Brazilian company enters sugar business in Cuba

One the eve of a visit by the Brazilian president to Cuba, Brazil’s Grupo Odebrecht told several media outlets that a subsidiary will form a joint production agreement with state company Azcuba to operate a sugar mill in the province of Cienfuegos.

Although the production agreement is a notch below a direct investment, this is the first time a foreign company becomes active in Cuba’s sugar industry. As part of a radical restructuring of the sector since 2002, the Cuban government announced a few years back it was opening up sugar to foreign investors.

Companhia de Obras e Infraestrutura (COI), an Odebrecht subsidiary that is also the foreign partner in the Brazilian-financed expansion of the Port of Mariel, said it will sign a 10-year agreement to operate the 5 de Septiembre sugar mill. The 30-year old sugar mill in Rodas, near the port of Cienfuegos, was closed early during the 2010 harvest due to “inefficiency”, according to local press reports.

The objective, an Odebrecht official told news agency Reuters, is to increase sugar production and milling capacity, and help with the revitalization of the sugar sector.

While Odebrecht has experience in operating sugar mills in Brazil and elsewhere in Latin America, the bigger prize for foreign investors in Cuba’s sugar industry is ethanol production and electricity generation. Last week, a spokesman for Brazil’s foreign ministry spokesman told reporters after a recent visit of the foreign minister to the island that Cuba is about to engage in ethanol production, as “Fidel’s resistance in this field is being overcome.” The historic leader of the revolution has maintained in his opinion columns that ethanol reduces food production and raises food prices.

A sugar industry executive familiar with the project told Reuters that Odebrecht is also developing a $258 million sugar mill joint venture in Angola with state company Sonangol that intends not only to manufacture 260,000 tons of sugar, but also produce 30 million liters of ethanol and 45 megawatts of electric energy. Odebrecht’s bioenergy division is one of Brazil’s largest ethanol producers.

The Brazilian conglomerate has been active in Cuba since 2007, beginning with railroad and road repair projects, and — so far — culminating in the $700 million Mariel project. According to Brazilian press reports, Odebrecht is interested in building roads and railroads, petrochemical and other industrial plants, hotels and resorts, as well as water supply and water treatment systems in Cuba; the company would also like to become an electricity producer on the island.

“Our guarantee are the increasingly close relations between the two countries,” COI Chief Executive Ricardo Guimarães told Opera Mundi in 2010. “Because very little has been built since the end of the Soviet Union, the need for infrastructure construction and modernization is strong.”

Brazilian President Dilma Rousseff is due to arrive in Havana Jan. 30, where she will witness the signing of several economic agreements.

source: cubastandard