Does somebody else’s off-hand comment ever catch in your mind so that you just have to research it a little farther? That happens to me all the time, most recently with respect to this comment about Cuban exports from David Bernstein (hat tip: Glenn Reynolds):
And, for the unitiated, Cuba is not actually economically isolated from anywhere but the U.S., it just doesn’t sell much of anything that anyone wants to buy.
Really? Delving back into my elementary school geography lessons, I remembered that Cuba’s main exports were sugar, nickel, tobacco, fish, and citrus. After a little research I was rather surprised to learn that medical supplies have become an important Cuban export. Would I be out of line in wondering if that weren’t part of a deliberate program on the part of the Cuban government to get into some higher value exports? What about the rest?
Sugar is Cuba’s overwhelmingly most important export. Here’s a great resource for statistics related to sugar production. I learned here that Cuba is one of the highest-cost producers of cane sugar. On this page from the U. S. Department of Agriculture I learned that some of the keys to Brazil’s strength in the sugar market are the weakness of the real and relatively low costs of transportation to the U. S., a major market for Brazilian sugar. And Brazil is improving its position by investing in some new facilities:
Brazil is enhancing its export ability by improving transportation and loading facilities. In 1999, four new automated sugar terminals began operating in the southern port of Santos. This has reduced costs and speeded up the flow of exports to the world market.
Brazil and India are the heavyweight champions of sugar production.
Here are my tentative conclusions about Cuban exports:
- U. S. and EU sugar subsidies result in both the U. S. and the EU producing too much sugar (and importing less sugar), keeping prices low.
- The U. S. is Cuba’s natural trading partner. The trade embargo hurts Cuba’s sugar exports, eliminating what would otherwise be a great advantage in transportation.
- Cuba could probably stand some capital improvements to lower its production costs. Is it possible that foreign investors aren’t much interested in putting money into a Communist dictatorship? (or are discouraged)
The United States does consume quite a bit of sugar (as I can tell by looking around at my fellow citizens). So Cuba does produce things that people want. But given the situation in the world sugar market they can’t do it at a price that people want to pay.