Cuba worries as sugar industry dissolves

Cuba worries as sugar industry dissolves
By Marc Frank in Havana
Published: May 18 2010

From sugar bowl to empty cup: it is a sign of the times that Cuba is
opening up sugar production to foreign investment for the first time
since the industry was nationalised in 1959 as the communist-run country
seeks to reverse a relentless decline in output.

Cuba was once the world's largest sugar exporter. But, according to a
local expert, it "has been reduced to rubble by poor state management, a
lack of capital, sanctions, hurricanes and other factors".
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Sugar production is expected to weigh in at around 1.1m tonnes this
year, compared with 8m tonnes in 1990 before the Soviet Union collapsed
and the poorest result since 1905, according to a rare recent admission
by Granma, the Communist party daily.

Negotiations are under way with several groups to co-administer some of
the eight largest mills, built after the revolution, say foreign
business sources and Cubans with knowledge of the industry. It is a big
shift in policy under Raúl Castro, president, whose brother Fidel
insisted the island knew as much about producing sugar as anyone.

A big obstacle is the US Helms-Burton law, penalising investment in
properties expropriated from US owners and containing a yet-to-be
implemented chapter allowing Cuban-Americans to sue investors who
"traffic" in their expropriated properties.

All but eight of Cuba's mills were built before the revolution and
therefore nationalised, and most plantations are lands expropriated by
the government after Fidel Castro took power in 1959.

The Cuban sugar ministry will be replaced this year by a state-run
holding company, similar to those that run the oil and nickel
industries, the sources said. Cuban sugar minister Luis Manuel Ávila
resigned earlier this month. His deputy, González Orlando Celso, is
destined to be the island's last such minister.

"Sugar cane is part of Cuba's patrimony . . . It is no accident that the
harvest is carefully followed, unfavourable results [are] painful and
the subject of much comment. It is indispensable to put sugar back in
the place to which it corresponds as an important factor in the
economy," said the long Granma article, announcing this year's dismal
results and apparently preparing the public for the changes to come.

Fidel Castro promised to rid the land of its one-crop economy upon
taking power in 1959, but was quickly seduced into supplying the Soviet
Union at padded prices instead. By 1990 Cuba was the world's largest
sugar exporter and the crop accounted for 90 per cent of export
earnings. The ministry presided over 156 mills, a vast railway, numerous
ports and half the country's arable land.

But Cuba is no longer a market force, sugar accounts for under 5 per
cent of exports and just 60 mills still work, of which up to 20 will
soon close.

That Cuba is no longer a one-crop economy deserves applause. The export
of medical and other technical services accounts for more revenues than
all other sources combined, followed by tourism, nickel, refined oil
products and pharmaceuticals. But the near destruction of the sugar
industry was never part of the plan.

The crisis reflects a broader one in manufacture and agriculture in this
semi-tropical land where coffee production has fallen from 60,000 tonnes
in 1960 to 6,000 tonnes this year, citrus output will be 40 per cent of
what it was a decade ago and more than 60 per cent of all food consumed
is imported.

A report by Raúl Castro's cabinet last year cited an "accumulated
decapitalisation of the economy and need to reinsert Cuba into the world
economy. . . "

Raúl Castro has made reversing agriculture's decline his signature issue
since taking over from his brother in 2008, but so far with poor results.

He has raised prices the state monopoly pays for produce, reduced
bureaucracy and reorganised labour at state farms. He has placed more
emphasis on private farming by distributing fallow state lands and
decentralised some decision making, but he has stopped short of
loosening the state's grip on supplies for the sector and food distribution.

In its latest concession to farmers' demands for more autonomy, the
government announced on Sunday that private farmers will purchase
supplies directly in future, instead of having them allocated by the state,

But Marino Murillo, economy minister, said there were no plans to
eliminate the state's monopoly of food sales.

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