Cuba Said to Seek Investors in Sugar

Cuba is seeking direct foreign investment in sugar milling and cultivation for the first time since nationalizing the industry soon after the 1959 revolution, Cuban and foreign sources said this week.

At least three companies, all with long-term business experience in Cuba, have made proposals to invest in and administer mills and adjoining cane plantations, though the companies wish to remain anonymous as negotiations proceed.

“They told us they were given the green light at the highest level to discuss milling and cultivation,” a potential investor said.

The sources cautioned that hard bargaining was ahead before the first milling deal could be signed.

Theoretically, the state-run sugar industry has been open to direct investment for a decade, but in practice there has been no interest up to now on the government’s part except in a few derivatives and mechanical ventures, the sources said.

The Sugar Ministry recently formed Zerus, a company empowered to create joint ventures.

Zerus Director Jose Rivera Ortiz told the official business weekly Opciones that Cuba was interested in forming ventures to produce sugar, ethanol, alcohol, energy and other derivatives, and that “negotiations obviously include the resources necessary for the development of cane.”

A big obstacle is the U.S. Helms-Burton law, which penalizes investment in expropriated U.S. properties and allows Cuban Americans to sue investors who “traffic” in their expropriated properties.

The Cuban sugar industry, once the world’s biggest exporter, with raw sugar output reaching 8 million metric tons in 1990, has been in decline since the former Soviet Union collapsed, depriving it of a preferential market.

Cuba shut down and dismantled 71 of 156 mills in 2003, when raw sugar prices were about 5 cents a pound, and relegated 60% of plantations to other uses. Last year’s 1.3-million-metric-ton harvest, the lowest in a century, led to more closings.

All but eight mills were built before the revolution and later nationalized, and most plantations are on expropriated lands.