June 06, 2002


Cuba - WSJ.com - Major Business News

It remains astonishing and remarkable: thirteen years after the collapse of the Soviet Bloc, and Cuba continues to be frozen--politically and economically--in the pattern it took in the 1970s. There is something to be learned about the persistence of modern dictatorships from this, but I am not sure what...

Cuba's Slumping Economy Means Shortages, Blackouts


MEXICO CITY -- Cuba appears headed for a long, hot summer of electrical blackouts, gasoline shortages and economic hardship as its tattered economy reels from a sharp fall in tourism, a cutoff of cheap oil from Venezuela and slumping sugar prices.

In the latest development, Havana is preparing to close about half its 156 sugar mills in coming months and restructure the industry, which has been the backbone of the island's development for most of its history. Cuba's state-run media has yet to report the plan, which would close 71 mills, but government officials and sugar-mill employees confirm it, according to Reuters. Cuban government officials weren't available to comment.

"Cuba is heading into another economic crisis," says Damian Fernandez, a Cuba expert at Florida International University near Miami. "Tourism, oil, sugar -- everything points downwards."

The closure of the mills would follow yet another disappointing sugar harvest -- of 3.6 million tons, only about 80,000 tons more than last year. Since the collapse of the Soviet Union, Cuba's sugar industry, which saw production peak at 8.1 million tons in 1989, has been plagued by shortages of spare parts, fuel and fertilizer. The Soviet collapse ended the island's profitable barter trade, whereby it exchanged most of its sugar for Soviet-bloc products and oil valued at as much as $4.8 billion a year. At today's sugar prices, about five cents a pound, Cuba will make about $430 million from this year's crop.

Analysts say the loss of the mills -- most built more than half a century ago -- shouldn't affect world prices or Cuba's own dwindling sugar production. Experts have long urged Cuba to close its many inefficient mills, but Havana had been hesitant to take the axe to the country's largest employer, one with more than 400,000 workers.

Posted by DeLong at June 6, 2002 02:25 PM | TrackBack

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