U.S. Ships to Cuba Food... a Lot of Other Things
When President Obama announced plans in April to ease the embargo by lifting family-travel restrictions to the island and allowing U.S. telecommunications firms wide latitude to do business there, many analysts said the policy changes could significantly expand ties between the estranged neighbors -- assuming Havana responds positively to the overture.
But fairly significant commerce has been going on since the Trade Sanctions Reform and Enhancement Act of 2000 opened the door to U.S. food and medicine exports to Cuba -- despite the tense relationship between Havana and Washington and a trade embargo that has spanned nearly 50 years.
U.S. agricultural exports to Cuba hit a record $711.5 million in 2008, as prices for commodities soared. That makes the United States Cuba's fifth-largest trading partner overall.
"We are the natural provider of food and agriculture products to Cuba," says Kirby Jones, president of Alamar Associates, a consulting firm for U.S. companies aspiring to trade with Cuba. "We're No. 1 and could be selling a lot more, were it not for the restrictions."
Over the past nine years, Cuba, which imports 80 percent of its food, has come to rely heavily on its nemesis to the north for wheat, corn, soy goods and scores of other key agricultural products.
American companies provide two-thirds of Cuba's imported chicken and more than 40 percent of its pork imports. Utility poles, organic fertilizer and chewing gum also make their way in.
Not much medicine has been shipped, however, since Cuba has other options.
CASH FLOWS FROM U.S.
Much has changed since President John F. Kennedy imposed a total economic embargo of Cuba in 1962, making it illegal for Americans to spend any money in Cuba or trade with Havana.
The chinks began when some travel restrictions were lifted in the late 1970s, and through the years there has been a tightening and loosening of the embargo as administrations change in Washington.
In recent years, Cuba has raked in U.S. dollars in a host of other ways, too:
• The Castro government charges a 10 percent fee to exchange greenbacks for convertible pesos, or CUCs, used by Cuban Americans and other visitors, and there's another 10 percent hit due to the unfavorable exchange rate given by money changers.
• Cuba also gets millions of dollars -- perhaps hundreds of millions -- in fees from U.S. telecommunications companies that already provide long-distance service to the island through third countries.
• When Cuban Americans make trips to Cuba, they generally travel heavy, lugging an estimated $3,000 to $5,000 in goods for family and friends. If just half of the 200,000 Cuban travelers expected this year carried even the low end, or $3,000 worth, that would amount to $300 million of clothing, electronics and household gadgets winding up in Cuba in 2009 alone. These travelers also are allowed to spend up to $179 per day while in Cuba, according to U.S. regulations.
• Cuba's airport-related fees levied on U.S. air-charter companies average $120 per passenger, according to charter officials, which would bring in some $12 million for the 100,000 U.S. visitors last year and possibly double that amount this year.
• And money sent by individual Cuban Americans to help family members amounts to an estimated $400 to $800 million a year, according to a 2004 study by the Commission for Assistance to a Free Cuba, which noted some estimates put U.S. remittances as high as $1 billion a year.
Even with all major portions of the embargo still in place, such commercial ties between the United States and Cuba could easily exceed $2 billion a year.
Meanwhile, a series of intentional hurdles reflects the U.S. government's conflicted attitude toward dealing with the communist regime that has outlived nine U.S. presidents.
The cash-strapped island must pay in advance for U.S. goods, and with no banking ties between two nations, Cuba has to pay through a bank in a third country, typically France.
U.S. exporters need clearance from the Office of Foreign Assets Control and the Commerce Department's Bureau of Industry and Security. Cargo ships carrying goods from the United States must go directly to Cuba before visiting any other nations, and they are forbidden from picking up anything to haul elsewhere. Cuban food inspectors often can't get visas to visit U.S. facilities.
And the trade remains a one-way street. Virtually nothing can be imported to the United States from Cuba, with the exception of artwork, printed materials and recordings. Last year, that came to a grand total of $39,126.
That gives Cuba the curious distinction of helping the United States with its chronic balance of trade deficit, albeit in a token fashion.
The obstacles to Cuba trade have tipped the scales in favor of agribusiness Goliaths like Cargill, Archer Daniels Midland and Tyson Foods.
For American businesses, there is only one customer in Cuba: Alimport, the government agency that coordinates purchases from the United States.
Small and mid-sized exporters are often spooked by the maze of regulations and the opaque process of selling to Cuba. More than a few would-be exporters have ventured to Havana trade fairs only to come home empty-handed.
"People [looking to export to Cuba] get discouraged," says Jay Brickman, vice president of government services at Crowley Maritime Corp. He travels frequently to Cuba for his company, which sends a cargo ship with chicken and other agricultural products to Havana from Port Everglades every week.
"They confuse being nicely received by the Cubans with the idea they're going to get business. Cuba is limited [in its ability to buy imports], and they're price-conscious. You almost have to have a certain passion to really want to be there," he said.
Some U.S. business executives imagine big opportunities in an untapped market. Others are drawn to the forbidden fruit.
Naples businessman John Parke Wright IV shipped beef cattle to Cuba from Port Everglades three years ago and flew to Havana to shepherd his herd from the dock.
Last year, Wright, a member of the Lykes family that owned vast agricultural lands in Cuba before they were seized in the revolution, exported 2,500 straws of Brahman bull semen from the J.D. Hudgins ranch in Hungerford, Texas, to impregnate Cuban heifers.
Now he's negotiating more cattle deals for Florida and Alabama Brangus cattle and semen. Wright, who has been making frequent visits to Cuba for nearly a decade, sees big potential for agricultural development on the island, in keeping with President Raúl Castro's recent call to the Cuban people to work the land. "There was and there is another Florida there in the land mass and agricultural potential," says Wright.
But many others have called it quits after a few sales. Independent Meats shipped some goods about a year and a half ago, but decided its Idaho location is too far west to compete with other U.S. suppliers.
"It just didn't make a lot of sense for us," said Independent Chief Executive Patrick Florence.
Cuba, meanwhile, has spread out its purchases among as many U.S. states as it practically can in hopes of drumming up support in Congress for an end to the embargo.
And yet, this year, U.S. exports will likely trail 2008 as Cuba struggles with severe financial problems that limit its ability to pay for foreign goods..
CUBA'S CREDIT WOES
Some experts believe Cuba is facing its biggest challenges since the early 1990s, when the collapse of the Soviet Union left Fidel Castro scrambling for support in a changed world.
Just as poor families do, the Cuban government often makes purchases based on access to credit. That leaves U.S. businesses at a disadvantage, since transactions must be in cash.
U.S.-grown rice, especially the long-grain style favored in many recipes, was a huge hit with Cubans until 2005, when the Bush administration changed the meaning of cash in advance to mean payment before a product leaves U.S. shores -- instead of when it arrives in port in Cuba.
Since that tightening of policy -- which is expected to be reversed under provisions in the 2009 omnibus appropriations bill -- U.S. rice exports to the island have plunged. Cuba has relied more on Vietnam, which is thousands of miles away and sometimes delivers broken rice but provides generous credit.
Some argue, however, that the cash-in-advance rule is a blessing in disguise for American companies, because it ensures that they get paid.
"Cuba generally doesn't pay on time," says John Kavulich, senior policy advisor for the nonprofit U.S.-Cuba Trade and Economic Council. "And sometimes it doesn't pay at all."
Source: Miami Herald