CubaNews / April 2007
By Larry Luxner
From the First State to the Cornhusker State, U.S. governors, port officials and secretaries of agriculture are flocking to Cuba for lucrative food export contracts worth tens of millions of dollars.
In early March, tiny Delaware sent its first-ever trade mission to Havana, followed later in the month by a 31-member Nebraska delegation headed by Gov. Dave Heineman. At press time, Idaho Gov. C.L. “Butch” Otter was in Cuba on his first overseas trip since taking office.
What is it about Cuba that makes the forbidden island such a tantalizing market for individual states — even as the White House is doing all it can to discourage such visits? For one thing, says John Pastor, a trade official at the Delaware Office of Management and Budget, “there’s no risk of not getting paid.”
Under the 2000 Trade Sanctions Reform and Export Enhancement Act (TSRA), U.S. companies are required to receive payment up-front and in cash from Cuban food purchasing agency Alimport before the goods can leave the dock. In some respects, that makes Cuba the least risky country on Earth to do business with.
For another thing, the Cubans are close to U.S. ports — and they’re eager to buy. Since TSRA’s passage, Cuba has become the 34th-largest market for U.S. agricultural exports out of 227 countries, importing $341 million in food products, utility poles and other commodities in 2006.
This year, Alimport will buy over $1.6 billion worth of food from the United States and other countries, says Alimport CEO Pedro Alvarez.
Yet Alvarez said procedural rules imposed in 2005 make the U.S. an “unreliable” supplier and have driven Cuba to buy from lower-cost competitors like Brazil, Vietnam and China.
“We’ve been obliged to divert several hundreds of millions of dollars,” Alvarez told foreign reporters Mar. 28 after signing deals to buy $60 million worth of wheat, pork and soybeans from Nebraska farmers. “U.S. companies, which are efficient, are in many cases unreliable for us, because you don’t know when a shipment is going to be held up,” Alvarez complained.
Heineman brought along officials from Louis Dreyfus, Farmland Foods and other companies hoping to land wheat, corn and soybean contracts with Alimport.
“Despite the challenges be-tween our countries, we hope to increase the number of Nebras-an products sold here,” said Heineman, a Republican. “I’ve been here three times now, probably more than any of the 50 governors, I can assure you. This has been a very significant and very meaningful relationship for our state. It’s been a terrific opportunity for us to look at an expanded relationship. That’s why we’re down here again.”
A fellow Republican, Gov. Otter of Idaho, is now in Havana, accompanied by 35 agribusiness executives with similar intentions.
Both Otter and Idaho Sen. Larry Craig are outspoken in their opposition to the U.S. embargo against Cuba; in 2003, then-Rep. Otter told the Times-News of Twin Falls that the embargo was an impediment to America’s weapon of capitalism.
“If we wanted to bomb Cuba,” he said at the time, “we’d be better off dropping Sears Roebuck catalogs out of the back of a plane.”
Last year, according to the Times-News, Idaho exported $22,613 worth of frozen foods to Cuba, as a result of Otter’s initial trips to the island as a congressman.
But that was only a drop in the bucket compared to the $731.5 million worth of potatoes and other food Idaho sold to China in 2006.
“Obviously he wants to open up markets to Idaho products into that communist country,” said Otter spokesman Jon Hanian. “It’s limited, and it’s very tightly controlled. Primarily we’re looking at agricultural goods, timber products, and medical supplies — anything from bandages to generic drugs.”
Delaware, the second-smallest state in the nation, wants to get in on the game too. Alimport is interested in buying frozen poultry, apples, wheat, potatoes and soybeans from Delaware, according to Rebecca Faber, executive director of World Trade Center Delaware in Wilmington.
“We’re a small state, but we have one of the largest densities of chickens per-capita in the nation,” Faber told CubaNews. “We have a lot of small farmers, and we’d like to pull them together in a cooperative effort.”
Delaware’s 13-member delegation, which spent three days in Havana, was led by Agriculture Secretary Michael Scuse and included executives from Perdue Farms, Tyson Foods and Diamond State Port Corp., which manages the Port of Wilmington.
That port can handle shipments of 5,000 to 10,000 tons of frozen chicken a month depending on the season, according to Tom Keefer, deputy executive director of Diamond State Port Corp. It can also handle containers of wheat and other grains, and is already receiving dozens of vessels year-round from Central and South America laden with bananas, grapes and other fruits.
Trade with Cuba would allow some of these ships, which often return to South America empty, to carry products to Cuba.
“There is more and more interest, and we believe that there are some real possibilities for some Delaware products to be sold into Cuba,” Scuse told the News Journal of Newcastle.
Scuse added that he’s talking to some farmers about sending a container of wheat to Cuba. The state sells most of its 45,000 acres of wheat to mills in Pennsylvania. But most of those mills are at capacity and farmers don’t have nearby markets to sell the wheat.
If Cuba represents such big trade opportunities for Delaware, imagine what the island can do for Texas — the largest state in size (excluding Alaska) and the nation’s No. 3 state in population. Using a share of production method, Texas exports of farm products to Cuba have come to $113 million since December 2001, according to Parr Rosson of Texas A&M University in College Station.
“Texas agribusinesses are well-positioned to respond to the expanding Cuban market due to quick delivery time from Texas ports, the availability of high-quality products, and competitive pricing,” said Rosson.
During 2006, Texas exports to Cuba were valued at $22.3 million — down from the $40 million range in 2004 and 2005.
“Two important reasons for this decrease,” said Rosson, “is that the U.S. has exported increasing amounts of soybeans and soybean products, of which Texas has an extremely small share of U.S. production, and a decrease in exports of dry milk, which is coming mainly from Texas.”
In 2005, the Lone Star State’s share of total food exports to Cuba by value was 11.46%, up from 10.17% in 2004 and 2.09% in 2003. But last year, that tumbled to 6.54%, says Rosson.
On the other hand, Texas is a major producer of chicken and rice — two of the top U.S. agricultural exports to Cuba.
Rice farmer Curt Mowery, who’s seen the area cultivated with Texas rice shrink from 500,000 acres in the mid-1970s to less than 150,000 acres today, told the Dallas Morning News he blames the decline on urban sprawl, low commodity prices, high farming costs and tighter water supplies.
“Cuba could literally buy 100% of our rice crop and part of Louisiana’s, too,” said Mowery of Sandy Point, about 40 miles south of Houston. “You just can’t lose a market, particularly nowadays.”