Dominican Republic - Cash Crops

Cash crops

Despite ongoing diversification efforts, in the late 1980s the Dominican Republic continued to be the world's fourth largest producer of sugarcane. The sugar industry influenced all sectors of the economy and epitomized the nation's vulnerability to outside forces. Fluctuating world prices, adjustments to United States sugar quotas, and the actions of United States sugar companies (such as Gulf and Western Corporation's sale of all its Dominican holdings in 1985) all could determine the pace of economic development for decades.

Columbus introduced sugarcane to Hispaniola, but sugar plantations did not flourish in the Dominican Republic until the 1870s, much later than on most Caribbean islands. Investment by United States sugar companies, such as the United States South Porto Rico Company and the Cuban-Dominican Sugar Company, rapidly transformed the Dominican economy. These companies had established themselves by the 1890s, and between 1896 and 1905 sugar output tripled. During the United States occupation (1916- 24), the sugar industry expanded further, acquiring control of major banking and transportation enterprises.

Trujillo constructed a string of sugar mills, many of which he owned personally, beginning in 1948. The elimination of United States sugar quotas for Cuba after the Cuban Revolution of 1959 further enhanced the economic role of sugar, as the Dominican Republic assumed Cuba's former status as the main supplier under the quota system.

Heavy reliance on sugar created a number of economic difficulties. The harvest of sugarcane, the zafra, is arduous, labor-intensive, and seasonal, and it leaves many unemployed during the tiempo muerto, or dead season. Haitian laborers have harvested most of the Dominican cane crop since the late nineteenth century, by agreement between Hispaniola's two governments. Although Haitian cane cutters lived under conditions of virtual slavery, two factors continued to draw them across the border: depressed economic conditions in Haiti and the reluctance of Dominicans to perform the backbreaking, poorly regarded work of cane cutting.

After the death of Trujillo, Dominican policy makers faced the sensitive issue of how best to manage the dictator's economic legacy, which on the one hand was the rightful property of the people, but on the other hand represented more of a drain on national finances than a catalyst to development. These contradictions played themselves out within the CEA, an entrenched, politicized, and inefficient parastatal.

The role of sugar changed markedly in the 1980s as external conditions forced the national economy to diversify. Sugar prices had reached unprecedented highs in 1975 and again in 1979. The international recession of the early 1980s, however, pushed prices to their lowest level in forty years. Lower world prices hurt the Dominican economy, but the reduction of sales to the United States market, as a result of quota reductions that began in 1981, was even more costly because of the preferential price the United States paid under the quota system. The international market continued to be unpromising in the late 1980s. The market had been glutted by over-production, caused principally by European beet growers; major soft-drink manufacturers had also begun to turn to high-fructose corn sweeteners and away from cane sugar.

In the late 1980s, the CEA continued to control about 60 percent of national sugar output through the ownership of twelve of the country's sixteen sugar mills, employment of a work force of 35,000, and possession of 233,000 hectares of land, only 100,000 hectares of which were sown with sugarcane. Governed by a board--the members of which were drawn from the public sector, labor, and the private sector--the CEA operated at a financial loss and at lower productivity than the two major private sugar companies, Casa Vicini and Central Romana. Besides these major producers, thousands of small farmers (colonos) also grew cane. Sugar from all properties covered an estimated 240,000 hectares in 1987, and it yielded 816,000 tons, well below the 1.25 million tons harvested in 1976, the year of peak volume. Worse yet, lower prices kept 1987 sales at less than one-third of what was realized in 1975, when sugar export revenues peaked at US$577 million. The Dominican Republic still exported about half its sugar to the United States in the late 1980s (but, unlike in the past, not all under the quota system with its preferential prices). The Soviet Union became the second largest purchaser of Dominican sugar, following the signing of a three-year bilateral agreement in 1987.

Coffee, the second leading cash crop, was also subject to varying market conditions in the 1980s. Introduced as early as 1715, coffee continued to be a leading crop among small hillside farmers in the late 1980s; it covered 152,000 hectares throughout various mountain ranges. Coffee farming, like sugar growing, was seasonal, and it entailed a labor-intensive harvest involving as many as 250,000 workers, some of whom were Haitians. The preponderance of small holdings among Dominican coffee farmers, however, caused the coffee industry to be inefficient, and yields fell far below the island's potential. Output of coffee fluctuated with world prices, which reached an eight-year low in 1989. Another problem was the coffee bushes' vulnerability to the hurricanes that periodically ravaged the island.

The Dominican coffee industry faced not only national problems, but also international ones, which resulted mainly from the failure of the International Coffee Organization (ICO) to agree on quotas through its International Coffee Agreement (ICA). As a consequence, the Dominicans' ICA quota dropped several times late in the decade, hitting a low of 425,187 sixty-kilogram bags by 1988. Although Dominicans consumed much of their own coffee, they were increasingly forced to find new foreign markets because of the ICO's difficulties. As was true of many Dominican commodities, middlemen often smuggled coffee into Haiti for re- export overseas. Official coffee exports in 1987 were US$63 million, down from US$86 million in 1985 and US$113 million in 1986.

Cacao, the bean from which cocoa is derived, endured as another principal cash crop, occasionally surpassing coffee as a source of export revenue. The Dominican cocoa industry emerged in the 1880s as a competing peasant crop, when tobacco underwent a steep price decline. Although overshadowed by sugar, cocoa agriculture enjoyed slow, but steady, growth until a period of rapid expansion in the 1970s. In response to higher world prices, the area covered with cacao trees grew from 65,000 hectares in 1971 to 117,000 hectares by 1980. Small farmers cultivated the most cacao, producing some 40,000 tons on approximately 134,000 hectares in 1987. This crop was enough to make the Dominican Republic the largest producer of cacao in the Caribbean. Combined cacao and cocoa exports in 1987 reached US$66 million. Despite the brisk growth in the crop, the Dominican cocoa industry suffered from low yields and from increasing quality-control problems. In addition, three exporters controlled 75 percent of all cocoa, thus limiting competition. The country also forfeited greater foreign-exchange earnings because only a small portion of the crop was processed into cocoa before export.

Tobacco enjoyed a renaissance in the 1960s, with the introduction of new varieties and an increase in prices. Sales revenues peaked in 1978, but they declined considerably in the 1980s because of lower prices, disease, and inadequate marketing. In 1987, 23,000 hectares yielded 23,000 tons of tobacco. Black tobacco of the "dark air-cured and sun-cured" variety represented 88 percent of national production in the late 1980s. Manufactured into cigars for export, black tobacco was the foremost foreign- exchange earner among the various strains of the crop grown in the Dominican Republic.

Numerous companies participated in the export of black tobacco. Sales to Spain, the United States, the Federal Republic of Germany (West Germany), and France totaled US$14 million in 1987. A growing number of cigar companies operated out of the country's burgeoning free zones, registering US$26 million in sales in 1987.

Declining prices and structural changes in the international market for the Dominican Republic's traditional cash crops of sugar, coffee, cocoa, and tobacco forced the government to consider opportunities for nontraditional agricultural exports during the 1980s. This new emphasis on nontraditional exports also coincided with the implementation of the Caribbean Basin Initiative (CBI), which afforded the country reduced-tariff access to the United States market. The main categories of nontraditional exports that the government promoted included ornamental plants, winter vegetables (vegetables not grown in the United States during winter months), citrus, tropical fruits, spices, nuts, and certain types of produce popular among the growing Hispanic and Caribbean populations in the United States. However, new investments in agribusiness during the 1980s were less successful than anticipated, particularly in comparison to the dramatic success of assembly manufacturing and tourism. Nonetheless, officials apparently had succeeded in broadening the options of farmers and investors from a few crops to a diverse range of products. The government spearheaded agricultural diversification through an export promotion agency, the Dominican Center for the Promotion of Exports (Centro Dominicano de Promoci�n de Exportaciones--Cedopex), and through cooperation with a nongovernmental organization, the Joint Agricultural Consultative Committee, which promoted agribusiness investment in the republic. By 1989 some successes had been achieved with citrus and pineapples, but quicker growth in nontraditional agricultural exports was hindered by the slow pace of the CEA's diversification program, which had scheduled portions of the fertile sugar plains for conversion to nontraditional crop production.

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