The International Sugar Market
Although Cuba originally produced almost exclusively for U.S. consumption, the growth of internal production of both beet and cane sugar in the United States had caused the American government to increase import tariffs, thereby causing the Cuban share of the U.S. market to decline as the price of Cuban sugar rose for U.S. consumers.20 This in turn led Cuba to look elsewhere, and by the 1950s about half of the Cuban harvest was aimed at the rest of the world, so that the income from the “world market” developed a considerable significance in the island’s economic affairs.21 The heightened international tension at the time of the Korean War led to stockpiling of sugar, then considered an important strategic foodstuff, leading to considerable price inflation, so that from December 1951 when the world price of sugar was 4.84 cents a pound, it climbed to a brief high of 5.42 cents the following March.22 This high price encouraged a vast increase in worldwide production, with new areas being turned over to both cane and beet farming, but, as there was not a comparable increase in consumption, the resulting crisis of overproduction led, within a year, to a collapse in the price to a mere 3.55 cents a pound.23 At this time Cuba was producing 18 percent of the world total and thus the collapse in the market was disastrous for its economy. Cuban sugar farmers played their part in the general international scramble to grow more sugar and the 1952 zafra (sugar harvest) was the biggest in the island’s history at over 7 million tons, compared to the previous record of 5.5 million tons the year before. Unfortunately for the Cuban producers, however, of that 7 million tons they were only able to sell 4.8 million, producing a general economic crisis for the entire island.24
In an attempt to cope with the immediate problems of the sugar industry, the government purchased 1.75 million tons of the 1952 zafra to be kept in reserve and off the open market, thus hoping to use Cuba’s dominant position in the market to stabilize the price. Compensation was paid to the owners for this measure, which resulted in a budget deficit of $82.6 million.25 The Cuban unilateral cutback in production was implemented by decree number 78, which ruled that the 1953 harvest would be restricted to 5 million tons by shortening the length of time in which cane could be cut.26 The tactic of restricting the length of the sugar harvest was designed to increase profits for the owners of the sugar companies at the expense of their employees. The sugar workers were paid only during the actual cane-cutting period, and therefore if the harvest were of shorter duration the wage bill would be reduced. Should the restriction be successful in raising or at least stabilizing the price of sugar, this would maintain or increase the employers’ income, or at least mitigate the fall in profit. Critics of the strategy of restricting production were clear at the time that only the sugar bourgeoisie could benefit from the policy of restriction, and it was widely portrayed as being against the national interest.27 This illustrates the contradictions inherent in “economic nationalist” politics when the nation is divided into classes with divergent interests, and, in consequence, there is no single “national interest.”
As many of its critics predicted, this unilateral action was a complete failure, as other producing countries took advantage of Cuba’s voluntary restriction to increase their output, and the price continued to fall. The total national income from sugar fell from $655.5 million in 1952 to $404.9 million in 1953, and the total wage bill for the industry fell from $411.5 million to $253.9 million.28 Moreover, speculation, insider trading, and corruption were rampant, with those who ran the Instituto Cubano de Estabilización de Azúcar (ICEA, Cuban Institute of Sugar Stabilization) enriching themselves scandalously.29 The reduction in national sugar production was implemented by issuing production quotas to Cuban sugar companies, which were then able to trade these to their own immediate enrichment, while their employees faced being let go when their employer sold their quota. An example of this is the 1956 protest at the closure of central La Vizcaya in Matanzas when its quota went to La Chaparra in Oriente.30 The UK government also profited from the unusually low price of sugar to end sugar rationing at home and buy a million extra tons from Cuba at less than 3 cents a pound.
Following the failure of Cuba’s unilateral action to arrest the decline in the world price of sugar, an attempt was made to organize an international agreement to regulate the market. This approach had been tried before in the 1930s with the Chadbourne Plan, which had not been particularly successful because other countries, not members of the scheme, simply increased their production and undermined the scheme.31 In 1953, however, forty-four governments were present at the negotiations, and the Cuban government, one of the most enthusiastic backers of the approach, had greater hopes that the sugar price on the world market might be stabilized.
The chaotic situation in the world sugar market prompted the intervention of the United Nations. In April 1953, the UN invited seventy-eight countries to send representatives to an International Sugar Conference in London, to take place in July of that year, with the intention of negotiating an International Sugar Agreement. The idea behind the agreement was to stabilize the price of sugar by allocating quotas to the different producing countries that would, in the words of the agreement, “regulate the world sugar market and reach an equilibrium between supply and demand that would allow the price to be maintained between the limits of 3.25 and 4.35 cents per pound.”32 The Cuban quota was designed to allow a zafra of 5 million tons. In the event of the price falling below 3.25 cents, quotas would be progressively cut by a maximum of 20 percent, and when that occurred no further action was envisaged. The final agreement was signed in August by only thirty-eight of the forty-four participating countries, while the rest of the sugar-producing world, particularly Peru, Indonesia, Brazil, Formosa, and East Germany (an important sugar beet producer), was not bound by the treaty.33 Not signing the agreement and increasing production was only an option for smaller producers whose economies were not so dependent on sugar. This may have been short sighted, but it represented an opportunity for growers in these smaller producing countries to gain an income they had not previously enjoyed. If Cuba were to have tried this approach, such was its importance in the world market that its withdrawal would have destroyed the agreement.
The partial nature of the International Sugar Agreement was to be its undoing, because those countries that did not sign the agreement could increase their production as much as they wished, while importing countries who were signatories were not obliged to buy exclusively from other member states. Furthermore, the agreement only restricted production in exporting countries and did not restrict internal production in participating importing countries, a particularly important loophole for European sugar beet producers. There were also two other important sugar regulation arrangements, the Commonwealth Preference and the United States’ sugar quota schemes. The latter accounted for about half the Cuban production and would have an important effect on the situation as U.S. growers, eager to increase their own share of the domestic market, succeeded in their campaign to reduce the amount of sugar purchased from Cuba. This exacerbated the problem caused by the reduction in income from the rest of the world market. The Commonwealth scheme, designed to develop sugar production in the British Empire and guaranteeing an annual 2.5 million tons to Britain’s colonies and ex-colonies, was an additional complication because it further reduced the potential market for Cuba.34 Thus Cuba faced an unfortunate conjuncture, as falling prices due to overproduction coincided with a reduction in the American and British markets, where preference was given to internal U.S. and British Empire production. Meanwhile, some smaller producing countries took short-term advantage of the London Sugar Agreement’s attempt to reduce the amount of sugar on the market and undermined the agreement by increasing their own production.
These defects were obvious from the beginning as the price dropped to 3.14 cents in November 1953, thus triggering a 15 percent drop in quotas as soon as the agreement came into force. The price continued to fall, and in May 1954 another 5 percent cut in quotas was decreed by the International Sugar Council, which had been set up under the agreement to manage the quota system. This intervention had little effect; in June, the price fell to 3.05 cents. The maximum cut in quota now having been reached, the agreement was powerless to act further, although the council did suggest a further voluntary cut.35
The failure of the London