Mexico Takes Steps to Privatize State-Owned Sugar Mills

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Posted on: 14 Aug 2012

The Secretariat of the Public Service published on July 23, 2012 an agreement to release nine sugar mills from Federal control in order to sell them by public tender.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 8/1/2012 GAIN Report Number: MX 2057 Mexico Post: Mexico Mexico Takes Steps to Privatize State-Owned Sugar Mills Report Categories: Agriculture in the News Policy and Program Announcements Sugar Approved By: Dan Berman Prepared By: Dulce Flores Report Highlights: The Secretariat of the Public Service published in the Diario Oficial (Federal Register), on July 23, 2012 an agreement to release nine sugar mills from Federal control in order to sell them by public tender. The Secretariat of Agriculture (SAGARPA) will have to determine the strategies that the government will follow in order to proceed with the public tenders. Disclaimer: This summary is based on a cursory review of the subject announcement and therefore should not, under any circumstances, be viewed as a definitive reading of the regulation in question, or of its implications for U.S. agricultural export trade interests. In the event of a discrepancy or discrepancies between this summary and the complete regulation or announcement as published in Spanish, the latter shall prevail. Title: Agreement by which various properties that are part of nine industrial units known as sugar mills, are disincorporated from the regime of public domain of the Federation, located in the states of Morelos, Puebla, San Luis Potosi and Veracruz, and authorizing its sale through the Management Service and Property Disposal (SAE). Executive Summary: This report summarizes an announcement by the Secretariat of the Public Service published in Mexico’s Diario Oficial on July 23, 2012 to release nine sugar mills from Federal property and sell them by public tender. The Secretariat of Public Service is an agency of the Federal Executive that promotes compliance with the monitoring and control processes of the federal government, directs and determines the procurement policy of the Federation, and coordinates and conducts audits on the expenditure of federal funds, among other functions. In September 2001, the Government of Mexico (GOM) expropriated 27 sugar mills from several sugar industry groups based on charges that national sugar supply was in danger, that they were highly indebted, and that the mills actions endangered the jobs of thousands of employees. The nine mills announced in this publication are the last to be divested by the government. Since expropriation, these mills have been owned and administered by FEESA (Fund of Expropriated Companies from the Sugar Sector) and have generally been responsible for 20-30 percent of Mexico’s annual sugar production. The current administration is interested in finding a solution that results in a re-privatization of the mills, a process that began in 2006. The nine mills belonged to Grupo CAZE and could not be returned to it due to pending litigation issues. SUGAR MILLS STATE Atencingo Puebla Casasano Morelos El Modelo Veracruz El Potrero Veracruz Emiliano Zapata Morelos La Providencia Veracruz Plan de San Luis San Luis Potosi San Cristobal Veracruz San Miguelito Veracruz For purposes of the sale, SAGARPA has decided to offer the nine mills as ongoing businesses. The sales process will be conducted through SAE -Management Service and Property Disposal MX2057 Mexico takes steps to privatize state-owned sugar mills Page 2 (decentralized entity of the Federal Public Administration from the Secretariat of Treasury). SAGARPA will determine the strategies that SAE will follow in order to be able to proceed with the public tenders. Although its intentions are unclear at this time, SAGARPA may choose to offer all nine mills as a block, single mills, small groups of mills, or a combination of the above. The first step in the sales process for the GOM will be to go through the legal proceedings to disincorporate the mills from the public domain of the Federation and authorize the selling of the mills by public tender through SAE. However, this step cannot be completed until a resolution is reached in the litigation process that was brought to the courts by Grupo CAZE to have the nine mills returned to their ownership. SAGARPA’s Secretary of Agriculture publicly commented that the privatization of the mills will allow the industry to invest in infrastructure that the government had not been able to do because of budget reasons. The Mexican sugar industry also prefers that the remaining mills be privatized so that all mills are operating based on private commercial decisions. This is not the first time that the GOM has talked about reprivatizing these mills. Significant legal and political challenges will have to be overcome if these mills are to be purchased by private interests. Important Dates 1. Publication Date: February 7, 2012. 2. Effective Date: April 7, 2012 (sixty calendar days after publication) For More Information FAS/Mexico Web Site: We are available at www.mexico-usda.com or visit the FAS headquarters' home page at www.fas.usda.gov for a complete selection of FAS worldwide agricultural reporting. FAS/Mexico YouTube Channel: Catch the latest videos of FAS Mexico at work http://www.youtube.com/user/ATOMexicoCity Useful Mexican Web Sites: Mexico's equivalent of the U.S. Department of Agriculture (SAGARPA) can be found at www.sagarpa.gob.mx, the equivalent of the U.S. Department of Commerce (SE) can be found at www.economia.gob.mx, and the equivalent of the U.S. Food and Drug Administration (SALUD) can be found at www.salud.gob.mx. These web sites are mentioned for the reader's convenience but USDA does NOT in any way endorse, guarantee the accuracy of, or necessarily concur with, the information contained on the mentioned sites. Report Number Title of Report Date Submitted MX2019 Sugar Annual 04/10/2012 MX2057 Mexico takes steps to privatize state-owned sugar mills Page 3
Posted: 14 August 2012

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