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Eyes on the prize
Journal of Commerce / Oct. 7, 2002

By Larry Luxner

HAVANA — If and when the U.S. trade embargo agaisnt Cuba is lifted, the Caribbean island could again become a major customer of American products — with trade growing from virtually zero to hundreds of millions, if not billions, of dollars a year.

But even with the embargo, the opportunities for U.S. shipping companies in Cuba are better than at any time since Fidel Castro came to power 43 years ago.

That's the word from executives representing several dozen shipping lines, vessel owners, agents, forwarders and others participating in last month's U.S. Food & Agribusiness Exhibition in Havana.

"Cuba is an excellent market for the U.S. Gulf," said Clifton St. Pierre, vice-president of Barwil-Fillette, Green Ship Agencies of New Orleans. "We find Cuba to be of great interest."

Amy Miller, business development director for the Port of Pensacola, said her port did more business with Cuba than any other Gulf port prior to the 1959 revolution. The reason Cuba is on the radar screen again is the Trade Sanctions Reform and Export Enhancement Act of 2000, which allows U.S. producers to export food and agricultural commodities to Cuba on a cash-only basis.

Miller said paper products will be especially important to Pensacola, traditionally a breakbulk port, because lumber is classified as an agricultural product.

Since the devastation caused by Hurricane Michelle in November 2001, the Cuban government – through its food import agency Alimport – has purchased $140 million worth of U.S. food and agricultural products. While most of this has consisted of basic commodities such as wheat, flour, corn, soybeans and edible oils, U.S. branded products and processed foods are beginning to show up on Cuban supermarket shelves.

Brands that Alimport has requested include Jif peanut butter, Jell-O, Miracle-Whip, Kraft salad dressing, Philadelphia cream cheese, Kellogg's cereals, Crisco oil, Pop-Tarts, Spam luncheon meats, Pepsi and Coke.

Many of those products are already sold at hard-currency shops in Cuba, but they generally arrive through third countries. And that often results in outdated products, higher costs and delayed deliveries.

Under the trade sanctions reform act, food commodities may be exported directly to Cuba. the No. 1 supplier of such commodities has been Decatur, Ill.-based Archer Daniels Midland, which also happened to be the trade show's chief sponsor. Tony de Lio, a top international marketing executive at ADM, said his company has sold over $60 million worth of commodities to Cuba in the past 10 months.

Some of the other 287 entities participating in the unprecedented trade fair included Cargill, Riceland Foods, the Washington Apple Commission and Perdue Farms. the expo attracted more than 15,000 people, including Castro, who toured the exhibition and spoke with dozens of U.S. executives selling everything from California raisins to Wisconsin cheese.

Also at the event – ready with information booths, maps and leaflets – were the Georgia Ports Authority, Great Western Shipping, Mississippi Coast Foreign Trade Zone Inc. and the port authorities of Corpus Christi; Freeport, Texas; Jacksonville, Fla.; New Orleans and Pascagoula, Miss.

The shipping company that has benefitted the most from renewed U.S.-Cuban trade is Crowley Liner Services of Jacksonville, Fla.

Jay Brickman, vice-president of Crowley's Colombia, Mexico and Venezuela service, said Crowley now has three scheduled sailings a month to Havana from Gulfport, and two a month from Jacksonville. Since December 2001, Crowley has moved about 700 containerloads of cargo on 17 voyages to Cuba, generating over $1 million in revenues for the company.

Crowley, which transports 150 FEUs a month to Cuba, at the expo signed a $1.8 million deal with Alimport to extend its contract to December 2003. The contract was personally signed by Chief Executive Tom Crowley Jr. and Fidel Castro.

"We think the Cuban market is very important," said Brickman. "We've invested a lot of time developing the necessary infrastructure. We certainly hope that by next year, we'll have a break-even operation."

Brickman estimates that Crowley moves more than 90% of the containerized cargo going from the United States to Cuba, since "there's really no one else interested" in the market. He added that frozen chicken comprises around 70% of all such exports, with the remaining 30% consisting of other frozen commodities like turkeys, as well as fresh onions, garlic and apples.

Also at the Cuba trade fair was John D. McCown, chairman and CEO of Trailer Bridge. McCown says he hopes to replicate his company's success in penetrating the U.S.-Puerto Rico trade with Cuba.

"We have had Cuba on our radar screen for some time, and we realize that when it opens up, most particularly for shipping companies, there's going to be a rebuilding phase which will generate massive amounts of cargo," he said.

Trailer Bridge, with about 12% of the US-Puerto Rico trade, uses 53-foot containers on barges. That trade is worth around $750 million to the shipping industry, and consists of 300,000 FEUs a year, with an average cargo value of $35,000 to $40,000 per load. that comes to $12 billion worth of goods.

But McCown notes that Cuba's population is 2.5 times that of Puerto Rico, which generates 5,000 full loads of freight per week. "If we were to use this as a benchmark, if there's total open trade and Cuba develops to the point where their buying power is equivalent to that of Puerto Rico, this market could be pushing $2 billion a year in freight revenue," he said.

Trailer Bridge last year received a license to provide shipping services to Cuba. But it hasn't shipped anything to the Caribbean island yet because conditions must develop further, McCown said.

"Our focus is more down the road, when things open up," he said. "We'll only start when the volumes are significantly bigger. The business we're longing for is appliances, tires, furniture and toys."

When that will happen depends mainly on politicians. As long as Castro rules Cuba, the United States -- especially the Bush administration -- is unlikely to lift the embargo. But Castro is 76, and pressure is increasing on Congress to end the embargo, especially from lawmakers of farm states that stand to benefit from a resumption in trade between the two countries.

As Pensacola's Miller says, "Everyone here expects that it's a matter of when, not if."

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