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Cuba: A force to reckon with?
Seafood Business / July 1998

By Larry Luxner

Seafood importers in South Florida and across the nation can hardly wait until the United States lifts its 36-year-old trade embargo against Cuba -- a tropical, Pennsylvania-sized island run by a Marxist regime desperate to do business with the yanquís.

Sitting only 90 miles south of Key West, Fla., Cuba could provide the U.S. retail and restaurant industry with a potentially new and inexpensive source of seafood, if only the controversial embargo were repealed and full bilateral diplomatic relations between Washington and Havana restored.

"It would be a boom for business. Demand would be incredible," muses Allan Levine, vice-president of sales at Miami's Collins Fish and Seafood Inc., which imports spiny lobster. "It's not like you'd have to send a boat out for three or four days, find a port and do your production. Cuba is so close you could process the seafood here in Florida."

The post-embargo possibility also intrigues Bond Pace, owner of Pace Marketing Inc. in Port St. Lucie, Fla.

"If Cuba starts exporting tilapia to the United States, it would come in at a lower price in order to get market share. That would enable me to source a different country," he said. "If the embargo were finally lifted, it would open up a completely new range of imports. I think we'd see a lot of the major restaurant chains and processors go flying right over to Cuba and offer to buy all their production."

Nobody, however, is rushing to buy plane tickets just yet. Thanks to the 1996 Helms-Burton Act supported by Miami's powerful lobby of right-wing exiles, it would now take an act of Congress before President Clinton or anyone else could abolish trade sanctions against Cuba. Given political realities, that's unlikely to happen until Cuban President Fidel Castro dies or is overthrown.

Bob Rosenberry, a San Diego-based shrimp industry analyst, says very few people outside Cuba really know what's going on.

"A lot of people in Miami and Latin America would like to have shrimp farms in Cuba because of the proximity to the U.S. market, and the ease of doing business in Cuba if it were again a democracy," he says. "But we've been waiting for Castro's downfall for over 30 years. To say it's going to happen in the near future is a mistake."

To ignore Cuba, however, could also be a mistake. From tuna to tilapia, from spiny lobster to silver hake, there is no question the Caribbean island is becoming an increasingly important player in the non-U.S. market for seafood products -- particularly for high-valued finfish and shellfish.

In 1997, Cuban seafood exports came to $180 million, up from $102 million in 1994, according to Anicia E. García Alvarez of the University of Havana. This year, Cuba plans to sell $100 million worth of seafood in Europe, $30 million in Japan and another $30 million in Canada, according to Cuba's fisheries minister, Orlando Rodríguez Romay. Seafood is now Cuba's No. 4 foreign-exchange earner after tourism, sugar and nickel.

"Our fundamental goal is to increase exports and foreign-exchange earnings while diversifying," García told Seafood Business. "Until now, our exports have been concentrated in lobsters and shrimp. But we're trying to increase the proportion of live and whole products, mainly to France, Italy and Japan."

García was one of a dozen speakers at a recent Cuba conference in Washington, at which nearly 100 attendees listened as visiting experts from the University of Havana and the University of Florida in Gainesville assessed the future of Cuban agribusiness.

That the meeting took place at all -- only a few miles from the White House and Congress -- is indicative of the growing interest U.S. observers have in Cuba, a country which has been off-limits to American companies and tourists ever since President Kennedy imposed a trade embargo against Havana in 1962.

Besides the conference itself, there are other, far more profound signs that relations, once defined by the Cold War, are beginning to thaw.

Following Pope John Paul II's visit to Cuba earlier this year, the Clinton administration ended a ban on direct flights between Miami and Havana, and began allowing Cuban exiles to send dollars to their relatives on the island legally. Congress has also acted to ease the prohibition against selling U.S. food and medicine to the Communist island.

"These are positive actions, and there is no doubt that the president of the United States has been trying to take steps [forward], but he is confronting resistance," Castro told reporters during a May Day ceremony in Havana. "I have the impression that many U.S. leaders feel ashamed of what is happening, but it is indisputable that they themselves have created the mess in which they find themselves."

Politics aside, with 135 species or species groups targeted by commercial fleets, Cuba's diversity of fish and shellfish is exceeded only by the United States and Canada, reports the UN's Food and Agricultural Organization (FAO).

Yet prior to the 1959 revolution that brought Castro to power, Cuba's seafood industry was rather unsophisticated and underutilized, with small fishing boats bringing their low-value catches to local processing facilities. Annual fishery landings -- primarily for domestic consumption -- averaged around 20,000 metric tons a year.

After the revolution, however, things changed dramatically. The sudden expansion of the Cuban fishing fleet -- made possible by cheap, subsidized Soviet fuel -- made Cuba the envy of all Latin America and the Caribbean, with landings surpassing 100,000 metric tons by 1970 and 200,000 tons by 1976.

The Cuban fishing fleet was divided into four sectors: the Flota Cubana de Pesca (FCP), a distant-water fleet targeting low-valued species such as mackerel, herring and hake for the domestic market; the Flota Atunera de Cuba (FAC), composed of tuna and swordfish longliners operating in the Gulf of Mexico and Mid-Atlantic regions; the Flota del Golfo (FG), targeting bottom fish and reef fish in near-shore waters, and finally the Flota de Plataforma (FP), which went after high-valued, near-shore species such as shrimp, spiny lobster, sponge, reef fish and crab.

Around 1977, Cuba's seafood industry took a sudden downturn.

"Virtually all coastal nations in the Americas [including Cuba] imposed 200-mile limits for their territorial waters in the late 1970s," according to Charles M. Adams, a professor with UF's Institute of Food and Agricultural Sciences. "With few exceptions, the exclusive rights claimed by these coastal nations excluded access by all other countries to the fisheries resources found in their territorial seas. Cuba's fleets, especially the distant-water fleet, were designed to access these resources throughout Latin America. Thus, Cuba was left with a stable of large, operational costly vessels, which were then forced into the role of only being able to operate in the even more costly open-ocean regions. The high-cost nature of the fleet, while being forced to target low-valued stocks, produced an economically inefficient venture."

Says Adams: "Overall, Cuba's distant water fleet was fishing in the southeast Pacific, off Namibia and Angola, and in the northern Atlantica. That global fleet was subsidized by cheap Soviet fuel. Now those boats are used for freight hauling."

Things got even worse after the breakup of the Soviet Union, with Cuban landings of all forms of finfish and shellfish falling from 232,000 tons in 1988 to 87,700 tons in 1994. According to the FAO, per-capita consumption of fish and seafood in Cuba plummeted from 21.8 kilograms during the 1985-87 period to 11.8 kilograms during the 1991-93 period.

The situation has improved, however, with landings up slightly to 94,200 tons in 1995 -- the latest year for which statistics are available.

Of this total, some of the more important species include silver hake (16,800 tons); blue tilapia (10,500); silver carp (9,900); spiny lobster (9,400); snapper (3,800); oysters and clams (3,800); sharks (3,100); pink shrimp (1,900), tunas (1,300) and squid (1,000).

Adams says it's unlikely Cuba will ever return to the high volumes of the 1970s and 1980s, simply because "before, they were harvesting low-volume stuff all over the world, and now they're only harvesting stocks in their own contiguous waters."

On the other hand, the dollar value of Cuba's seafood production could skyrocket as the country targets near-shore species for the export market.

Asked if Cuba could become a chief seafood supplier to the United States, he says "it could be, for lobster tails and for certain reef fish species like grouper and snapper. Another possibility could be fresh tuna for the sushi market."

Notably, both silver carp and blue tilapia have become important species for aquaculture production. The increase in production for both species, says Adams, "suggests a growing expectation for aquacultural production to augment the supply of fishery products for the Cuban domestic market."

Nearly all of the 19.7 million pounds of spiny lobster (Panulirus argus) Cuba produces annually is exported -- mostly in the form of cooked whole lobster, with lesser quantities of raw, whole lobster and frozen tails. In terms of total value, the major markets for Cuban spiny lobster are Japan (28%), France (24%), Spain (19%), Italy (15%) and Canada (10%). In addition, says Adams, the United States consumes small quantities of Cuban seafood products imported via third countries such as Canada and Nicaragua.

Interestingly, about 40% of Cuba's lobster landings, or 7.1 million pounds, occur during Florida's closed season, which lasts from May through July. That gives Cuba a window of opportunity lasting two months or so.

Most of Florida's raw, cooked and live lobster production is exported, making it unlikely the state's suppliers would accept similar product from Cuba. However, the market within Florida is for tails, of which over 90% comes from various Caribbean sources.

A renewal of ties between the United States and Cuba "would ultimately be a very good relationship, but this is purely speculative," says Tom Hill, co-owner of Key Largo Fisheries in Key Largo, Fla.

Hill, whose company exports spiny lobster to Europe and Asia, insists that while any change would affect the U.S. seafood industry, "I don't think a considerable amount of thought will be given to this issue until the government changes in Cuba, or until the U.S. decides to end the embargo."

At the moment, Cuba has 14 processing plants for lobster, shrimp, canned tuna and fish. These plants -- which handle the freezing, canning, smoking and salting of a variety of products -- are located in La Coloma, Isla de la Juventud, Batabanó, Havana, Matanzas, Cienfuegos, Casilda, Caibarién, Santa Cruz del Sur, Niquero, Manzanillo, Santiago de Cuba, Guantánamo and Nuevitas.

Havana has three additional canning facilities: Regla, Hacendados and Cojímar. There are also 20 smaller processing facilities across the island; all are managed by the INDIPES association and various provincial fisheries associations.

Yet, like most factories in Cuba -- from the H. Upmann cigar plant to the Havana Club rum distillery -- the Soviet-era technology is antiquated, and production is plagued by constant electricity shortages. At least one French company is now believed to be investing over $200,000 to upgrade an existing spiny lobster processing facility in Batabanó, a coastal town south of Havana. A lifting of the embargo would almost certainly attract U.S. firms eager to upgrade many more seafood processing plants.

On the other hand, Cuban seafood exporters hoping to ship to the lucrative U.S. market would have to meet strict new quality standards established by the Food and Drug Administration. The FDA's Hazard Analysis Critical Control Point (HACCP) program, which became effective in December 1997, requires all U.S. seafood processors and handlers to adopt a monitoring program to ensure that product safety isn't compromised during the handling, processing, storing and shipping of seafood. Non-compliance with HACCP standards would result in Cuban shipments being labeled by FDA as adulterated and embargoed.

Besides supplying the U.S. market, says Levine, a lifting of the embargo would also allow companies like his to export to Cuba. "It's a beautiful island. I'm sure tourism would flourish on the island. Therefore there would be a great demand for our products."

Meanwhile, under Decree Law 164, passed in 1996, Cuba's Ministry of Fisheries (MIP in Spanish) is being restructured so that government oversight in the day-to-day management of fishing operations is reduced dramatically.

"Basically, the MIP will continue to be responsible for management and regulatory issues, but the logistics of near-shore fisheries production will be relegated to a complement of production associations," according to Adams. "The restructured MIP will contain only 21 associations. The near-shore fisheries and acquaculture activities will be administered through 15 provincial fisheries associations which in many ways resemble cooperatives. Each will contain at least 20 state-owned vessels, which each vessel operating within a prescribed budget and quota. Production over the pre-determined vessel quota may generate a profit percentage in the form of monthly bonuses."

In short, says the UF professor, "they've made a real effort to decentralize the management of their fisheries. The quotas they're setting are still handled by the Ministry of Fisheries, but day-to-day operations are being moved to the local level and providing incentives to boat captains to do things in a much more efficient manner."

Decree 164 also creates a Comisión Consultiva de Pesca, which bans fishing of en-dangered species and imposes sanctions for those who don't practice responsible fishing.

"They're understanding now that they could very easily overfish things," says Adams. "They're contracting a bit and passing measures that impose sustainable management. They have an eye on the future."

If and when Washington decides to lift the embargo against Cuba, the island nation could enjoy a sudden increase in exports of spiny lobster, pink shrimp (Penaeus duorarum) and other species to the U.S. market -- providing its prices are competitive with Nicaragua, Honduras and other traditional seafood exporters.

"The U.S. shrimp market is dominated by imports, particularly farm-raised shrimp. Additional supplies of pink shrimp would be easily accepted, particularly during those per-iods when Florida pink shrimp landings are low," says Adams. "However, Cuban trawlers would be forced to comply with U.S. law concerning the use of turtle excluder devices."

He adds that "Cuban snapper would likely be very competitive with product arriving from more distant sources within the Central American and Caribbean region. The Florida market for reef fish is very strong and would probably absorb any additional sources of product. And if the Cuban product is priced competitively, other foreign sources may be displaced in the short run."

Says Dan Davis, senior vice-president of sales and marketing at Singleton Seafoods in Tampa: "I don't think it would hurt us. Cuba's quality is good, and there's always a market for quality shrimp."

Mike Picchietti, a tilapia importer with Regal Springs on Florida's west coast, says a resurgence of Cuban tilapia exports wouldn't be an issue for Florida farmers -- since the state doesn't really produce tilapia -- though "it would probably hinder a Florida industry from getting started."

"Florida has the climate, like Taiwan, to produce a lot of tilapia," he says. "I suppose that if the Cubans come in and the freight issue was greatly reduced, they would squash any chance Florida would have, given they have no environmental costs, a little bit warmer season, government support, cheaper labor and cheaper processing."

For the moment, Cuban tilapia exports to Europe and Canada don't pose much of a threat, says Picchietti, because they are of such low quality compared to the tilapia Regal Springs imports from Honduras and Indonesia.

That could change, however. Several foreign groups including Israelis -- who are also the largest investors in Cuban citrus -- are quietly working to improve the quality of Cuban tilapia. But because of possible U.S. repercussions stemming from Helms-Burton, the Israelis keep a very low profile and rarely discuss their activities with the press.

Pace predicts that a renewal of diplomatic and commercial ties between the U.S. and Cuba would be good for some people, and bad for others.

"As it stands now, Canada has been consuming everything Cuba produces, and Canadian Food & Drug is substantially more stringent than we are, which would lead me to believe that the Cuban species of lobster is probably superior to what we receive from Honduras and other countries," he told Seafood Business. "If the embargo should be lifted, I think it would affect a lot of U.S. producers, because that might be the rude awake-ning for them to finally stop adding so many chemicals to shrimp and other seafoods."

In the meantime, Adams says UF's Institute of Food and Agricultural Sciences in no way advocates either lifting the U.S. embargo or keeping it in place -- a potentially explosive issue in South Florida, hme to over a million Cuban exiles.

"We're just trying to describe the situation and provide information that would be useful for those who need it," he insists, "in order to assess the potential impact if trade is ever resumed."

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