We suspect China will show political support to El Salvador by purchasing their sugar.
This follows last year’s formal diplomatic agreement with China at the expense of Taiwan.
The status of El Salvador access to the Taiwan quota is still unclear, but as of yet we have not heard of any change in the FTA.

Sweet Diplomacy

In August 2018, El Salvador recognised the People’s Republic of China at the expense of the Republic of China (Taiwan).
El Salvador had previously received an 80k tonne per year sugar export quota to Taiwan, the status of this access is unclear.
As of today the Taiwanese government has not indicated that they are planning to revoke the free trade agreement with El Salvador.
The diplomatic move had been challenged at the Salvadorian high court by sugar producers who had been concerned at losing valuable export markets.
We have subsequently heard that Chinese buyers have offered to purchase El Salvadoran sugar at high premiums.
This may be an attempt to gain support in the country.

El Salvador Raw Sugar Supply by Season

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In addition, China has committed USD 150m aid to El Salvador for “technological and social projects” and also contributed rice food aid following drought in 2018.
This follows a similar trading pattern for China this year, where bilateral sugar deals have been created alongside infrastructure investments.
In April, China awarded Pakistan a 300k tonne sugar export quota to shore up investments at Gwadar Port and other infrastructure linked to the Belt and Road Initiative.
China has recently bought 120k tonnes of white sugar from Myanmar, and sought to invest in sugar mills there.

What Does This Mean for the Raws Market?

Details around this are unclear, and there is no formal purchase agreement between China and El Salvador, so all sugars would be bought on a spot basis.
But it appears China would be keen to take a significant amount of sugar.

China Raw Sugar Offtake by Season

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These sugars could displace Chinese world market imports of Brazilian VHP.
The effect on world market availability would be neutral, as Central American sugar would replace Brazilian raws one for one.

2019 Chinese Raw Sugar Imports by Origin

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However, this would mean less lower-polarisation Central American sugar is available to the world market, and more Brazilian VHP.

Vincent O’Rourke

Vincent began his career at CZ in 2016 as an analyst in the London Office, focusing on raw sugar flows and the Refineries in North Africa and the Middle East. Since 2019 Vincent has moved to the Miami office, leading the Americas analysis (excluding Brazil) and implementing the new data capture and database processes. Vincent graduated from Edinburgh with a master’s in theology in 2015 and completed a Masters in Emerging Economies from King’s London University in 2016