COMMODITIES-CUBA: Modest Sugar Growth Feeds Hope for Recovery

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Jun 7 2000 (IPS) - This year’s sugar harvest of 4.06 million tonnes could be a catalyst for Cuba’s economic recovery, say political leaders, though the government-run media itself describe the increase in production as “modest.”

This year’s sugar output is seven percent more than in 1999, when the total reached 3.78 million tonnes, hinting at a “sustained” recovery for the sector after the disappointing sugar harvest in 1998 of just 3.2 million tonnes.

This recovery in the sugar industry, on top of increased tourist activity and expanded petroleum production, has led authorities to predict that the island’s gross domestic product (GDP) will see more than 4.5 percent growth for the year 2000.

“In general, the performance of the year’s first quarter is positive and this confirms that we can meet, and even surpass, the goals established for this year,” said Vice-President Carlos Lage.

Sugar Minister Ulises Rosales del Toro, meanwhile, stated that the improvement in sugar production is still moderate and emphasised the need to pursue strategies that boost production by reducing costs and increasing efficiency.

At the conclusion of the harvest in May, each tonne of sugar had cost 321 pesos to produce, nine pesos less than last year, but the official goal for the next two years is to push costs down below 300 pesos per tonne. The Cuban peso is on par with the dollar at the official exchange rate, but in government authorised change houses, the dollar buys 21 pesos.

The government also hopes to achieve sugar production increases of 400,000 to 500,000 tonnes per harvest, with sights set on reaching the seven or eight million tonne yearly output the island enjoyed in the 1980s.

Rosales del Toro, a general in the Cuban army entrusted since October 1997 with fomenting the sugar industry’s recovery, said he would continue the policy of shutting down sugar mills that are inefficient and maintain high operating costs.

The recent harvest was handled by 112 sugar mills, while another 44 shut their doors because they did not meet the conditions necessary for production – and because there was a lack of sugar cane to be processed.

But officials have dismissed criticisms that this strategy will create unemployment, saying the former mill workers are shifted to jobs in other sectors, including the production of other sugar cane derivatives.

Approximately a half million people are directly employed by the sugar industry, a sector hard hit by the crisis that began when the Soviet Union and the Eastern European socialist bloc disappeared, which had been the principal supplier of the petroleum and fertilisers necessary for Cuba’s sugar production.

The current slow recovery does not translate into significant economic benefits because sugar prices on the international market have deteriorated.

The drop in prices meant that last year’s sugar income was 117 million dollars less than in 1998, despite exporting 571,000 tonnes more than the previous year, Minister Del Toro pointed out in an interview with the state-run press.

He commented that Cuba continues to export more and earn less, and added that this year, the island sold 781,000 tonnes more than in 1998, but that income had seen a similar fall.

Sugar, traditionally Cuba’s major export commodity, has been replaced by tourism in recent years as the island’s major income generator, though authorities continue to defend the strategic importance of the crop because it is “a generator of cash and credit support for the nation.”

Plans to ensure the sector’s recovery include boosting the added value of sugar cane by developing its derivatives, an endeavour that is open to foreign investment.

Eight joint ventures are currently operating in manufacturing products such as panels made of sugar cane pulp, cane alcohol and paper. Officials predict that Cuba will ultimately produce 50 to 60 sugar cane-based products.

This industry offers unlimited opportunities, according to Lage, one of the strategists behind the cautious reforms implemented in the early 1990s as an attempt to pull the country out of economic crisis.

In the mid-1980s, the sugar cane derivatives industry had earnings totalling some 100 million dollars, an achievement the crisis of the 1990s brought to an abrupt halt.

Lage underscored the use of cane pulp in generating electricity as one of the significant areas yet to be developed as a way to cope with high international oil prices. Despite the increase of petroleum production in Cuba, the oil supply continues to be one of the economy’s weakest points.

Researchers affirm that Cuba has barely scratched the surface in cane-based energy production, mostly due to the outdated technologies used in sugar mills, which have an output of approximately 24 kilowatt hours per tonne of pulp, compared to the international average of 60 kilowatt hours.