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Cuba as Future Client and Competitor
CubaNews / June 1995

By Larry Luxner

Cuba will buy more U.S. farm goods than the 24 nations of the Caribbean Basin Initiative combined once the U.S. trade embargo is lifted, according to a University of Florida agriculture expert.

William A. Messina Jr., executive coordinator of UF's International Agricultural Trade & Development Center in Gainesville, told a group of Washington executives last month that his office has prepared detailed, up-to-date studies on key sectors of Cuban agriculture, including sugar, citrus, vegetables, tobacco, livestock and specialty tropical products.

Messina's staff also supplies the U.S. Department of Agriculture with Cuban farm statistics -- since the Cuban government itself stopped publishing statistics in 1989 -- through an agreement with the University of Havana. In addition, UF has sent researchers to Cuba to study the spread of the tristeza virus, which attacks citrus trees.

Funding for Messina's project comes from the John D. and Catherine T. MacArthur Foundation, since, as he points out, it's illegal to use state or federal monies to travel to Cuba.

"Agriculture is the key to the Cuban economy," said Messina, speaking at the May 17 conference organized by USDA and the Library of Congress. "Tourism is growing by leaps and bounds, but it still represents only 10% of the economy."

Messina said three recent developments offer short-term hope for Cuba's agribusiness future, even without a lifting of the U.S. embargo: the October 1994 decision to abolish state farms in favor of smaller cooperatives, the long-awaited reopening of farmers' markets, and the welcoming of foreign investment into all sectors of agribusiness, including the once-sacred sugar industry.

"Farmers markets are designed to allow farmers to sell surplus, over and above their quotas," said Messina. "But we understand that the quotas are not being met. So we don't know if that's really an increase, or just a reshuffling of production."

On Cuba's overall potential, he said, "we know the embargo won't last forever, and there's a very good possibility that once the embargo is lifted, it will have more of an impact on U.S. agriculture than either the CBI program or the GATT accords."

Sheena Kuruvilla, spokeswoman for the Washington-based United Fresh Fruit and Vegetable Association, says the UFFVA's 1,500 members are divided on whether Cuba's eventual opening will help or hurt them.

"A lot of our members are concerned that Cuba will displace their markets here and overseas. At the same time, another solid group of members believes Cuba will give them opportunities for joint ventures and expanded markets around the world," she said.

Lobbyists for the National Pork Producers Council say Cuba could quickly become one of the top 10 export destinations for U.S. pork, while the Rice Millers' Association says Cuba would become a "significant market" for U.S. long-grain rice. Fertilizer, pesticide and poultry interests would also stand to gain if American firms were allowed to trade with Cuba.

At the moment, the largest agribusiness investment in Cuba is a $22 million project headed by Grupo BM of Israel, which is developing a 115,000-acre citrus operation in Jaguey Grande (see CubaNews, January 1994). 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.

"Florida citrus producers are feeling the impact of that joint venture in the European market," Messina said. "The quality of Cuban citrus was always poor. But as a result of Israeli and Chilean investment in oranges and grapefruit, Cuban fruit is now hitting the European market on a reliable schedule, quality is up, and that's putting price pressures on Florida growers."

Richard Kinney, executive vice-president of Florida Citrus Packers in Lakeland, Fla., says Florida growers have $10 billion invested in groves, and that competition from Cuba "would put people out of business," regardless of the benefits it might bring to other agribusiness sectors.

"About 60% of our product in fresh channels is grapefruit, and they ve got 85,000 acres of grapefruit in production," he said. "We already have a mature grapefruit market in this country. While there may be some narrow [investment] opportunities in Cuba, the downside of that coin is pretty tremendous."

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.

According to Messina, the Cuban government has recognized citrus as one of agriculture's best foreign-exchange earners, and -- given shortages of fuel and spare parts for tractors -- has been forced to divide its citrus lands into three categories: top priority earmarked for foreign investment; older groves, which are getting the most basic maintenance, and inferior groves, which have been virtually abandoned.

The shortages have been felt most in the sugar industry, Messina said. Pesticide purchases, for example, have dropped to 15% of pre-1989 levels. As a result, this year's sugar harvest will be no more than 3.5 million metric tons, compared to 8.4 million tons in 1989. Of 156 sugar mills, only 20 are in operation.

Yet foreign investment in that sector is likely as well, and negotiations are said to be "quite advanced' between the Cuban government and certain British, Swiss and Arab firms. The companies are said to be more interested in the financing, production and marketing of sugar than in the purchase of sugar mills or other assets.

In addition, the Dutch banking group Internationale Nederlanden Group plans to lend the Cuban sugar industry $30 million for the current harvest as part of a five-year deal to help the industry recover from its difficulties. The loan will be used in La Habana and Matanzas provinces for fertilizer, pesticides, spare parts and machinery, and is designed to help Cuba get back to 1989 levels of production.

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