By Patricia Grogg
HAVANA, Aug 29 (IPS) - Foreign direct investment in the sugar industry
is acceptable to the Cuban government for producing alcohol and other
derivatives, but it continues to be a topic that the authorities prefer
not to talk about, at least in public, although experts regard it as
desirable for the recovery of the industry.
At present there are seven joint ventures involving capital from Spain,
Italy, Canada and Mexico, all of which concentrate on the
diversification of the sugar industry, Liobel Pérez, the Sugar
Ministry's chief communications officer, told IPS.
Pérez said six of the joint ventures between Cuban and foreign capital
are based in this Caribbean island nation, and one is based in Mexico,
where it markets technological expertise and technical assistance for
optimising sustainable sugar production.
Discreet approaches made some two years ago by foreign companies
interested in investing in sugar production did not prosper.
"Conversations were held, but they did not produce concrete results,"
Deputy Minister Juan Godefoy of the Sugar Ministry responded to an
enquiry by IPS, without elaborating.
At the time, according to experts, no agreement was reached, among other
reasons because the investors held out for greater decision-making power
over the use of funds, although these reports were not confirmed by the
government.
When Cuba began to restructure its sugar industry in 2002, it closed
down about half of its sugar mills and reduced the crop area under
sugarcane, citing the goal of boosting efficiency in the face of the
steady decline of international market prices.
Of the 156 sugar mills in operation prior to the beginning of this
decade, only 61 are now working. Prices began to improve in late 2005,
and the Cuban government responded by devoting extra resources to
reactivating the sector and increasing the area under sugarcane cultivation.
The sugar harvest this year was between 1.4 and 1.5 million tonnes,
enough to satisfy domestic demand as well as the promised shipment of
400 million tonnes to China, and even providing a small surplus for
export to other markets, experts say.
In 2006 and 2007, output stood at around 1.2 million tonnes, and the
country was forced to import between 200,000 and 250,000 tonnes each of
those years to supply the needs of its 11.2 million people.
According to experts, the poor harvests were due to the decapitalisation
suffered by agroindustry over the past 14 years, which drove
agricultural machinery and truck transport to the verge of collapse.
There have also been technical problems with sugar agroprocessing
equipment, as well as adverse climate factors, the experts say.
Given this context, "agroindustrial recovery would have greatly
benefited if foreign capital had been allowed to participate on a
greater scale, particularly in sugar production," researcher Armando
Nova wrote in an article on the subject.
The Cuban government strategy for sugar, which for many years was the
mainstay of the island's economy, is that it is now only one among many
of the industry's products.
"We cannot produce just sugar any more, no one in the world is doing
that," Luis Gálvez, the head of the Cuban Sugarcane Derivatives Research
Institute, said in mid-August.
He told journalists that Cuba is "not against alcohol," although he
criticised the sidelining of food production by biofuels. Gálvez
stressed the many different uses of ethanol (alcohol) in foods and
medicines.
ALFICSA, the Cuban-Spanish joint venture that produces and sells
extra-fine sugarcane spirits, is so far the only company with foreign
investment in alcohol, a sugar fermentation subproduct that Cuba hopes
to develop by modernising 11 distilleries.
Joint ventures with new foreign partners have not been ruled out in
plans for these enterprises.
Sugarcane is the raw material for a host of derivatives used in the
food, chemical, pharmaceutical and biotechnology industries.
Animal feed, resins, preservatives, plastics and inputs for pulp and
paper mills and furniture factories are among the useful byproducts that
add value to sugarcane production.
Within its strategy for the reconversion of the sugar industry, Cuba
hopes to reactivate and expand the derivatives side of the industry,
which was interrupted in the 1990s by the crisis following the demise of
the Soviet Union, the island's main economic and trading partner, and
the fall of the East European socialist bloc.
Cuba is developing part of its sugar industry reconversion process,
where it welcomes foreign capital, in partnership with Venezuela, to
which Cuba has transferred ownership of 11 formerly disused sugar mills
that have been modernised, as well as technology used in the derivatives
industry, especially for producing animal fodder.
Foreign direct investment in Cuba, focused on the search for new
external markets, competitive technologies and financing (mainly long
term), is regulated by a 1995 law and requires authorisation from the
Council of State executive committee, or the relevant Council-appointed
government commission.
There are currently 319 foreign companies operating in Cuba, 75 percent
of which are joint ventures with the state. (END/2008)
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