Trading with Cuba
Exporting agricultural goods to Cuba is an arduous chore under tight
U.S. restrictions, but deals continue to be made with Havana.
BY MARTHA BRANNIGAN
mbrannigan@MiamiHerald.com
Fidel Castro used to fete visiting American business delegations with
mojitos at receptions in Havana. His brother Raúl has shunned that role
since assuming power from the ailing Cuban dictator last summer, instead
letting officials such as National Assembly President Ricardo Alarcón do
the mingling.
Initial exuberance that Raúl Castro's transition to power would spur
warmer political and economic relations with the United States has waned
as the Bush administration has held its hard line. But despite the
headaches that come with exporting agricultural and food products to
Cuba, a steady parade of hopeful U.S. salespeople keeps slogging away.
In March, a Nebraska entourage led by Gov. Dave Heineman went to tout
corn and soybeans, and Delaware -- on its first trade visit -- offered
up poultry and winter wheat. In April, Idaho's Gov. C.L. Butch Otter led
a 35-member delegation there to hawk peas, lentils and pork.
Raúl Castro's ascent to power ''hasn't changed things at all either
way'' with respect to U.S. trade, says Kirby Jones, president of the
U.S.-Cuba Trade Association. ``It's totally seamless.''
Last year, U.S. exports to Cuba dipped to $340.4 million from $350.2
million in 2005. By most accounts, exports of agricultural goods to Cuba
will remain a fraction of what they could be as long as U.S.
restrictions remain and Cuba has friends such as China that can help
fill in its most severe food gaps.
''As long as Venezuela and China prop up Cuba economically, the island
will make few reforms to reach out to the U.S., because it doesn't have
to,'' said John S. Kavulich II, senior policy advisor to the U.S.-Cuba
Trade and Economic Council. ``Cuba wants more than anything else to be
relevant in U.S. political discourse. Everything about the relationship
between the two countries is political.''
LEGAL REFORMS
The narrow trade now permitted stems from the U.S. Trade Sanctions
Reform and Export Enhancement Act of 2000, which -- despite the U.S.
trade embargo against Cuba -- allows sales of food and agricultural
products to the island. A separate measure permits medical shipments.
But in February 2005 the Bush administration tightened its
interpretation of the law, requiring that Cuba pay cash for purchases
before they can leave U.S. ports -- an expensive hurdle. In addition,
Cuba can't wire funds directly to U.S. banks; instead, it must get a
letter of credit from -- or wire funds to -- a bank in a third country,
typically France or elsewhere in Europe.
''Cuba would buy more if it didn't have to pay through a costly and
time-consuming process,'' said Phil Peters, a vice president at the
Lexington Institute, a policy research group in Arlington, Va. ``It's
kind of a crazy system. The trade is perfectly legal, but we treat the
payments as if it's money laundering.''
Another hurdle: U.S. businessmen must obtain a license to travel to Cuba
to negotiate sales. The U.S. Treasury's Office of Foreign Assets Control
sometimes denies licenses without explanation, says Jones. ``No reasons
are given, and it is common for letters and telephone calls to go
unanswered -- sometimes for months.''
Such barriers are drawing heightened scrutiny in Washington.
The International Trade Commission, at the behest of the Senate Finance
Committee, is investigating the effects of U.S. trade and travel
restrictions on U.S. exports of fish, forest and agriculture products to
Cuba. The ITC will issue a report June 29.
The study comes as several bills are afoot in Congress to lift or ease
the embargo, although the specter of President Bush's expected veto has
stymied past legislative efforts.
''The current policies hinder further economic growth via trade with
Cuba,'' Roger Johnson, North Dakota's agriculture commissioner, who has
led five trade missions to Cuba since 2002, told an ITC hearing on May 1.
U.S. sales of soybean products to Cuba rose to $91 million during fiscal
2006, from $40 million in fiscal 2002. But the American Soybean
Association says the United States is at risk of losing business.
''While countries like Venezuela, Brazil and Canada can trade freely
with Cuba, the U.S. industry must work through third-party banks, apply
for travel licenses and obtain cash in advance -- all of which are
impediments to economic growth in Cuba and for the U.S. soybean
producers,'' Richard Ostlie, president of the soybean trade group, said
in a letter to the ITC.
RICE POTENTIAL
U.S. rice exports to Cuba rose to 157,744 metric tons during 2006, up
2.5 percent from 153,855 metric tons a year earlier. But American rice
producers say that's a fraction of the business they could do with Cuba
if the restrictions were lifted.
Cuba, with 11.4 million people, is a natural market, a stone's throw
away from the United States. The USA Rice Federation, a trade group
based in Arlington, Va., said that proximity allows cheaper
transportation and the nimbleness of shipping smaller quantities,
cutting storage costs. And many Cubans prefer the quality of U.S. rice.
Still, Cuba buys rice from countries like Vietnam, in part because
current restrictions make the United States an ''unreliable'' supplier,
said David Coia, a spokesman for the rice group, ``and we can't offer
credit like China or Vietnam or almost any other country.''
FOOD CONTRACTS
Kavulich said Cuba uses food contracts to pressure U.S. firms to support
an easing of trade sanctions. ''It started in '03. Cubans started tying
political activism with the amount of money companies may see from
Cuba,'' he said.
''Cuba's purchases from the U.S. are driven at least as much by politics
as economics,'' said William A. Messina, Jr. an agricultural economist
at the University of Florida.
Currently Cuba seems to be making an effort to reach out to U.S.
exporters: Alimport, its food import agency, will host a big trade expo
with U.S. exporters in Havana May 28-31.
It will be the first big event targeting U.S. firms since the United
States tightened restrictions two years ago. Some experts speculate Cuba
may feel a bit encouraged by the Democratic Congress in the United States.
Neither Alimport's president Pedro Alvarez Borrego nor the Cuban
Interests Section in Washington returned phone calls seeking comment.
But in an invitation letter to the American agricultural community,
Alvarez Borrego said the agency expects to nail down ''$100 million to
$150 million'' in contracts, including freight, to help meet demand for
the second half of 2007. And the letter said: ``The U.S. providers
represented in person at the event with competitive bids will stand the
highest chance to be awarded supply contracts.''
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