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Cuba food expo nets $95m in contracts; U.S. firms say this is only the beginning
CubaNews / October 2002

By Larry Luxner

HAVANA -- They were only five months old, but Louise and Clarke — two female buffaloes from southern Minnesota — quickly became star attractions at last month’s U.S. Food & Agribusiness Exhibition in Havana.

Even so, the pair of baby bison — along with two beef cows, two milk cows, two sheep and two pigs — weren’t enough to upstage Cuban President Fidel Castro, who attended nearly every day of the Sept. 26-30 event at Havana’s sprawling Pabexpo convention center.

“You are making a very noble effort to overcome obstacles,” Castro told 850 executives at a banquet for 288 U.S. companies participating in the historic trade show. “Fortunately, we are neighbors, so it’s better that we be friends.”

Friendship aside, the exhibit generated $95 million in contracts between U.S. companies and Alimport, the sole entity authorized to purchase U.S. farm commodities on behalf of the Cuban government — a number likely to rise in coming weeks as more deals are finalized.

Some 20,000 Cubans attended the exhibition, most of them crowding the booths to sample everything from California raisins to Wisconsin cheese. Many left Pabexpo toting plastic shopping bags filled with Spam, Land o’ Lakes margarine, Wrigley’s chewing gum and other U.S. brands not sold in Cuba since the revolution.

“I believe it went exceedingly well,” said organizer Peter W. Nathan, who’s already planning to repeat the show in January 2004 and hold it concurrently with a U.S. health-care exhibition.

The Trade Sanctions Reform and Export Enhancement Act of 2000, one of the few loopholes in Washington’s 42-year-old embargo against Cuba, allows the Castro government to buy U.S. farm commodities on a cash-only basis to help feed its 11.2 million people.

Since Hurricane Michelle in November 2001, Cuba has used TSRA to buy $125 million worth of U.S. food — a number now expected to reach $210 million as a direct result of the show.

John Kavulich II, president of the U.S.-Cuba Trade and Economic Council Inc., said the $95 million in contracts was divvied up among 62 companies in 23 states and Puerto Rico, with 70% of all product deliveries to take place in the first quarter of 2003.

Yet 37% of Alimport’s shopping spree went to just two Midwestern farm conglomerates: Illinois-based Archer Daniels Midland (ADM), the official show sponsor, and Minneapolis-based Cargill Inc., one of several co-sponsors.

ADM won $18 million in Alimport contracts for nearly 99,000 metric tons of commodities, including the following: 35,000 tons of rice; 15,000 tons of corn; 20,000 tons each of soybeans and soybean meal; 5,000 tons of crude oil; 3,500 tons of edible oils, and 200 tons of citric acid, soy proteins and margarine.

Interestingly, Cuba now ranks 46th in U.S. agricultural purchases among 228 countries, up from 144th in 2001 and dead last in 2000.

To date, the island has sourced commodities from 34 states which collectively account for 81% of the membership of the House of Representatives and 68% of the Senate.

“Clearly, Alimport has indicated that they’re looking to sign as many new suppliers as possible,” said Tony de Lio, corporate VP for marketing at ADM, whose cumulative sales to Alimport have now surpassed $75 million. “Cuba’s agenda is to get the broadest possible support of U.S. business behind further reform that will make trading easier.”

ADM’s biggest rival, Cargill, scored $17 million in contracts during the food show, for 70,000 tons of soybean oil, soybean meal, corn, feed phosphate and meat products.

“Cuba’s food imports are estimated at $1 billion a year,” said Jim Bohlander, vice-president and general manager of Cargill Grain & Oilseed Supply Chain. “Obviously, as living standards improve, those numbers are going to be double or triple that.

“But things have to happen for that to occur. Under TSRA, financing isn’t allowed. In the majority of other markets, financing is a critical and key component. Right now, we have to deal with what is. You have to take a look at the creditworthiness of the customer when you’re making credit decisions, and so far, the Cubans have performed very well.”

Alimport’s president, Pedro Alvarez, says his agency could be spending $500 million a year on American agricultural commodities by 2005, with the United States eventually supplying 70% of Cuba’s imported food needs.

“The vast majority of the American public wants normal trading relations between our two countries,” said Alvarez. “In order for these relations to grow and develop, the existing restrictions must be repealed.”

While ADM and Cargill walked away with the biggest contracts, other deals between Alimport and U.S. firms exhibiting at the show included the following:

* $6 million to The Rice Company for an unspecified volume of milled and paddy rice.

* $5 million to Iowa-based FCStone for 15,000 tons each of corn and soybeans.

* $3.5 million to Riceland Foods (Stuttgart, Ark.) for 25,000 tons of milled and paddy rice.

* $1.5 million to Atlanta-based Louis Dreyfus for 3,000 tons of frozen chicken.

* $1.2 million to Radlo Foods (Watertown, Mass.) for 30 million eggs.

* $1 million to Marsh International Inc. (Indianapolis) for over 100 assorted Marsh-branded food products.

* $500,000 to North Carolina-based PS International for 5,300 to 8,000 tons of peas.

* $500,000 to Massachusetts-based Boston Agrex for 1,000 tons of frozen chicken.

* $150,000 to Sun-Maid Growers of Cali-fornia (Kingsburg, Calif.) for an “initial commitment” of 60 to 80 tons of raisins.

Most sales were considerably smaller. For example, Bluegrass Dairy & Food of Springfield, Ky., sold Alimport one container of lactose powder worth $10,000.

“We wanted to be there, meet some people and encourage open doors and opportunities for growth,” said general manager Jerry Hardin. “That was more than worth the trip.” Other exhibitors were less enthusiastic.

“We did not make any sales,” said Andy Thornton, national sales manager for Southern Pride Catfish in Greensboro, Ala. “We have a fish that may be higher in price per pound than what the majority of the Cuban marketplace is looking for.”

Said Grady Brown, president of Louisiana-based Panola Pepper Corp., which produces a line of hot sauces: “It was worthwhile, but I didn’t sign any contracts. I went down there half-blind, thinking the Cubans liked spicy foods, but they don’t.”

Shelly Shultz of Hormel Foods Corp. didn’t come back with any contracts either.

Nevertheless, Shultz said her company’s line of Spam luncheon meats was warmly embraced by the Cubans — especially older ones who remember Spam from the 1950s.

Dozens of exhibitors attended seminars on trademark protection and doing business in Cuba, but the media was barred from covering one particularly interesting session sponsored by BNP-Paribas on financial transactions with the Cuban government.

Contacted later by phone in Paris, Maha Chahine, one of three BNP-Paribas officials present at the seminar, told CubaNews: “We cannot give a copy of the presentation itself, either to you or to any U.S. exporter. For the time being, I have instructions to make exporters sign a confidentiality agreement before disclosing the presentation.”

Asked to explain the secrecy, Chahine said Paribas is worried that competing non-U.S. financial institutions might learn too much about BNP’s financing mechanisms.

At least one some exhibitor says he regrets having gone to Cuba at all.

“A lot of companies like ours came under false pretenses,” said Ivan Goldstein, president of Purity Products Inc. in Baltimore, which exports juices to the Caribbean.

“We came to Cuba with the anticipation that we’d be walking away with a lot of business,” he said. “The promoter [E.J. Krause & Associates of Bethesda, Md.] had insinuated there would be $180 million spent with U.S. companies at this event. Only half that was spent, and there were twice as many exhibitors as we were told there’d be.”

Contacted by CubaNews, an official at E.J. Krause said that any information he gave exhibitors came from Alimport, and that it’s not his company’s fault if more participants showed up than originally expected.

Even so, Goldstein said he wasted $16,000 bringing himself, other executives and various products to Havana. “I feel the government knew exactly what it wanted to buy before we ever set foot in Cuba,” he said.

Kavulich also had some complaints about the way things were handled at the show, reserving special wrath for James Cason, chief of the U.S. Interests Section in Havana.

He said Cason made “offensive remarks” about Cuba to reporters who were barred from a reception at the Hotel Meliá Cohiba.

Then, during a visit to Pabexpo, Cason told exhibitors to focus on cash-only deals rather than push for changes in U.S. law that would allow Cuba to finance food purchases.

“It was highly inappropriate for a U.S. diplomat to deliberately seek to poison an event that the U.S. government has specifically authorized,” Kavulich fumed. “Coupled with [U.S. Assistant Secretary of State Otto] Reich’s comments during the previous two weeks, this pretty much made Jim persona non grata.”

Despite repeated attempts to contact him, Cason, through his spokesman in Havana, declined to be interviewed by CubaNews.

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