CubaNews / January 2007
By Larry Luxner
Relations between the United States and Cuba have never been worse — but that’s hardly dampened the island’s ravenous appetite for American food products.
In 2006, state-run purchasing agency Alimport says it contracted for just over 1.4 million metric tons of U.S. agricultural commodities worth $544.1 million. That was up slightly from the $540.9 million Alimport spent on 2005 purchases from U.S. suppliers, even though volume dropped from the 1.8 million tons of food commodities shipped in 2005.
It should be noted that not everyone accepts Alimport’s numbers. John Kavulich of the U.S.-Cuba Trade and Economic Council Inc., quoting U.S. Commerce Department and USDA figures, says 2005 U.S. food exports to Cuba came to only $350.2 million, down 11% from 2004 sales.
Yet if Alimport’s figures are to be believed, the obvious conclusion is that in every year since passage of the Trade Sanctions and Reform Export Enhancement Act (TSRA) — a loophole which authorizes such exports in the first place — Cuba’s purchases from the United States have gone up.
And it’s not just food the Cubans are buying.
Utility poles — because they’re made of wood — qualify as an agricultural export under TSRA rules. In the last eight months, around 30,000 of them have been shipped to Cuba, 99% of them from Alabama (see our interview with Alabama Agriculture Commissioner Ron Sparks, page 8).
Likewise, Alimport CEO Pedro Alvarez says his agency has purchased $37 million worth of U.S. paper products since TSRA’s passage more than six years ago.
But grains still dominate U.S. exports to Cuba, the most important being wheat ($402.7 million in 2006 exports) and yellow corn ($368.5 million). Other leading commodities include chicken; milled and paddy rice; soybean meal; soybeans; milk powder; refined soybean oil; peas, chickpeas and lentils; animal feed; beans and supermarket products.
One reason Cuba is buying more U.S. food — despite the Bush administration’s ever-increasing hostility toward Havana — is that it has more money to spend.
With a GDP growing at 12.5%, thanks to Venezuelan oil and record-high prices for nickel and other export commodities, Cuba’s economy is in better shape than at any time since TSRA was passed by Congress in 2000.
But that’s not the only reason.
“People are getting used to dealing with the obstacles,” says Kirby Jones, president of the US-Cuba Trade Association. “Everybody has to deal with them — the seller, the port, the shipper and Alimport. They all suck it up and jump through the hoops and over the hurdles. Having said that, I believe Pedro [Alvarez] when he says that if these obstacles were not there, he could buy $200-300 million more in U.S. imports.”
Those obstacles, Jones told CubaNews, include OFAC’s demand that Alimport pays for the goods before they leave a U.S. port, as well as the letter of credit requirement.
“The letter of credit process is very clumsy,” said Jones, whose Washington-based organization has 55 member companies and associations. “It has to go from a Cuban bank to a third-country bank, which sends it to their corresponding bank in the U.S., and that bank sends it to the seller’s bank. So there are four banks involved, and that piece of paper must be perfect. If a comma is misplaced, the whole thing has to be corrected.
“Or, let’s say the contract calls for a shipping date of Jan. 15, and for some reason the ship is late; there’s a storm at sea, for example, and they can’t do it until the 16th or the 17th. The whole letter of credit has to be changed.”
That frustrates U.S. agribusiness interests enormously.
“From our perspective, OFAC’s requirement of cash payment prior to shipments is one of the major constraints we have in exporting to Cuba,” complained Jim Guinn, VP of international promotions for the USA Rice Federation, based in Virginia. “Cuba would seem like a natural market for us because long-grain rice is produced in Louisiana."
Guinn’s organization is one of dozens across the United States that have been lobbying Congress to force OFAC to relax its rules on selling farm commodities to Cuba under TSRA.
“Obviously, we support opening up the Cuban market,” said Chris Garza, director of legislative affairs for the American Farm Bureau Federation. “We’ve been working with the Cubans to make sure they continue to purchase U.S. commodities, despite the barriers we face in selling to them. The only way we can justify to Congress and the administration at this point is because we continue to see our sales to Cuba increasing.”
Garza added: “What we’ve been hearing from Congress is that their priority is dealing with the issue of Cuban-American travel to Cuba, as well as remittances. While those do not have a direct impact on our sales, it’s part of easing restrictions towards Cuba.”
To date, 162 companies in 37 states have exported food to Cuba under TSRA. Since December 2001, total contracted tonnage comes to 8.16 million metric tons, with total actual deliveries amounting to just under 7.0 million tons valued at $2.08 billion.
All these exports were transported by 815 vessel journeys, 72% of that via U.S.-flagged ships. Alimport has made contact with over 4,300 companies in 45 states, and with 132 farm associations and federations in 32 states.
Barring any dramatic developments in Cuba, that trade will continue into 2007.
Veteran Cuba analyst Phil Peters, vice-president of the Lexington Institute, said Fidel Castro’s illness and transfer of power to his brother Raúl has had absolutely no effect on Alimport’s purchases of U.S. farm products.
“I don’t see any real instability there. Business decisions are being made, and the government seems to be functioning normally,” Peters told CubaNews.
“I don’t think Fidel’s absence and the uncertainty about his health are having any impact on basic government decisions, certainly not on something like this,” he said. “The Cubans clearly don’t like the [U.S.] restrictions, but they’re buying a good amount from us, and they also don’t put all their eggs in one basket.”