The Americas 60.4 (2004) 664-665
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"Assuming the continuation of massive assistance from the Soviet Union and of high world commodity prices, the Cubans are on the verge of making their system work."So stated Pat M. Holt, chief of staff of the Senate Foreign Relations Committee, in 1974. If I were to summarize the work of Alvarez and Peña Castellanos, I would be hard pressed to think of a better example of how Cuba's sugar industry went so wrong. The Soviet Union is no more. And commodity prices, well, they always come back to earth. This is especially true for the price of sugar, which has been more or less falling since the seventeenth century. Technological change and massive increases in the availability of inexpensive inputs led to increased supply. Beet sugar and now, better living through chemistry, have produced a host of non-sugar substitutes that have reduced the growth in demand. Thus as your Econ I textbook tells you, the relative price of the good, sugar included, must decrease. In such a world, survival of the cheapest will rule. And herein lies the problem: Cuba is not the cheapest. So how will it survive?
While not really a historical monograph, this slim volume, a compendium of statistics and analysis, makes the source of Cuba's problems very clear. During the 1980s, the expansion of sugarcane agriculture rested on the implementation of a state-based extensive growth model characterized by extensive areas under production, high levels of capital investment, and high use of inputs such as chemical products, machinery and irrigation. As Alvarez and Peña Castellanos conclude, "Production costs rose considerably during this period" (p. 11). When the Special Period began in 1990, the sugar industry was in serious trouble. It faced declining productivity, the loss of Eastern European and Soviet markets, and the reinforcement of economic measures by the United States against Cuba. As a consequence, the island's share of the leading exporters' market fell from 15.5 percent in 1994 to 8.7 percent in 1998. At that rate, one would suppose, extinction—or something close to it—could not be far down the road. A massive devaluation of the official exchange rate by something approaching the black market premium might conceivably delay such a fate, yet it hardly seems likely to prevent it. As Alvarez and Peña Castellanos put it, lowering production costs is a must to recover Cuba's former competitive position, but "The task will not be an easy one" (p. 93). That would seem to be the understatement of the year. [End Page 664]
None of this, incidentally, necessarily leads to the conclusion that Cuba faces a dark economic future, especially if one could somehow see past the next decade or two. The inevitable collapse of the exchange rate will make Cuban assets seem cheap, and its literate, educated labor force a bargain. Cuba is situated 90 miles off the coast of one of the largest markets in the world. The Cuban people are entrepreneurial, have relatives everywhere, and with a reasonable government at home, will have lots of friends in high places. This may not be a recipe for the recovery of the sugar industry, but it does not necessarily point to a rehabilitation of Batista and the Godfather either. How will Cubans celebrate the Revolution in 2059? Fidel proposes, but the market, alas, ultimately disposes. Anyone interested in the vital questions of contemporary Cuban political economy would benefit from this politic, but sophisticated and shrewd analysis.
Richard J. Salvucci
San Antonio, Texas