U.S. Sales Ignite Dominican Republic's Cigar Industry

SANTIAGO, Dominican Republic - In a city that exports more handmade cigars than Cuba, it's virtually illegal to buy a quality smoke. In the world capital of premium cigar-making, there's not a single cigar store.

Such paradoxes, oddly enough, do not worry cigar-makers in this pleasantly provincial city of 900,000 people, where many street addresses are as simple as "next to the BAMBUSA factory."

Santiago's cigar industry, developed in part with the help of Cuban tobacco masters since the 1960s, is surfing the crest of a boom in U.S. sales beyond almost everyone's wildest dreams.

Wholesale buyers from Miami to Seattle rub elbows at the city's lone upscale hotel. Factories work nights and weekends. Everyone is training young cigar rollers. There's even a shortage of cigar boxes.

Indeed, premium hand-rolled cigars that retail for $3 to $7 in Miami are catching up to professional baseball players as the Dominican Republic's best-known exports to the United States.

"If with some magic wand I could double production right now, we still could not meet demand," said Cuban-born Benjamin Menendez of General Cigar, which makes Partagas and Macanudo cigars.

Ironically, the boom is almost imperceptible in Santiago because most of the 19 cigar factories are in duty-free industrial parks, producing for export and legally banned from selling locally.

Ask a hotel concierge for the best place to buy cigars and you're sent to a small supermarket in the old heart of the city, with a poor selection of national-market cigars that barely fills a four-foot shelf.

This is in a city that in 1995 exported some 65 million premium cigars, more than Cuba's estimated 55 million to 59 million cigars and a bit more than one-third of the United States' total premium-cigar sales last year.

This, in a city that turns out more top-shelf cigars than Nicaragua and Honduras combined, in a valley that produces the only wrapper leaves rated by some experts as close to and perhaps even better than Cuban wrappers.

U.S. sales feed bonanza

It has been an almost inconceivable bonanza, fueled almost single-handedly by an explosion of U.S. cigar sales from about 100 million in 1992 to some 175 million last year.

Carlos Fuente Jr., 42, a fourth-generation Cuban cigar-maker whose family firm, A. Fuente, is Santiago's largest manufacturer, saw exports soar from 18 million in 1992 to 28 million in 1995.

"I can honestly say I am shocked," said Fuente, who is expecting to ship 32 million cigars this year. He is expanding from three to four factories this year, and his payroll has gone from 1,000 to 1,600 since 1993.

Eight smallish factories have opened since 1992 - four of them by Cubans from Miami or Honduras - joining four other small plants and the "Big Seven" that dominate the market with brands such as Partagas, Davidoff, Romeo y Julieta, Juan Clemente, Leon Jimenez and H. Upmann.

General Cigars has added 300 cigar rollers who can make about 25 cigars an hour and is training 65 more, said Menendez, 60, whose family in Cuba manufactured the H. Upmann and Montecristo brands.

And Rafael Schott, who started a cigar-box factory in his back yard, using a tarp to shade his workers and moving machinery into his garage when it rained, went from 21 to 50 employees in the past three years.

The cigar boom has had little impact on the look and feel of Santiago, where total employment in the still largely handmade cigar-making industry is estimated at 5,000 - and dwarfed by the 44,000 workers in duty-free parks.

But it has had a powerful impact on the surrounding countryside, where tens of thousands of peasants grow tobacco for cigars and cigarettes or harvest the leaves and then dry, sort and ferment them.

"Five or six years ago a lot of our workers were poor peasants," said Hendrick Kelner, manufacturer of Davidoff cigars. "Now, to be a cigar-maker is something, a source of pride and money for a family."

An expert cigar-maker can earn around $330 per month, a good income in a country where the average salary hovers around $225 per month and where an estimated 30 percent of the labor force has no permanent job.

Good conditions, and timing

Experts say the Cibao valley that surrounds Santiago has good soil and perfect climate for tobacco: high humidity, steady rains, little wind during the growing season, and low humidity, no rain and steady breezes during the drying season.

But it was really accidents of history and economics that turned Santiago and the Dominican Republic, a nation with a minuscule domestic-cigar market, into the world capital of stogie-making.

After the U.S. government clamped a trade embargo on Cuba in the 1960s, most of the big Cuban cigar-makers moved to Spain and Nicaragua because of those countries' trained and low-salaried cigar-makers.

Dominicans increased tobacco production to fill the Cuban vacuum but exported the leaves to Nicaragua and Spain and did not step up cigar-making. A few Cuban cigar families moved here in the 1960s, but mostly established tobacco wholesaling operations.

But then Nicaragua sank into civil war in 1978 and Spain raised taxes and salaries after Generalissimo Francisco Franco's death in 1975. And the Dominican government began creating duty-free industrial parks to attract manufacturing jobs.

The result was the move to the Dominican Republic of several big cigar manufacturers from Nicaragua, Spain and Tampa, Fla., who found almost ideal conditions.

From the duty-free parks, they could import leaves such as Connecticut wrapper and Nicaraguan filler without paying duties.

Many of the factory owners, especially those of Cuban descent, also found an easygoing nation where they felt almost totally at home with the people, food and music.

"My dad always wanted to move here because it reminded him of Cuba," said Fuente, whose Cuban ancestors began making cigars in Tampa in 1912. The family lost a factory to civil war in Nicaragua and another to a fire in Honduras before moving to Santiago in 1980.

(Copyright 1996, Knight-Ridder Newspapers)