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5447: Re: 5427: On sugar production Poincy replies (fwd)
From: Jean Poincy <firstname.lastname@example.org>
Thanks for enjoying my posts, but I am sorry to disappoint you on this
one and I am afraid that I will continue to do so.
My concern on Ayiti's sugar cane production and the international market
has nothing to do with Ayiti's inability to compete, although in
question. Rather, my point is that the stiffness of the competition due
to many competitors makes a newcomer's (allow me to use the term
newcomer to illustrate my point) successful entrance less likely. Its
presence would merely bring the price down and consequently reduce the
profitability rate of all. The newcomer would get hit harder because of
all the costs involved to start-up. We should not forget that the price
of such a product is determined on the international market and
alternative sugar productions exist.
In other words, Ayiti may acquire the best modes of production to outdo
any long established competitors on the international market, but to
never prevail when considering its negligible return in relation to cost
of production. To have a hedge on the international market, Ayiti would
need to produce a much greater volume. In that case the authorities
would have to convert 3/4 (if not all) of the 1/3 arable land, provided
erosion is not a problem, to produce mainly sugar cane. Ayiti might as
well return to the slavery era since sugar cane plantations would suck
up at least 90% of the labor force.
Even with this scenario, the international market would have to host
very few competitors for the production of such a great volume to be
beneficial to Ayiti. This is unlikely. Hence, Ayiti's presence with a
great volume of sugar cane production along with many competitors and
other sugar production alternatives on the international market would
automatically make the price of sugar cane take a very deep dive. How
then such a low proceeds would benefit the country when at least 90% of
its labor force is dedicated to such a production. That would not be a
wise economic decision.
Now if the focus were on the national market only, the economy of scale
would make producing sugar for local consumption very unfavorable, even
if we exclude the presence of Dominican products in Ayiti. The national
market would be too small to absorb this level of production. Moreover,
Ayiti would not to feed itself off sugar only.
Let's say that the quantity produced would be reduced so that less of
labor force would be used and the market could absorb the quantity
produced, it would still not worth the try. Again due to its
labor-intensive nature, it would still eat-up a big chunk of the labor
force. Such an allocation would still be excessive and quite damaging to
the country productive capacity overall. The reason is that sugar
consumption is not of a higher degree of utility than that of rice,
corn, or roads construction. In fact the entire thing boils down to the
degree of utility of other things needed to produce in the country to
raise its living standard. With this in mind, authorities would make a
better decision in determining where to allocate factor of production
and in what quantity.
If the case is because Ayiti produces nothing and does not hope to
produce anything else in the future but sugar, I have no argument.
Otherwise, it would not be wise to lock a factor of production in an
area with low potential of sustained economic growth when in the near
future there might be a greater need for it elsewhere. Unfortunately,
for some of us it would seem convenient to do just that because the
country is not producing right now and revamping would create jobs that
were not there before, but doing so would be a very myopic economic
strategy and a failing one.
Let me end with this thought: a sector can boost an economy only if it
can pull other sectors of the economy to create the domino effect. This
is what Ayitian authorities need to seek for. The sugar cane industry
has no such characteristics; instead it tends to do the contrary.
Ayiti has lived, lives and will live