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Kentucky food exporters find Cuba a tough nut to crack
CubaNews / July-August 2010

By Larry Luxner

Back in 2002, after a two-hour meeting in Havana with Fidel Castro, Kentucky Agriculture Commissioner Billy Ray Smith — in a rush of enthusiasm — predicted that Cuba’s 11 million citizens would soon be eating Kentucky-raised buffalo steaks, washing them down with soft drinks bottled in the Bluegrass State and smoking cigarettes blended with Kentucky-grown burley tobacco.

“We feel like this is just the beginning of a mutually beneficial relationship between Kentucky and Cuba,” Smith said following the signing of a $7 million contract with Pedro Alvarez, chairman of the Cuban state food purchasing agency Alimport.

“The Cuban people need food products of all kinds, and Kentucky producers are looking for new markets,” he said at the time. “We are thrilled that the Kentucky Department of Agriculture was able to play a role in making this agreement a reality.”

But the reality eight years later is that Kentucky exports to Cuba don’t amount to a hill of frijoles — a consequence of bureaucratic obstacles on both sides of the Florida Strait, and Washington’s continuing prohibition against most U.S. travel to the island.

“Cuba’s not a target for us,” said John Waugh, vice-president of marketing at Louisville-based Phoenix Process Equipment Co., which makes water treatment systems. “We’d put many other priorities way ahead of Cuba, such as the U.S. domestic market, South America, Australia, Canada, Mexico and South Africa. In time, we might develop an interest, but right now, spending resources on Cuba wouldn’t be prudent.”

In 2000, Hurricane Michelle struck Cuba, devastating the island. In response, Congress passed a loophole to the embargo, the Trade Sanctions Reform and Export Enhancement Act. Under TSRA, U.S. companies may ship food and agricultural commodities to Cuba, provided they’re paid up-front and in cash for those purchases, and that the transactions are not handled by U.S. banks.

In 2002, half a dozen Kentucky exporters attended a U.S. food exhibition in Havana, hoping to cash in on the growing exports to Cuba. For the next six years, annual U.S. shipments to Cuba skyrocketed — from $256.9 million in 2003 to $710 million in 2008 — dominated by basic commodities like poultry, soy-beans, corn, wheat, pork, beans and turkey.

But in 2009, cash-strapped Cuba slashed its U.S. food imports by 26% to $528.5 million.

And indications are that they continue to fall. During the first half of 2010, said the U.S. Commerce Department, food shipments to Cuba came to $220 million — a 28% drop from the same period in 2009.

La Grange-based Northland Corp., which sells hardwood lumber, hasn’t had much luck with the Cubans at all.

“I think there are some definite opportunities, but I tried pursuing some leads for a year and a half after the [2002] exhibition, and for whatever reason I wasn’t able to get anything done,” said Orn E. Gudmudsson Jr., Northland’s export manager. “But that has more to do with the cumbersome process in Cuba than a lack of interest. Personally, I don’t find the U.S. regulations that cumbersome. The complicated part is having to go through Alimport, which just adds another layer to the negotiations.”

Roger Quarles, president of the Burley Tobacco Growers Cooperative in Lexington, said that despite the hype, nothing amounted from his participation in the 2002 Kentucky trade mission to Cuba.

“Back when we did that trip, we were still under the old government price support program that allowed us to sell tobacco at a discount,” he explained. “We can longer do that. We hoped we could make subsidized sales to Cuba, but that’s gone, never to return.”

Quarles added that “there are plenty of opportunities for Kentucky to sell corn, soybeans and soft drinks to Cuba, but not tobacco. We have no information to support any hopes that we could directly export American leaf to Cuba.”

Added Mike Ammerman, vice-president of Farmers Tobacco Co. of Cynthiana: “They in-vited us to go, and then we found out we couldn’t sell our products down there. You could only sell tobacco in the raw form, not in the manufactured form.”

Another Kentucky businessman who was also part of the 2002 delegation said “we’re going nowhere,” despite seven years of pursuing trade deals with Alimport.

Kirk Williams, vice-president of Bluegrass Dairy & Food in Glasgow, Ky., said although “no one’s been able to make any progress” in trading with Cuba, “we’re excited if opportunity arises in the future for Kentucky farmers and food manufacturers.”

There is hope for Kentucky exporters, however. Current legislation in Congress would make it easier for U.S. companies to sell to Cuba by removing the onerous restrictions that govern such sales.

In late June, the House Agriculture Committee voted 25-20 to approve HR 4645, the Travel Restriction Reform & Export Enhancement Act. This bipartisan bill, introduced by Rep. Collin Peterson (D-MN) and Rep. Jerry Moran (R-KS), has the backing of 140 groups including the U.S. Chamber of Commerce, the American Farm Bureau Federation and Human Rights Watch.

A recent study by Texas A&M University showed that easing restrictions on farm ex-ports to Cuba and lifting the travel ban would spark $365 million in sales of U.S. goods and create 6,000 new jobs in the United States, leading to an economic impact of $1.1 billion.

Lisa Simon, president of the Lexington-based National Tour Association, said the bill’s passage in the House Ag Committee was “a huge move forward,” but that supporters still face an uphill battle in getting it approved by both houses of Congress.

“We’ve called on Kentucky legislators locally and in Washington. We’ve been working hard to persuade them to be co-sponsors,” she said, noting that the NTA is specifically lobbying the Travel and Tourism Caucus headed by Rep. Sam Barr (D-CA) as well as Byron Dorgan (D-ND) in the Senate.

Yet it won’t be an easy sell.

According to Public Campaign, a nonprofit, Washington-based organization that focuses on campaign reform, the US-Cuba Democracy Political Action Committee has given $10.8 million nationwide to nearly 400 candidates and members of Congress, including more than $850,000 to 53 House Democrats who late last year sent a letter to House Speaker Nancy Pelosi opposing any change in U.S. policy toward Cuba.

According to Public Campaign, at least 18 House members — including some from farm districts — received campaign contributions from pro-embargo groups and later switched their positions on Cuba.

One of them was Rep. Ed Whitfield, a Kentucky Republican from Hopkinsville who until June 2004 had consistently voted to repeal the travel ban and make it easier to sell agricultural commodities to Cuba.

But then, supporters of the embargo have contributed $12,000 to Whitfield, and now he votes consistently to uphold the sanctions.

Yet the congressman’s spokeswoman, Kristin Walker, recently told McClatchy Newspapers that the $12,000 her boss received from the anti-Castro PAC represents only 0.03% of all campaign funds raised over the past three election cycles.

“Obviously, she said, “U.S.-Cuban relations remain fluid and ever-changing. It is common practice for PACs to donate to candidates who have taken a similar position on a particular issue, so the fact that the congressman has received contributions from the U.S.-Cuba Democracy PAC is not out of the ordinary.”

Despite continuing opposition from lawmakers like Whitfield and especially those representing the powerful Cuban exile community in South Florida, Simon — whose NTA speaks for 700 U.S. and Canadian tour operators — said the travel ban cannot endure forever. And once it’s lifted, she predicted, between 800,000 and one million Americans will visit Cuba in the first year alone.

“It’s also going to help generate revenues and jobs for cruise-ship companies, airlines, travel agencies and hotel chains,” said NTA’s Simon, “and in this economy, that’s something we’re all interested in.”

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