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Cuba prepares for another bitter sugar harvest

Sandokan

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Cuba prepares for another bitter sugar harvestCuba prepares for another bitter sugar harvest | Reuters

*Government hopes to match this year's 1.1 million tonnes

*Fewer mills to open

*Joint venture talks stalled

By Marc Frank
Mon Oct 18, 2010 3:23pm BST

HAVANA, Oct 18 (Reuters) - Cuba's once proud sugar industry is gearing up for the 2011 cane harvest with fewer mills scheduled to open and hopes to merely equal this year's dismal output of 1.1 million tonnes of raw sugar, the official media reported on Monday.

The Communist party newspaper Granma, quoting deputy sugar minister Adrian Jimenez Fernandez, said 39 mills would grind the cane into raw sugar, compared with 44 the previous season and 54 in 2009, with the "mission of producing a similar amount of sugar as this year's Harvest".
Cuba sugar production was 1.1 million MT in 2010. The estimate for 2011 is close to one million MT with a population of 11.4 millions. In 1894, one year before the War of Independence, the island produced over one million MT with a population of 1.7 millions. More than 117 years later the communist regime will be producing even less.

In 1959 Cuba exported 5.0 million tons. In the years just preceding the 1959 Revolution, Cuba has been the larger exporter of sugar cane in the world. Who would have imagined a few years ago that the world's largest exporter of sugar would have to resort to external supplies to meet its needs?
 

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So much for the Communist system.

I friend went to Cuba though Mexico a couple years ago and said the people live under terrible conditions. She went into areas where she wasn't supposed to go and said many of the houses didn't even have glass in the windows and in the Hotel they were rationed a certain number of sheets of toilet paper per day.

And some idiots are trying to push us into: "From each according to his ability, to each according to his need."

Cuba is a great example change we don't need. And Nov. 2nd is V4V-Day. Vote 4 Victory Day. Send the Socialists/Marxists/ Communists/Black Liberation Theologists a clear message that we want our Nation Back the way it was before this radical crap started.

We don't want to end up like Cuba.
 

Hatuey

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This talk of Cuba's "proud" sugar industry. When was it ever proud? When the U.S. was given preferential prices? Or when Russia subsidized it so it could have access to the island? Next you'll be telling us that sugar cane farm hands(which were out of a job and income for the many months in which sugar cane production ceases) fared better before Castro. An economy which is not diversified, such as Cuba's, means that regardless of who is in power the majority of the people won't ever benefit. This is the case across the overwhelming majority of under developed nations.
 

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This talk of Cuba's "proud" sugar industry. When was it ever proud? When the U.S. was given preferential prices? Or when Russia subsidized it so it could have access to the island? Next you'll be telling us that sugar cane farm hands(which were out of a job and income for the many months in which sugar cane production ceases) fared better before Castro. An economy which is not diversified, such as Cuba's, means that regardless of who is in power the majority of the people won't ever benefit. This is the case across the overwhelming majority of under developed nations.
A free market, could have deversified. Under the control of a government that didn't have the will, or a clue, to deversify, deversification wasn't going to happen.

Hence, the problem with too much government in the market.
 

Hatuey

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A free market, could have deversified.
Spoken like somebody who has no clue what they're talking about. Cuba had a free market before Castro and yet it had no diversified economy. A free market does not mean a diversified economy. Look at West Africa.
 

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How the Castros regime can explain the reasons why they have to resort to a sugar importing country like the United States, to procure a product that traditionally exported the island. Who would have imagined that Cuba would become an importer of food, even importing sugar, from the United States, of all places?
 

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I imagine it will be no easy for the official propaganda machine try to avoid that the people will not associate the sugar imports with Florida, the larger producer of sugar cane in US. The sugar plantations and industries in Florida were developed by entrepreneurs whose industries and plantations in Cuba were confiscated by Castro brothers regime, in order to put them “to the service of the people” and to make them “more efficient and productive”. A tale that time has demonstrated it develop with a conclusion very different from the beginning. The end result has been the collapse of the sugar industry developed over centuries by hard and intelligent work of many generations. It has been cause by lack of foresight and mismanagement under the Castros dictatorial regime.
 

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Cuba official statistics show the island has 700,000 hectares dedicated to sugar cane and 44 mills participating in the harvest. The state of Florida has only 163,000 hectares dedicated to sugar cane, 5 sugar mills and 2 refineries. The sugar production in 2010 reached 1.63 MT valued at approximately $500 million. Look at the figures and arrived to your own conclusion.
 

obvious Child

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Spoken like somebody who has no clue what they're talking about.
That would seem to be obvious considering the person you quoted.

Cuba had a free market before Castro and yet it had no diversified economy. A free market does not mean a diversified economy. Look at West Africa.
The Batista-era was not exactly a free market. However, you are correct that a free market will not necessarily lead to a diversified market. Actually a free market should actually lead to a less diversified market in the context of global trade as comparative advantage results in industries in certain non-competitive regions dying off. There is a reason that the US doesn't make T-shirts anymore in large numbers and why Mexico doesn't write software. Actual free markets should on a broad scale, especially in total dollar value, become very specialized markets. And considering Cuba's geographical location, it does not suggest that it could become significantly diversified. Virtually no island nation has its GDP gathered from dozens of industries. Most are dependent upon a handful, if not one, usually tourism. Nauru for instance is massively dependent upon phosphate exports.
 

obvious Child

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So much for the Communist system.
Cuba's not Communist. Cuba has social classes, dictators, and no power to the people. Not to mention it does trade with the West. That's basically failing every major Marx test to be Communist.

That said, Cuba has been exceptionally poorly managed. But the sugar probably has more to do with Brazil's constantly expanding sugar production depressing prices. There's no way Cuba can manage the economy of scale Brazil can with its sugar. Comparative Advantage clearly favors Brazil. The fact that government sugar mills in Cuba are closing is a partial sign of that.
 

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I imagine it will be no easy for the official propaganda machine try to avoid that the people will not associate the sugar imports with Florida, the larger producer of sugar cane in US. The sugar plantations and industries in Florida were developed by entrepreneurs whose industries and plantations in Cuba were confiscated by Castro brothers regime, in order to put them “to the service of the people” and to make them “more efficient and productive”. A tale that time has demonstrated it develop with a conclusion very different from the beginning. The end result has been the collapse of the sugar industry developed over centuries by hard and intelligent work of many generations. It has been cause by lack of foresight and mismanagement under the Castros dictatorial regime.
You do realize that prior to the excessive tariff placed on imported sugar, the US production was on a serious decline? The US sugar industry exists because the government is protecting them from free markets. And American consumers are paying more then they should for sugar. There's a reason why food producers use high fructose corn syrup over sugar. Because sugar's price in artificially high in the US due to government manipulation.

How the Castros regime can explain the reasons why they have to resort to a sugar importing country like the United States, to procure a product that traditionally exported the island. Who would have imagined that Cuba would become an importer of food, even importing sugar, from the United States, of all places?
Because they are an island with expanding population? The same problem every island nation with expanding population has? Your grasp of economics, especially developmental coupled with geography is appallingly shallow.

Oh I forgot. You don't respond to anyone who points out the flaws in your arguments.
 
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obvious Child

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$~.5b, accounting for ~ half of Cuban exports =/= stupid item.
In this context it does. Cuba's failing sugar industry has more to do with the price of sugar then anything else. The US had declining production before Congress enacted high tariffs to protect them. Brazil has comparative advantage and Cuba cannot even begin to compete regardless of who is in power there. Brazil produces so much it can feed a huge ethanol industry at the same time significantly depressing world sugar prices.

Citing sugar as a failure of the Cuban political system is a stupid item when you understand the economic of sugar.

Uh...sugar doesn't account for half of Cuban exports. $297 million is not half of $1.672 billion.
 
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ecofarm

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In any context it is a big deal. Cuba's failing sugar industry represents the country's major industry and a massive portion of their exports.

Uh...check the numbers from 2001-2. Shall we check the percentage before that?

You can have all the excuses you want but they failed in their biggest industry. Failed hard. "Now what?" is a reasonable question and the collapse of Cuba's export market is not a stupid item. This forces the Castro regime to seek foreign investment (read: intervention) in some regard, or risk falling back decades more from western standards of living. Cuba needs tourism, badly.

Hello casinos, the Batista days are here again. Havana, no Rules! Wooo!
 
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obvious Child

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In any context it is a big deal. Cuba's failing sugar industry represents the country's major industry and a massive portion of their exports.
No more so then the failure of US sugar producers to keep up. Does that mean the US failed in its government?

Uh...check the numbers from 2001-2. Shall we check the percentage before that?
Oh yay. Old numbers. Look up 2008 export numbers.

You can have all the excuses you want but they failed in their biggest industry.
Biggest? Dude. Check your own links. Furthermore, I don't disagree they failed, but their failing has more to do with structure comparative advantage issues more so then anything government related. There's frankly nothing Cuba can do to compete with Brazil in sugar exports. Hence why Sandokan's use of sugar decline as a reason Cuba's government is bad is stupid. Cuba's government is bad for other reasons. You don't seem to get that key point. That's the context of the discussion. And hence why this topic is stupid in that context.

Failed hard. "Now what?" is a reasonable question and the collapse of Cuba's export market is not a stupid item
You might want to read your own charts. Sugar =/= Cuba's export market.

This forces the Castro regime to seek foreign investment (read: intervention) in some regard, or risk falling back decades more from western standards of living. Cuba needs tourism, badly.
Cuba needs more then just tourism. Furthermore, it has been getting record number of tourists anyways. Cuba needs property reform so that individuals can own and generate their own property and wealth. Fix that and you'd fix a lot of other problems.

Hello casinos, the Batista days are here again. Havana, no Rules! Wooo!
Hopefully. Amusingly, if we ended the embargo, the Castro days would end quickly.
 

ecofarm

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US sugar does not represent the vast majority of our exports or GDP. Apples and oranges.

Looking at 2008 numbers is meh, the industry fell apart in the past decade not last night. It's only now that it has reached very embarrassing and dangerous shortcomings with no sign of possible recovery. It's a big deal and if Cuba doesn't make up for that cash a terrible situation is going to get worse, stop the "nothing to see here" spin.
 
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obvious Child

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US sugar does not represent the vast majority of our exports or GDP. Apples and oranges.
Uh..okay?

I sense you are just looking around for an argument. Sugar doesn't represent the vast majority either for Cuba. Still, that's not the point here. Cuba's sugar industry is failing for the same reason the US sugar industry was failing prior to protectionist measures. Does that support Sandokan's argument? Not a chance. Hence why he's abandoning this thread.

Looking at 2008 numbers is meh, the industry fell apart in the past decade not last night. It's only now that it has reached very embarrassing and dangerous shortcomings wit no sign of possible recovery.
Cuba's industry mirrors the US's. There's frankly nothing they really could have done to prevent its collapse. The US still imports sugar, even with high tariffs. The notion that if the US can't even fix its sugar industry that Cuba could is pretty loony.
 

ecofarm

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The only thing loony is you thinking that sugar should matter to the US as much as it does to Cuba.
 

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The only thing loony is you thinking that sugar should matter to the US as much as it does to Cuba.
Still not getting it are you?

I'll make this exceedingly simple for you.

Sandokan argued Cuba's sugar problem = why Cuba's government is bad

Does that make sense in the context of sugar economics? You tell me.

Tell me, what do you think Cuba should have done to fix its sugar industry in the face of overwhelming Brazilian domination of the world sugar market?
 

ecofarm

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Cuba's sugar problem = bad government. They were ill-prepared and are facing a crisis. Let's not waste time blaming everyone else. One cannot demand to operate in a static market environment just because their sluggish, archaic government is unable to adapt and overcome. Stop playing the victim card for an ineffective (and tyranical) government. Time came for change and they failed; those commies are lucky we don't allow failing to evolve politically and economically to cause their extinction.

They will get bailed out for this lack of adaptability, but they will continue to live decades behind their neighbors as long as tyranny reigns.
 
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obvious Child

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Cuba's sugar problem = bad government.
So you believe that declining sugar production across the world is due to bad government?

They were ill-prepared and are facing a crisis. Let's not waste time blaming everyone else. One cannot demand to operate in a static market environment just because their sluggish, archaic government is unable to adapt and overcome. Stop playing the victim card for an ineffective (and tyranical) government. Time came for change and they failed; those commies are lucky we don't allow failing to evolve politically and economically to cause their extinction.

They will get bailed out for this lack of adaptability, but they will continue to live decades behind their neighbors as long as tyranny reigns.
It's a sad day when people just ignore whatever they want to outright fabricate lies about what their opponent said. You have addressed absolutely nothing I posted.
 

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The Batista-era was not exactly a free market. However, you are correct that a free market will not necessarily lead to a diversified market. Actually a free market should actually lead to a less diversified market in the context of global trade as comparative advantage results in industries in certain non-competitive regions dying off. There is a reason that the US doesn't make T-shirts anymore in large numbers and why Mexico doesn't write software. Actual free markets should on a broad scale, especially in total dollar value, become very specialized markets. And considering Cuba's geographical location, it does not suggest that it could become significantly diversified. Virtually no island nation has its GDP gathered from dozens of industries. Most are dependent upon a handful, if not one, usually tourism. Nauru for instance is massively dependent upon phosphate exports.
In the Cuban case your argument doesn´t apply. Cuban economist looking at the future recognized the need for agricultural diversification and industrialization. The economist Dr. Joaquín Martínez Sáenz, appointed president of the Cuba National bank in 1952, develop an economic policy oriented to the diversification and industrialization of the island.

The Cuba National Census of 1953 estimated in 24% the labor force in the industrial sector. The Bank of Economic and Social Development (BANDES) provided the loans for the creation of industries, given great impulse to the industrialization of the island from 1952 to 1958. An Industrial Promotion Law was enacted in 1953 that granted, among other things, tax incentives to new industries. Cuban industrial installations exceeded $600 million from 1952 to 1956. Cuba, in the 1950s, made important gains in diminishing its dependency on the sugar sector.

The Cuban Sugar Stabilization Institute was created with the objective to balance the offer with the demand of the international markets and stabilized the prize of sugar. The sugar industry contribution to the nation income declined from 29% in1950 to 25% in 1958. In 1959, there were 161 sugar mills in operation, and 120 of them were own by Cuban nationals which accounted by 65% of the sugar production. The diversification of the sugar industry using the sub products of the sugar cane, created new industries that include 16 refineries and 29 distilleries producing alcohol, ethanol, rum and brandy, candy; factories of yeast, fodder, wax, 12 fertilizers and paper plants from bagasse. This produced very favorable effects in the Cuban economy. The capital investment in the sugar mills and related sugar industries in 1957 was estimated at $1,160 million.

Data from the UN 1955-56 ranked Cuba in 39 placed among 108 nations in the annual consumption of steal per capita, important index of the development of industrialization. The International Conference in Geneva 1955 ranked Cuba 24 among 124 countries (first place in Latin-American) in the annual consumption of electricity per capita, considered the most accurate indicator of the general development of the economy.

Ginsburg in his Economic Atlas ranked Cuba as number 30 among 97 countries analyzed with regard to the population working in agriculture. Eugene Stanley of the Committee of Exterior Relations of the U.S., who analyzed 100 countries, positioned Cuba among the top 19 intermediate to developed countries in the world. These analysis of the data changed the traditional vision of Cuba from an agricultural country to one on the verge of industrialization. On the eve of the Cuban Revolution the island had a semi-industrialized market economy.
 

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Cuba's not Communist. Cuba has social classes, dictators, and no power to the people. Not to mention it does trade with the West. That's basically failing every major Marx test to be Communist.

That said, Cuba has been exceptionally poorly managed. But the sugar probably has more to do with Brazil's constantly expanding sugar production depressing prices. There's no way Cuba can manage the economy of scale Brazil can with its sugar. Comparative Advantage clearly favors Brazil. The fact that government sugar mills in Cuba are closing is a partial sign of that.
Your statement is only partially true. The demise of the Cuban sugar industry has to do with the deficiencies of the regime and management of it. Castro, in 1959, blamed the sugar industry as the major determinant of underdevelopment in the island, and the “economic genius” Che Guevara said that the American sugar quota was and “instrument of imperialist oppression.” When Guevara was appointed minister of industries in 1961, in his pursue of diversification, he reduced the sugar cane cultivated area and diverted idle manpower to other activities. His attempt to industrialization failed and by 1963 the plan was abandoned. Fidel Castro reverse course in 1965 and declared that sugar was the backbone of the economy. In the following 25 years the sugar production grows by 40% and the island maintained his position as the world’s larger sugar exported. During those years Cuba sugar industry remained largely artificial. Cuba who was leaving behind the monoculture, was brought back to it under Castro’s impulsive and incompetent leadership.

The collapse of the Soviet Union in 1991 had disastrous consequence for the regime due to the discontinuance of the premium prices and credits received from the Soviet bloc countries. Due to lack of resources sugarcane yields and total sugar production fell steeply.

During the period 1961 to 1991 the Island survived thanks to the Soviet subsidy of $150billion, 5 billion a year. During that period the resources dedicated to the construction of houses, transportation, modern facilities, equipment and infrastructure were minimal. About 90 of the 161 sugar mills were built before 1913 and the capital investment on them was minimal.

The bulk of the money did not benefit the Cuban people since most of it was used to pay the cost of the wars in Africa, the subversion against the democratic governments of Latin America, the huge military force, and the repressive apparatus of the Department of the Interior.

In 2002 the regime announced a restructuring of the sugar industry, closing 71 of the 156 existing mills; production was targeted at 4 million tons. In 2006 Castro gave instructions to take urgent steps to increase sugar production, in response to a rise in world sugar prices. During the decade of the 1950s the average sugar production was 5.7 million MT; from 2000-2010 the average has been 1.9 MT after the "urgent steps to increase sugar production", only 33% of the production 51 years ago.

The restructure of Cuba’s sugar industry by the regimen had as main objective to restrict the private sector companies. Castro brothers regime never changed the way they do business. Castro describes his concept of administration when he said in 2005: “The central state administration doesn’t need to negotiate with any minister; it must issue orders to the ministers.”

Change is inevitable as is the importance of the management in the change. The management of change by Castroism has been disastrous by doing it hastily alternating with hesitation.

Many countries readapted the industry to the new conditions of the market. Brazil, India, Thailand, Australia and other nations have maintained their sugar industries, and have continued to develop new products derived from sugar cane, allowing them to continue increasing sugar production.

Cuba can neither regain its former place in the U.S. and world markets nor match the production costs of Brazil, today’s world leader. But even Brazil cannot cover all of the world’s sugar and bioethanol needs. There is room for an efficient, suitably niche of the Cuban sugar industry. To succeed, it must rely as far as possible on market mechanisms that ensure feedback and accountability.

Cuba has exceptional conditions for the planting of sugar cane and the know how to achieve high yields. It is the plant with better perspectives in the present and future global economy. In short to revitalize the Cuban sugar industry it is necessary to concentrate in the production of the ethanol and other products derived from sugar cane.
 

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You do realize that prior to the excessive tariff placed on imported sugar, the US production was on a serious decline? The US sugar industry exists because the government is protecting them from free markets. And American consumers are paying more then they should for sugar. There's a reason why food producers use high fructose corn syrup over sugar. Because sugar's price in artificially high in the US due to government manipulation.



Because they are an island with expanding population? The same problem every island nation with expanding population has? Your grasp of economics, especially developmental coupled with geography is appallingly shallow.

Oh I forgot. You don't respond to anyone who points out the flaws in your arguments.
The US tariff on imported sugar isn’t new. In 1917 the US government started its intervention in the sugar industry by fixing the top price in its internal market. In 1923 the sugar cane production started to increase in the Philippines, Hawaii and Puerto Rico. In 1929 the tariff Hawley-Smoot on imported sugar was approved to protect the American sugar producers.

The US quota close to 3 million MT assigned to Cuba in 1959, today is only 1.25 million divided among several counties. This is due to an increment of sugar production and a reduction in the consumption in the US. At the same time ethanol consumption and the use of bagasse in the generation of electric energy keep increasing. This open up a future opportunity for Cuba to sell ethanol derived from sugar cane to the US, with much better yields in comparison with corn, soybeans and other agricultural products. At the same time there use in the island will reduce the consumption of imported oil.

Brazil is the world’s largest exporter of ethanol, accounting for 52 percent of the world’s ethanol exports. About 50% of the ethanol is exported to the US. Even with the 54 cent per gallon tariff barrier to offset the 51 cent per gallon subsidy for blended domestic corn or imported ethanol, making the actual import duty only 3 cents, Brazil managed to sell 790 million gallons of its more energy efficient sugarcane-based ethanol in U.S. markets in 2008.
 
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