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Cuba: Helms-Burton Act disappoints U.S. investors
The Packer / January 27, 1997

By Larry Luxner

WASHINGTON -- U.S. agribusiness investors hoping for an end to Washington's trade embargo against Cuba were sorely disappointed in 1996, when Congress decided to go the opposite route and tighten the embargo by passing the so-called Helms-Burton law.

This legislation, officially known as the Cuban Democracy Act, allows sanctions to be implemented against foreign companies that trade with Cuba. On Jan. 16, 1997, President Clinton must decide whether he'll once again suspend the effective date of Title III of the law, its most contentious provision. Failure to do so will allow lawsuits to be filed in U.S. courts against the Cuban government and foreign firms that benefit from expropriated U.S. property in Cuba.

The law is strongly supported by Cuban exiles in Miami who want to bring down the Castro regime, but is just as vociferously opposed by Canada and the European Union, which view it as U.S. interference in their trade relations with Havana.

Despite its tough-sounding rhetoric, Helms-Burton hasn't dissuaded non-U.S. investors -- Israelis, Greeks and Chileans among them -- from sinking their money into vast Cuban citrus plantations. In fact, the island would have set a record in orange and grapefruit shipments to Europe this year if not for Hurricane Lili, which devasted not only the citrus crop but also sugar, coffee and tobacco exports.

The 1996-97 citrus harvest (August to June) commenced with plans to increase production from 600,000 metric tons to 700,000 tons, well above the 1994-95 total of 500,000 tons.

According to Cuban government statistics, the citrus industry exported 45,000 tons of fresh fruit and 15,000 tons of juice and extracts during the last harvest, making citrus Cuba's No. 5 dollar earner. About 60% of citrus acreage is devoted to oranges, mainly Valencias, while grapefruit (mainly Marsh seedless) takes up 26-30% of acreage, and limes and other acid fruits use 9-10%. Tangerines and other hybrids cover the remaining acreage.

At the moment, the largest foreign citrus venture in Cuba is a $22 million project headed by Grupo BM of Israel, which is developing a 115,000-acre citrus operation in Jagüey Grande, in Cuba's Matanzas province. The plantation, largest of its kind in the world, aims to improve the export quality of Cuban citrus by using Israeli drip-irrigation technology, modern sorting machines and other innovations. In exchange for their know-how and capital investment, the Israelis get an unspecified share of the profits.

According to unconfirmed reports, the U.S. Treasury Department earlier this year sent a letter to Tel Aviv-based BM, demanding it pull out of Cuba or face sanctions under Helms-Burton such as the denial of U.S. visas for company officials. Neither Treasury nor BM itself has commented; BM, in fact, has consistently refused to talk to reporters ever since its president -- Rafael Eitan, former chief of the Israeli Mossad -- set up operations in the Havana suburb of Miramar in 1993.

John S. Kavulich II, president of the U.S.-Cuba Trade and Economic Council Inc., says he doesn't know if Treasury will force BM out, though his organization has seen no evidence that Helms-Burton is having a chilling effect on foreign investment in Cuba.

"Overall, the Cubans have certainly benefitted by the citrus investments made by the Chileans, Israelis and Greeks, and the benefit in no way is limited to the actual dollars that have been brought into the country," Kavulich told The Packer in a phone interview from New York. "Where Cuba has gained the most is from the marketing and production expertise that these companies have brought with them.

"Prior to those involvements, Cuban citrus had often been arriving in the European market a week or two before citrus from the United States. But because the quality was poor, as soon as the U.S. citrus hit European shores, it would wipe out the Cuban presence. Now Cuban citrus is better quality, better marketed and they're increasing their market share."

The Chilean citrus project, a venture between Pole S.A., Ingelco S.A. and the Cuban government, involves an 11,000-hectare plantation on the Isle of Youth. Initial plans are to export 1 million boxes of grapefruit to Great Britain, with exports to Japan as well. A smaller Spanish/Greek venture, Lola Fruits, is exporting oranges and grapefruits to Holland and France, and also includes an industrial plant in Ciego de Avila for the export of orange-juice concentrate to Great Britain.

With the Cuban economy still suffering the combined effects of the U.S. trade embargo and the collapse of the Soviet Union -- for years its main benefactor -- Cuban agribusiness, particularly sugar, has performed disastrously. However, according to the monthly newsletter CubaNews, "one exception to this generally bleak picture involves the production of citrus. Thanks to the intensive cultivation efforts designed to supply former trading partners in the dismantled Soviet bloc, production in 1990 was ten times higher than in the early 1960s."

In 1996, Cuba's gross domestic product was expected to jump between 7% and 8% after a 35% tumble between 1989 and 1993.

In October, the industry received a shock when Hurricane Lili passed directly over the island, causing $500 million in damage and leaving thousands of Cubans homeless.

"In the citrus sector, 154,000 tons of citrus fruit has fallen, which equals one-third of the total production of citrus fruit estimated for the year, including a large number of unripened fruits," Carlos Lage, Cuba's vice-president of the council of state and economics minister, was quoted as saying.

Nevertheless, Roger Delgado, director of the Victoria de Girón citrus complex in Matanzas province, says his August-to-June harvest goal of 350,000 tons would be achieved. According to Delgado, 40,000 of the 97,000 tons of citrus downed by the storm were saved and processed into juice. He said that plans would also be met to export 43,000 tons of fresh fruit, valued at $8 million.

Officials from citrus orchards on the Isle of Youth say fresh grapefruit exports thsi year came to 1,739 metric tons, a 300% increase from the same period in 1995. Harvest plans are for the export of 3,000 tons of fresh fruit and collection of 50,000 tons, mainly for processing. Some 80% of Cuban citrus is export through the port of Cienfuegos, located 250 kilometers southeast of Havana.

Pedro Rojas Díaz, the Chilean-born managing director of Pole, says export volume is increasing rapidly. According to him, Cuba exported 100,000 crates of grapefruit and 300,000 crates of oranges in 1991. This year, Cuba is expected to export 3.0 million crates of fresh fruit. Juice concentrate exports are projected to jump from 4,000 tons of orange juice to 15,000 tons, and over 7,000 tons of grapefruit juice.

Cuba's best orchards are now controlled by the joint ventures, along with the island's three processing plants and 23 packing houses, all with port access. The three processing plants can move 48 tons of fruit per hour. Two of the plants are currently being expanded and will soon double processing capacity.

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