A Sugar Boost for the Cuban Economy

Patricia Grogg* – Tierramérica

HAVANA TIMES, May 11 (IPS) — Cuba hopes to revive its sugar industry as part of the recently announced economic changes and take advantage of good international prices for what was once the Caribbean island’s main export.

After a disastrous harvest in 2010, Cuba met its target for the current harvest several weeks ahead of schedule, although official media have not released specific figures. Specialists estimate that the goal for this year was 1.2 million tons.

A total of 39 sugar mills were in operation this season, and a dozen were kept running in April and some even into early May. “They will keep working for as long as efficiency permits,” Ministry of Sugar spokesman Liobel Pérez told Tierramérica. “All in all, this harvest has been very positive,” he added.

In comparison with last year, industrial and agricultural output has improved, costs were lower than planned, and inputs and resources arrived when they were needed. “The potential is huge. The policy now is to take maximum advantage of the installed capacity,” said Pérez, the communications director for the ministry.

The sector seems to be bouncing back after touching rock bottom. The 2010 harvest was the worst in 100 years. At the time, state media outlets blamed the disaster on poor planning policies, obstinacy and a lack of control, as well as the error of compromising the development of the industry by milling sugar reserved for the next season.

The strategy to revive the sugar industry, which was once the driving force of the Cuban economy, includes expanding the area under sugar cane cultivation from the current 750,000 hectares to over a million hectares, according to a researcher on the subject who asked to remain anonymous.

“Resources should also been invested in repairing equipment, since the poor condition of the equipment in use tends to cause frequent interruptions during the harvest. Failing to make these investments would be a huge mistake,” he added. In any event, this point is included in the economic and social policy document approved at the sixth congress of the ruling Communist Party of Cuba, held in April.

According to the policy document, the primary objective of the sugar industry will be to increase sugar cane production. It was also noted that the links between sugar cane growers and sugar mills need to be streamlined. During discussions, delegates at the congress stressed the need for sugar cane plantations to be located closer to the refining facilities.

The strategy also includes diversifying production through the most efficient use of sugar cane derivative production facilities, taking into account the current conditions on the international market, a factor that should also be considered when setting prices for the purchase of sugar cane and sugar from producers.

There are plans to gradually increase the production of sugar and sugar cane derivatives until enough hard currency revenues are generated to totally finance operation costs and cover investments made in the sector, finally achieving a net contribution to country’s coffers.

The plans encompass the creation or recovery of facilities for the production of sugar cane derivatives, with priority placed on alcohol, animal feed and “bioproducts” in which the sugar industry has proven its capacity.

Another area of development of the sector involves increasing the generation of electricity from bagasse, a by-product of sugar production, and other sugar cane and forestry waste products, creating the conditions for the industry to continue generating power during inactive periods.

But any strategy must reverse the process of recapitalization and deindustrialization of the sugar sector in recent years, according to specialists. Because of the sector’s significant potential to exercise a multiplier effect on the rest of the economy, it should be restored to its proper place with a new vision.

For his part, economist Armando Nova emphasizes the need to develop a “bio-energy agro industry” to create new sources of renewable energy and produce food and raw materials, generating exports while permitting the substitution of imports.

Unconfirmed reports indicate that the government is planning to convert the Ministry of Sugar into a union of state enterprises under which the entire sugar agro industry would be reorganized, from the planting of sugar cane to the production of sugar. The industry could also be opened up further to foreign investment, which is currently limited to sugar cane derivatives.

After the fall of sugar prices on the world market – which dropped to less than six cents a pound (454 grams) – and the recapitalization of equipment and machinery, Cuba restructured its sugar industry in 2002 and 2004, reducing the area of sugar cane plantations and shutting down over half of the 156 sugar mills in operation at the time.

But international prices rallied, reaching a high of over 30 cents a pound in 2010 and currently sitting at just over 25 cents.

According to official figures, during the “good times” of trade with the now defunct Soviet Union and its allies, Cuba’s sugar exports once totaled up to four billion dollars a year.

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