Luxner News Inc, Stock Photos of Latin America & the Caribbean

Article Search

Two Citrus Ventures Exit Cuba, Leaving BM With Biggest Project
CubaNews / September 1997

By Larry Luxner

Two unrelated foreign citrus ventures have quietly pulled out of Cuba -- the victims of difficult operating conditions and a fruit glut on the world market that has driven down prices for fresh oranges and grapefruits.

The first is Chile's Pole S.A., which was exporting fresh grapefruits to Western Europe from an 11,000-hectare plantation on Cuba's Isle of Youth, located south of the main island. The second is Lola Fruit S.A., a joint venture headed by Greek businessman Michael Logothetis -- owner of Lomar Shipping -- which in 1993 leased nine citrus plantations covering 31,000 hectares. The objective was production and marketing of oranges, grapefruits and limes to Great Britain and elsewhere.

"It's our understanding that the Chilean venture and the Greek-British consortium were both terminated about a year ago, that they're no longer involved," said Bill Messina Jr., executive coordinator of the University of Florida's International Agricultural Trade & Development Center. "The only other fresh produce venture we've heard about is Sherritt Green, which is intended to produce fresh fruits and vegetables for the tourist trade."

Adds Spreen: "I think they left because they weren't making any money. Florida grapefruit growers aren't making any money, and Cuba competes directly with Florida. The Cuban government kept it under wraps for a whole season. We were there twice, and [the Cubans] never said anything to us about it."

Unlike Pole, which left, another Chilean citrus venture -- Ingelco S.A. -- is still in Cuba. In 1992, Ingelco entered into a deal with the NCC to produce 30 million liters of citrus juice annually at a processing plant in Jaguey Grande. Currently, juice produced through this venture is being sold in Europe under the brand name "Tropical Island."

The departure of Pole and Lola Fruits leaves Israel's Grupo BM as the largest single foreign investor -- and the only one of any size -- in Cuba's citrus industry. Tel Aviv-based BM has reportedly invested $22 million in its plantations at Jaguey Grande, where it runs one of two packing houses. The factory sits in the middle of a 115,000-acre citrus operation -- reportedly the world's largest under one management.

BM runs the highly secretive operation under a joint venture formed in 1993 with Cuba's National Citrus Corp. (NCC), which owns the land. The project's goal: to upgrade the quality of Cuban oranges, grapefruits, mandarin oranges and other citrus so Cuba can boost exports to Western Europe and -- as soon as Washington's trade embargo against Cuba is lifted -- to the United States as well. In exchange for their know-how and capital investment, the Israelis get an unspecified share of the profits.

Eitan's company operates from a private house in Havana's upscale suburb of Miramar. Inside, exhibits display such well-known Israeli agricultural technology as Netafim drip-irrigation and Dan sprinkler systems.

"We are changing agriculture in Cuba," Eitan recently told the Israeli newspaper Yediot Aharonot. "Take corn, for instance. They used to get 100 kilograms of kernels per hectare. I told them: I'll get you 800 kilograms per hectare, and they simply cannot believe what they see."

Yet when reached by phone at his Havana residence, Eitan refused to comment on either the citrus project or on his company's many other Cuban ventures.

"We don't share our private business with journalists," he told CubaNews. "I really don't want to talk about our business."

Perhaps the biggest reason for Eitan's secrecy: the U.S. trade embargo. Earlier this year, Eitan received a letter from the U.S. State Department, warning him that his venture -- which employs 1,800 full-time and 20,000 part-time workers -- is a violation of Helms-Burton. Under that 1996 law, any foreigner who makes capital investments or does business with the Castro regime may be denied a U.S. visa.

Needless to say, no Americans can legally invest in Cuba, given the current state of affairs. That Eitan would risk so much to do business in Cuba is surprising, considering the country's Communist system and the oversupply of both grapefruits and oranges on the world market.

"I don't know why anybody would want to make a citrus investment anywhere in the world right now," says citrus specialist Tom Spreen, a professor of food and resource economics at the University of Florida in Gainesville. "It doesn't make any sense to invest huge amounts of money, which is what Cuba needs. I don't know why the Israelis have stayed there. If we had a freeze in Florida and many trees got killed, or if Brazil got a virus that would really alter the balance of supply and demand in the world, then there might be interest, and it's conceivable that someone might look at Cuba."

But at present, says Spreen, "Cuba would be the last place I'd want to make an investment" -- especially since the Marxist government still won't give foreign investors title to land or buildings, or allow companies to hire their own employees directly.

In a paper presented Aug. 7, 1997, to the Association for the Study of the Cuban Economy's seventh annual meeting in Miami, UF Professor James E. Ross says that partly because of lower output but also as a result of the lack of markets, Cuban fresh citrus export volume has fallen from the 1990 level of 456,697 metric tons. Exports in 1991, 1992 and 1993 were 107,300 tons, 45,011 and 98,230 tons respectively. No data is available for 1994 or later years, though production trends don't indicate any major change in export supplies.

"Oranges accounted for more than half of all the country's citrus exports during the decade before termination of Soviet aid and the loss of preferential markets in Eastern Europe," said Ross. "Grapefruit made up about 40% of the citrus exports, and limes the remainder. During the 1990s, the ratio has been reversed. Grapefruit exports have become larger than fresh orange exports, accounting for more than half to three-fourths of the value of all citrus trade."

The Netherlands now constitutes Cuba's dominant market for fresh citrus, followed by the United Kingdom, France and Germany.

At the moment, two companies import virtually all of Holland's citrus from Cuba: Citronas B.V. and International Fruit Maatschappij B.V.

Marco Korpel, export manager at Citronas, says his company imports Cuban oranges from early January until the end of April under the "Conchita" brand, with prices at the beginning of the deal going for $8-9 a box. "We are happy with the quality. There are no problems," he said.

Dick Aaldyk, sales manager at International Fruit, says he's selling about a million boxes of Cuban citrus a year -- 300,000 boxes of grapefruits and 700,000 boxes of oranges under the "Cubanita" label. Both come from BM's operation at Jaguey Grande.

"For years, Cuban oranges have been popular here because of their suitability for juicing," Aaldyk said in a phone interview from Rotterdam. "In Holland, supermarkets sell juicing oranges year-round, though normally in the wintertime it's a tropical type of orange from Cuba, and in summer we sell oranges from Brazil." He adds that "the Israelis have lifted the quality of Cuban fruit tremendously in the last five years."

Although Cuban oranges are no juicier than their counterparts from Florida, they're considerably cheaper -- mainly because Cuban labor is a lot cheaper. A 16- to 17-kg box sells in Rotterdam for around $7.50 (about 44 a kilo), while a 19-kg box of Florida oranges sells for $12 (about 63 a kilo).

Aaldyk says the Netherlands buys half of all Cuba's two million boxes of fresh fruit exports to Europe, and that his company accounts for 70% of Dutch imports; Citronas buys the remaining 30%.

While nearly all of BM's Cuban oranges get sold on the Dutch market, it sells Cuban grapefruit not only in Holland but also exports it to Great Britain, France, Germany, Italy and various Eastern European countries.

John S. Kavulich II, president of the New York-based U.S.-Cuba Trade and Economic Council Inc., says where there has been foreign participation, Cuban yields have increased, and both marketing and distribution have improved, though recent statistics are unavailable.

"The unsung opportunity for foreign investment in Cuba is in non-sugar agriculture -- everything from citrus to flowers to coffee," Kavulich said in a phone interview from Havana. "Citrus is one commodity where worldwide demand has increased and continues to rise. Cuba's harvests are earlier than Florida's, and a few weeks can make all the difference in terms of whoever's first to get their product to market."

During the 1996-97 harvest, Matanzas province's Victoria de Giron citrus orchard alone produced 440,000 tons of fruit -- 90,000 tons more than in 1995-96. The orchard, founded 30 years ago, is the country's largest, accounting for more than 40% of fresh fruit, juice and extract exports. Cuban Agriculture Minister Alfredo Jordan said in May that the 1996-97 harvest would be approximately 700,000 tons, compared with 600,000 tons produced the year before, and 536,000 tons produced in 1994-95.

"Prior to [these foreign citrus investments]," says Kavulich, "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 Florida 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."

Yet according to Cuba's own official figures, the overall impact of citrus on the economy has been rather minimal. In 1996, sugar accounted for 52.5% of all export earnings, followed by nickel (23%), seafood (7%), tobacco (6%), citrus (0.6%) and non-nickel mining (0.4%).

Asked if U.S. citrus exporters should worry about Cuba just yet, Spreen says no.

"Cuba is in big trouble, for several reasons: we've reached a point of oversupply in the world citrus market. Florida is already talking about restricting the amount of grapfefuit that can come to market," he said. "The Cubans have a window they could potentially fill in October, but Florida has about half of the world's grapefruit production. Except for the Israelis, everybody else has a difficult time getting in. Therefore, in terms of fresh grapefruit, Cubans are really suffering from oversupply in the world market.

"On orange juice," Spreen adds, "they produce an interesting product. It's a real poor color, but it's real sweet. When you drink it, you think they put sugar in it, it's so sweet. Cuba could never stand alone selling 100% Cuban orange juice. What the Israelis are doing is selling this high-ratio stuff in Europe for blending purposes. But there's a limit to how much market share you can get."

Luxner News Inc, PO Box 938521 - Margate, FL 33093 USA tel=301.365.1745 fax=301.365.1829 web site design washington dc