ECONOMY-CUBA: Sugar Industry at a Crossroads

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Jan 15 2002 (IPS) - Sugar continues to play a strategic role in the Cuban economy despite the collapse in international prices and the fact that it has been surpassed by tourism as the country’s main foreign-exchange earner.

Cuba suffered the ups-and-downs of depending on a single crop for two centuries, but abandoning it now could lead the country to the no-less risky fate of becoming a service economy, experts warn.

Cuba’s sugar industry is now facing the challenge of boosting efficiency and productivity to survive in an increasingly unpredictable global market, marked by depressed prices and heavy competition from synthetic sweeteners.

Sugar production in this Caribbean island nation has plunged in the past few years, with harvests of 4.4 million tons in 1996 and 3.1 million in 1998 – the lowest seen in half a century, after production levels of seven and eight million tons in the early 1990s.

The latest harvest was no better: just 3.5 million tons, with export revenues falling by more than 100 million dollars.

Nor are forecasts for this year positive. The damages to sugar cane plantations caused last November by Hurricane Michelle will carry over to this year, with output projected at less than the initially forecast four million tons.

Official sources put the average annual revenues brought in by sugar at 550 million dollars, while tourism drew in more than 600 million in 2000.

The 800 million to one billion dollars sent home annually in remittances by Cubans living abroad, most of which circulates in the informal sector of the economy, also exceeds the revenues of what was long the economy’s chief earner.

The sugar industry directly employs 500,000 people and indirectly generates jobs for another two million, in a population of 11.2 million.

“That is why we have protected, and will continue protecting, our sugar workers,” President Fidel Castro told parliament in an analysis of the country’s economic performance in 2001 and the outlook for this year.

Castro said the way to revive sugar production was to bolster the efficiency and profitability of the sugar mills, save on materials and fuel, and cut costs.

The sugar crop also serves as a guarantee for the credit that is so necessary to Cuba, which does not have access to loans from the big multilateral lenders due to the embargo imposed by the United States since the early 1960s.

The industry must be transformed “not only into a big sugar harvest, but into a modern, diversified enterprise, with greater added-value,” capable of providing what the country expects, said Sugar Minister Ulises Rosales del Toro.

Official statistics indicate that Cuba has the technology needed to produce 21 different kinds of sugar, including “organic” sugar, not to mention liquor, soft drinks and other by- products.

Around a dozen mixed enterprises have been set up by the state and foreign firms to produce sugar derivatives, which currently bring Cuba around 60 million dollars a year.

So far capital has been invested by Spain, Mexico, Canada, Italy and France in alcohol production and the manufacturing of steam boilers and other equipment for sugar mills, while agreements for joint ventures with Germany, China and Venezuela are being studied.

The value of Cuba’s sugar exports plummeted after the loss, in the early 1990s, of Havana’s standing agreements, based on preferential terms, with the former east European socialist bloc.

In 1989, sugar sales to the Soviet Union and other socialist countries, at prices up to 690 dollars a ton, totalled four million tons, 56 percent of Cuba’s total sugar exports.

However, earnings from the same amount of exports to the socialist bloc in 1990 had sunk to less than half, due to the collapse of prices on the international market that year.

The foreign exchange brought in by sugar exports to that bloc had shrunk from 2.8 billion dollars in 1990 to 1.1 billion the following year, and to 800 million in 1991, according to the Economic Commission for Latin America and the Caribbean (ECLAC).

Cuba currently sells 85 percent of its sugar harvest on the free market, where beet sugar in the European Union continues to enjoy heavy subsidies, the regional United Nations agency reported.

Cuba, which has the capacity to produce 10 million tons of sugar a year, averaged seven million tons a year in the 1980s.