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Despite tensions, U.S. food sales to Cuba keep climbing
The San Juan Star / December 17, 2003

By Larry Luxner

HAVANA — Corn from Iowa, cattle from Florida, rice from Texas and apples from Washington state — these are just a few of the farm commodities eagerly being snapped up by the Cuban government in an expensive and calculated effort to influence members of Congress to lift the embargo.

Thanks to the Trade Sanctions Reform and Export Enhancement Act of 2000 (known in business circles as TSRA), Cuba has become an important customer for everything from cereals to soybeans. The United States now accounts for 25% of Cuba’s total food imports — up from virtually zero two years ago.

Negotiations for further trade are underway in Havana, where several Puerto Rico firms are among the 256 U.S. businesses represented.

The first U.S. agricultural sales to Cuba began in December 2001, after the island’s main crops were devastated by Hurricane Michelle. Under TSRA, the Cuban government must pay cash for all U.S. purchases.

While that restricts sales, it also offers U.S. exporters a virtual guarantee that they’ll be paid for their products — a luxury denied Canadian and European rivals, some of which have waited for years to get paid by Cuba.

"Cuba has to pay this food in cash. But so far, the banks aren't complaining because they have always been reimbursed on time," said Sven Kuhn von Burgsdorff, the European Union's top-ranking diplomat in Havana.

According to European diplomats, the problem is that the Cubans have problems honoring their public debt to European countries.

Jaime Suchlicki, director of the University of Miami’s Cuba Transition Project, calls TSRA “an attempt to undermine the embargo.” He recently told the Chicago Tribune that U.S. food sales to Cuba are “politically as well as economically motivated.”

In fact, 36 of the 47 companies that won deals at last month's Havana International Fair were U.S. firms, according to Cuban food purchasing agency Alimport.

Pedro Alvarez, president of Alimport, said it signed contracts valued at $164.9 million during the show; that figure includes insurance, shipping and related fees.

One of the largest deals, according to the Wall Street Journal, was an $18.6 million contract for soybeans, soy oil, soy flour and corn from Archer Daniels Midland of Decatur, Ill. Minneapolis-based Cargill won a $4 million deal to supply wheat and soy protein. Iowa-based FC Stone LLC, representing 750 U.S. farm cooperatives, signed a deal for $4 million in soybeans, while Michael J. Lahanan of Jacksonville won a $5.5 million contract for yellow pine timber.

Also signed were three chicken deals; $5.8 million with Louis Dreyfus Group; $5.8 million with Tyson Foods of Springdale, Ark. and $1.3 million with AJC International of Atlanta.

Smaller contracts went to Y&Y Agriculture Corp. of Savannah ($350,000 worth of soy-based ice-cream); Dallas-based Dean Foods ($162,470 of coffee creamer); Langdale International Trading of Valdosta, Ga. ($135,000 of wood); Cadbury-Adams of New Jersey ($163,300 of chewing gum) and Illinois-based ConAgra Foods ($76,200 in meat products).

In the two years since TSRA’s passage, the United States has exported food commodities worth $554 million, according to Alvarez. By year’s end, that figure could top $600 million.

During the trade show, Alimport signed a shipping agreement with Port Manatee, on Florida’s Gulf of Mexico coast. The first shipment of 250 beef cattle to Cuba from Florida will sail early next year from Port Manatee, said the port’s chairman, Joe McClash.

Despite Florida’s large Cuban-American exile community and their hostility to the Castro regime, more Florida executives were at the show than from any other U.S. state.

Last year, U.S. companies sold 875,000 metric tons of agricultural products worth $138.6 million to Alimport; these products were sourced from 34 states and delivered to Cuba aboard 83 vessels and three cargo aircraft.

A top Cuban official, Angel Delmau, admitted that Cuba's strategy was politically motivated in a surprisingly candid interview last month with Agence France-Presse. He told AFP that Alimport’s purchases were more about influencing domestic U.S. politics than saving Cuba money.

Yet the very next day, an “official note” appeared on the front page of Communist Party daily Granma.

“We would like to clarify that this functionary, although acting in good faith, was not authorized to make declarations of this type about the subject in question,” said Granma, adding that Dalmau “did not correctly interpret the objectives of the government” in buying U.S. food commodities.

It wasn’t clear at press time how the Castro government plans to punish Dalmau for telling the truth.

Politics or not, Cuba now ranks as the 16th-largest overseas buyer of U.S. corn, according to the Iowa Corn Promotion Board. In the past 12 months, Cuban purchasing agency Alimport has bought 11 million bushels of U.S. corn.

Meanwhile, the Indiana Farm Bureau has vowed to work for the repeal of trade and travel sanctions against Havana, in return for a Cuban pledge to buy $15 million worth of pork, soybeans, corn, poultry, eggs and cattle.

A total lifting of the trade embargo could easily double or triple U.S. food sales to Cuba, since experts predict that American suppliers would quickly grab 60% or more of Cuba’s annual $1 billion food import bill.

Despite worsening tensions between Washington and Havana, the trend has shown no sign of slowing down; in fact, U.S. food exports to Cuba are soaring.

During the first eight months of this year, U.S. companies shipped $139.1 million worth of food commodities to Alimport — a 50% jump over the same period a year ago. That’s according to John Kavulich, president of the U.S.-Cuba Trade and Economic Council.

“U.S. commodity prices continue to be good,” Kavulich told the monthly business newsletter CubaNews. “And with the events of earlier this year — the arrests, the convictions and the executions — the Cuban government has only one remaining effective lobbying tool, and that is the purchase of food under TSRA.”

Kavulich explained: “If the Cubans reduce or eliminate those purchases, they extinguish the last remaining constituency in the U.S. seeking a change in U.S. policy. So the business community is somewhat insulated, because the Cubans have no alternative.”

One company alone, Archer Daniels Midland (ADM) of Decatur, Ill., accounts for nearly half of all U.S. food exports to Cuba.

Tony DeLio, former vice-president of marketing and public relations at ADM, was quoted by the Tribune as saying: “We are always concerned when there is a lack of freedom. But as a company, our ability to affect that, and where we can help bring about change, is through trade.”

Dave Radlo, president of Radlo Foods LLC in Watertown, Mass., said he’s sold four million dozen eggs to Alimport for just over $2 million, thanks to TSRA.

Those eggs sell for $1.44 a dozen in Cuba’s dollar stores, and considerably less in the peso markets, which supply the commodities that Cubans are entitled to as part of their monthly rations.

If the U.S. travel ban is lifted, Radlo said “it would be good for everybody involved. We’d sell more eggs, and there would be more money to buy eggs. Tourists love to have eggs for breakfast.”

Other companies are less keen to do business with Castro — especially after President Bush’s Oct. 10 speech announcing a crackdown on illegal travel to Cuba by U.S. citizens.

In fact, said Kavulich, “about 10 very large, well-known branded U.S. food companies have decided to put on hold indefinitely their exploration of opportunities in Cuba. They simply didn’t want to expose themselves to potential political fallout.”

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