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This Month's Focus: The history and birth of the sugar economy and how it became the New World's most profitable export. How the Philippines started trading in this commodity with favourable tariffs/subsidies from the US and the effects on the trade when the tariffs were removed and the struggles faced by the farmers to keep the industry afloat.
Sugar cane is a massive, bamboo-like grass of genus "Saccharum", tribe "Andropogonaeae", and family "Poaceae". Scientists call it photosynthetically efficient, in that it creates sucrose from sunlight, air, and water better than just about any other plant on earth. The only ones that come close are sugar maple and sugar beet; not coincidentally, those are precisely the two plants that compete directly with cane in the world sugar market.The Checkered Origins of the Sugar Industry
The history of sugar production is intricately linked to the evolution of two rather unsavory reflections of man's inhumanity to man, those being colonialism and slavery. Early European settlers in the Caribbean soon began planting sugar cane and building sugar mills to process the output. Sugar cane is a delicate plant, and there was always a need for plenty of fertilizer, irrigation, and a workforce that would work long hard hours of backbreaking labor without complaint - or without choice, as in the case of slaves. The colonialists brought almost 12 million West Africans to the Caribbean in chains in the holds of slave ships during the four and half centuries between 1450 and 1900.
The early sugar business was defined by the notorious "triangular trade." Sugar from the Caribbean was taken to England for refining and rum production. Cloth, firearms, and rum were in turn shipped down to West Africa as capital for the slave trade. The slave ships then took their degraded human cargo to places like Haiti and Barbados to exchange them for yet more sugar.
The production process for sugar was exacting, and the slaves lived and worked in unspeakably difficult conditions. They spent weeks on end in the fields, bent over at the waist, hacking away at the tough stalks, some as tall as 20 feet, with razor-sharp machetes. After harvesting, the cane was taken to a mill, where it was ground through rollers to extract the precious juice. This was followed by laborious cooking in witch-type cauldrons that had to be tended around the clock. Timing was of the essence, since cane juice spoils quickly. After extraction, the juice was poured into molds, with the excess drained off to make molasses. The hardened bricks of raw sugar were shipped off to Antwerp or London refineries for processing.
During harvest time this was a 24/7 operation and the slaves were worked to near-death. Workers inevitably got so exhausted that fingers or hands were often lost. According to one historian: "A hatchet was kept in readiness to sever the arm, which in such cases was always drawn in; and this no doubt explains the number of maimed watchmen."
Early on, sugar was a minor commodity, used primarily as a spice. But the introduction of tea, coffee, and chocolate to the Western palate led to surging demand for sugar, which soon displaced tobacco as the New World's most profitable export. Indeed, the matrix of sugar, molasses, and rum (made from the fermented molasses) represented one of the first major industries in the colonies.
It didn't take long for a massive world sugar industry to evolve throughout the tropical and subtropical worlds. Many fortunes were made and lost, and the sugar industry played a key role in stimulating industrial production in Britain. By the end of the colonial era, many ex-colonies were locked into a cycle of dependent development, with sugar exports being their primary if not only source of foreign exchange earnings.
The Case of Negros Occidental
Although there was never a slave trade in the Philippines, the sugar industry here has its own unique history of exploitation, excitement, and human drama. Nowhere is that story better illustrated than in the province of Negros Occidental, located between Panay and Cebu in the Visayas.
The Spanish crews who first surveyed the island coined the term Negros Occidental because of the dark-skinned people they saw. The ethnic mix changed substantially in the intervening centuries as a result of the complex intermarriage among natives, Spanish, and Chinese. Indeed, Negrenses are known for their fair skin and mestizo traditions.
Sugar was grown as a subsistence crop long before it was exported. Nicholas Loney, a British businessman, was the first to recognize its potential as an export crop. He brought in machinery for sugar production in the 1850s. Originally based in Iloilo, rich mestizo businessmen soon migrated to nearby Negros to take advantage of the fertile land and large indio workforce. In an early form of globalization (see Globalization, Part 1 and Globalization, Part 2 ), the opening of Visayan ports (Iloilo and Cebu) and the introduction of sugar cane as a lucrative cash crop changed everything. By the 1860s, Negros Occidental was the leading sugar producing province in the Philippines, well on its way to becoming known as the "sugar bowl of the Philippines."
The hacienda system that evolved in Negros was built on sharecropping and debt relations. The rich sugar families, all of Spanish roots, created a classic hacendero system much like the Latin American model. They took paternalistic care of "their" people pretty much from cradle to grave, serving as godparents, paying their medical bills, and occasionally bailing them out of jail. In return, they demanded and received complete subservience based on sharecropping and the "company store" model.
The Quota System and the Emerging World Market
By the early 1900s, the Philippines sugar industry was well established. The American colonialists played a key role in boosting the industry in the form of the Payne-Aldrich Act (1909). This important law created a tariff wall that guaranteed easy export of sugar to the states at prices held artificially well above world norms. It also created a situation in which the gap between rich and poor grew even greater, and ensured that there would be little economic incentive for modernization.
Over the next decades, the Philippines produced and exported huge amounts of sugar to the American market. This system was further reinforced by the quota system created in 1934 by the Jones-Costigan Act. This law essentially guaranteed a protected market for Philippines sugar. One result was that 70% of cultivated land in Negros was soon planted in sugar, accounting for half of Philippine sugar production year in and year out. Another result is that the sugar élites emerged as an even more dominant political and social force in the years leading up to independence.
After World War II and with the coming of Philippine independence, the sugar elite came into their element. As described in Cronies and Booty Capitalism, the 1950s saw the absolute heydey of the sugar economy. Wealthy sugar families maintained palatial homes in Bacolod and Manila, traveled in style around the world, and educated their children in the country's top schools. Although many sugar families diversified into other sectors and became dominant industrial and business forces, many of the Negros families were content to live the life of Riley and enjoy the fruits of a very lucrative endeavor.
However, there were many flaws in the sugar system, not the least of which were the extremely inequitable land distribution inherent in a sharecropping system and the dependence on the kindness of strangers (in the form of the Yank's continued subsidization of sugar via the quota system).
By the 1960s, the US had developed its own sugar industry based on High Fructose Corn Syrup, leading to dramatic reductions in quotas for sugar cane. The Philippines suddenly found itself forced to sell its sugar on the world market, which had become basically a "dump market" for highly subsidized sugar such as that from the European Community. In the global context, sugar cane nations like the Philippines were (and are) in direct competition with sugar beet producing nations in the temperate zones. In those countries, which include the states and European nations, production is highly mechanized and farmers are paid well (subsidized) for their crops. In the post-quota system, you were either fortunate enough to be able to take advantage of subsidies (as the Philippines had been as long as quotas held up) or you were left out in the cold. After the collapse of quotas, the Philippine sugar barons - and those who worked their land - were freezing.
Although a series of International Sugar Agreements have controlled world prices to some extent, massive fluctuations have been the norm over the last quarter century. Indeed, the world price sank from more than 60 cents/pound in 1974 to 40 cents in 1980 to an abysmal 3 cents in 1985. The resulting economic crash drove 85% of Negros' population below the poverty line (to read about some of the human tragedy that resulted, refer to Eva From Cebu or Leavin' on a Jet Plane).
In addition to dependency on unpredictable international commodities markets, the sugar farmer is subject to the vagaries of Mother Nature. When it rains too much, trucks can't get out in the fields to get the cane. Although the na´ve observer may admire the beauty of a field of sugar cane blossoming with snow-white flowers (sort of like the poppy field that put Dorothy and the Cowardly Lion to sleep), that same panorama brings chills to the spine of the sugar planter. He knows that those entrancing blossoms mean that the sugar content of the cane is being rapidly depleted, and along with it market value at the mill.
Sugar has become a feast or famine industry dependent on the vagaries of the international market. Hacenderos have grown used to a repetitive pattern of one good year, then a bad year, then a so-so year, always praying that the good years yield enough income to subsidize the bad. In recent history, however, the bad years have become increasingly common and the good years fewer and farther between.
Philippines development policy has never been particularly kind to the agricultural sector. Indeed, it has for the most part either ignored or punished agriculture, instead stressing industrialization on the import substitution model. Although Erap came into office on a populist platform that emphasized the primacy of food security and a self-sufficient agricultural sector, actions speak louder than words. The President has recently shifted his attention back to the IT- sector and "IT-enabled" services and away from the agricultural sector, largely as part of the political run-up to his upcoming visit to the states.
The bottom line is that the agricultural sector is always given a back seat. This is unfortunate given that the Philippine sugar industry employs an estimated 556,000 farmers and 25,000 sugar mill workers, and about 5 million people depend on the industry directly or indirectly. Filipinos consume 150,000 tons of raw sugar a month, reflecting their sweet tooth for everything from leche flan to ensaymadas to Coca Cola. Indeed, the Philippines beverage industry accounts for 30% of national sugar consumption. The Philippines is now a net importer of sugar.
Sugar tariffs are absurdly low and the planters have no protection against the world "dump market." Cheap foreign sugar is imported at prices as low as 5 cents a pound, below the cost of Philippine production. Planters note bitterly that the Eximbank, World Bank, and IMF have loaned plenty of dollars to sugar mills in various tropical countries ruled by corrupt dictators, many of whom employ child labor and totally ignore environmental requirements of the sort built into WTO - precisely the countries that so often dump their sugar on the Philippine market.
Changes in government policy are uncertain. Ed Angara, Secretary of Agriculture, said last year: "We have to face the reality that globalization is now the name of the game. The best we can do is prepare for it." There seems little sympathy for the sugar farmers' plight. Instead of raising tariffs to protect them, tariffs are lowered as part of WTO and in service to the holy grail of globalization.
Sure, a few programs have been introduced. One initiative, Traktora Para sa Magsasaka, allows farmers to put up a tractor as collateral to borrow money at pretty good terms. But, being more or less rational, the farmers have stayed away in droves. Who says prices won't go even lower? Or that interest rates won't go up? Or that the folks from Agrarian Reform won't come calling to break up the family hacienda?
The Filipino people are resilient, and there are a few promising signs. Filipino women in particular can show amazing strength. When sugar's house of cards came tumbling down in the 1970s and 1980s, many women from elite families - women who had been raised in the lap of luxury, women who were used to shopping junkets to Hong Kong and playing mah jongg on the veranda - were faced with financial devastation. A significant minority of them turned to small scale handicrafts, organizing local producers into coops to produce unique, creative, high quality handicrafts. In many cases, their efforts literally saved the family farm. Such small-scale diversification in the economy has made some dent in the troubling overall economic trends.
However, the modern day reality is that the Philippines' sugar industry continues to face staggering indebtedness and serious questions about its long term viability. The recent financial difficulties and reorganization of old line sugar mills like Victorias Milling Company and San Carlos Milling Company bear witness to the deeply troubled state of the Philippines sugar industry.
Take a trip to Negros today and you may well feel as if you're in a time warp. Sacadas (field workers) wear droopy clothes and headgear to protect themselves from the searing sun, with just a slit open for their eyes. Steam engines, known affectionately as "iron dinosaurs," meander their way through the cane fields, mechanical caterpillars out of place and out of time, and it's not very hard to transport yourself back to the colonial era. But they symbolize the antiquity and general non-competitiveness of the Philippines sugar industry as it stands today.
I write about sugar cane with some personal investment and a certain sense of nostalgia, affects having to do with some quixotic misadventures and an abortive business deal that I experienced some years ago. I know firsthand that there's something mystical and totally irrational about sugar cane, and can testify that it can have a hypnotic effect on the brain that disables common sense.
When I first started ruminating about this particular "Pearl," I intended to write a gonzo sugar cane story having to do with multinational investments in power plants situated on barges, revamping the Philippines telecoms system, secure communications systems tucked neatly away in Samsonite briefcases, multi-million sugar cane deals brokered by an Eastern European commodities wheeler-dealer, and Russian freighters steaming across the South China sea to pick up umpteen metric tons of sugar at some Visayas port or another. It all had something to do with my wife's family background as a daughter of one of those Negros' sugar clans and old family friends in high places, although I'm still not quite sure how I found myself sucked into quite so much intrigue. Must have been the aroma of over-ripe cane blossoms having an opium-like effect.
However, I never could figure out how in the heck to change enough names or fictionalize enough events to keep from making enemies or getting myself in deep trouble. So I settled for this more in-depth (if less fun) piece.
Comments, questions?... Post a note to the APMF discussion board (See left hand sidebar) or email Clarence direct
|...from Clarence Henderson's Pearl of the Orient Seas|
|Clarence Henderson Henderson Consulting International Manila Philippines|
|Clarence has had over 20 years of consulting experience in New York, Los Angeles, and the Philippines. He brings to the forum many years of experience in the Philippines and his monthly column integrates the experience of working in the Philippines with business tips earned the hard way! You can learn more about Clarence by clicking on his photo.||
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