The declining euro continues to be a worrisome issue particularly for countries which are major exporters of sugar to Europe as it would result in huge financial losses for their respective sugar industries. However, western economies may benefit from this scenario and therefore developed countries may not be inclined to give assistance to sugar exporting countries to help cushion the adverse effects of the loss in revenue as a result of a declining euro.
According to the International Business Times: : As the Euro declines, which it no doubt will continue to do over time as the ECB printing presses go into Warp Speed, the main beneficiaries will be the Western economies. And while it’s also likely to slow the Chinese economy for now, in the longer term euro depreciation will help to serve a needed purpose there.”
“First, because oil is bought and sold in dollars, you might think that euro depreciation relative to the greenback will cause the cost of oil to increase in Europe. The opposite, however, appears to be true right now.”
“The cost of a barrel of oil was 64.54 euros at the start of trading on May 3 when the euro opened on $1.3354. But with the euro recently at $1.2638 and the price of light sweet crude falling to $75.88/bbl, oil has fallen to 60.04 euros (a 6.97% decline in just over a week).”
“Second, because the yuan is pegged to the dollar, it has undergone (and will continue to undergo) an appreciation relative to the euro. This of course will make European exports more completive in China and will go a long way towards correcting the huge trade imbalances which now exist. It should also help cool Chinese inflation and its overheated economy, including its property bubble, first because exports to Europe (China’s largest export market) will slow as they become more expensive and second by making imported commodities cheaper (because they will decline in price as the dollar appreciates).”
Abdullah A. Dewan in an article in The daily Star points out: “Greece’s deficit-driven debacle.
“While the EU bosses debate the moral implications of a bailout, a falling euro is already providing some relief. The moral hazard is that other problem economies could unleash their deficit spending habit, believing that the rest of the euro zone would ultimately come to their rescue anyway.”
“So far, the euro has depreciated nearly 15 percent against the dollar and continues to slide — albeit slowly. The falling euro boosts Greece’s exports and provides the desired means to increase tax revenues, restoring some order in fiscal operations and the much needed fiscal consolidation. Until the crisis emerged, the euro was believed to be overvalued and the correction came as a blessing, as if to rescue Greece, and was welcome in all the euro zone capitals.”
With respect to our sugar industry which is the mainstay of the national economy, this will definitely aggravate and complicate the existing financial difficulties of the Guyana Sugar Corporation (GUYSUCO).
According to officials of the corporation at the current exchange rate of the euro financial returns will dip by 14% and based on remaining shipments for the year it will lose some $840M while in 2011, it stands to lose a whopping $2.3 billion based on minimum contracted quantity of sugar (185,00 tonnes to be exported to Europe.
This is indeed a grave situation because it means that a severe strain will be put on the industry‘s continuing modernisation and expansion programme which is gearing to improve efficiency and competitiveness. At the same time increased wages and benefits for workers may have to be put on hold.
In this context, therefore trade unions will have to act with restraint and adopt a responsible attitude, while management will have to have to ensure there is minimum wastage and optimum efficiency as the upcoming crop will be a crucial one for both the sugar industry and the national economy.