Crony Capitalist of the Month: The Fanjul Sugar Barons

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Written By Kitty Testa

Fall is in the air here in the Midwest, a favorite time for many. The leaves are turning yellow, orange and red. We’re into sweater-weather evenings with bonfires and s’mores, and the store shelves are being stocked with Halloween candy…

What!?! $4 a pound for Snickers?  I need at least ten pounds of candy to satisfy my neighborhood goblins on Halloween!

Would it surprise you to learn that Americans have paid inflated prices on sugar and foods that contain sugar to the tune of $50 billion dollars since Y2K? That’s on top of millions of dollars every year doled out as sugar subsidies that, in conjunction with import restrictions and production quotas, keep the price of domestically produced sugar artificially high—at times double global market prices. Add to that the sales taxes on inflated prices, and soft drink taxes that seem to be cropping up all over the country.

Some say sugar is bad for your health. It’s also bad for your wallet. So how did this happen?

Our federal government’s romance with domestic sugar goes as far back as the country’s founding, with import tariffs on sugar in 1789. The US Sugar Program has been in existence since 1934, and Congress reaffirms the program in the farm bills it passes each year in the budget.

So who benefits from higher sugar prices? Sugar producers. Enter the Fanjuls.

Alfonso Fanjul Sr. was already one of the world’s most successful sugar barons in Cuba when Fidel Castro seized the family’s fortune in 1960. Like many others, the Fanjuls fled to Florida to escape the revolution in Cuba. Fanjul had already diverted assets to the US prior to the uprising of Castro and his comrades, and he was able to rebuild his sugar empire here in the US.

I admire Fanjul’s foresight and risk management skills in moving capital to the US prior to the communist takeover and his ability to rebuild. That’s one terrific capitalist. But the journey from capitalist to crony capitalist was a quick one. The US sugar program was already in effect, and the Fanjuls not only took advantage of it, but have been big political donors for decades, ensuring that the program stays alive. According to Bloomberg, Alfonso Fanjul and his brother Jose control Crystal Corp in Florida and the family’s wealth, which is spread around to politicians of all stripes, enhancing the Fanjuls’ influence in US sugar policy.

The pair have [sic] shared so much of their money with politicians over the years that it could be that “sugar, dollar for dollar, is the most influential commodity in the U.S.,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics and former deputy assistant secretary in the Treasury Department. As long as the brothers are around, “I would fall out of my chair at any approach that leads to a free market in sugar.”

Candy companies, whose products require a lot of sugar, aren’t especially pleased with US sugar policy. John Downs, president and CEO of the National Confectioners Association, recently penned an OpEd in the Orlando Sentinel pulling no punches:

The U.S. sugar program is a complicated tangle of price supports, market allotments, import quotas and government-guaranteed loans. The program artificially inflates sugar prices by limiting sugar imports and setting a guaranteed minimum price for sugar. Because of this, the U.S. has some of the highest sugar prices of any major market in the world.

In fact, our prices are so inflated that the program costs American consumers an extra $3.5 billion per year. And, while nearly every consumer and a large number of businesses are harmed by this outdated policy, only 14 sugar-producing corporations benefit.

Propping up the sugar-producing industry at the expense of consumers and businesses is the worst form of crony capitalism.

Since the Great Depression, wealthy sugar-cane and sugar-beet producers have recklessly wielded their political influence to the detriment of American consumers and hundreds of thousands of people employed by companies that include sugar as an ingredient in their products.

Although sugar production represents only a small portion of total U.S. farm output, the sugar-producing industry has contributed more to congressional campaigns than any other farm commodity. Put simply: The sugar program is analogous to price fixing in exchange for political donations that prop up a few billionaires and Washington insiders.

Downs goes on to say that the sugar subsidies result in a net deficit for American jobs, with three jobs lost for every job saved by the program, a loss about 132,000 jobs since 1997. He believes that if the antiquated programs were ended, America’s candy companies would add more jobs, and be a net positive for domestic production.

A few years ago, the famous jelly bean maker, Jelly Belly, opened a processing plant in Thailand so it could purchase sugar at market prices to serve the foreign market competitively. If we had market sugar prices domestically, perhaps we’d still be exporting Ronald Reagan’s favorite jelly beans.

The Fanjuls have entertained many political celebrities on their 7,000-acre Florida estate, including three former presidents and one former secretary of state, among others. It’s time for our politicians to decline such invitations, to rebuff the influence of donations, and to end the government program that costs the American consumer $3.5 billion per year.

The US sugar program is a trick on us and a treat for the sugar barons. Keep that in mind when you’re doling out candy to your neighborhood goblins this year.

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