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Cuba trade on the table
United States has become
island's top food supplier
By Ian Katz, Havana Bureau.
Posted June 18 2006 in the Sun Sentinel.
HAVANA· American businessman Gregory
Calhoun strides into the lobby of the Hotel
Melia Cohiba in Havana. He's just back from
a meeting with Cuban government trade officials,
and feeling pretty good about the prospects
for stepping up his food exports to the
island.
Calhoun, CEO of Calhoun and Associates,
a reseller based in Montgomery, Ala., has
sent 9 million pounds of ham to Cuba in
the past eight months. Now he wants to add
canned goods and snack foods to his shipments.
The Cubans are eager buyers but skilled
negotiators, said Calhoun, who had arrived
that early June morning on a charter flight
from Miami and was leaving the next day.
Because of U.S. economic sanctions, nearly
all trade and investment with Cuba is banned.
Corporate icons such as McDonald's and Citibank
that dot the rest of the globe are absent
from the communist nation. But a law approved
in 2000 allows U.S. firms to export food
and agricultural goods.
Quietly, without billboards or TV commercials,
U.S. food products -- mainly chicken, corn,
wheat, rice and soybeans -- are finding
their way onto Cuba's dinner tables. Last
year U.S. companies exported $338 million
of food and agricultural products to Cuba,
up from almost nothing in 2001. That makes
the United States the leading food provider
and No. 4 exporter overall to Cuba, behind
China, Spain and Canada.
That's not to say exporting to Cuba is
always easy. It can be complicated because
of uncertainty over export rules, restrictions
on travel to Cuba and the antagonistic relationship
between the two countries.
Richard Waltzer, president of Fort Lauderdale-based
Splash Tropical Drinks, became interested
in exporting to Cuba when he heard about
a 2002 trade show in Havana. Since then,
Splash has signed $2 million of contracts
to send juice concentrate and daiquiri mix
to Cuba. He has added five people to his
28-employee company because of the extra
business.
Though politics is present everywhere in
the U.S.-Cuba relationship, Waltzer said
he has never had a problem with South Florida
opponents of trade with Cuba. "I don't
get into the politics of it," he said.
"We follow the law to a T."
In fact, Waltzer and other executives said
it is Washington, not Havana, that poses
the most obstacles to sending goods to Cuba.
First, exporters must receive special Commerce
Department approval. And to travel to Cuba
they must get permission from both the U.S.
and Cuban governments, which can take a
week or more. Potential exporters also don't
get assistance from the U.S. Interests Section
in Havana, which does not promote trade
between the countries.
Until late 2004, Cuba paid U.S. exporters
while shipments were in transit or after
they arrived. But the Treasury Department's
Office of Foreign Assets Control, which
enforces trade and travel restrictions with
Cuba, started to interpret the law to mean
that exports to Cuba must be paid for up
front.
Sales dropped sharply for several months
until July 2005, when OFAC decided that
the cash advance requirement could be met
if Cuba paid through banks in third countries.
Exports have rebounded since then, but remain
slightly below 2004 levels. On Wednesday,
the House of Representatives voted to override
the Bush administration's cash-in-advance
requirement.
John Kavulich, senior policy adviser for
the New York-based U.S.-Cuba Trade and Economic
Council, does not think confusion over the
rules contributed to the decline in U.S.
exports to Cuba. Instead, he cited Cuba's
strengthening economic ties to Venezuela
and China. He also said Fidel Castro's government
prefers to do business with U.S. firms that
may agree to lobby in Washington for fewer
restrictions on trade with Cuba.
Still, the bureaucracy and uncertainty
keep some U.S. traders out of Cuba.
John Bauer, president of Fort Lauderdale-based
supplier Basic Foods International, said
he has thought about exporting and has received
e-mail pitches from the Cuban government,
but isn't convinced. He said he was concerned
about the frequent changes in the payment
rules and the hassles involved in traveling
to Cuba. "If there is a discrepancy
[in a shipment], you can't just go down
there and straighten it out," he said.
Calhoun, the Alabama executive, said the
key for U.S. businesses is getting enough
volume. "Margins will be thin. They
[the Cuban government] want the best price
since this is a poor country." Calhoun
said that as a result of his exports to
Cuba, he might add 15 to 20 people to his
475-employee company.
U.S. exporters can also send medicines
and medical equipment to Cuba, but food
and agriculture account for 94 percent of
the exports. Statistics for the first quarter
of 2006 show that in dollar terms, the United
States sent about three times as much food
as Brazil, the No. 2 food exporter to Cuba.
Business executives and trade analysts,
however, said there is plenty of room for
growth. U.S. companies could export far
more beef, bread, crackers, cookies, wine,
beer and processed vegetables, said Loyd
Coonrod,an economist with the Food and Drug
Administration. "In some of those areas
we're selling next to nothing," he
said.
Whether that changes depends on the future
of U.S.-Cuba relations. Bauer, of Basic
Foods, said he is waiting for "the
easing of restrictions." But for those
already exporting to Cuba, selling food
to the communist government has turned into
good capitalism.
U.S. Food Exports to Cuba
Dollars 2005 $338.5Year (in millions)
2001 $4.6
2002 $139.8
2003 $247.6
2004 $384.0
Source: U.S. Census Bureau
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