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HAVANA, Feb 22 (Reuters) - Cuba will only jump on the ethanol bandwagon if it can produce the biofuel from sugar cane as a by-product that does not affect its sugar output, local experts said on Friday.
Fidel Castro's retirement this week fueled speculation that ethanol could become a billion-dollar export industry for the cash-strapped communist country under his brother Raul Castro.
The younger Castro, who is expected to be confirmed as Cuba's new leader on Sunday, is considered less ideological and more pragmatic than his brother, and has indicated an interest in drawing more foreign investment in recent speeches.
But Fidel Castro is expected to retain huge influence in Cuba and he has repeatedly branded the use of food crops to produce fuel as a crime against humanity because rising prices will increase hunger.
A local economist with ties to the sugar industry said Cuba is working to develop technology to produce fuel from milled sugar cane bagasse. If successful, Cuba could become more interested in making ethanol, he said.
"It is inconceivable while Fidel is still alive that his brother Raul, or anyone else, would convert a significant proportion of our sugar crop or vacant land to ethanol," the economist said, asking not to be identified.
"Even after Fidel dies, I can't imagine that happening for quite some time," he said.
Currently, ethanol is obtained from sugar cane juice and cannot be made from bagasse, but new research is focusing on cellulose technology that could make this possible.
Cuba was once the world's largest sugar exporter. In 1990, it produced 8 million tonnes of raw sugar. But the fall of the Soviet Union, low prices and bad management left the industry in ruins. The 2006-2007 harvest was just 1.2 million tonnes.
Sugar is no longer a major export earner and Cuba, in fact, has been importing about 200,000 tonnes a year of low grade whites to cover domestic consumption.
Ronald Soligo, an energy economist at Rice University in Houston, said Cuba could produce about 1.6 billion gallons of ethanol annually if it returned to sugar cane yields prevalent when the Soviet Union was buying its sugar at inflated prices.
At that time, in the 1980s, yields were 55 tons per hectare, but have fallen to 22 tons, he said in Miami at a Florida International University conference on Cuba.
"It appears that sugar cane ethanol really is an opportunity for Cuba to supplement, replace some of its imported fuel and maybe even to export ethanol," he said.
Some experts believe Cuba could become the world's third ethanol producer after the United States and Brazil, but that would require huge investments, not just to improve its cane harvests, but also to finance the research and construction of distilleries.
The government, however, has been reluctant to allow foreign companies to administer farms, a precondition for any business wanting to invest in agriculture in Cuba.
There are only a few minor joint-ventures in the sector, though in a recent interview Anaiza Rodriguez, a senior official at the foreign investment and cooperation ministry, hinted that could change.
"We are analyzing how to increase investment in the sector with the goal of substituting imports," she said, making no mention of ethanol.
Cuba has said it plans to modernize some of the 17 alcohol and ethanol distilleries in the country, but they produce small amounts for non-fuel usage, mainly to blend into distilled rum and for the pharmaceutical industry. (Additional reporting by Jeff Franks in Miami, editing by Anthony Boadle)