It is about people

A conversation with José Orive, Executive Director of the International Sugar Organisation

Good morning José. Could you please tell me a little about yourself?

I grew up on a ranch in Guatemala; we were mainly cattle, but we did have some sugarcane and we fed the molasses to the cattle. My brother stayed on the farm and I studied law at Georgetown University in the US, and then did a masters degree in international trade agreements. That led to me working with the Guatemalan diplomatic service as a trade negotiator.

So you are a diplomat with experience of trade negotiations. Does that help in your current role?

It does, especially given the sensitivity around sugar at the moment. Different people have different expectations—and the cultural differences are enormous. Although most people view the ISO as “being about statistics,” we are really about people.

But what does the ISO do exactly?

We are a United Nations body that came out of the Bretton Woods Agreement. It was part of the post-World War era, where food security was of paramount importance.

At first, the ISO intervened actively in the world sugar market, telling people what to produce, when to market it, what stocks to hold and what price to sell at. But by the end of the 1970s, countries realized that the market did all those things better, and did away with the so-called “economic clauses” of the agreement.

Our role now is to monitor, analyse and study the world of sugar and biofuels. Our goal is to produce intelligence that enriches people’s decision making. We avoid telling people what to do, but we lay out the variables and the key factors around issues that are pertinent to the sugar world.

We have 88 country members, including the EU, which acts as one party, and 10 staff.

Is it part of your mandate to defend the sugar industry?

Yes it is. We have an advocate role. It is an interesting function, as many governments do not have a single voice on the issue. Sometimes we act as arbitrators between ministers of health and ministers of trade and agriculture—around the importance of sugar for sustainable development and its role in nutrition as part of a healthy diet.

You have to remember that the sugar industry is a key driver for development and incomes in rural areas in many developing countries. When you visit these countries you can see how villages and small towns can be lifted up when a sugar mill opens nearby. You will see schools and hospitals being built, and then the next generation ends up with a college degree. That is something that governments have to encourage. Sugar plays a huge part in that; it is a driver for development.

Does the ISO also get involved in arbitrating between farmers and millers?

We are currently undertaking a study of the payment systems of cane and beet worldwide. One of the main drivers for this has been the desire of growers of beet and cane to participate in downstream projects such as ethanol, electricity co-generation and green plastics.

Some millers want farmers to participate in the downstream products, but they argue that farmers have to invest with them and assume some of the risk. Other millers say, “No, we acquire the raw material and we pay for it. What we do with it is our business and not yours, because you have been paid. We can lose money in a bad year if the price of these products is
low, but that is our risk and not yours.”

With governments becoming increasingly anti-sugar, are they asking themselves why they should be members of an organization whose role it is to promote the sugar industry?

I haven’t seen a country or a government directly question their membership as a result of their position on sugar. That said, it is almost impossible to stop finance ministers from considering a sugar tax. They look at the additional revenue and it is hard for them to resist. Sugar taxes are driven both by politics and revenue. The tax in Mexico raised $1.2 billion over two years.

Do sugar taxes reduce sugar consumption?

If you take Mexico as an example, domestic sugar consumption dropped during the first year after the tax was introduced in 2014-15, but by the beginning of 2017 it was back to its pre-tax level. By September 2017, consumption was above the pre-tax level.

Politicians suppose that if they make a product more expensive people will stop consuming it, or consume less of it. But that is not the case when the product is relatively cheap to start with.

But aren’t sugar taxes just taxes on the poor? Rich people don’t care, but people on low incomes do. And as you have shown in Mexico, they don’t consume less; they just pay more in taxes.  

That is exactly the case in Mexico where sugar consumption is overwhelming concentrated among the poorer sectors of society.

But is that money being given back to the poor in terms of education or healthcare?

That is the question. I don’t understand why governments aren’t making a big fuss about all the schools and hospitals that they are building with the revenue from the sugar tax. But they aren’t. It is total silence.

If you have $600 million coming in per year and you are only spending $200 million on schools and hospitals, people will start asking what you are doing with the rest of the money. And people will start asking whether the money has been spent efficiently. Politicians hate that.  We have tried to look at the figures in some countries, and we must try to get the politicians to stand up and be transparent with the numbers.

Some advocates of sugar taxes have asked for the revenues raised to go into a separate fund, but in most cases this hasn’t happened. The money just gets funnelled into the general kitty box.

Are you arguing that the sugar taxes have not had any effect on sugar consumption?

Sugar taxes don’t seem to have affected consumption in developing countries, but per-capita consumption in niche markets of developed countries is falling, and the anti-sugar lobbyists are claiming credit for that.

But per-capita sugar consumption in developed countries has been falling for the past fifty years.

Historically, global sugar consumption has been rising at 2.0/2.1 percent per year. Now it is rising 1.6/1.5 percent. The growth in global sugar consumption has slowed, but the total amount consumed is still growing. England is an exception to that; total sugar consumption is dropping in the UK.

Apart from sugar taxes, what are the other challenges facing the industry?

Producers are realising that they have to diversify, and not to put all their eggs in one basket. The companies that are diversified are doing well in spite of the current low sugar prices. I think the traditional model of specializing in, and just producing, sugar is outdated.

I also believe that more effort needs to be made to bring together cane growers and millers, beet growers and factory owners. The industry also needs to work together better to share best practises in terms of sustainability, nutrition and new technologies.

And what are your main challenges at the ISO?

First, we have to stay relevant, to constantly tweak our products and services to make sure that they are relevant to our members. I am sure that we can do more with the data that we have, and we are working on that.

Second, we have not only to maintain our existing membership but we also have to bring in new members.

Third, we have to organize good events—events that are rich in content, interactive and dynamic.

Fourth, we must build relations with our sister organisations in other commodities, to learn from them and share with them.

Fifth, we must learn how to better engage with NGOs, for example on child labour and sustainability, and with health organisations, on sugar and nutrition. If governments are going to adopt policies that affect our industry, then our industry needs to have a seat at
the table.

Where are the success stories in the sugar industry?

There are many. The role that sugar plays in rural development is well documented, but it also has a role in nutrition. Guatemala has the world’s most successful micronutrient programme with the fortification of sugar with Vitamin A. The programme has completely eradicated infant blindness in the country, as well as leading to a fall in child mortality. Malawi and Tanzania are now following Guatemala’s example. We need to do more
to highlight these successes.

Thank you José for your time.

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