FOOD VS. FUEL: A FALSE DILEMMA FOR CUBA—A SURVEY OF THE ISSUE

Antonio Gayoso

The objective of this essay is broadly to assess the and biodiesel. Currently, strong interest in the pro- factors that determine whether the production of duction of biofuels derives from several factors. To biofuels from biomass could be viable in Cuba and wit: whether it could compete with food production. This question is important in view of the significant First, the high price of oil prevalent during the past decreases that have occurred in Cuba’s agricultural few years, as the result of supply limitations agreed and food production during the past several decades. upon by the Organization of Petroleum Exporting Countries (OPEC). In addition, the world is experi- In particular, shortages of staple food products have encing an apparently insatiable demand for hydrocar- characterized the last twenty years and, although bons, spearheaded by countries such as China and famine conditions have never materialized, the coun- India. High oil prices have enhanced the economic try has had to import foodstuffs it used to produce viability of producing biofuels. before. In 2006, according to the Communist Party official newspaper Granma, Cuba commercially im- Second, has been the growing consensus, now sup- ported nearly 85 percent of its food needs. For more ported by scientific evidence, about the impact of hy- than a decade, it has also depended on food dona- drocarbon consumption on climate change. Indeed, tions from the United Nations World Food Program most scientists now believe that continuous and in- (WFP) to feed more than 700,000 families in the five creasing use of hydrocarbons is a major factor in eastern-most provinces. global warming. This impact, if not abated, could In addition, Cuba’s capacity to import the food it have significant negative effects on the world’s ecol- needs, as well as other critical goods, has severely de- ogy, on agricultural productive capacity, and on food teriorated with the collapse of key exports sectors, production in most countries. particularly sugar, and the suspension of large subsi- This last concern is important because, according to dies from the former Soviet Union. Currently, capac- the Food and Agriculture Organization (FAO) of the ity to import food has increased somewhat with the United Nations, there are an estimated 850 million subsidies from Venezuela. A large portion of these people with diets well below internationally-accepted food imports comes from the United States. minimum norms. Widespread decreases in food pro- OVERVIEW duction would make this situation worse. It is impor- The potential dilemma between the production of tant to note, however, that there is consensus on the bio fuels, based on agricultural feedstock, and food fact that poverty—lack of income—and not the lev- production has become a controversial issue for pol- el of available food supply, currently adequate, is the icy makers. In this context, biofuels include ethanol major cause of hunger in the world.

212 Food vs. Fuel: A False Dilemma for Cuba

Third, added to the potential impact of global warm- Whether or not it is an issue would depend on a ing, is competition for productive land. A major con- thorough assessment of suitable land availability, cern has been that production of biofuels, based on yields, and technologies available or used in the agricultural feedstock, might divert agricultural land country or, said in simpler terms, economic feasibili- and feedstock into biofuel production, thus decreas- ty of different alternatives, under different policy ing food supply and increasing the price of staples. frameworks and organizational sectoral structures. Recently, the price of both sugar and maize, main in- Only such an assessment would answer the question puts used to produce ethanol, has risen rapidly as de- of whether Cuba has the physical and ecological ca- mand for them by ethanol distillers has increased sig- pacity to produce most of the food it requires while nificantly. This is the core reason for the food vs. also producing feedstock for a biofuel industry. fuel potential dilemma. TECHNOLOGY CONSIDERATIONS Technologies used to produce ethanol from corn Finally, economic and political vulnerability. That is, and cane sugar are well known and relatively straight- the concern, on the part of oil importing countries, forward. In the case of biodiesel, currently derived particularly the United States and the European from oil seeds such as rapeseed, as well as from palm Union (EU), that continuous dependency on oil oil and soybeans, the technology is also simple but from a few, often strongly adversarial and unstable more costly, on a per unit basis, than that used for producers, is not politically advisable and could lead ethanol. For both ethanol and biodiesel production, to political instability. even with oil at $70 a barrel, production is not cost competitive with hydrocarbons in most countries. These preoccupations have resulted in government Thus, in all countries, except currently in Brazil, policies that emphasize the production of alternative there is significant protection via tariffs or subsidies. fuels, mainly ethanol and biodiesel, which could de- As the price of oil inches its way to $100 per barrel, crease the demand for hydrocarbons. These actions however, cost ratios will change in favor of biofuels. have also led to governments’ decisions to set man- datory levels of use of these alternative fuels in the Ethanol can also be produced from a wide variety of short to medium term. Additional attention has been other feedstock. These include prairie grasses, re- placed on research on the direct uses of biomass for newable biomass and residues from forestry and ag- the production of energy, a practice that has been ex- ricultural cropland, and even municipal wastes. Many tensively followed by the world’s peasantry in their of these agriculture-based sources grow on marginal households and by many countries in some of their lands, not suitable for food crops. Therefore, their industries. use as feedstock would not divert land from food production. However, the technology necessary for These issues and factors are important for Cuba. The producing cellulose-based ethanol from these sourc- country does not produce but one-half of the oil re- es is still under development. According to rough es- quired to meet its current energy needs, even for an timates by the U.S. Energy Information Administra- economy at a depressed level of activity. Cuba, how- tion, the capital costs associated with cellulosic ever, has had long—albeit limited—experience in ethanol production are several times greater than the production of ethanol from sugar and of its use those for conventional ethanol production. as a supplement for gasoline, as well as in the direct LOCATION OF CURRENT BIOFUEL use of biomass (sugar cane bagasse) to produce ener- PRODUCTION gy in the sugar mills’ boilers. Because of the dismal Brazil and the United States are the world’s largest status of the island’s agriculture and food sector, the producers of ethanol, the first relying on sugar cane, food vs. fuel dilemma could be real for Cuba, should and the second mostly on maize, a basic food and there be a policy shift to emphasize ethanol produc- feedstuff. According to a recent World Bank study tion from sugar cane and other feeddstock. on trade and biofuels, prepared by its Energy Sector

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Management Assistance Program (ESMAP), only iesel feedstock. Furthermore, fears abound about de- Brazil’s ethanol program has attained economic sus- forestation in the Amazon and in the Indonesian for- tainability, as the country, after two decades, no lon- ests, in order to plant soybeans and oil palm, because ger uses subsidies or protection to support growth of that shift would increase the environmental and eco- the industry. Certain tax incentives, favoring the use logical costs of producing biofuels. of gasohol or pure ethanol as transportation fuels, re- main though. IS THE THREAT AGAINST FOOD PRODUCTION TRULY SERIOUS? Close to 50% of the sugar Brazil produces goes into According to a study by the UN Foundation, as well ethanol production. Parallel to this, its automotive as the FAO (OECD and FAO, Agricultural Outlook, industry has developed a variety of cars and trucks 2007–2016), there are sufficient land areas worldwide that can use a wide range of combinations of ethanol to increase production of feedstock for biofuels and gasoline. Ethanol now accounts for more than without significantly affecting the adequacy of the 40% of Brazil’s ethanol/gasoline sales. food supply. The development of cost effective cel- In addition to sugar cane, ethanol can be produced lulosic ethanol technology would decrease pressure from other food stock such as maize, sugar beets, on cropland, as agricultural residues could then be- wheat, cassava, and other starches. Sugar, however, come major feedstock to the industry. For instance, seems to be the most cost effective raw material. In agricultural residue from maize areas could be the the United States, ethanol production originates source of ethanol without affecting the use of maize mostly from maize. This crop is heavily protected by grain for food and feed. a tariff on ethanol imports, without which ethanol By way of illustration, in the United States, there are production from maize would be unprofitable. It is about 400 million acres under cultivation. These ar- because of this tariff, and the government-mandated eas consistently produce surplus food crops. Howev- use of ethanol as a supplement to gasoline, that the er, it is estimated that one half of nation’s 2.26 billion industry subsists and grows. acres have some potential for biomass production. In Biodiesel production, concentrated in the EU and addition, most researchers believe that increases in based mostly on rapeseed oil, is still far from com- food crop yields will continue that will make feasible mercial viability and remains heavily underwritten by to feed more people from a given area cropped. It is tax incentives and trade protection. In fact, where it also feasible to use residues from the production of is available in Europe, mainly Germany and Switzer- ethanol from biomass as cattle feed, thus reducing land, the price of biodiesel at the pump is commonly the need to use maize for this purpose. lower than that of regular diesel. Biodiesel can also In addition, from an income standpoint, given that be produced from soybean oil, palm oil, waste oil, the major cause of hunger is poverty, increased de- and other vegetable oils. mand for biofuels is likely to increase prices paid to Non-EU countries, which have begun production of producers of feedstock and/or result in more paid biodiesel, include Malaysia, Indonesia, the Philip- employment. In Brazil, the number of new jobs cre- pines, and India. Brazil is assessing feasibility of pro- ated by the sugar/ethanol industry is estimated to be ducing biodiesel from soybeans and from low-quality 1 million. Thus, more people will be able to access coffee beans. In India, with millions of hectares of the food they need. marginal lands, the use of jathropa, an oil seed that grows well in such land, is undergoing experimenta- There are social problems that could/will arise. For tion. example, some NGOs in Brazil, including religious ones, submit that working conditions in many of the There is widespread concern that in these countries, sugar plantations in that country are just slightly bet- cropland will be diverted to the production of biod- ter than slavery.

214 Food vs. Fuel: A False Dilemma for Cuba

THE CUBAN CASE Underlining these decreases in productivity, there Cuba has a long history of using biomass to produce has been a serious deterioration in the quality of soils energy and other products. In addition to sugar, the in sugar cane plantations. Mismanagement of har- sugar cane industry has produced ethanol for fuel as vesting machinery has resulted in widespread soil well as molasses for cattle feed, and rum. Sugar cane compacting and, in many areas, water-logging. Too bagasse, the residue from the cane harvest, was tradi- late and haphazard harvesting of sugar cane have de- tionally used to run the sugar mill boilers, either by it- stroyed many of the cane plants that were traditional- self or by mixing it with bunker oil. This practice ly able to produce for several years without replant- continues to this day. Bagasse was also used, during ing the decade of the 1950s, to produce newsprint and Furthermore, over one million hectares of land compressed boards. During the same decade, etha- (about 2.5 million acres), of the total 1.8 million hect- nol, mixed with gasoline at a 10/90 ratio, was sold as ares (about 4.5 million acres), formerly planted with vehicular fuel. At the time, it was called the “national sugar cane, have been abandoned and taken over by fuel.” No data is available regarding what share of marabú, a variety of acacia, a deep-rooted bush that consumption this fuel accounted for. produces nothing of value and is very difficult to During the last 15 years, sugar production in Cuba eradicate. Thus, close to 2 million hectares of land has decreased precipitously. In 1959, Cuba was the could be used in the future for an integrated sugar in- world’s largest exporter of sugar and literally domi- dustry: one that could produce sugar, ethanol, paper, nated the international market, with total exports of cattle feed, and other products without competing sugar surpassing 5 million tons per annum. In con- for foodstuff cropland, provided that a return to ear- trast, the 2007 sugar harvest, at about one million lier productivity levels are achieved. The possibility tons, was the lowest in more than 100 years, suffi- of directly using sugar cane biomass to produce sur- cient only to cover local (rationed) consumption of plus electricity, in addition to fueling the mill during roughly 700 thousand tons and not quite enough to the harvest, has also been technically proven profit- fulfill export contracts with China. able.

After the 2002 government decision to restructure The international market for sugar, though, has the sugar industry, the number of sugar mills de- changed radically since the beginning of the Revolu- creased drastically. Only 42 mills participated in the tion. In 1959, Cuba exported more than three million 2007 harvest. More than half of the 161 mills active tons of sugar to the United States, under a preferen- in the 1980s have been either dismantled or literally tial quota. In 2006, total U.S. imports of sugar were abandoned to rust. More than 200,000 workers have lower that 1.6 million tons. The United States now been released by the industry. In 2005, the govern- produces close to 8 million tons of sugar, from both ment announced new investments to reactivate the sugar cane and sugar beets. Furthermore, production sugar sector in order to take advantage of higher sug- and consumption of non-sugar sweeteners has ex- ar prices. That effort, if it was carried out, seems to ploded. have produced nothing. For domestic political reasons and the present alloca- Agricultural yields have also decreased radically. Cu- tion of import quotas, it is unlikely that U.S. domes- ban fields now yield less than 30 tons of sugar cane tic production would decrease to permit Cuba to be- per hectare compared with a world average of 63 come again a highly significant player in U.S. sugar tons per hectare. Concerning production of sugar, imports. An additional factor is that, under the the Cuban government has reported that, in 2006, in- North American Free Trade Agreement (NAFTA) dustrial yields averaged less than 11%, compared after 2008, Mexican sugar will have unrestricted ac- with the average 12.83% reached during the decade cess to the U.S. market. Other than cane sugar, how- of the 1950s. ever, U.S. demand for ethanol and other sugar cane-

215 Cuba in Transition • ASCE 2007 based products could provide the new market for a the producers, as individuals, cooperatives, or corpo- renewed Cuba’s sugar cane sector. rations. Foreign direct investment and join ventures in the sector should be legal, subject only to key nec- SUGAR OR ETHANOL? essary regulation and taxation. The market for labor I have asserted that, if former sugar cane areas are re- should be free. That means that owners hire workers coverable, Cuba will have close to 2 million hectares and pay them directly. Labor unions should be legal of land available to produce sugar cane. As men- and independent from the state. A competitive fac- tioned before, the historical experience of Cuba and tors’ market, as well as a national financial system, Brazil shows that many products can be obtained should be functional. A functioning free market de- from sugar cane, in addition to sugar itself, for exam- termining prices should be the rule. Intermediation ple molasses for cattle feed, newsprint, rum, etc. All should be legal and highly competitive. Contracts of these products can be produced using the entire should be enforceable. cane plant, without competing for land for food crops and using existing technology. In conclusion, the physical resources, however dete- riorated, exist that can be used for a sugar industry To achieve such goals, a truly radical restructuring of renaissance that can lead to increased exports and the Cuban agricultural and sugar sector will be re- employment for Cuba in the future. This would be quired. This restructuring will require a drastic policy possible without diverting any cropland from food shift that can/should be rapidly implemented regard- production, thus permitting a higher capacity to im- less of the government in power. There needs to be a port foodstuff that Cuba cannot produce for ecolog- clear government policy that establishes the goal of ical reasons. In this effort, the role that capital, mar- rescuing the sugar industry, which identifies the ac- ket, and technical know-how of Cuban exiles can tions proposed to reach these goals. play cannot be overemphasized, but will require a In my opinion, overall, agricultural land and the sug- soft touch to insure its full participation in the pro- ar mills should be privately owned, the property of cess.

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