SUGAR PRICES TOO LOW TO BOOST LATIN OUTPUT Latin American sugar producers are awaiting further rises in world market prices before moving to boost production, official and trade sources said. Although prices have risen to around eight from five U.S. Cents per lb in the past six months, they are still below the region's nine to ten cents per lb average production cost. The recent rise in prices has placed producers on the alert, Manuel Rico, a consultant with the Group of Latin American and Caribbean Sugar Exporting Countries (GEPLACEA), told Reuters. However, Rico said, it would require another five to seven cents to stimulate notable increases in output. "Producers are taking measures for increasing their production when the prices are profitable," he said. Officials in Mexico, Guatemala and Ecuador said a continued rise in prices would stimulate production, but industry leaders in Panama and Costa Rica said there was still a long way to go. "The prices are ridiculous," said Julian Mateo, vice president of Costa Rica's Sugar Cane Industrial-Agricultural League. "At current prices nobody is going to consider increasing production." Other producers are wary of committing funds to increasing output, given the instability of world markets. An official at Colombia's National Association of Sugar Cane Growers said they had no plans to raise export targets. "The market is very unstable. What is happening is not yet giving way to a pattern and so there is no reason to modify anything." In 1985, the latest year for which full figures are available, Central and South American nations produced 28 mln tonnes, raw value, of sugar of which 12.3 mln were exported. A year earlier, they had produced and exported about 800,000 more, according to the London-based International Sugar Organization. Years of continuous low prices have plunged the sugar industry in many countries in the region into a recession from which it will be hard to recover. Miguel Guerrero, director of the Dominican Republic's National Sugar Institute, said it would be difficult to boost production even if prices recovered sharply. Output had slumped to under 450,000 tonnes a year from 900,000 in the late 1970s. Obsolete refineries, poor transport and badly maintained plantations were barriers to any short term recovery in output, he added. Plans of nearby Cuba, the world's largest cane sugar exporter, to increase output to 10 mln tonnes a year by the end of the decade seem ambitious, trade sources said. Output is running well below the record 8.6 mln produced in 1970. Cuba suffers from run down plantations, harvesting problems and poor processing facilities more than from low world prices, since much of its output is sold to Eastern Bloc countries under special deals. Last year, bad weather added to its troubles, and output fell to 7.2 mln tonnes from 8.2 mln in 1985. The low world prices of recent years have led many countries in the region to cut exportable production to levels where they barely cover U.S. And, in the case of some Caribbean countries, European Community (EC) import quotas, for which they receive prices well above free market levels. Progressive reductions in the U.S. Quotas have led to production stagnating or falling rather than being shifted to the free world market. Peru, for example, shipped 96,000 tonnes to the U.S. In both 1983 and 1984. This fell to 76,000 in 1986 and this year its quota is only 37,000. A national cooperative official said that, as long as world market levels continue at around half of Peru's production cost, the future of the industry is uncertain. At a meeting of GEPLACEA in Brazil last October officials stressed the need to find alternative uses for sugar cane which, according to the group's executive-secretary Eduardo Latorre, "grows like a weed" throughout the region. Brazil, the largest cane producer with output of around 240 mln tonnes, uses over half to produce alcohol fuel. Cane in excess of internal demand for alcohol and sugar is refined into sugar for sale abroad to earn much needed foreign currency. The difference in the price the state-run Sugar and Alcohol Institute (IAA) pays local industry and what it receives from foreign buyers costs the government some 350 mln dlrs a year. Soaring domestic demand for both alcohol and sugar over the past year, coupled with a drought-reduced cane crop, has meant Brazil will have difficulties in meeting export commitments in 1987, trade sources said. Negotiations to delay shipments to next year have been indecisive so far, the main sticking point being how Brazil should compensate buyers for non-delivery of sugar it had sold at around five cents per lb and which would cost eight cents to replace. Brazilian sugar industry sources said new sugar export sales were expected to be extremely low for the next year, with the Institute wary of exposing itself to domestic shortages of either alcohol or sugar and because of the need to rebuild depleted reserve stockpiles. However, the situation could change dramatically if the economy goes into recession and internal demand slumps. Sources within Latin America and the Caribbean hold little hope for the region's sugar industry to return to profitability unless the U.S. And EC change their policies. "The agricultural policies of the European Community and of the United States have caused our economies incalculable harm by closing their markets, by price deterioration in international commerce and furthermore by the unfair competition in third countries," Brazil's Trade and Industry Minister Jose Hugo Castelo Branco told the October GEPLACEA meeting. The EC has come under prolonged attack from GEPLACEA for what the group charges is its continued dumping of excess output on world markets. GEPLACEA officials say this is the main cause of low prices. GEPLACEA sees a new International Sugar Agreement which would regulate prices as one of the few chances of pulling the region's industry out of steady decline. Such an agreement would have to have both U.S. And EC backing and industrialised countries would have to see it as a political rather than a merely economic pact. "They have to realise that the more our economies suffer, the less capcity we have to buy their goods and repay the region's 360 billion dollar foreign debt," GEPLACEA's Latorre said.