Mexico's Agriculture Secretary published the action, which takes effect on Tuesday, in the federal government's official daily gazette.

Finance Minister Francisco Gil said Monday the measure is aimed at stemming the flow of government resources into the industry, resources which were being ``milked by the owners for their personal interest.''

``The government cannot keep putting money into this financial black hole,'' Gil said at a press conference.

Gil said the state was forced to move in because the mills were unable to guarantee processing of more than 22 tons of sugar cane expected from the 2001-2002 harvest, which begins in November.

Gil said that the state doesn't expect to pay much in the way of compensation to mill owners, who owe the government millions in overdue taxes and social security payments.

Still, Gil said the move will initially cost taxpayers $110 million, but that that figure could rise to as much as $330 million in coming months. He added, however, that the government expects to recover 90 to 95 percent of its investment.

``These companies do not only have liquidity problems, they have solvency problems,'' he said.

Agriculture Minister Javier Usabiaga told reporters Monday that the mills should be returned to private hands with 18 months and that Mexican and foreign investors have expressed interest in buying the mills.

Privatized in the 1990s, Mexico's sugar industry has been battered by a global drop in prices, a dispute with the United States over its right to export surplus sugar duty-free and labor problems.

Last November, at least 48,000 sugar workers went on strike in 58 mills throughout the country to protest the lack of an agreement on salary increases and retirement plans.

Last year, some of the mills were unable to pay cane growers for their cane. By taking over the industry, the government will almost certainly ensure that workers still waiting for a year's worth of back salaries will get paid.

Mexico also has been fighting the United States over surplus sugar exports. The United States wanted to limit the exports and has disputed the country's interpretation of the North American Free Trade Agreement that it has the right to export all of its surplus sugar duty-free.

The issue, complicated by Mexico's controversial antidumping tariffs on high fructose corn syrup from the United States, still has not been resolved.