The Packer / December 25, 1995
By Larry Luxner
MIAMI -- Americans can't invest in Cuba for the moment, but that hasn't stopped other investors -- Israelis, Greeks and Chileans among them -- from investing heavily in the Cuban agribusiness sector.
At the moment, the largest such endeavor is a $22 million project headed by Grupo BM of Israel, which is developing a 115,000-acre citrus operation in Jaguey 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.
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."
Indeed, Cuban exports of citrus have soared over the last few years, and profits from cultivation and overseas sales have increased accordingly, a leading private producer said recently.
Pedro Rojas Diaz, managing director of Pole Internacional, said that in 1991 Cuba marketed some 100,000 crates of grapefruit and nearly 400,000 boxes of oranges in Western Europe, but today the total is in excess of 3 million crates. Likewise, total juice concentrates five years ago to the same market amounted to only 6,000 tons, but today the figure is about 23,000 tons, nearly four times as much.
Meanwhile, the University of Florida's Institute of Food and Agricultural Sciences (IFAS) plans to release a comprehensive study in the next few weeks on the future of Cuba's citrus industry.
Bill Messina is executive director of the International Agricultural Trade & Development Center, a unit of the IFAS Department of Food and Resource Economics. He said his staff has made close to 20 trips to the Communist island since 1992, when the project began. And his Cuban counterparts have visited Florida at least 10 times in return.
"What were trying to do is assess the current situation, and look down the road at opportunities in a post-embargo Cuba, as far as investment and possible trade flows," he said. "We're looking at citrus, vegetables, specialty fruits such as papayas and guavas, sugar, marine and seafood products, and later tobacco and rice."
Messina said the travel is being funded by the John D. and Catherine T. MacArthur Foundation, since the embargo forbids the use of state or federal money for travel to Cuba. The actual work is being carried out by Thomas H. Spreen and Ronald P. Muraro, with collaboration from Dr. Armando Nova Gonzalez, head of the University of Havana's Centro de Investigaciones de Economia Internacional.
While the study isn't yet finished, Messina has a few ideas on how the island's citrus industry is being managed.
"It's our understanding that what the Cubans have done is divide their groves up into three categories: top priority groves which they're targeting for as much care as they can muster; a second category they're trying to maintain, though they can't put a lot into them, and a third category that they're not abandoning altogether but just doing the absolute minimum to make sure the trees don't die."
With Florida planting more trees today than ever before in history -- mostly in the southwestern part of the state -- production is increasing to the point where the United States will in the next five years be a net exporter of frozen orange-juice concentrate, making Cuban competition irrelevant. Yet with grapefruits, it's a much different story.
Nevertheless, says Messina, "there's a level of competition that Florida hasn't seen in the past" with regard to Cuban grapefruit exports.
"Cuban grapefruit ripens a month or two before Florida's, so they get a jump on Florida in the European market. Even in that narrow market window, as a result of joint-venture investment by foreigners, the quality of Cuban grapefruit has increased dramatically. So not only are they offering additional competition to the Dominican Republic and Honduras in that early-market window, but even later in the season when Florida grapefruit starts hitting the market."
Assuming an end to Washington's trade embargo after the 1996 presidential elections -- as many pundits are now predicting -- what would happen with regard to Cuban fruit and vegetable exports to the U.S. mainland? Not much, says Messina, at least not for awhile.
"If by some mysterious process trade was opened tomorow, there's a whole series of paperwork they'd have to go through with APHIS (Animal and Plant Health Inspection Service) before Cuban fruits and vegetables would be allowed into the United States," he said. "It's not as if the floodgates would be opened immediately."