Dominican Republic Sugar Industry
The sugar industry in the Dominican Republic dates back to the first years of the colony in the early 16th Century. The Spanish Crown supported its development by granting loans for planting and processing sugarcane brought to the country by Christopher Columbus on his second voyage. Justo Germán Cantero in his book Los Ingenios states that Mr. S. R. Porter said that
“…if Christopher Columbus discovered America, Pedro Esteban brought sugarcane to Santo Domingo, that Miguel Ballestero a native of Catalonia was the first to extract the juice from sugarcane and Gonzalez Veloso the first one to reduce the juice to sugar; that in 1518 according to Hevane, under the authority of [Pedro] Martyr there were twenty eight sugar factories on the island and its cultivation extended quickly and to great extent yielding enormous production.”
There is evidence that the first sugar mill in Santo Domingo was established in 1504 at or near Concepcion de la Vega where the first trials were made to crystallize sugar. The first sugar mill to produce on a commercial scale was installed in Nigua, San Cristobal in 1517 by Spaniard Dr. Gonzalo de Velosa in partnership with his brother Cristóbal de Velosa and Francisco Tapia. They imported skilled sugar masters from the Canary Islands and two vertical roller mills powered by water that produced sugar for export to Spain. There are ruins still standing of the Ingenio Boca de Nigua today.
By 1533 there were twenty three sugar estates and by 1545 there were twenty four in existence in Spanish Saint Domingue. Among these were Ingenio Boca de Nigua mentioned above, Ingenio La Concepcion de Nuestra Señora owned by Alvaro Caballero, Ingenio Santiago de la Paz in Azua owned by Hernando Gorjón a Spaniard from Extremadura, Ingenio Santi Espíritus in Azua owned by Esteban Justinián and Juan de Villoria, Ingenio La Magdalena also in Azua owned by catholic priest Damián de Peralta and his nephew Alonso de Heredia and Ingenio Samate near Higüey also owned by Juan de Villoria.
Sugar production remained at a somewhat unstable growth trend until the 1570s when it started to decrease because of the reduction of Spanish navigation, smuggling, transfer of investments to livestock, competition in terms of profitability from ginger and the paralysis of the slave trade, among others. For the second half of the 16th Century, Spain was in conflict with other European powers, so King Philip II banned the Spanish possessions from trading with foreigners. This provision left the colonies without an important market that caused a crisis in the Spanish Saint Domingue sugar industry when many settlers decided to migrate or engage in raising livestock.
The island of Hispaniola was populated by the Spaniards mainly on the eastern half of the island. Starting in the 1670s, the French began to establish informal settlements on the western coast that the sparse population of the island was incapable of defending. Spain formally ceded the western part occupied by the French in the Treaty of Ryswick of 1697. The Spaniards and the French agreed to leave unsettled the central mountain range that eventually came to be the dividing border between French Saint Domingue and Spanish Saint Domingue.
In 1785, black slaves were scarce in Spanish Saint Domingue and therefore sugar production was still limited to local consumption and some export to Puerto Rico and Spain. On April 12, 1786 King Charles III issued a Royal Decree authorizing the importation of African slaves to the colonies. The new labor force source was short lived as on July 22, 1795 a result of the Peace of Basel, Spain ceded the eastern ⅔ of the island of Hispaniola then known as Spanish Saint Domingue to France in exchange for keeping Gipúzkoa. Spanish Saint Domingue was invaded and occupied in 1801 by Haitian General in Chief of Saint Domingue, Toussaint Louverture and subsequently in 1804 by Jean-Jacques Dessalines, both abolitionists born to slave parents. In 1809 Spain regained control of Spanish Saint Domingue beginning the thirteen year period known as the España Boba or "Lazy Spain".
President José Nuñez de Caceres of Spanish Saint Domingue declared independence from Spain in December 1821, but on February 9, 1822 after encountering little resistance, the island of Hispaniola was again unified under the Haitian rule of Jean Pierre Boyer (1776-1850) who was President of Haiti from 1818 to 1843 and was responsible to reuniting the north and south of the country into the Republic of Haiti in 1820. With the abolition of slavery by Boyer in 1822, sugar production was limited to molasses, basically a subsistence product which caused a number of mills to disappear during the Haitian occupation.
In 1844, a year after Boyer was overthrown as a result of the Dominican War for Independence under the leadership of Juan Pablo Duarte, Spanish Saint Domingue gained its independence from Haiti for a second time and the Dominican Republic was born. In the years that followed, the political situation in the Dominican Republic was very unstable. From 1844 until 1849 when Buenaventura Báez was elected to his first of five terms in office, there were eight presidents, Francisco del Rosario Sanchez was president twice for a total of thirty five days, Pedro Santana was president three times and Santiago Espaillat was elected but never took office afraid that his predecessor (Santana) would undermine his ability to govern. Six presidents held office between 1849 and 1861 when then president Pedro Santana asked Queen Isabella II of Spain to retake control of the colony which happened by the Royal Decree of Aranjuez on May 19, 1861. Spain’s occupation lasted only four years until July 11, 1865 when as the result of the Restoration War, Spain conceded defeat and withdrew from the island. Constant changes in leadership continued during the years of Spanish rule when there were eight Captain Generals in four years. After the end of the Spanish rule in 1865 and 1878 when Báez fifth term in office ended in a coup d'état, there were sixteen presidents including Baez three times, José Maria Cabral twice, Ignacio María Gonzalez twice, a Triumvirate, a Junta of Generals, a Council of Secretaries of State and a Superior Governing Junta.
Despite the political instability, several mills were established between 1879 and 1882 as a result of the tumult caused by the Ten Year War in Cuba (1868-1878) that brought to Santo Domingo three to four thousand Cuban exiles including a few prominent sugar men with new ideas, knowledge of advanced technology and capital to invest that contributed greatly to the development of the sugar industry in the Dominican Republic, among them were;
Brothers Carlos Loynaz Arteaga (1843- ), Enrique Loynaz Arteaga (1844-1894) and Diego Loynaz Arteaga (1841-1909) who established in Puerto Plata the mercantile firm Loynaz Bros., later Loynaz & Crosby with American Allen Crosby. In 1872, the Loynaz brothers established the first steam powered sugar factory in the Dominican Republic when they installed at their La Isabel property in San Marcos a portable steam engine imported from the US to produce muscovado sugar
José Eleuterio Hatton, Cuban born of British descent who shortly after arrival in the Dominican Republic established the San Isidro and La Fé sugar mills and later the Barahona sugar mill
Joaquín M. Delgado and Rafael Martín who in 1874 introduced steam power at Ingenio La Esperanza in Santo Domingo, considered by some the first central sugar mill in the Dominican Republic
Pablo Padrón and Pedro Solaún of Catalonian descent, members of the firm Padrón, Solaún & Cia. who in 1881 established Ingenio Agua Dulce, renamed Ingenio Consuelo in 1886, the finest and largest central sugar mill in the Dominican Republic at the time
Salvador Ross owner of Ingenio Santa Fé
Juan Amechazurra owner of Ingenio Angelina which he later sold to Juan Bautista Vicini
Other world wide events that also influenced the development of the Dominican sugar industry during those years were the American Civil War that negatively affected sugar production in Louisiana and the Franco-Prussian War of 1870 that involved two of the main beet sugar producing countries in Europe. Production for export rose sharply from 7,000 tons in 1880 to 144,911 tons in 1916 and investments in sugar reached RD$11 million as early as 1893. However, the development of the industry was not without ups and downs. The drop in prices in 1884 resulted in the bankruptcy of a number of sugar factories and several mills. Between 1884 and 1890, at least fourteen sugar mills were declared insolvent and closed, a few of the surviving estates were able to absorb the less fortunate, modernize their machinery, become more efficient and produce better quality sugar. The sugar mills adopted the “colono” system heretofore not used in the country contracting with former independent sugar factory owners that became solely cane growers and took on the cultivation side of the industry implementing new methods to move sugarcane from the fields to the factory and increasing the amount of planted sugarcane.
The political situation stabilized in 1887 with the rise to power of Ulises Heureaux in his second term in office. During his twelve year incumbency, Heureaux opened the country to foreign investment and agricultural methods were modernized with the establishment of up to date sugar mills. Technological advances were implemented mainly to save on labor costs and progress such as railroads, the telegraph and electric lighting closely followed the technological advancements in the sugar industry. The success of the sugar industry generated wealth both for the treasury and for the population as a whole and set the stage for further economic growth. During this period, foreign capitalists increasingly invested in the Dominican Republic. Some of these investors were; José Eleuterio Hatton, Bartram Brothers, Alexander & William Bass who established Ingenio Consuelo, Hugh Kelly, Santiago Michelena Bellvé [2], Bentz Brothers [3], the West India Sugar Finance Co. and Juan Bautista Vicini Cánepa.
The period that followed the assassination of Ulises Heureaux in 1899 was marred with renewed political instability with seventeen rulers in as many years. During the first couple of decades of the 20th Century, Dominican sugar imported in the US was always subject to higher tariffs than sugar from Puerto Rico, Cuba, Hawaii and the Philippines. This negatively affected Dominican producers who did not enjoy any tariff discounts for their sugar exported to the US, therefore only 2% of the Dominican sugar went to the US market, its primary markets were Canada and the UK. This situation caused that fourteen ingenios had to close down in 1902 and only twelve survived. [3]
The February 8, 1907 Convention signed between the US and the Dominican Republic that provided for the US to collect and administer all Dominican customs revenues, was a positive measure that attracted foreign investors and helped revive the Dominican sugar industry. Another factor that benefited the investment of foreign capital in the Dominican sugar industry in the early 20th Century was the US military occupation of the Dominican Republic between 1916 and 1924. The occupation was triggered by concerns about possible German use of the Dominican Republic as a base for attacks on the United States during World War I and concerns about rising Dominican national debt and continued political instability. At the end of the US military occupation in 1924, there were twenty two ingenios of which twelve were owned by US interests. These twelve sugar mills owned and/or controlled 81% of the land dedicated to sugarcane and 82% of the declared capital invested in the industry. Only three of them, Central Romana, Ingenio Barahona and Ingenio Consuelo contributed almost 50% of the total sugar produced. [4]
The situation with land titles in the Dominican Republic was so uncertain that allowed US capitalists to acquire vast estates of relatively unpopulated land for the development of sugar production at very low prices. Of the 438,000 acres of land owned by sugar estates in 1924, 75% or 326,000 acres were owned by the five largest mills; Romana, Barahona, Consuelo, Santa Fé and Cristobal Colón. Ownership concentration was even higher with three groups of investors practically controlling the whole industry; West India Sugar Finance Corp., Central Romana and the Vicini Group.
The destruction of the sugar beet fields in Europe during WWI made beet sugar scarce resulting in the rise in prices of cane sugar. A quintal of sugar rose from $5.50 in 1914 to $12.50 in 1918 and to $ 22.50 in 1920. This price boom created a time of high profits for sugar manufacturers known as the Dance of the Millions. Due to the prosperity brought about by foreign investment and the dance of the millions, the sugar industry in the Dominican Republic enjoyed a very prosperous time in the early 1900s and contributed to the urban and economic development of towns like San Pedro de Macorís and La Romana. Major participants in this new era were the South Porto Rico Sugar Co., the West India Sugar Finance Corp., Hugh Kelly & Co. and Bartram Brothers. During those years, the only major player of local capital was the General Industrial Co., the successor to the interests of Juan Bautista Vicini Cánepa. However, the time of prosperity and high profits did not last long, terminating with the sugar price crash of 1921.
In 1947, export taxes on sugar represented almost 25% of all government collections. That year, seventeen years after dictator Rafael Leonidas Trujillo assumed control of the Dominican Republic, the sugar industry was mostly foreign owned but its development had been stagnant around the 450,000 to 475,000 m.t. of raw sugar in part due to the stringent government fiscal policies that prevented the industry to grow. After World War II, the price of sugar in the US was relatively stable around 5¢ to 6¢ per pound, as sugar remained under price controls and rationing until 1947 when the price gradually began to rise as rationing ended. In 1948, seeing the profits that could be had, Trujillo started a movement to “Dominicanize” the sugar industry by creating for himself and his family a monopoly of the sugar industry using a complex scheme involving several corporate entities.
Trujillo started his incursion in the sugar industry by promoting the relatively modest Ingenio Catarey in 1948 followed by the much larger Ingenio Rio Haina in 1951. From then on, he decided to acquire existing sugar mills rather than establishing new ones. In a matter of ten years, Trujillo would control twelve of the sixteen existing sugar mills at the time, that is, all except Central Romana of the South Porto Rico Sugar Co. and the three sugar mills owned by the Vicini family, thus becoming the larger producer in the country. Trujillo’s involvement in the sugar industry allowed the London International Sugar Council of 1953 to assign Dominican sugar a quota of 600,000 m.t., higher than any previously assigned, increased to 750,000 m.t. in 1957. The Cuban Revolution of 1959 resulted in President Eisenhower eliminating the quota assigned to Cuban sugar increasing the sale of Dominican sugar in the US alone to 460,000 m.t. in 1960. Trujillo’s net profits from his sugar interests represented a reported profit in excess $40 million during the decade of 1950. In 1961, upon Trujillo's assassination, the new government assumed ownership of all twelve sugar mills the dictator had taken control of. In 1966, the Dominican Government established the Consejo Estatal del Azúcar (CEA) to manage the newly acquired sugar mills.
In spite of the low number of central sugar mills in operation, in the late 1980s the Dominican Republic was the 4th largest producer of cane sugar in the world and enjoyed the largest share of the US allocated Tariff Rate Quota at 17.6%. Production declined in the 1990s in part because of the US Government decision to reduce imports due to expanded domestic production. In 1996 total production of the CEA sugar mills was for the first time under 200,000 m.t. Another factor contributing to decreased production was lower international sugar prices due to increased production in Brazil and the European Union. As it eventually happens with most government operated business enterprises, by 1999 the CEA was insolvent and kept alive financially due to governmental subsidies. In the early 1990s, total annual sugar production was averaging just below 600,000 m.t., however, even though production from all the CEA sugar mills combined shrunk 30% between 1990 and 1996, production of La Romana and the Vicini own sugar mills increased in 80,000 m. t. and 30,000 m.t. respectively. [5]
In 1987 the CEA closed down Ingenios Catarey and Esperanza, in 1999 the financial situation of the CEA was such that the government decided to lease all of its ten operating sugar mills to four private operators: (1) Consorcio Azucarero del Caribe, a Mexican firm that would operate Rio Haina, Ozama, Boca Chica, Quisqueya and Consuelo at annual rent of $6.3 million; (2) Pringamosa, a local firm that would operate Ingenio Porvenir and Ingenio Santa Fé at an annual rent of $2.3 million; (3) Consorcio Azucarero Central, a local firm that would operate Ingenio Barahona at an annual rent of $1.8 million and (4) Agoindustrial Cañabrava, a local firm that would operate ingenios Montellano and Amistad at annual rent of $450,000. In all, this reorganization intent failed to produce positive results, the deal with Consorcio Azucarero del Caribe fell through when the Dominican Government declined to guarantee loans the firm was to take to modernize the installations, in 2006 the Central Bank of the Dominican Republic as liquidator of Banco Intercontinental (Baninter), assumed all the assets of Consorcio Agroindustrial Cañabrava and the agreement with Pringamosa was a failure as the government ended up taking back and operating Ingenio Porvenir and closing down Ingenio Sant Fé in 2010. The agreement with Consorcio Azucarero Central was the only one that had a successful result.
This pretty much put the sugar industry in the Dominican Republic in the situation it is today with only four sugar mills in operation; Ingenio Barahona (Consorcio Azucarero Central), Central Romana (Fanjul), Ingenio Porvenir (CEA) and Ingenio Cristobal Colón (Vicini). Agriculture though, is still today one of the most important sectors of the national economy of the Dominican Republic. Sugarcane is the principal agricultural product of the country and the second agricultural product exported behind bananas. The industry is concentrated in three businesses that control 75% of the sugarcane plantations in the southeastern part of the country in the towns of San Pedro de Macorís and La Romana: the CEA, the Vicini Group and Central Romana.
As previously mentioned, today the number of sugar producing units in the Dominican Republic has been reduced to four. The largest private producer is Central Romana which continues to dominate the Dominican sugar market producing 232,558 m.t. or 61% of total production. The second largest private producer is Vicini's Ingenio Cristobal Colón with 96,591 m.t. followed by Consorcio Azucarero Central’s Ingenio Barahona whose production is some 50,000 m.t. of sugar. The smallest producer is the only government run sugar mill, Ingenio Porvenir that produced 13,983 m.t. of sugar in the 2015-2016 milling season.
The US remains today as the main market for Dominican sugar. Exports to the US in 2017 were 178,350 m.t. or 96% of the allocated quota, the largest single-country quota allocation under the US Tariff Rate Quota with 17% more than any other country. [6] According to the Dominican Sugar Institute INAZUCAR, 355,235 m.t. of sugar were produced in the 2016-17 sugar milling season with the three non-government run sugar mills operating in the country (Romana, Cristobal Colón and Barahona) contributing 331,452 m.t. or 93.3% of total production.
The history and development of the Dominican sugar industry is no less complicated than the country's political history. That being the case, we have limited its review to the above and dedicated pages of the industry's outstanding players in the 20th Century.
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[1] Santiago Michelena Bellvé (1862-1928) was a Puerto Rican native who established himself in the Dominican Republic as a general commission agent and mercantile broker and later branched out to other areas among which were import-export, shipping agencies and banking. In 1890, Michelena established Michelena Bank which served as depository institution for customs revenues under the 1907 Convention between the Dominican Republic and the United States. In 1917 MIchelena Bank was acquired by the International Banking Corporation, a subsidiary of the National City Bank of New York. In 1912, Michelena and his wife Avelina Luisa Pou Cardona, built what was then known as Estancia Michelena pictured below, a beautiful home on 20 acres in the outskirts of the capital city Santo Domingo. This property was acquired in 1934 by Rafael Leonidas Trujillo and became his residence. In or around 1908 Michelena acquired Ingenio Ozama, established in 1880 on lands of what today is Villa Duarte by Luis Cambiaso of Italian descent in association with Augusto Cisneros as Ingenio San Luis. The sugar mill ceased to operate and went bankrupt as the result of damage caused by Hurricane San Zenón of 1930. Ingenio San Luis C. por A., was sold at public auction in 1935 to the Ozama Sugar Co. Ltd. organized in 1935 as a wholly owned subsidiary of the Bank of Montreal who rebuilt the sugar mill and resumed its operations in 1940. In 1944 due to Dominican laws limiting the operations of banks in non-banking activities, the Bank of Montreal sold Ozama Sugar Co. Ltd. to the Canadian firm British Columbia Sugar Refining Co., acting as broker Czarnikow Ltd.
[2] Bentz Brothers was a merchant firm established by Rodolfo and Augusto Bentz during the waning years of the 19th Century to operate a grocery store. It later came to own two sugar mills. Rodolfo and Augusto bents were two of the five sons born to German immigrants Emil Bentz and Maria Hatchmann who married in 1865 one year after arriving in the Dominican Republic from Bremen. In 1918, Augusto commissioned Spanish architect Martin Gallart Canti to design what was later known as Villa Bentz in downtown Puerto Plata completed in 1919, pictured below. Following Augusto’s death in 1933, the family had to rent the house which for several years was used as a secondary school. Today it is known as the Amber Museum. In 1899, Bentz Bros. (58%) in partnership with Juan N. Folch (21%) and Juan Martinez (21%) established Ingenio Amistad in the town of Llanos de Perez near Imbert in the Province of Puerto Plata. The Louisiana Planter and Sugar Manufacturer edition of Jamuary 25, 1902 states “This season will open with one additional factory in operation in the republic. Messrs. Bentz Brothers, of Puerto Plata, are erecting a plant of moderate size at Perez on the Puerto Plata and Santiago Railroad, about 18 miles inland. Some of the machinery of the abandoned La Rosa estate is being put in the Perez house.” Before the rise in sugar prices following the end of WWI that resulted in what is known as the “dance of the millions”, Bentz Bros. sold 4 years worth of production for future delivery to a Turk firm. This transaction caused the demise of Amistad and prompted Bentz Bros. to establish Ingenio Montellano. It is unbeknown to us how or when title was transferred, but when Amistad was sold to the Trujillo interests in 1953, its owners were Puerto Rico born Victoria Luisa Julián de Estrella (1915- ) the wife of Spanish immigrant from Santander Dr. Honorato Estrella Entralgo (1911- ) and her mother Maria Luisa Toro (1893-1977) who had inherited it from her husband, Guayama PR born of Spanish father from Zaragoza Cornelio Julián Rodriguez (1892- ). From 1918 to the early 1920s Cornelio Julián workd at La Romana Sugar Mill.
[3] Arturo Martinez Moya: La Caña da Para Todo
[4] Manuel Moreno Fraginals: El Ingenio
[5] Oscar Zanetti: Esplendor y Decadencia del Azúcar en Las Antillas Hispanas