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Cuban Sugar Sector Aims for Recovery in 2013

HAVANA, Jan 9 2013 (IPS) - The Cuban sugar industry seems to be experiencing a rebirth thanks to an economic modernisation programme that has allowed for an injection of foreign capital as part of a strategy to strengthen and diversify this key sector.

“There is a recovery, an awakening in the production of sugar cane, sugar and sugar derivatives,” said specialist Liobel Pérez from the state-owned business group Azcuba, created just over a year ago to replace the once powerful Ministry of Sugar. Azcuba’s effectiveness will be put to the test in 2013 as it implements new forms of management in the sector.

Foreign investment in the sugar industry was formerly limited to a handful of sugar derivative enterprises. Its extension to sugar production was one of the innovations introduced by Azcuba in 2012. “There are two major investments which complement the measures that have contributed to sustained growth in production,” Pérez told IPS.

Pérez was referring to two agreements signed at the latest Havana International Trade Fair, held in November 2012: one with Brazil’s Companhia de Obras e Infraestrutura (COI) – a subsidiary of the powerful Odebrecht group, which has investments in other sectors of the Cuban economy – and the other with the British company Havana Energy.

The contract between COI and Empresa Azucarera Cienfuegos, an Azcuba subsidiary, is for joint management over the next 13 years of the 5 de Septiembre sugar mill, located in the province of Cienfuegos, 232 km southeast of Havana.

The Brazilian company will invest in agricultural mechanisation to raise crop yields and in industrial processing technology.

It is hoped that this injection of capital will “optimise human and industrial resources” and thus help the Cienfuegos mill to raise production to the 90,000 tons per harvest for which it was designed, from the 25,000 to 30,000 tons it has produced in recent years.

As for Havana Energy, it is entering into a joint venture with Azcuba subsidiary Zerus SA to build a biomass power plant near the Ciro Redondo sugar mill in the province of Ciego de Ávila, in central Cuba.

The plant will be built with an investment of between 45 million and 55 million dollars, and is scheduled to begin generating electricity in 2015. During the harvest, it will be powered with the sugar cane bagasse left over after sugar processing. The rest of the year, it will run on marabu weed, which has taken over large areas of idle farmland in the country.

A number of other foreign investment projects are being studied, involving joint management, which seems to be Cuba’s preferred strategy for sugar mills.

However, other potential joint venture initiatives are also being considered, “primarily in the energy and sugar derivatives sectors,” said Pérez.

Sugar cane is a source of a wide array of derivatives used in the food, chemical, pharmaceutical and biotechnology industries. The long list of by-products includes animal feed, resins, preservatives, plastics and raw materials for paper and furniture production.

“Cuba has over 400 years of experience in sugar cane cultivation, as well as trained human resources, facilities, land, scientific research centres, infrastructure and organisation. What it lacks is technology and, above all, the money to buy it,” explained Pérez.

He believes that what is most important is the “new vision” of how the recovery of the sector can be achieved, which makes it possible to speak of sustained growth in sugar production, he said.

Pérez preferred not to hazard an estimate for the 2012-2013 harvest, which began in November of last year with the so-called “small harvest” and will continue until May, with the participation of 50 sugar mills. He did however indicate that production is expected to be 20 percent greater than last year’s.

Other sources close to the sugar sector said that the current harvest should yield enough cane to produce 1.8 million tonnes, although the plan is to produce just over 1.6 million. Sugar continues to be the leading product but not the only one produced by this industry which was the mainstay of the centralised Cuban economy until the late 20th century.

This is why projections include increased production of derivatives, such as electricity from sugar cane bagasse, alcohols and animal feed. Pérez believes that the success of measures such as better organisation of production and growing financial autonomy is now clearly visible.

He also pointed to the importance of the timely arrival of inputs, from fertilisers and pesticides to industrial equipment and replacement parts.

The transformation of the entity responsible for the sugar sector from a ministry to a business group has enabled a new degree of autonomy that leads to better decision making, he said.

Azcuba is one of the state entities that will be run under new forms of business management as of this month – initially on an experimental basis – with the goal of economic self-sufficiency, without the need for capital injections from the state.

The authorities believe that Azcuba will serve as a perfect test case for more effective functioning of the production chain, since it encompasses every stage of the chain, from the production of raw material to export.

“The revitalisation of this sector is good news for our country, because sugar continues to serve as a guarantee for international credits and foreign sales are a secure source of income,” a specialised economist told IPS.

Of its total annual production, Cuba should export 400,000 tonnes of sugar to China, while supplying between 550,000 and 700,000 tonnes for domestic consumption.

* This story was originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme, United Nations Environment Programme and the World Bank.

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