Dominican Republic Sugar Industry
The sugar industry in the Dominican Republic dates back to the early 16th Century during the first years of the colony. 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. 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 Vellosa in partnership with his brother Cristóbal de Vellosa 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.
It is known that 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".
After President José Nuñez de Caceres of Spanish Saint Domingue declared independence from Spain in 1821, 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.
After Boyer was overthrown in 1843, in 1844 as a result of the Dominican War for Independence under the leadership of Juan Pablo Duarte, that Spanish Saint Domingue gained its independence from Haiti for a second time and the Dominican Republic was born. It was then that sugar manufacturing resumed in a large scale in the the Dominican Republic, growth that was interrupted in 1861, only seventeen years after its independence, when Dominican General Pedro Santana asked Queen Isabella II of Spain to retake control of the colony, transfer that was formalized by the Royal Decree of Aranjuez on May 19, 1861. The Spanish retake lasted only 4 years and ended as the result of the Restoration War. The subsequent favorable policies established by Buenaventura Báez during his 4th term as President of the Republic (1868-1874) finally provided for good the right atmosphere for the development of the sugar industry in the Dominican Republic.
In addition to Baez' policies, the modernization drive of the sugar industry in the Dominican Republic was influenced by three other factors or events:
the Ten Year War for Independence in Cuba (1868-1878) that brought to Santo Domingo a considerable number of Cuban sugar men with new ideas, knowledge of advanced technology and capital to invest
the American Civil War that negatively affected sugar production in Louisiana
the Franco-Prussian War of 1870 that involved two of the main beet sugar producing countries in Europe
The three to four thousand Cuban exiles that arrived in Santo Domingo as a result of the Ten Year War, included a few prominent sugar men that contributed greatly to the development of the sugar industry in the Dominican Republic.
Carlos (1843- ), Enrique (1844-1894) and Diego (1841-1909) Loynaz Arteaga 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 imported from the US a portable steam engine installed at their La Isabel property in San Marcos to produce muscovado sugar
José Eleuterio Hatton, Cuban born of British descent who shortly after arrival in the Dominican Republic established the Barahona, San Isidro and La Fé sugar mills
Joaquín M. Delgado and Rafael Martín who in 1874 introduced steam power at Ingenio La Esperanza in Santo Domingo, considered 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
Salvador Ross owner of Ingenio Santa Fé
Juan Amechazurra owner of Ingenio Angelita which he later sold to Juan B. Vicini
A number of sugar estates were established during this time by Cuban, US, Italian and French immigrants and locals as well, some two to three hundred small sugar factories in all, mostly individually owned semi-mechanized factories with basic technology of a blood driven mill and a Jamaican Train. Not all of them survived the transformation and consolidation of the industry of the 1880s caused by the drop in sugar prices that started in 1884. Between 1884 and 1890, at least fourteen sugar mills were declared insolvent and closed. The few surviving estates were able to absorb the less fortunate, modernize their machinery, be more efficient and produce better quality sugar. They also implemented new methods to move sugarcane from the fields to the factory and increase the amount of planted sugarcane by adopting the “colono” system heretofore not used in the country.
This reorganization of the sugar industry, absorbed some and controlled a number of old family estates who had no other choice but become just sugar growers or “colonos” selling their sugarcane to the nearby ingenio.[1] Following are some of the main names in the transformation of the sugar industry im the Dominican Republic which gave way to the central sugar mill concept. Not included in the names below but a major participant in the industry is that of an Italian immigrant established in the Dominican Republic since 1860 Juan Bautista Vicini Cánepa (1847-1900).
José Eleuterio Hatton (1854-ca.1916) - Cuban immigrant of british descent, who in 1882 established Ingenio San Isidro in the immediacies of what today is the San Isidro Air Force Base in Santo Domingo together with also Cuban immigrant Mariano Hernandez. In 1916 with his son Richard, under the corporate name Barahona Sugar Co. incorporated in New York, Hatton promoted Ingenio Barahona in the town of the same name.
Bartram Bros. - A New York shipping and commission merchant firm organized in 1864 by Connecticut born brothers Joseph (1800-1881) and Thomas Burr Bartram (1803-1886). In 1888 Joseph Percy Bartram, son of Joseph, was admitted to the firm as a partner. Bartram Bros. engaged extensively in the importation to the US of raw sugar from their plantations in St. Croix and the Dominican Republic for sale to local refiners in New York City. They owned Ingenio Consuelo and Ingenio San Isidro which were sold in 1920 to the Cuban-Santo Domingo Sugar Development Syndicate.
Alexander and William Bass - See Ingenio Consuelo in the Rafael Leonidas Trujillo page.
Hugh Kelly - The House of Hugh Kelly was a merchant firm established in 1884 by New Yorker Hugh Kelly (1858-1908). In 1903, all the business affairs of the House of Hugh Kelly were assumed by Hugh Kelly & Co., established in New York by Hugh Kelly and Joe Rigney. Hugh Kelly & Co. were owners of two sugar mills in the Dominican Republic; Ingenio Ansonia in Azua acquired in 1893 when named Carlota and Ingenio Porvenir in San Pedro de Macoris acquired ca. 1907. In addition to its interests in the Dominican Republic, Hugh Kelly & Co. owned Central Teresa in Cuba and was involved in the design of the Guanica Centrale in Puerto Rico and other sugar mills in Cuba.
Santiago Michelena Bellvé (1862-1928) - Puerto Rican 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.
Bentz Brothers - 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.
West India Sugar Finance Co. - A Connecticut corporation organized August 1913 by sugar brokers Lorenzo D. Armstrong, F. S. Armstrong, James B. Coombs, Loring D. Farnum, James Howell Post (President of NSRC) and his cousin Thomas Andrews Howell (President of the Cuban American Sugar Co. & VP of the NSRC) and was controlled by the NSRC and B. H. Howell, Son & Co. which was run by Thomas Andrews Howell (1877-1930). Both the NSRC and the Cuban American Sugar Co., which controlled seven mills in Cuba, were interlocked with the National City Bank whose president James A. Stillman was an investor in B. H. Howell, Son & Co., therefore the West India Sugar Finance Co. was in a sense a National City concern.[2] César J. Ayala in his book American Sugar Kingdom states that in 1921 the West India Sugar Finance Corp. was a holding company that controlled the Consuelo, Barahona, Quisqueya, San Isidro, Las Pajas, San Marcos, San Carlos, Santa Fé, Porvenir and Ansonia sugar mills in the Dominican Republic.
After the end of the Spanish American War, sugar imported to the US from Cuba, Puerto Rico, Hawaii and the Phillipines enjoyed reduced tariffs. This negatively affected Dominican producers who did not enjoy any tariff discounts for their sugar exported to the US. During the first decade of the 20th Century, only 2% of the Dominican sugar went to the US market, its primary markets were Canada and the UK. As a result, 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 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, Romana, Barahona and Consuelo contributed almost 50% of the total sugar produced.[4]
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 and Cuba. However, 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./Cuban-Dominican Sugar Co., 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 Canepa. 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 m.t to 475,000 m.t. 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, In 1951 he followed by promoting 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 that any previously assigned, and increase it 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; 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, Pringamosa a local firm that would operate Porvenir and Santa Fé at an annual rent of $2.3 million, Consorcio Azucarero Central a local firm that would operate Barahona at an annual rent of $1.8 million and Agoindustrial Cañabrava a local firm that would operate 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 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; Barahona (Consorcio Azucarero Central), La Romana (Fanjul), Porvenir (CEA) and 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: the CEA, the Vicini Group and Central Romana. The majority of production is found in the southeastern part of the country in the towns of San Pedro de Macorís and La 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. and third is Consorcio Azucarero Central (Barahona) whose production is some 50,000 m. t. of sugar. The only government run sugar mill, Ingenio Porvenir produced 13,983 m. t. of sugar in the 2015-2016 milling season.
The US remains 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. The three non-government run sugar mills operating in the country (Romana, Cristobal Colón and Barahona) contributed with 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 our review of it to the above and five dedicated pages representative of the industry's development for the most part of the 20th Century and its current status. Two of the pages encompass the current Government involvement in the industry (Barahona, CEA) and two pages encompassing the private sector involvement (Vicini, La Romana). We dedicate a fifth page to the involvement in the industry of dictator Rafael Leonidas Trujillo, who had a substantial involvement in the industry after he took power in 1930 until he was assassinated in 1961.
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[1] In Puerto Rico and Cuba sugar mills are called centrales but in the Dominican Republic they are called ingenios.
[2] César J. Ayala: American Sugar Kingdom
[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