January 30, 2012 / 8:43 PM / 8 years ago

Brazil to breathe life into faded Cuban sugar sector

By Esteban Israel	
    SAO PAULO, Jan 30 (Reuters) - Brazilian builder
Odebrecht plans to produce sugar in Cuba, the company
said on Monday, as looser restrictions on foreign
investment in the communist island raise hopes of a recovery in
the once-booming sector after decades of decline.	
    News of the project came on the day Brazil's President Dilma
Rousseff begins a mostly ceremonial official visit to the
country, which has been under communist rule since the Fidel
Castro-led revolution and an ensuing U.S. trade embargo.	
    Odebrecht will sign a "contract of productive
administration" with Cuba's state sugar company Grupo de
Administracion Empresarial del Azucar to operate the 5 de
Septiembre mill in Cienfuegos province on the south coast.	
    "The agreement for a period of 10 years aims for an
incremental increase in the production of sugar and crushing
capacity and help with an overhaul" of the sector, Odebrecht
said in an email to Reuters through its press office.	
    The project will finally open the capital-starved Cuban
sugar industry to foreign inflows after years of failed attempts
by overseas investors to gain a foothold in the sector
nationalized several years after the 1959 revolution.	
    Cuba's sugar production has fallen from a peak of 8 million
tonnes in 1970 to just 1.2 million tonnes in the last harvest.
The country was once the world's top sugar supplier.	
    Odebrecht gave no further details but a Brazilian sugar
sector executive told Reuters the contract could be signed this
week during Rousseff's two-day visit, deepening Brazil's role in
modernizing the island's dilapidated infrastructure.	
    Brazil is not only the world's top sugar producer but a
pioneer in cane-derived ethanol, with flex-fuel technology
fitted to almost all new cars sold in the country enabling them
to run on ethanol or gasoline or any mix of both.	
    Odebrecht is also carrying out work estimated at $800
million to modernize the container port at Mariel, west of
Havana. The project, largely financed by Brazil's development
bank BNDES, is seen as vital for commerce should the United
States lift its trade embargo with the island.	
    Cuba has allowed foreign investment for more than a decade
to develop other strategic industries including tourism and 
more recently, oil, with a consortium led by Spain's Repsol
 to explore Cuban waters in the Gulf of Mexico.	
    Cuba, where sugar once accounted for 90 percent of export
earnings compared with under 5 percent last year, has drawn up
plans to reorganize the industry and allow foreign investment
for the first time since mills were nationalized.	
    Its once-powerful Sugar Ministry was abolished last year,
leaving it up to a new state-owned company to revamp the rusting
industry, with many mills pre-dating the revolution and some
built with capital provided by the Soviet Union.	
    Odebrecht would also produce ethanol from sugarcane as well
as electricity from the biomass that is left over when the cane
is crushed, according to the Brazilian sugar industry executive
who is familiar with the details of the project.	
    "Cuba is opening up the possibility of producing ethanol
through energy generation and Odebrecht will build a distillery
there," the executive said, adding the project is similar to one
Odebrecht is developing in Angola.	
    That is a $258 million undertaking in partnership with
Angola's Sonagol oil company to produce 260,000 tonnes of sugar,
30 million liters of ethanol and 45 megawatts of electricity.	
    Large-scale ethanol production in Cuba has come up against
opposition from former president Castro, a fierce critic of the
use of edible crops as fuel.	
    Some experts believe that with sufficient investment, Cuba
has the potential to become the world's No. 3 biofuel producer
after the United States and Brazil. 	
    Ron Soligo, economist at Rice University in Houston, Texas,
and an expert on the Cuban sugar industry, calculates that the
island could achieve ethanol output of 7.5 billion liters per
year. Brazil, by comparison, produces roughly 20 billion liters.	
    "But developing the ethanol sector in Cuba will take time,
since most of the (cane-growing) land was abandoned for years,"
he said.	
    Brazil, the world's No. 2 ethanol producer, has offered
technical assistance to Cuba to produce the biofuel from cane.	
    "The subject is on the table. There are investments planned
in sugar and there exists a possibility that at some time this
will be taken on board by the ethanol industry," a source at
Brazil's foreign ministry told Reuters.	
 (Writing by Peter Murphy; Editing by Dale Hudson)
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