Earlier today, the the “sugar is the new oil” post I updated with a post from Gusano that quoted Jorge Piñon, former oil exec at Amoco, now Senior Research Associate at the University of Miami Institute for Cuban and Cuban-American Studies. If you came by the Cuba Nostalgia Pavilion this year, you may have met him as the UM booth was our neighbor.

Here’s Jorge’s observations:

A few observations about Cuba, sugar, ethanol, and of course politics.

Politics first.

We are currently going through a succession period. A process by which the new leadership…Lage, Raul, Alarcon, et. al., and in any other combination…will have to be institutionalized and legitimized…Party Congress, new elections etc. I believe that this period would take between one to two years to solidify and have enough strength on its own right to begin the process of structural change, if that is what they really want.

In the meantime they are going to tinker with the system and try to make it more efficient without changing the model…good luck. Read Raul’s speeches of December 24 and July 26.

The next question is transition; how and when, political and economic? both at the same time? one before the other? Remember transition is regime and model change. Now you not only change the players, but you also change the rules by which you play the game. We believe this process could take up to five years….Raul’s political lifetime.

My public comments posted here…”change will come from Washington not La Habana”, referred about a number of catalysts and or enablers which we monitor, which could come from inside or outside the island, and accelerate change/transition.

Cuba’s youth pushing for change…within the system.
The collapse of Chavez regime…loss of subsidies.
Washington lifting the embargo…in a quid pro quo basis…drug agreement, release of some prisoners, etc. This is not going to come unilaterally. The one exemption could be the travel restrictions. We will have to wait for a new admin.


We are about to publish a study at ICCAS in the next few months on Cuban sugar…here are some observations.

1-5 year re-capitalization of the sector both upstream…sugarcane agriculture, and downstream…processing sugar/ethanol. Total investment $2.3 billion, this includes not only the milling capacity but also distillation and combined cycle power projects.

Year 3-7 total production of 60 million tons of sugarcane. Remember..we no longer talk about sugar…it is now how much sugarcane can we produced. In an optimum production model ie Brazil…we can now produce 100% sugar or 100% ethanol…price will dictate the ratio…also it will dictate electric generation versus ethanol (cellulosic)…bagasse can be used to produce electricity and or ethanol (cellulosic)…again price will dictate the production ratios of the new mills/distilleries/power plants.

With a fifty/fifty model…sugar at $0.10lb and ethanol at $2.00gal…you would have revenues in the neighborhood of $3 billion a year…good pay back for investors…Conservatively 16-19 IRR. Plus 234,000 new jobs. A no brainer. Sugarcane would surpass nickel (at $23Kton), and again be our number one export…in value.

Look for Cuba to change its land tenancy laws…they are studying Vietnam’s model. The State retains land property rights but gives the usage tenancy rights to individuals or corporations for 25-50 and up to a maximum of 99 years…with right to sell, mortgage, inherent etc. This is how Vietnam is today the third largest exporter of rice in the world…at one time they imported rice. They created a true market agricultural economic model and gave the land rights to the farmers…no more collectives.


Jorge Pinon

Jorge R. Piñón, Senior Research Associate
University of Miami
Institute for Cuban and Cuban-American Studies

6 thoughts on “<strike> AZUCAH!</strike> ETANOL!!!”

  1. “The State retains land property rights but gives the usage tenancy rights to individuals or corporations for 25-50 and up to a maximum of 99 years…”

    Sounds like feudalism. Wait a minute…I thought capitalism was supposed to replace feudalism and then morph into socialism before becoming full communism.

    So in the end, after endless slaughter of kulaks, landholding peasants, entrepreneurs, intellectuals, fixed elections, show trials, forced collectivization and institutional starvation, all workers’ paradises become either:

    free-market “capitalist”, or feudal societies.

    Marx lied, people died.

  2. Somehow the “Vietnamese” model still seems to cut out the campesino from the real action. Deluxe feudalism at best. -S-

  3. Yes land property laws will be reformed by the senior Cuban government leaders and then their friends will divide up the land between them. One wonders if such Mexicanization will be an improvement

  4. “In 1958 there were in Cuba 161 sugar mills: 113 owned by Cubans, 41 by Americans, 6 by Spaniards, and 1 by French.” By the end of 1960 the castro bros. had already confiscated all the sugar mills. As of today (thanks to fifo and company) only a handful are still in operation. These lands must be returned to their original owners. The decision to lease them, rent them, sell them, or whatever, should be theirs and no one else’s.

    As to Ethanol… Produced in Cuba…

    Raphael Katzen, (one of Ethanol’s industry founding father) was contemplating ethanol since his college days. In 1942 when he was working for Vulcan Copper and Supply Co.
    he worked on a project (Defense contract during WWII) to build a cellulosic ethanol plant converting wood waste to ethanol. This ethanol plant was located in Springfield, Ore. Unfortunately, the completion of the ethanol plant came just as WWII came to an end. The plant closed and the project was abandoned, after only a few months of operation.

    Then, according to Katzen, “After [World War II], we saw a market in Latin America, especially in Cuba, which was an energized and developing country. I bought some property for a combined home and office in Varadero Beach, the most beautiful beach in the world.”

    “Although many consider Brazil as the first country to build a successful ethanol industry, chances are they learned much from Katzen. “After World War II, Ray was virtually solely responsible for the building of the fuel ethanol program in Cuba. Brazil took all the credit for making ethanol from sugarcane juice and molasses, but it is believed that the Brazilians learned much from Katzen’s work in Cuba.”

    I remember my father telling me that back in the 1950s many cars in Cuba ran with both gasoline and ethanol. Go figure!

  5. I agree that agricultural land should be returned to its original owners.

    I do not know what a free and elected future Cuban government will do…in the meantime we should be aware of the options that the current regime is thinking about.

    By the way in the current Vietnamese model the Vietnamese “campesino” has not been left out…in fact there is quite a bit of concern within government circles because they are becoming quite “affluent”. Another comment on Vietnam…the new residential housing law enacted last year gives residential tenancy laws to all Vietnamese including expats or Vietnamese-Americans living in the US. Intel’s Vietnamese-American expats, who are building a $1 billion microchip facility in the country, are building homes in HoChiMin City and two of them are building beach houses in Nahtrang. In my opinion they are “selling” their principals for a few dollars…but that is the way it is. Back in March Alarcon visited Hanoi for 8 full days…our sources tell us that he spent a long time out in the “field” seeing how things work.

    Again folks…I am not selling…in fact I am not buying! We just have to be aware of what they are up to…we have to be prepare to debate and defend objectively our point of views.

    My job here is to prepare for a debate to come…sooner then most people think…on Cuba’s future agricultural model as it relates to sugarcane. Many Brazilian, one Argentine, and two French groups are after sugarcane land concessions from the Cuban government…very similar contractual terms as petroleum production sharing agreements..PSAs…This format will really leave the Cuban campesino out of the picture….and this WE do not want!!


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