``We are abiding by the Constitution and legality and will have handed over the sugar mills by the end of today,'' Juan Cortina, GAM's chief financial officer, said in a radio interview.

GAM, No. 1 Mexican sugar producer Consorcio Azucarero Escorpion (CAZE) and two other major producers saw many of their sugar mills expropriated by the government this week as part of an effort to bail out the nation's battered sugar sector.

The government said on Monday it was expropriating 27 near-bankrupt sugar mills, or about half the nation's 60 private mills, to make them competitive and turn them around for sale within the next 18 months.

The mills slid into multimillion dollar debts over the past couple of years as the nation's sugar industry suffered from excess supply and the lucrative U.S. export market remained shut to them.

Mexican President Vicente Fox ordered the expropriation according to his constitutional right to seize businesses and goods if their operation is deemed harmful to public interest.

While GAM has not yet decided if it will fight the expropriation, other affected mill owners, such as the tightly-held Santos group, have reportedly said they will challenge the move.

Ignacio Burgoa Orihuela, one of Mexico's leading constitutional experts, told Reuters on Wednesday that mill owners could challenge the expropriation with the argument that mills' bankruptcy would not affect the national interest.

``The Mexican people do not in any way benefit from this expropriation,'' the lawyer said by telephone. ``I see no public good in the case of sugar mill expropriation ... it is unconstitutional.''

As many as 3.5 million Mexicans, or about 3.5 percent of the population, are directly or indirectly involved in the sugar trade.

One of the government's principal arguments for expropriation was the acute social impact that a collapse of the industry would have provoked.

Authorities also argued that mill owners had misappropriated government subsidies meant to promote their ability to compete internationally.

They said mills were run-down and in dire need of investment.

GAM, a public company that has not traded since a suspension of payments order in May 2000, paid about $280 million for the mills when it bought them from the government in the late 1980s, Cortina said.

The company also went to international markets for more money to invest in the mills, leaving it with a bill of $126 million which remains unpaid.

``Between 1995-2000, the GAM group invested 500 million pesos in the modernization and renovation of the sugar mills,'' Cortina said.

The sugar mill expropriation was one of the most dramatic interventions by the government in the affairs of an industry since banks were bailed out by former President Ernesto Zedillo after a peso devaluation in 1994.