Cuba trade expansion could mean good things for Alabama businesses

Cuba trade expansion could mean good things for Alabama businesses
Marty Roney, Montgomery Advertiser 12:33 a.m. CDT May 18, 2015

STORY HIGHLIGHTS
- One-fourth of the yearly shipments of frozen chicken to Cuba from Alabama
- Alabama also sells Cuba forestry products
- In 2013, U.S. shipped $350 million in agriculture products to Cuba
Farmers, businesses in the South benefit by being close to Cuba

Maneuvers in the halls of power in Washington, D.C., could pay dividends
in Alabama's fields, forests and factories.

President Barack Obama wants to move to normalize relations with Cuba,
and a big part of that is doing away with a trade embargo that went into
effect in 1962. Any lifting of the embargo would have to get
congressional approval, which promises to be a lengthy, hard-fought battle.

Still, Alabama could profit from a shift in Cuba policy, said Jimmy
Lyons, chief operating officer for the Alabama Port Authority, which
operates the Port of Mobile.

"Cuba, pre-revolution, was a key American trading partner," he said. In
fact Havana and Mobile were sister cities in the pre-revolution days.
"If trade is re-established, I can see Alabama businesses sending
products to the country. Everything from steel sewer pipes made in
Birmingham to paint and building materials to other goods. There are a
lot of good possibilities present in trade with Cuba."

In 1959, an armed revolt led by Fidel Castro overthrew the government of
Cuban President Fulgencio Batista, who had the backing of the American
government. The embargo went into effect in 1962 as a way to punish
Castro's communist regime.

In 2000 the embargo was amended to allow shipment of food, medicine and
other humanitarian aid to the island nation. That move has been a boon
to Alabama agriculture. America ships about 200 tons of frozen chicken
to Cuba a year, according to the U.S. Department of Agriculture. In
2012, about 42 tons, or about one-fourth of the yearly shipments of
frozen chicken, came from Alabama.

The forests of the state also provide products for Cuba, in the form of
utility poles, lumber and railroad cross ties, according to the Alabama
Department of Commerce.

Trade restrictions now mean any exports to Cuba are paid for in cash,
handled by third-country banks, which often tack on fees to handle the
transactions. That means American products can be more expensive than
commodities coming from other countries.

Farmers in the Deep South are uniquely situated to profit from relaxed
trade restrictions with Cuba, said Mitt Walker, director of National
Legislative Programs for the Alabama Farmers Federation.

"I think any normalization of relations with Cuba is going to be a
slower process than most people think," he said. "Expanding trade with
Cuba creates exciting opportunities for Alabama farmers. And those
opportunities can expand to other products made in Alabama."

Farmers and businesses in the South benefit by being closer to Cuba,
which would cut down on shipping costs, he said.

"You have the Port of Mobile down there, one of the best shipping ports
in the country," Walker said. "It's almost a straight shot from the Port
of Mobile to Cuba."

Agriculture, including forestry products, is Alabama's leading industry.
Agriculture creates 580,295 jobs and generates a yearly economic impact
of $70.4 billion, farmers federation data show. In 2006, exports to Cuba
amounted to about one-fourth of Alabama's agricultural export revenue,
an Auburn University study shows.

In 2013, USDA figures show, the U.S. shipped $350 million in agriculture
products to Cuba, with frozen chicken, corn and soybeans the leading
commodities. That compares with $710 million of products in 2008, and
$4.3 million in 2001, the first year that agriculture and humanitarian
products were allowed to be shipped to Cuba.

The amount of trade fluctuates each year based on food and commodity
prices, the USDA says.

Still, Cuba's economy is weak and has to improve before Hyundais and
Hondas built in Alabama are bought, said Jeff Bates, distinguished
lecturer of economics at Auburn Montgomery. Cuba is about the size of
Alabama, and has a population of about 11 million, he said.

Along with lifting trade restrictions, travel restrictions have to be
loosened as well, he said.

"Americans can travel to Cuba now, but you have to go through Mexico or
some other country and it's a big hassle," he said. "The key to any
increase in trade is Cuba getting hard currency. The best way to do that
is through tourism."

Cuba was a tourist destination pre-revolution, he said.

"If you see American tourists return to Cuba, you will see hotel and
entertainment companies begin to invest in the country," Bates said. "It
will take time, but wealth will be generated. That's when you would see
the shipments of durable and consumer goods increase."

Source: Cuba trade expansion could mean good things for Alabama
businesses -
http://www.montgomeryadvertiser.com/story/news/local/alabama/2015/05/18/cuba-trade-expansion-mean-good-things-alabama-businesses/27518143/