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The Commission on Financial Costs of the Mexican Government
authorized today the liquidation of FINASA, the Mexican Government's
Sugar Development Bank. FINASA was originally created in 1943, and
in 1953 was transformed into a National Credit Society, as part of
the stable of government development banks. The plan is for all of
FINASA's assets and liabilities be transferred to stewardship of
FIDELIQ, the Goverment's Sugar Liquidation Trust. The sugar industry
owes FINASA about 1.5 billion USD, although about 75% of that figure
is concentrated in 3 large groups. According to informed sources,
FINASA's closing doesn't have to be approved by [ the Mexican
]Congress. These same sources estimate that the closure could take
about 3 months, which would mean that the problem would be solved by
the time the new administration takes power, and Fox wouldn't have
to inject more money into the bank, although it should be noted that
FINASA hasn't loaned any money to the sector for nearly 2 years.
The closing of FINASA will have tremendous repercussions,
especially for those mills and groups that are deeply in debt to the
institution (FINASA is the practically the principal shareholder of
at least 20 mills). By passing FINASA's portfolio to FIDELIQ, there
won't be any new loans, the official and hidden subsidies that
FINASA handed out to the sector (totaling nearly a billion USD over
the past decade) are done with, the discounts on the debt for new
purchasers are finished, and there won't be any further
restructuring of existing debt. From now on, mills that don't
perform on their debt will be seized by FIDELIQ.
Given this scenario, SIA has discovered that FIDELIQ is preparing
to take over the administration of at least 20 mills, including some
of those belonging to CAZE, Machado and Santos, along with several
others. Several analysts agree that CAZE won't find any investors,
either within or outside of Mexico, especially given the uncertainty
surrounding the outcome of the NAFTA sugar negotiations. Despite the
fact that CAZE restructured its debt about two years ago, FINASA
imposed several conditions. These included the requirement that CAZE
find a buyer or partner who would be willing to inject at least 300
million USD in new capital, no later than October 1, 2000. If CAZE
is unsuccessful, then FIDELIQ will take over CAZE's nine mills.
The Santos and Machado Groups, who together owe FINASA nearly 300
million USD are in a similar situation, although they don't face a
deadline.
DE LA CALLE CONFIRMS: NO AGREEMENT ON NAFTA SUGAR ISSUES
The Undersecretary for International Negotiations for SECOFI,
Luis de la Calle made public today information reported here two
weeks ago: there will be no additional US quota for Mexican sugar,
and as a result there's a possibility that the Mexican Government
will request that a dispute resolution panel be convened.
What is interesting about this development is that Mr. De La
Calle made this announcement in Colorado and not in Mexico, where
the mill owners are anxiously awaiting news about the supposed
negotiations that have been ongoing for several weeks between the
commercial negotiators of both countries.
Despite this acknowledgment, SECOFI has declined to mention a
date for requesting the panel. However, SIA has discovered SECOFI
still believes that it's possible to negotiate at least a minimum
quota. SECOFI would be happy with 250 thousand mt, or even the 150
thousand that have been mentioned in some documents. Still, quietly,
SECOFI's negotiators admit that the US doesn't even want to give up
100 thousand mt. of quota.
In the same meeting in Colorado, Greg Frazier noted that if
Mexico were to have access to 250 thousand mt. of quota, US
production would disappear within 10 years.
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