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Cuba's foreign trade balance up by 44% as Alimport cuts purchases of U.S. food
CubaNews / December 2007

By Larry Luxner

Cuba’s foreign trade balance will show improvement in 2007 for the first time in years, with exports up 44% through September and imports 3% higher.

“We have a commercial balance of goods which is better than previous years,” Foreign Trade Minister Raúl de la Nuez told Reuters in a Nov. 6 interview. Year-end figures are expected to be similar to those through September, meaning exports would increase by more than $1 billion and imports by less than $300 million.

This is great news for Cuba, but not for U.S. food exporters, which have seen their sales to state-run purchasing agency Alimport plummet every year since 2004, due to restrictions imposed by the Bush administration.

Kirby Jones, president of the Washington-based U.S.-Cuba Trade Association, said there’s no question these restrictions — which deny credit to Cuba and require up-front payment in cash before U.S. goods can even be shipped to Havana — have helped Vietnam, China and other suppliers at the expense of the United States.

“The U.S. agricultural community has done nothing, absolutely nothing, about trying to persuade members of Congress to change these laws,” Jones complained in an interview with CubaNews.

“The reason is that they’ve been diverted by the farm bill. From their point of view, it’s perhaps understandable,” he told us. “The farm bill deals with billions of dollars, with a B, while Cuba trade is only in millions, with an M.

Jones said: “If they want to resurrect or expand their business in Cuba, they’ll have to step up to the plate and make their voices heard.”

At the annual Havana International Fair held Nov. 5-10, only 100 U.S. companies showed up, down from 150 in 2006. A total of 1,425 entities — including 997 foreign firms — exhibited at the show, representing 53 countries.

All told, Cuba signed $301 million in contracts during the 5-day event, not even close to the $432 million in deals signed during FIHAV 2006. Contracts with U.S. companies accounted for $106 million of that $301 million total.

Among other things, Cuba closed deals for 150,000 tons of Canadian wheat worth $70 million for delivery next year.

Alimport also agreed to buy 100,000 tons of peas and 3,500 tons of powdered milk from Canadian companies, deals worth a combined $75 million, not to mention 200,000 tons of rice from Vietnam — the latter contract worth $90 million, according to Alimport Chairman Pedro Alvarez.

In addition, Cuba bought animal feed from Mexico and the Dominican Republic, as well as supermarket products from Spain.

In 2007, Cuban food purchases from Canada will have increased 40% over 2006 figures due to difficulties in buying from the United States and despite the higher value of Canada’s “loonie” against the U.S. dollar (see CubaNews, November 2007, page 1).

In the 2006-07 marketing year ending Jul. 31, Canada shipped 89,000 tons of wheat to Cuba, down from 177,000 tons of wheat the previous year. The 10-year average, according to Reuters, is 77,500 tons.

“We compete with the Americans all around the world, so we are very happy about this signing,” said Greg Arason, president and CEO of the Canadian Wheat Board.

Said Alvarez: “American producers are be-ing hurt by the embargo. Trade with the United States is uncertain because Cuban payments get blocked. Canadian businesspeople are very efficient, very strong and very competitive, and they don’t blockade us.”

That sentiment was echoed by Jones, whose trade association represents 55 companies and organizations.

“Other countries, particularly those that have lost market share to the U.S. such as Canada, want to get that back and are able to offer credits,” he told CubaNews.

“I know there were discussions [between the Cuban and Canadian governments] about Canada re-energizing its credit program. They have to offer something the U.S. can’t offer. I don’t know whether this wheat was bought on credit, but Alvarez was quoted as saying he’s going to sign contracts first with the Canadians, then the Americans.

“That’s a message to American companies that the current restrictions are causing problems,” Jones concluded. “U.S. firms are at a clear disadvantage because they can’t offer credit. That’s why rice sales are down.”

According to Marvin Lehrer, Latin America director for the USA Rice Federation, U.S. rice exports to Cuba dropped to 80,000 tons last year from 175,000 tons in 2005.

The shipping company that handles most Cuba-bound freight from U.S. ports sees little chance of business picking up while President Bush remains in the White House.

“There is great hesitation right now as people wait to see a change in the U.S. administration,” Jay Brickman, vice-president of Florida-based Crowley Maritime Corp., told Reuters. “The Bush administration is very clear about its policy. People feel they won’t get any trade and they have to go to other markets. They have no choice.”

Sales of U.S. farm commodities to Cuba have totaled $1.8 billion since passage of the Trade Sanctions Reform and Export Enhancement Act (TSRA) in 2000. Those sales peaked at $392 million in 2004 and declined to $340 million last year.

Despite plummeting U.S. sales overall, at least one state scored big during FIHAV. Nebraska signed a deal to sell $10 million worth of wheat to Alimport through commodities trader Louis Dreyfus. With this latest contract — which was signed by visiting Gov. Dave Heineman — Nebraska has sold more than $70 million in agricultural products to Cuba since the Cornhusker State’s export relationship was established in 2005.

Heineman, leading his fourth visit to Cuba as governor, was accompanied by representatives of Nebraska’s wheat, corn, soybean, beef and pork industries.

“Nebraska has been rewarded for our diligence in maintaining a strong export relationship with Cuba,” he said. “Our success here is due in large part to the hard work and preparation of our Nebraska companies and the Nebraska Department of Agriculture.”

Added Greg Ibach, the state’s agriculture director: “This latest visit has helped further the strong relationship weve built in recent years, and puts Nebraska in a good position to take advantage of opportunities for expanded trade in the future. Investing in a good relationship now is important to securing Nebraska a seat at the table in the years to come.”

Florida would like a seat at that table too, though not officially.

“The biggest companies in America are here: Cargill, Archer Daniels Midland and Perdue,” John Parke Wright IV, a livestock dealer from Naples, told the South Florida Sun-Sentinel. “All that Cuba needs is here.”

Other Florida exporters, however, aren’t quite so optimistic.

“Many firms don’t have the patience and the staying power that is needed because of all the restrictions and licenses,” said Marcela Jiménez of Gulf South Forest Products, a Ft. Lauderdale firm that’s already exported $3 million in utility poles and lumber to Cuba under TSRA. “A lot of time is wasted.”

Cuba’s top trading partners are now Venezuela, China, Spain, Canada, Italy and Brazil, which account for a combined 70% of the commerce Cuba conducts with the rest of the world.

In 2006, foreign trade came to $12.18 billion, with exports of $2.76 billion and imports of $9.42 billion. The deficit was offset by over $6 billion in revenue from services.

Cuba’s current account balance of payments was $240 million in deficit last year, compared with a surplus of $140 million in 2005, and foreign debt rose by $2 billion to around $16 billion, the government said.

“Nickel is the most important reason our exports are up, followed by pharmaceuticals and medical equipment and tobacco,” de la Nuez told Reuters.

Regarding the drop in imports, he said “we have been importing a great deal of equipment and products that did not have to be repeated this year and we are pursuing a policy of substituting imports.”

Accordings to Reuters, Cuban imports have doubled since 2003 as foreign exchange earnings jumped, due mainly to increased revenues from nickel and tourism, payment for medical services exported to Venezuela and soft credits from China.

In 2006, Cuban nickel and cobalt exports came to $1.3 billion, based on output of 74,000 tons of unrefined product.

The import boom sparked a sharp jump in economic growth during the same period, exceeding 12% in 2006 using a Cuban formula that includes free health and education services. Using the customary formula to calculate GDP, the economy grew by a more modest 8%.

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