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CUBA
Sugar boom goes sour
IPS, Jill Replogle
2/19/2003
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Economic woes spell disaster for the island´s sugar dynasty.

Once the cornerstone of the economy and a symbol of national pride, Cuba’s sugar industry is dying out as quickly as the fires of the winter cane harvest. December’s zafra chica, or small harvest, was probably the last of its size, as the government is cutting sugar production in half.

The decision to shut down 70 of the island’s 155 sugar refineries marks the end of an era that lasted more than 300 years. The island’s cane crop was once as valuable as black gold, and Cuba traded it for oil from the former Soviet Union.

Low market prices, coupled with the high cost of fuel and chemical imports, however, left Cuba unable to compete in a bloated world sugar market. In 1990, Cuba exported US$4.3 billion in sugar, according to the Economic Commission for Latin America and the Caribbean (ECLAC). By 2000, the figure had dropped to $448 million.

In his year-end economic report, Cuban Economy and Planning Minister Luis Rodríguez announced that 71 sugar refineries would remain in operation, while 14 would produce sugar byproducts. About half the land currently under sugarcane production will be converted into ranches, orchards, tree farms and vegetable fields. Some will be available for private use under Cuba’s growing cooperative system. About 100,000 sugar industry workers will return to school to retrain for other jobs.

Cuba’s economy grew by 1.1 percent last year, less than initially forecast and a decrease from its 2.5-percent expansion in 2001. Last year’s sluggish performance is attributed to damage from Hurricane Michelle in November of 2001 and hurricanes Isidoro and Lili, which struck last year. According to ECLAC, the three storms caused $2.7 billion in damages and seriously affected tobacco and citrus exports.

Tourism also took a beating last year, dropping off by 5 percent in the aftershock of the September 2001 terrorist attacks in the United States. As in most Caribbean nations, tourism is Cuba’s largest source of income (LP, April 9, 2001). In 2001, 1.8 million people visited the island, generating $1.84 billion in revenue. The state-run tourism system buys 68 percent of its products nationally, multiplying the industry’s benefits.

Production of Cuba’s second-ranking export, nickel, rose to 75,600 metric tons last year and is expected to increase by 4.4 percent this year. Exports of tobacco and medicine also continue to be important sources of revenue.

In the island’s long battle to avoid suffocation by the US economic embargo (LP, Nov. 6, 2000), Cuba has experimented with various strategies. Tourism and increased development of national energy sources are key components of this year’s economic plan. Officials are attempting to expand the range of tourist attractions, putting greater emphasis on ecotourism, as well as promoting the island as an ideal spot for family vacations and international conventions.

European charter flights are set to begin transporting tourists directly to Cuba’s new international airport on Cayo Coco, where new hotels and resorts have been built along the white sand beaches. The European Union accounts for 56 percent of the foreign visitors to Cuba.

Hopes are high that US travel restrictions will soon be lifted. Despite the ban, 800 US citizens attended the Havana International Jazz Festival in December. According to official figures, about 150,000 US citizens — only 35 percent of whom were of Cuban origin — visited the island in 2001.

A 20-percent increase in national oil and gas production allowed Cuba to satisfy 74 percent of its energy needs last year, according to Rodríguez. Officials are aiming to increase that figure to more than 90 percent this year. Meanwhile, the island is struggling to cope — for the second time in less than a year — with the unexpected cutback of oil supplies from Venezuela.

A statement from Cuba’s Foreign Ministry confirmed that oil imports from Venezuela were cut off on Dec. 2 because of a strike by managers of Venezuela’s state-run oil company, Petróleos de Venezuela SA (PDVSA) (LP, Jan. 15, 2003). Shipments finally began to arrive in early January. The cutoff caused the virtual shutdown of the oil refinery in Santiago de Cuba, 967 kilometers east of Havana, and forced the government to purchase oil from intermediaries at a higher cost.

Under an October 2000 agreement between the two countries, Venezuela pledged to sell Cuba 53,000 barrels a day of crude oil for five years. Havana pays for 80 percent of the oil at market price within 90 days of delivery, while the remaining 20 percent is payable in 15 years, with a two-year grace period, at 2 percent annual interest.

Havana received 25.6 million barrels of oil from Venezuela between December 2000 and early last April, when a failed coup against Venezuelan President Hugo Chávez (LP, April 22, 2002) caused the first interruption of imports of Venezuelan oil. That suspension, which lasted until September, forced the Cuban government to purchase crude and byproducts at higher prices, which were driven up even further by the cost of transport, because some of the contracts were arranged in Europe and Africa. "The lack of compliance by the state-run Petróleos de Venezuela caused more than $200 million in damages to our country" last year, the Foreign Ministry statement said.

This year’s economic outlook is reserved. While some critics say the 50-percent cutback in sugar production is too drastic, Cuba has survived economic disasters before. And increased emphasis on national food production and food security, along with export diversification, could serve as a lesson to other countries in the hemisphere, particularly in Central America, where famine threatens as a result of overdependence on a devastated international coffee market (LP, Aug. 12, 2002).

 

 

 


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