The Sugar King of Havana (12 page)

LOBO GRADUATED IN June 1919 and returned to Havana that autumn. A photograph taken the year before showed him standing in a muddy Louisiana yard, smiling, wearing dungarees and scuffed boots, holding a pipe. In a portrait taken some ten years later, he had become a powerful businessman dressed in a suit and tie, dripping savoir-faire, albeit with less hair, staring out at the viewer with an unflinching gaze and an inquisitorial raised eyebrow. Unfortunately, most of Lobo’s transformation from grinning student to titan of finance takes place in the shadows. Correspondence during this period survives only from his parents and siblings, and the letters that Lobo wrote to them have been lost. Thus one learns from Jacobo in March 1919 how dawn masses were being held daily at St. Gregory’s Church in Havana after their sister Leonor died during the great flu pandemic. Leonor had given birth to a son, Carlos Todd, just five months before, and her death was an emotional low water mark for the family. To ease Virginia’s grief, Heriberto built a country residence in Wajay on the outskirts of Havana and planted the garden with fruit trees, peonies, and ylang-ylang. He also encouraged Virginia to travel, taking their youngest daughter, Helena, as a companion. Six years after Leonor died, Lobo’s mother scribbled a chatty and tender letter to Lobo from her bathroom at the Waldorf-Astoria in New York while Helena slept next door. “She went out last night,” Virginia explained, “and did not get back until 1.30 in the morning having danced at the Lido with Menocal,” the former Cuban president. In Havana, Lobo worked hard, Virginia often urging him to take life more easily. “Why unhappy
mi corazón
, my heart? . . . You are too young to be so pessimistic. Grab life by its better side,” she wrote in one letter after what must have been a miserable message from Lobo himself. But he romanced too. “Helena says you are in love!” Virginia wrote. “Can I ask—with whom?!”

Most of the surviving letters, though, are from his father. They begin offering sage advice to a young man about to begin his career, evolve into sharp business letters during Lobo’s early years at work, and end in tones of respect toward a man he regarded as his equal. “Take care, work with faith, cultivate the spirit and dominate your passions,” Heriberto had counseled Lobo at his graduation. “Do not concern yourself about finding a job,” he added, as “there will be no lack, and it will be well paid.”

He was right. Lobo returned to Havana in the autumn of 1919 and found the city infected by a dreamlike fever. Fittingly, because so much on the island is characterized by music, it was called the “Dance of the Millions.” Sugar prices had risen in the run-up to World War I and then been fixed. After peace was declared in November 1918, the controls were lifted. Sugar prices soared, and Cuba was gripped by a speculative sugar rush that is one of the landmarks in the history of capitalism, the dot-com boom of its day. Money seemed to waltz down from the heavens. Enrico Caruso, the world’s greatest tenor, was contracted for a Cuban opera tour and paid the outrageous sum of $10,000 per performance, even though he was well past his prime. Small-time sugarcane farmers from the deep Cuban country shopped the jewelry stores in Havana in collarless shirts, wearing studs of diamond or gold embossed with their initials. The shops bulged with North American manufactured goods—radios, refrigerators, and sewing machines, all the appurtenances of the modern age. The National City Bank of New York asked:
¿Qué sucederá si no deja Ud. un testamento?
What will happen if you don’t leave a will? Cuban women, bored with their Spanish past, meanwhile modeled themselves on the Jazz Age’s independent-minded “flapper girl.”

How times had changed! In 1840 the Condesa de Merlin wrote how she spent all her days closeted inside her house in Havana avoiding the heat, and in the early evening might venture into the city in a horse and carriage for a
paseo
on the Prado
.
Now, when the Condesa’s descendants wanted to travel about town, they rode in a luxury North American or European motorcar with a chauffeur outfitted by Montalvo y Corrales, the firm that advertised its smart uniforms in the pages of
Social.
“Havana,” the magazine had trilled in 1917, “is progressing with giant steps in every field.” Amid the prosperity, Cuba seemed more like a rapidly emerging country than a developing one. Habaneros outdid one another in the lavishness of their parties as if to prove it. “A ball that never ends,”
Social
described one costumed dance given by Lily Hidalgo during the 1916 season. “An elegance that is enrapturing, a luxury that casts its spell, a beauty that bewitches; the men in their red tails, the ladies in period gowns, all so admirably classical, of exquisite taste, of extreme chic.”

Cuba was gripped by a sugar frenzy. New mills were built at great speed and older mills expanded. At Senado, my great-grandfather Don Pedro, who now managed the mill with Bernabé, tripled the amount of sugar it produced each year. They also built a church and a baseball field, which unusually for those times hosted mixed-race games; Senado remained a progressive mill, a place where no child, as the saying went, lacked for shoes. Elsewhere Cubans planted sugar wherever they could. “If things go on at this rate, we’ll be sowing cane in the patios of our houses,”
El Mundo
remarked. Around the country, the huge trees under whose shade the early Spanish chroniclers insisted one could walk from one end of the island to the other, and which the Condesa de Merlin had described so vividly to her friends in Paris, were burned in a terrible conflagration to clear fresh land. At night the fragrant aroma of smoldering hardwoods—cedar, mahogany, mastic, and pomegranate—covered the island with a smell like church incense.

For a young man seeking his fortune, Lobo’s return to Cuba could hardly have been better timed. He was fluent in English and Spanish, technically up to date—unlike the sons of most local sugar men, he also liked to get his hands dirty—and well connected. He could work wherever he wanted. His first job offer came from Manuel Aspuru, a contemporary and later close business associate, who had inherited the sugar mill Toledo two years before. A second prospect followed soon after. Rionda offered Lobo $500 a month to work as assistant superintendent at the Lugareño, a midsize mill adjacent to Bernabé’s property that had changed hands several times since independence. The Galbán Lobo office balked at the prospect of their president’s son working for the competition and invited him to join them instead. Lobo, just twenty-two years old, named his terms, aiming high: the princely wage of $1,000 a month, 5 percent of profits, and managerial authority to sign off on large deals. The office agreed, Heriberto apparently absenting himself from the negotiations.

On January 2, 1920, Lobo reported for his first day of work. The Dance of the Millions was in full cavort. Any sugar price over five and a half cents per pound was reckoned to be enough to “stimulate the country to extreme prosperity.” By February 1920, sugar traded at nine and one-eighth cents, almost twice as much. As prices rose, planters sought huge advances on future crops. The banks—many of them American—were happy to lend. National City had opened twenty-two branches in Cuba in 1919 alone. When local funds ran low, New York was tapped for more. Every bank had portfolios thick with mortgages on plantations, credit notes on standing and future crops, and liens on bagged sugar. Notoriously, one grower famously planted cane quickly around the edges of his fields. His bank loaned him an advance on the crop on the assumption that all his land was cultivated, and the grower absconded to Paris before the lender realized its mistake.

By the end of March, the sugar price had risen to twelve cents, at the end of April to eighteen cents, and by mid-May it stood at twenty and a half. Up, up, up rose the price of sugar—as did the harvest, to 3.75 million tons, the second highest in history. Then, just as fast, down, down, down the price fell. By August it had dropped to eleven cents, by September to eight cents. November saw it halve again, and by Christmas it had dropped to three and three-quarter cents a pound. During his first year in the business, Lobo, the future King of Sugar, the man who would later say “I am the market,” watched fortunes balloon and collapse. He had missed the biblical seven years of feast. He would witness and sometimes suffer the years of famine that followed.

 

 

YOUTH IS A time of promise and ambition. Questions about the costs of that ambition only come later, when its fruits are lost to old age or catastrophe. In his middle age, Lobo occasionally asked himself whether the prize of Sugar King had been worth it. So too in the 1920s did Cuba during the calamity of the ensuing bust.

The banks were the first to go, as in every credit-fueled boom. There was understood to be $80 million in loans outstanding, made on sugar prices between fifteen and twenty-two cents a pound. With the price fallen to a third of that, several U.S. banks teetered on the brink of insolvency. As much as 80 percent of National City’s entire capital had been loaned against Cuban sugar during the height of the boom. For the Royal Bank of Canada, Chase National, and the Guaranty Trust, the situation was almost as serious. For many Cuban banks, the case was hopeless. In the spring of 1921, the locally owned Banco Nacional closed its doors. On March 28, José (“Poté”) López Rodríguez, the wealthiest man in Cuba, committed suicide and was found hanging from his balustrade. Eleven days later, Cuba’s leading sugar speculator, José Lezama, met his creditors, declared himself bankrupt, and fled the country, leaving debts of $24 million behind. Mills folded, with more than forty taken over by U.S. banks in settlement of their debts, almost a quarter of the total on the island. It was a sea change for the industry. Before the crash, Cuban-owned mills produced almost 40 percent of the island’s crop, a tenth of world production. Afterward, they accounted for half that amount. Nationalist resentments, papered over by Cuba’s early prosperity, began to grow. The cartoon figure Liborio captured the national mood, becoming the popular face of Cuba. But while Uncle Sam is shrewd and wiry, and England’s John Bull jocular and fat, Cuba’s Liborio was skinny, big-nosed, and mute, a perpetual victim of North American power.

Senado escaped the worst of the crash, Bernabé having sold most of his sugar before the peak. So did Galbán Lobo, thanks to Heriberto’s prudence. The firm had sold the three mills it owned for a handsome price to Rionda’s Cuba Cane just as the Dance of the Millions made its last magnificent sweep around the floor. For Rionda, the bust and the decade of low sugar prices that followed were his undoing. He still controlled much of the sugar produced on the island and sold in the United States. Yet his star was dimming, and he passed the next ten years mediating an ignominious series of squabbles between sugar producers everywhere, trying to sort out the mess.

The problem, as seen objectively, was simple. Sugar production was too high. This depressed world prices. So output had to be cut. The question was, by whom? The prevailing opinion was Cuba. It alone accounted for a quarter of the world crop. In Rionda’s view, it was “consequently the greatest one to blame.” The Cuban government took it upon itself to prop up the market, passing a series of laws to restrict local production in an attempt to boost the world price.

The policy was unpopular with many of the larger Cuban planters. From London, John Maynard Keynes did not think it sensible either, at least not for Cuba over the long run. As well as being a distinguished economist, Keynes was a successful commodities speculator: between 1923 and 1928, he made around £47,000 trading on his own account. For men like Keynes, the economics were clear. Cuba was the “cheapest sugar-producing country in the world,” as Rionda put it. It therefore made sense for Cuba to produce the most sugar too. Instead, Cuba cut back. Keynes referred to this as the “paradox of artificial limitation in Cuba.” The reasons were largely political. Havana feared that lower prices would bankrupt the smaller Cuban-owned mills. Control of the industry would then pass entirely to the larger and more efficient North American concerns. This was seen as politically untenable, as it would reduce Cubans to the role of dogs at a rich man’s table.

The gambit failed. When Cuba cut back sugar production, other parts of the world—cane growers in Java, beet growers in Europe and the United States—simply increased their output. World prices stayed low and all of Cuba suffered. The Lobos, both father and son, had disagreed with the doomed strategy from the start, Heriberto doing so from a front seat. In July 1927, he sailed to Paris to witness another attempt by Cuba to convince European beet producers to join its efforts to stanch world sugar production and prop up prices. Despite the urgency, it was still the golden age of the ocean liner when a transatlantic crossing took five days, and evening dress was required at dinner. En route to Europe from Havana, Heriberto stopped in New York. His colleagues on Wall Street were pessimistic. They saw the Paris talks failing. Many had already sold all the sugar that they held, fearing that the price would only fall further. One told Heriberto that Rionda believed “the bankruptcy of Cuba was inevitable” unless sugar prices rose. Yet past attempts to restrict production and boost prices had not worked. Why, wondered Heriberto, would this time be any different?

Heriberto wrote to his son when he arrived in Paris. Most communication was then by mail, with only the most urgent situations requiring a cable, and very rarely a telephone call. On Waldorf-Astoria Hotel–headed paper, Heriberto wrote that he hoped “this crazy plan does not prosper.” In the end, economic efficiency would prevail and, as Heriberto added, underlining each word, it would all boil down to “
The Survival of the Fittest.
” He was concerned as a patrician, but his letters showed that he believed it would happen anyway.

Lobo, meanwhile, was in Havana. When he had started at the office seven years before, he had been put through his paces first, hawking
frijoles, harina y garbanzos
, beans, flour, and chickpeas. Now he directed Galbán Lobo’s day-to-day sugar trading operation. It was a fast promotion to a senior position, but as Heriberto told him: “I would much rather you make your mistakes now than later when I may not be around to pick up the pieces.” In 1921, showing early promise, Lobo had made the supposedly highest-ever priced sale of sugar to a U.S. bottling company, three thousand tons at twenty-five cents per pound. But now Heriberto was away, the market had crashed, and the firm’s senior vice president, Enrique Sosa, was suddenly absent because of an urgent medical operation. Lobo was in sole charge of the Havana office. He was twenty-eight years old.