Sugarcane production has more than doubled in El Salvador over the last several decades, especially in the eastern region surrounding the Bay of Jiquilisco. The department of Usulután, particularly in the Lower Lempa zone where our partners the Mangrove Association and La Coordinadora del Bajo Lempa are based, has experienced the greatest growth rates since the 1970s, with a 93 percent increase in the amount of land used to harvest sugarcane. In the blog series Sugar, Sustainability, Society, EcoViva explores the implications of sugarcane production for our partner communities and their work in promoting sustainable livelihoods and social inclusion.

This is the final installment of the tripartite series. Read the first blog, “Social Responsibility in Sugarcane: Should Corporations or Government Lead the Charge?,” here, and the second blog, “Kidneys, Chemicals, and Clinics: What Rural Communities and the Salvadoran Government Are Doing About a Global Epidemic,” here.

The story of sugar in El Salvador illustrates many of the Salvadoran economy’s most difficult and entrenched problems: poor, opaque central planning, zero coordination among different aspects of the supply chain, and little to no acknowledgement of the environmental and social “externalities” inflicted on society. All of these factors contribute to a level of dysfunction that inhibits competition and stifles value for all actors involved directly or indirectly in the supply chain.

Most importantly for EcoViva and our partners, the sugar industry’s current structure foists costs it incurs onto rural communities with the fewest resources to address them. These include the high social and economic costs of health care problems from local conditions that contribute to chronic kidney disease, and environmental degradation associated with sugarcane production.

Poor Central Planning

In 2001, El Salvador approved a general legal framework to structure the industry, known simply as the “Sugar Law.” This framework structures aspects of the production, processing, distribution, and trade of the sugar commodity, including a quota system for the six existing sugar mills. It also sets the percentage per pound of product the producer and processor each take home. According to the legislation, 54.5% of the cost per pound of sugar goes to the producers who grow, harvest, and transport cane from the field to the mill, and 45.5% goes to the mill that refines, packages, and sells the processed product to consumers at home and abroad.

At the time this law was drafted and adopted, overseen by an elected council (CONSAA) comprised of voting members from the government, producer, and mill sectors, such a structure may have seemed adequate. But over time, a growing number of sugarcane producers have begun to express concerns about this arrangement. For one thing, cultivating sugar is not cheap.

On one hand, the structure of the CONSAA governing body has historically allowed for the largest mills, such as “Centro Izalco” and “El Angel” to wield an outsized influence on quotas to process the nearly 7 million metric tons of sugar produced on average. This stifles important competitive advantages that could be undertaken by newer, smaller mills currently unable to enter the marketplace. It also limits the ability of the processing sector to adapt appropriately to challenges inherent to other aspects of the sugar supply chain. In addition to experiencing production constraints from chronic drought exacerbated by the current El Niño phenomenon, El Salvador has some of the highest transportation costs in the region. Ironic, given that the geographic scope of its sugarcane sector is miniscule compared to that of its much larger neighbors Guatemala and Honduras — each exhibiting significantly lower transportation costs.

No Vertical Integration

On the other hand, El Salvador´s conglomerate of sugar cane producers is disparate and immense: over 7,000 entities cultivate cane, harvest it, transport it, and sell it to the mill. These producers cover over 90% of the nearly 200,000 acre sugarcane footprint, of which 41% are considered small-scale producers or producer-owned cooperatives. The mill sector itself only owns 10% of this land.

Such a panorama creates a challenging environment for coordination on things like a share in sugar revenue and profits, the adoption of new techniques to improve production, and much-needed sector reform. In many ways, these thousands of growers remain beholden to a miniscule number of interests through CONSAA, given the governance structure, quorum rules, and voting rights within the council.

Social and Environmental Externalities

For producers and the adjacent communities living at the source of our breakfast cereal or coffee sweetener, the inefficiencies of the industry are borne out on a nearly daily basis. The indiscriminate aerial spraying of contaminates like glyphosate (a practice now banned as a means for coca eradication by the U.S. government in Columbia for its health hazards) occurs throughout the production cycle, and large quantities of local water aquifers are diverted to meet crop needs. Burning prior to harvest, along with speedy cutting and transport from field to mill is recommended to conserve the precious amount of “BRIX”, or sugar content that diminishes between the burning and milling of cane.

The impact of these externalities is real and visceral: health effects in the local population, including kidney deficiency and respiratory ailments; damaged and destroyed local crops from pesticide drift; diminished water tables for rural consumption and community agriculture and food security; increased deforestation to expand production capacity and meet the costs of doing business.

These impacts have a high cost on society, and on many local people like those in the coastal provinces of Jiquilisco and Tecoluca where sugar production has exploded. The question becomes: who will bear these costs on society, and can the industry reform to coexist in a healthy, sustainable coastal economy?

A Way Forward

To be fair, some actors in the Salvadoran sugar industry are beginning to acknowledge that a change is necessary. Groups like CASSA, which represents two major mills, have instituted community outreach programs, including a partnership with USAID and its SolucionES program to improve schools. CONSAA has committed to instituting tree planting programs, and the “El Angel” milling operation is leading the way to improve worker conditions in the field. Pressure from actors like OxFam through sugar buyers like Coca Cola have led to more strict adherence to child labor practices, enforced by the industry.

These measures represent a beginning, but they have yet to show a measurable improvement in the many externalities exhibited in places like the Lower Lempa.

Instead, sugar needs to embrace structural reform. The massive growing sector is clearly under pressure by the industry to produce sugar at increasingly lower margins, a reality that needs to be acknowledged within CONSAA. And local governments such as Jiquilisco, Tecoluca, and Zacatecoluca should continue to press for better land use and cooperation within the boundaries of their municipalities. There are also important points of common interest with the industry. During the 2014-2015 growing season, officials from El Salvador’s sugar lobby acknowledged that over 12% of burning in sugar fields were caused by delinquent elements. Clearly, better enforcement and coordination on burning could also serve industry interests as well.

EcoViva has been supporting a process for communities, academics, municipal governments, and national authorities to coalesce around a local vision for how the sugarcane industry should operate. To date, this vision includes:

• Greater transparency from CONSAA. The current governing structure is unbalanced and lacks transparency. Land use authorities across the spectrum in El Salvador need better information on the vertical relationships between fields and the mill, and land use tendencies such as water consumption, in order to collaborate in shaping a more sustainable sector, both environmentally and financially for growers.
• Sensible limits on production practices. Producers should stop planting cane crops close to rivers, streams, and other important natural resources, such as coastal mangroves forests or other protected areas. Sugarcane should also not be planted near social infrastructure like schools and hospitals.
• Local oversight. Permits for aerial spraying and burning should be obtained prior to these planned activities, and conditions such as wind direction and strength should be assessed before spraying and burning.
• Pesticide application and alternatives. Sugar mills are becoming more aware of labor practices on their land. They should broaden this concern with in-field practices to the 7,000 growers who supply them with product. One way to do this would be to collaborate with local governments and civil society to institute education programs on safe pesticide handling and disposal. CONSAA and other industry players should also work with authorities to find new alternatives to the application of substances like glyphosate, already banned in several countries and blacklisted by international pesticide watchdog networks.

The problems of sugar are systemic and multi-faceted. Like many of the thorniest issues throughout El Salvador’s economy and society, no one actor deserves all the blame, or should bear the brunt of solving the problem alone. A systematic re-think of the sector is necessary, which will include an “all hands on deck” approach. EcoViva is working with local communities to drive a vision for how the coastal zone should be overseen, including the enforcement of smart limits and sustainable alternatives on activities such as sugar. It remains to be seen whether other actors outside of the daily reality of the sugarcane field are ready to meet these challenges of sectoral and societal reform.