangements, ethanol opportunities as well as future expansion prospects. In addition to assessing the main general drivers, this paper presents an indepth analysis of the industries of the largest sugar economies in the region: Mexico, Guatemala, Cuba, El Salvador, Dominican Republic and Nicaragua. Future sugar consumption for CAC is estimated to rise only modestly at 0.7% a year to 2020, given already saturated per capita consumption levels and the prospects for greater penetration of HFCS into Mexico’s market. As a result, sugar export availability from the region could double over the next ten years to over 7 mln tonnes. Last but not least, developments in cogeneration are also assessed - it is becoming an increasingly attractive option for several countries, already providing up to 25% of demand for electricity in Guatemala.
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