Thursday, September 27, 2012

Cuba’s sugar industry looks to rebound after bitter decline

Posted on Wednesday, 09.26.12

Cuba's sugar industry looks to rebound after bitter decline
Associated Press

JARONU, Cuba -- Cuba's signature industry is showing signs of life two
years after the worst harvest in more than a century.

Hulking processing plants are coming back online and production is
rising, a boon to rural towns like Jaronu where producing sugar has been
a way of life for generations.

Officials recently said that the harvest is expected to increase by 20
percent in the coming season after jumps of 7 percent and 16 percent in
the last two harvests.

At the Brasil refinery in the steamy central province of Camaguey, a $6
million makeover is under way. During a recent visit, bulldozers were
busy re-grading the floor, operators were laying foundations for new
machinery and workers buzzed about, hammering and welding amid a
deafening mechanic roar and a pervasive oily odor.

"I've never seen as much money being spent here as there is now," said
Alodia Campo, a 54-year-old plant engineer and among the few employees
still remaining from the Brasil's glory days.

With world market prices rebounding, sugar is suddenly more profitable,
and a radical reorganization of the sector could offer a blueprint for
how to lift the rest of the island's inefficient command economy.

"The Cuban sugar industry is tied to the culture, history and identity
of this country," said Liobel Perez, spokesman for Azcuba, the largely
autonomous state-run company that replaced the Sugar Ministry in late
2011. "Sugarcane will not define Cuba's future, but it will have to be a
part of it."

Just two years ago, the sugar industry was on its knees.

The sugar minister had been sacked. State-run newspapers lambasted
rampant inefficiency and thousands of workers were moved to other
sectors. Eventually, the powerful Sugar Ministry itself was eliminated.

Even with the current reorganization, sugar revenues are far outpaced by
sectors such as tourism and nickel mining.

Last year, sugar earnings were $333 million, while nickel brought in
$1.25 billion, according to a study compiled by Rafael Romeu, a
U.S.-based economist and former president of the Association for the
Study of the Cuban Economy. Tourism brought in $2.5 billion in revenue
in 2011, according to government figures.

President Raul Castro created Azcuba as part of his effort to stimulate
the farm sector and streamline a fossilized Marxist economy that even he
says doesn't work anymore.

Unlike virtually every other part of the state-dominated economy, Azcuba
gets to keep 65 percent of its revenues and make decisions about
reinvesting without having to ask permission from the central government.

At the Brasil refinery, the mammoth rust-covered sheds installed by
American Sugar Refining Co., which launched the plant in 1921, still
stand. Although surrounded by the twisted carcasses of machinery ripped
out of the structures, the Brasil is expected to be ready for the
upcoming annual harvest and start milling cane by February.

That would have seemed an unlikely prospect during most of the last
decade. The plant mostly sat idle or was intermittently used as a grain
depot, with only 50 employees remaining from a workforce that once
numbered 500.

The Brasil's near-demise mirrors sugar's decline from the times when it
accounted for 80 percent of Cuba's export income, principally from the
nearby U.S. market before relations between the two countries soured in
the 1960s.

Over the decades since Cuba's 1959 revolution, bureaucratic
mismanagement created a slow-growing crisis that exploded in 2002, said
Arturo Lopez-Levy, a Cuban economist at the University of Denver. At
that time, sugar sold for just 6 cents a pound on world markets.

Cuban officials mothballed much of the industry.

From a peak of approximately 8 million tons in 1989, sugar output hit a
105-year-low of 1.1 million in 2010.

It was a black eye for a country where Fidel Castro once sent brigades
of soldiers, students, homemakers and bureaucrats from the cities to the
countryside in an ill-fated drive to reap 10 million tons of cane.

A restructuring that began in 2002 saw thousands of people lose their
jobs, though they were offered employment in other agricultural sectors
or job retraining programs.

Now with sugar topping 20 cents a pound worldwide, Cuba is newly
motivated to revive the industry and stimulate production.

Authorities have begun overhauling the Brasil and other mills, paying
farmers more for cane and handing over fallow land to private growers
and agro-cooperatives. As with other sectors of the economy, efficiency
is the buzzword, and officials hope Azcuba will be more nimble than the
ponderous Sugar Ministry.

Cuba acknowledges it still must address issues such as installing modern
irrigation systems, improving the supply chain and guaranteeing quality
of cane sent to the mills. Foreign investment in the sector is
nonexistent. Lopez-Levy, whose father was an engineer in the industry,
applauded measures such as Azcuba's financial independence. But he
cautioned that it's too early to brag about a major comeback, saying it
remains to be seen whether the sector can overcome the stubborn
bureaucratic mindset that has long plagued Cuba.

"After so many disasters, a measure of skepticism is realistic," the
economist said.

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