SUGAR-CUBA: Diversification Gives Key Sector New Lease on Life

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Feb 7 2000 (IPS) - The sugar industry is making a bid to maintain its strategic standing in the Cuban economy through basic changes in production, including the development of by-products.

Slumping international commodity prices, information on the possible ill effects of sugar consumption on health, and heavy subsidies for the producers of sugar beet derivatives in Europe have combined to paint an unpromising outlook for a sector that for four centuries has been the heart and soul of this Caribbean island nation.

But after 1998’s 3.2 million-ton harvest, a 50-year record low, 1999’s 3.7 million-ton yield shored up the flagging spirits of the sugar sector, which directly provides a livelihood to around half a million people in this country of more than 11 million.

“Sugar to Grow!” proclaims a huge sign on the front of the Sugar Ministry, which since 1997 has been headed by Ulises Rosales del Toro, a senior military officer of peasant background who at age 15 joined Fidel Castro’s rebel forces to fight and overthrow the government of Fulgencio Batista.

That slogan is less emphatic than the one repeated for years in Cuba: “Without Sugar, There Is No Country”. But it does pinpoint the key problem faced by an economy shaken hard since the start of the 1990s by the worst crisis in 40 years.

Thanks to last year’s harvest, sugar production lost its dubious status as the only sector of the economy left on the sidelines of the recovery which began to be seen in 1995. The results, however, are not yet up to par, said Minister of Economy and Planning José Luis Rodríguez.

According to economists, a return to six or seven million-ton harvests is key to Cuba’s definitive recovery from the recession that has made life tough for Cubans.

But the international market is not helping. Experts forecast around 20 million metric tonnes in excess production this year, and international prices of between five and 10 cents of a dollar a pound (11 to 22 cents a kilo).

“In 1999, prices crashed as never before,” complained Cuba’s Finance Minister, Manuel Millares. Thus, despite the fact that last year’s exports outstripped the previous year’s sales by 500,000 tonnes, state coffers received 127 million dollars less in 1999 than in 1998.

“The outlook is not favourable, and we must prepare ourselves to face up to these circumstances,” said Carlos Lage, considered the architect of the economic reforms implemented in Cuba since the mid-1990s to fight the recession. “The strategy is to steadily cut production costs, and to diversify.”

Just 112 of the country’s 155 sugar industry plants operated during the latest harvest as part of the strategy to boost efficiency. According to the Sugar Ministry, the remaining 43 plants will undergo a reconversion process in order to begin to produce sugar cane derivatives or other products.

Given the adverse global scenario, experts say the only real chance of lasting survival lies in the production of sugar cane by- products that incorporate added-value.

Only 10 percent of sugar cane is made up of sugar, while the rest of the organic material, long under-valued in Cuba, is potentially much more profitable than sucrose, according to experts in the field.

There is a long list of sugar cane derivatives, such as the alcohol derived from molasses, used in manufacturing synthetic fibres, paint, varnish, electrical insulating material and material for the plastics industry.

“By selling these products, we could increase the revenues currently obtained from the sale of a ton of sugar by as much as fivefold,” commented one local expert.

The Sugar Ministry currently has some 300 centres producing sugar cane by-products. And Del Toro pointed out that the conditions were in place to increase the production of yeast and rum.

The government also announced the launch of a number of new products, such as furfural-based anti-rust paint, dry ice, dried molasses for livestock fodder and bio-fertilisers.

New drinks are also being produced, such as Eros, a liqour, and Kubinskaya vodka, as well as beverages for workers in sugar mills and plantations.

The new products have been added to Cuba’s famous rum industry and to the production of yeast for animal feed, boards manufactured from husks of sugar cane, toffee, edible mushrooms, and sorbitol, used by the pharmaceutical, food and toothpaste industries.

As part of its strategy for survival and growth, the doors of the sugar business have been opened to foreign investment, and eight joint ventures, such as a boiler factory in Sagua, in the central part of the country, are operating so far, involving Canadian, Spanish, French, Italian and Mexican investors.

Foreign capital has also been invested in factories producing spare parts and rebuilding motors, in the production of one of the chemicals used by the sugar industry, and in the production of sugar cane derivatives.

Spanish capital has been invested in the construction of a distillery in the west-central city of Cienfuegos, with a daily production capacity of 600 hecto-litres of fine liquors.

Negotiations are also underway for joint ventures with Brazil in the production of alcohol and in machinery, and with Canadian companies for the construction of a distillery that will focus on the manufacturing of perfume and other products.

“We are negotiating with representatives of Colombian, French and Italian firms to reach agreements of mutual benefit in developing the industry of sugar cane husk boards and the production of husk-cement for a range of uses,” added Enrique Teutelo, the Sugar Ministry’s director of business and international relations.

The aim is to continue developing associations “in areas in which we need capital that we don’t have,” and especially in the branch of sugar cane derivatives, the official added.