CASHING IN ON CUBA
AT LONG LAST, AGRICULTURAL SALES TO OUR NEAREST ISLAND NEIGHBOR LOOK PROMISING
, by Linda L. Leake, Contributing Editor
Turn back the clock five memorable decades and picture post-World War II Americans gathered in front of the burgeoning media phenomenon, the family TV. Capturing viewers' attention and their hearts is an irrepressible, wide-eyed redhead who's married to a dashing Latin band leader.
When "I Love Lucy" debuted on Oct. 15, 1951, millions of baby boomers were first introduced to the largest island in the crystal-blue Caribbean Sea. That's because, as the enduring story line goes, Lucille Ball's character, Lucille McGillicuty, had met Desi Arnaz's Ricky Ricardo while vacationing in his homeland, Cuba. Thanks to the positive image generated by the stars' legendary show, it was easy for an impressionable young audience to fantasize: imagine the thrill of visiting a seemingly lush tropical island teeming with romance, rum and the captivating sound of Conga drums.
During that more innocent time, the majority of "Lucy" show aficionados were undoubtedly more tuned in to the weekly adventures of the Ricardos and their best friends, the Mertz's, than they were to Cuba's equally eventful political scene.
Lucy, Ricky, Fred and Ethel were the household names in this country, not a colorful Cuban character named Fulgencio Batista. A former military general, Batista had been elected Cuba's 14th president in 1940. In 1943 he legalized the country's communist party, which had been formed in Cuba in 1925.
On Oct. 10, 1952, with all the drama of a Hollywood production, Batista stages a coup, cancels the presidential election, suspends the constitution and becomes Cuba's first dictator.
In response to Batista's increasing force to maintain order and control, organized insurrections become more frequent and revolutionary groups pop up all over the country.
A young cigar-smoking rebel named Fidel Castro survives guerrilla warfare against Batista, imprisonment, a trial and exile to Mexico to eventually rise victorious as Cuba's leader on Feb. 13, 1959, at the age of 33.
Castro wastes no time implementing repressive and anti-American policies, including the expropriation of Americans and their property in Cuba, and the alignment of Cuba with the Soviet bloc. In response to Castro's actions, on Oct. 19, 1960, President 'isenhower establishes a partial embargo against Cuba, which becomes a total embargo 16 months later under President Kennedy. In 1963, Kennedy also makes it illegal for almost all Americans to travel to Cuba.
The bottom line: Cuban markets for U.S. agricultural products are off limits until further notice.
Now fast-forward nearly forty years: At long last, the situation improves.
OPENING THE GATE
In January 1999, President Clinton announced several new initiatives toward Cuba, including allowing the sale of food to private, non-governmental Cuban entities.
In the 106th U.S. Congress, 1999-2000, members proposed legislation to both reduce and increase sanctions against Cuba. The Trade Sanctions Reform and Export Enhancement Act (TSRA), signed into law by Clinton in October 2000, re-authorized the direct commercial export of food and agricultural products from the United States to the Republic of Cuba, irrespective of purpose. However, the law prohibits any public or private U.S. financing of such exports; rather, all sales conducted under the TSRA must be on a cash basis. (TSRA does permit third-country financing, as well as financing by foreign subsidies of U.S. financial institutions.)
The first contracts under provisions of the TSRA were signed in November 2001, according to John Kavulich, president of the New York-based U.S.-Cuba Trade and Economic Council (USCTEC).
Since then, approximately 650,000 metric tons of agricultural commodities and food products have been contracted from more than 40 U.S.-based companies by Cuba's Empresa Cubana Importadora de Alimentos (Alimport). These products have been sourced from some 30 states, Kavulich says.
A government-owned purchasing agency operating under the country's Ministry of Foreign Trade, Alimport is Cuba's exclusive contracting representative for products delivered directly from the U.S.
Since December 2001, the total market value of the agricultural commodities purchased, contracted, or confirmed as having intention to contract by Alimport, with delivery from December 2001 through September 2002, is approximately $109 million, Kavulich reports.
Not bad for our island neighbor that ranked 138th in 2001 and 180th - dead last - in 2000. If Alimport purchases its predicted $260 million in 2003, Cuba could rank 33rd.
As we go to press, some 256 companies, organizations and government offices from at least 34 states and the Commonwealth of Puerto Rico have reserved booths for the U.S. Food & Agribusiness Exposition, scheduled for September 26-30 in Havana, Cuba. This event is the first and only exposition specifically licensed by the U.S. Department of the Treasury's Office of Foreign Assets Control for representatives of U.S.- based entities to visit Cuba and market agricul-tural products.
Archer Daniels Midland (ADM), Decatur, Ill., is the primary sponsor of the landmark Expo, according to Tony DeLio, ADM's vice president of marketing and external affairs.
"The Expo is the first opportunity most U.S. suppliers have to really showcase their value-added products," DeLio says. "Sales generated during the Expo should have a major impact on improving the quality of food available in Cuba."
Having visited Cuba four times, DeLio has seen first-hand that there are three ways to acquire groceries there. These include, he says, government rations of commodities such as rice and beans; peso stores, which are similar to U.S. farmer's markets; and dollar stores, which include some imported products, mostly of inferior quality, and where all sales are in U.S. currency.
The U.S. is attractive to Cuba as a supplier of ag products for three primary reasons, DeLio says. "We have the most economically efficient production system in the world, so we can offer very competitive prices," he begins. "Logistically, we are much closer to Cuba than most of the island's primary trade partners, so our shipping costs are significantly reduced. And because of the shorter distance, we offer a lower turnaround time than most other countries. For example, it generally takes an extra six to seven days for cargo to arrive from many European ports than it does from the U.S."
FARM BUREAU'S STANCE
Representing more than five million U.S. farm families, the American Farm Bureau Federation (AFBF), Park Ridge, Ill., is both enthusiastic and explicit about trade opportunities with Cuba, according to AFBF senior economist John Skorburg.
Since the TSRA was enacted, AFBF delegations from six states - Arkansas, Illinois, Michigan, Minnesota, South Dakota and Texas - have visited Cuba, as has the AFBF Trade Advisory Committee. The North Dakota Farm Bureau is a scheduled participant in the U.S. Food & Agribusiness Expo.
"We support opening negotiations to resume normal trade relations with Cuba," Skorburg says.
"Cuba imports around $4 billion in goods per year from countries other than the United States," Skorburg points out. "Of this amount, 20 to 25 percent is agricultural commodities approaching $1 billion in value. Prior to the 1960s embargo, the U.S. had 75 to 80 percent of this market."
Moreover, according to a recent study entitled Economic Impacts of U.S. Agricultural Exports to Cuba, if the U.S. pursues expanded trade, investment and tourism with Cuba, it is reasonable to expect that, under optimum conditions, U.S. ag exports could approach $500 million to $1.2 billion annually. Published in October 2001, the 52-page research report was prepared by Texas A&M University ag economists Parr Rosson and Flynn Adcock, under contract for the Cuba Policy Foundation.
"Substantial political and economic changes will have to occur before this ideal can be attained," USCTEC's Kavulich emphasizes, "and it will take five to 10 years after complete normalization of our relationship with Cuba."
"What is significant right now is that the actual current $109 million exports to Cuba have exceeded the study's low-level projections of $37.5 million," Rosson says.
"While $1.2 billion would be a relatively small share of annual total U.S. exports of $55 billion, it would have a substantial economic impact on the states that produce, handle, ship, process and market products destined for Cuba," Rosson relates.
What's more, he adds, potential U.S. investment and exports of fertilizer, herbicides, pesticides and farm machinery to Cuba could exceed $250 million annually.
If free trade were to open with Cuba, the number of U.S. tourists visiting the island would increase from 60,000 annually to one million within a couple years, Rosson predicts.
"That would mean more U.S. dollars on the island and lead to an increase in Cuban gross domestic product," he says, noting that Americans would likely spend about $250 million on food at hotels and restaurants during their travels to Cuba, which would, of course, be purchased from part of the total $1.2 billion worth of ag products the U.S. exports there.
Today Cuban workers typically earn 250 to 500 pesos per month, the equivalent of just $10 to $20, AFBF's Skorburg says. "It's not uncommon for Cuban doctors to supplement their $75 monthly earnings by moonlighting as cab drivers, waiters and hotel maids, " he says. "In tourist venues, they can garner an additional $250 monthly in tips, all in American dollars."
Wages might sound grim, but housing, education and health care are free, plus food and utilities are subsidized by the government in Cuba, Kavulich notes.
The win/win potential is great relative to trading with Cuba, Skorburg believes. However, the obstructions are many.
Without a license from the U.S. Treasury Department's Office of Foreign Assets Control, direct travel from the U.S. to Cuba is still prohibited. Cuba lacks a political system based on open and free elections and a legal system that protects the right to own and use private property.
Lack of information and inaccurate information are two of the greatest challenges the U.S. business community must overcome in order to understand and deal effectively with the Republic of Cuba, Kavulich says.
"Cuba should be evaluated like every other market for U.S. exports," he advises, "but companies need to look through the rhetoric in both the U.S. and Cuba to clearly evaluate the commercial opportunities."
The reality is that commercial, economic and political relations between the U.S. and Cuba will be redefined; they will reemerge and reconnect, Kavulich predicts.
"It's not a matter of 'if', but 'over what duration of time?'" he notes. "Since November 2001, all of our country's focus relative to Cuba has been in the area of commerce, rather than on human, cultural or political issues. I believe that trend will continue for the foreseeable future."
Earlier this year, Secretary of State Colin Powell testified before Congress that the Bush administration would neither promote nor discourage neutral sales to Cuba under the TSRA. He further stated the administration would not stand in the way of U.S. entities wanting to do business with Cuba, and was, in fact, pleased that U.S. companies were soliciting business with Cuba.
Tommy Irvin, Georgia's commissioner of agriculture, considers the administration's recent stand on U.S./Cuban relations a positive step.
"Our government is the only barricade standing in the way of free trade with Cuba," Irvin emphasizes. "It's time to liberate the Cuban people, and let them see how democracy and a free enterprise system can improve their lives. Since Castro has been in power for 43 years, there are two generations of Cubans that don't know anything about freedom."
A major focus during Irvin's 34-year tenure in office has been opening world markets to Georgia's farmers. In addition to leading a fact-finding mission to Cuba with a group of Georgia agribusiness leaders in October 2000, Irvin sent his key international trade staff to the island last September, and he was a featured speaker at the January 2002 U.S.-Cuba Business Conference in Cancun, Mexico. Irvin and some 15 Georgia agribusinesses are scheduled participants in the U.S. Food & Agribusiness Exposition.
"Cubans are friendly toward Americans, and their government leaders are anxious to do business with the U.S," Irvin says. "Agricultural trade can do more to cement our relationship with Cuba than any other tools we have." AM
Free-lance journalist Linda L. Leake follows U.S./Cuban relations from her home base in Wilmington, N.C.