- El Salvador had announced it was due to diplomatically recognise China, which excludes recognising Taiwan.
- This would have meant El Salvador would have lost an 80k tonne sugar FTA with Taiwan.
- However, a court injunction and a change of president could mean a complete reversal of position.
Taking Sides
- Last August, El Salvador decided to end diplomatic ties with Taiwan in order to formalise its relationship with China.
- This raised questions around the annual 80kmt duty-free free-trade agreement Taiwan awards El Salvador.
- The agreement was due to be scrapped on March 15th, but an injunction by the El Salvadorian sugar cane milling industry has kept it alive for the time being.
El Salvador to Free Trade Access to Taiwan
COFCO Look to Soften the Blow
- COFCO have offered to buy 100kmt of raws from El Salvador in 2019.
- China has imported from El Salvador in the past, however there is currently no advantage to importing raws from El Salvador over other origins.
- Unless COFCO are willing to pay up to 60pts premium to the No.11 the El Salvadorian mills are better off selling into the protected Taiwanese market instead.
- There is also very little information as to the length of the deal; COFCO’s offer might be for one year only!
- If it is not guaranteed in the long term the millers are highly unlikely to accept it willingly.
Repercussions for Central American Producers
- Other Central American origins which recognise Taiwan (such as Guatemala) are hoping to gain a portion of the 80kmt FTA access El Salvador might give up.
- This would reduce world market supply of raw sugar from Central America.
Current Central American duty free access to Taiwan
