HAVANA, Cuba (Reuters) – Cuba plans to close its sugar ministry later this year and replace it with a state-run corporation.
Business sources said it is the most important reorganization of the once-thriving industry since it was drastically downsized in 2002.
Plans to create the new sugar corporation and revitalize the industry by allowing foreign investment and closing inefficient sugar mills are nearing final approval by president Raul Castro, said the sources, who know the industry well and asked not to be identified.
The ministry’s upcoming demise appears to be the last chapter in the dramatic decline of the sugar industry in a Caribbean island country where sugar was once king but now accounts for less than five percent of foreign exchange earnings.
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This latest move is similar to other agricultural reforms under Castro, who replaced older brother Fidel Castro in 2008 and is trying to increase food production by loosening the communist-led government’s control over farming.
Cuba’s fall from once being the world’s biggest sugar exporter, producing eight million tonnes of raw sugar annually, began with the collapse of former benefactor the Soviet Union in 1991.
Since then, the sector has declined relentlessly and production is expected to be only 1.2 million tonnes this harvest.
However, with the upcoming reorganization, “in the medium-term they hope to increase production to 2.8 million tonnes using fewer mills,” said a Cuban source with intimate knowledge of the sugar industry.
The source said yields are 1.2 tonnes per acre and the goal is to increase it to at least 2.4 tonnes per acre.
The international standard is 3.2 tonnes per acre.
Cuba consumes 700,000 tonnes of sugar annually.
Similar corporations to the one planned for sugar operate with foreign partners in nickel (Cubaniquel) and oil and gas (Cubapetroleo) under the basic industry ministry. It was not clear if the new sugar company would fall under the agriculture ministry or some other government authority.
“The new structure will give decision makers in the industry more autonomy and allow them to keep a percentage of revenues for re-investment,” a Cuban economist said.
Cuba’s history has been sweet on sugar
Cuba’s sugar industry and policies have seen ups and downs since the 1959 revolution put Fidel Castro in power:
1959 – Castro sweeps to power in a nationalist revolution with the sugar industry in private hands. He promises to diversify Cuba away from its one-crop economy.
1959-60 – The last harvest in private hands weighs in at 5.6 million tonnes of raw sugar, of which two million are bought by the United States and 2.5 million by communist countries.
May 1960 – Diplomatic relations are restored with the Soviet Union.
June 1960 – Sugar plantations are nationalized, though mills remain in private hands.
July 1960 – The U.S. cuts the sugar quota under which it was required to buy half the Cuban sugar crop at two cents per pound above the market price. The Soviet Union offers to buy the sugar that the U.S. relinquished.
August 1960 – U.S.-owned mills are nationalized, with the remainder of foreign-owned mills following in October.
January 1964 – The Soviet Union agrees to buy a growing percentage of the crop through 1970. Castro announces plans to raise annual production to 10 million tonnes by 1970, saying this will lead to industrialization and end sugar dependence. Cuba fails to achieve the 10 million tonnes goal.
1970-1989 – Sugar production increases from 5.9 million tonnes of raw sugar in 1970-71 to 7.4 million in 1980-81, 7.3 million in 1985-86 and 8.1 million in 1988-89.
1991 – Sugar accounts for 90 percent of Cuban export earnings, when the Soviet Union falls apart, leaving Cuba without a preferential sugar market.
1995-96 – The sugar harvest is 4.3 million tonnes.
1996 – The U.S. Helms-Burton law, a reinforcement of the U.S. trade embargo on Cuba, lays down heavy penalties against foreign third parties for investing in expropriated Cuban properties, including almost the entire sugar industry.
October 1997 – The economic report adopted by Cuba’s ruling communist party states: “Sugar production must significantly reduce costs … and reach a minimum seven million tonnes with much greater net earnings than today’s.”
2000-01 – The harvest is 3.4 million tonnes.
2002 – Cuba downsizes its sugar industry by 50 percent and cuts land dedicated to raw sugar production by up to 60 percent. Citing “garbage dump” world sugar market prices, the sugar ministry says Cuba will limit future raw sugar production to a maximum four million tonnes per year. A maximum 70 mills, out of Cuba’s 156, will produce raw sugar in the future, another 14 mills will produce byproducts and the remainder will be closed permanently.
2005 –Castro says: “Cuba will never live off sugar again. That belongs to the era of slavery…. This country’s means of support is now its source of ruin.”
2005 – The sugar ministry announces more mill closings and plans to build more than 100 factories to produce pasta, chocolate and candy, and process soybeans and corn to replace mills. More sugar cane land is taken out of production.
2005-06 – The harvest falls to 1.2 million tonnes.
2006 – The sugar minister says the process of downsizing the industry is over with the number of mills reduced to 66.
2008 – Industry sources report the medium-term output goal is to reach three million tonnes of raw sugar.
2009 – The government moves former sugar plantations to the agriculture ministry and the industry’s railways to the transportation ministry.
2009-10 – With 44 mills grinding, plans call for this year’s harvest to total 1.3 million tonnes, though by April, production lagged by 100,000 tonnes.
