CubaNews / November 2003
By Larry Luxner
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.
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.
Yet 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.”
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; recently, Iowa-based FCStone sold $8 million worth of corn and soybeans to Cuba.
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.
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.
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 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 (see box below).
On Oct. 15, Communist Party daily Granma reported that a national network of 2,388 farmers’ markets with prices fixed at the provincial level — on the basis of production and costs, and the absence of intermediaries — is being consolidated as an alternative to the private sector supply and demand markets, where prices are very high.
Prices at the state-run farmers’ markets are fixed by the Poder Popular, which makes a monthly calculation based on production estimates and the average costs of items being sold. There’s a top ceiling, but this can be lowered according to quality.
If the U.S. travel ban is lifted, Radlo told CubaNews, “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.”
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.
There’s little doubt that U.S. companies lost a valuable chance to market their commodities when the Bush administration cancelled a second agribusiness fair planned for January 2004 in Havana.
Peter Nathan, president of PWN Exhibicon International of Westport, Conn., was turned down in late June by the Treasury Depart-ment’s Office of Foreign Assets Control, which enforces the embargo.
Nathan successfully staged the U.S. Food & Agribusiness Exhibition at Havana’s Pabexpo last year. That five-day event was atended by 16,000 Cubans including Fidel Castro — and generated $92 million in sales for many of the 291 U.S. companies and state organizations participating in the historic event.
Following the denial, Nathan accused the White House of putting politics before U.S. interests, charging that OFAC has shown “a painful lack of understanding of commerce and the role of trade exhibitions.”
Responding to Nathan’s charges, Treasury spokesman Taylor Griffin told the Dallas Morning News:“It’s beside the point whether trade shows help or hurt commerce. This is really about Castro’s brutal oppression of his own people. You’re gonna round up dissidents, fine. You’re not going to get trade shows.”
That whole battle could soon become moot, said Kavulich, who helped Nathan put together last year’s event in Havana.
“Eventually they will issue the license,” he told us. “Cuba itself is a commodity, and its value is very low, and it’s unlikely to increase until after November of next year.”