By Anthony DePalma.
The New York Times. February
4, 2001
The Havana harbor has been a forbidden port of call for American ships since
the United States imposed its economic embargo on Cuba in the early 1960's, and
not much was expected to change after Congress enacted a law last fall lifting
the embargo just enough to allow the first sales of food and medicine. The new
law imposed such severe restrictions on financing that nobody expected any
deals.
But the law, to take effect in a month, may allow American companies to sell
a surprising variety of products to Cuba, ranging from fertilizer and cigarettes
to washing machines and live sheep. And some deals may be small enough so that
the Cubans can afford to buy the products without borrowing, which would bypass
the financing restrictions.
There's a catch — two actually. One is the Bush administration, which
will draft the final regulations to carry out the law and has a much tougher
view of Cuba than the Clinton administration did. Second is Cuba itself. Cuba
officially views American products as symbols of oppression and has vowed not to
buy so much as a grain of American rice or a single box of Rice Krispies.
As a result, the diplomatic and commercial tug of war between Washington and
Havana will largely determine the extent to which American companies can break
into the market that Canada, Mexico and other countries have had to themselves
for 40 years.
The effort to punch a hole through the embargo has as much to do with
commercial interests as with politics. American farmers and food producers
pushed for an end to the sanctions and want government agencies to interpret the
new law as broadly as possible. They hope that even with the financing
restrictions, the United States will gain a toehold in a market worth $1.6
billion a year in sales of food and medicine.
But the Cuban government is upset by financing restrictions added at the
last minute by Representative Lincoln Diaz-Balart, a Republican from Miami, and
other legislators who opposed weakening the embargo. The restrictions prevent
American companies and banks from extending credit directly to Cuban buyers.
"Our country will not acquire one penny worth of food or medicine in
the United States," said an editorial in Granma, the official newspaper of
Cuba's Communist Party. The financing conditions were called humiliating and
unjust and the government convoked more than half a million people in Havana to
protest.
Still, American food producers are trying to persuade the Cubans to make
some purchases and prove that the country is a viable market; otherwise, the
producers say, support for lifting the embargo completely will shrivel.
"We're working very hard to get a shipment into Cuba this year,"
said Audrae Erickson, a trade policy specialist at the American Farm Bureau
Federation in Washington, which represents the big grain growers in the United
States. "We believe we can do cash transactions with Cuba if we can resolve
some of the outstanding political issues that Cuba has."
But Fidel Castro is known for contrariness concerning the embargo, which he
has used for decades to fan resentment against Washington.
Pamela S. Falk, a trade expert at the City University of New York School of
Law who is advising several companies interested in doing business with the
Cubans, said Mr. Castro might feel threatened by the partial lifting of the
embargo. Economic necessity may force him to do business with the United States,
she said, especially because Cuba has trouble with other suppliers.
Ms. Falk noted, for example, that Cuba's wheat-for-sugar barter arrangement
with France had faltered because of Cuban credit problems, which could lead Mr.
Castro to seek an alternative. France has decided to withhold $160 million in
credits for the purchase of wheat and flour until Cuba repays millions in debts.
American producers may also be able to make offers that the Cubans find hard
to refuse. Cuba's proximity to the United States means that transportation costs
would be far less than for shipments coming across the Atlantic. For example,
the Agriculture Department estimates that Cuba will buy more than 450,000 tons
of rice this year. American rice producers, who are expected to be first in line
to complete deals, have said they could sell rice to Cuba at about half the
price it pays to buyrice from Vietnam and China, two of Cuba's biggest
suppliers.
If the Cubans buy, the range of goods they may choose is much broader than
the term "food and medicine" suggests. John S. Kavulich II, president
of the U.S.-Cuba Trade and Economic Council, a business group that focuses on
Cuba, said that despite appearances, the legislation represented a real
loosening of the embargo. "By anyone's definition, the commercial landscape
between the two countries has radically changed."
The law lifts sanctions on sales of food and medicine not only to Cuba, but
also to Iran, Libya, North Korea and Syria. The president can decide to lift
financing restrictions on the other four countries, but not for Cuba.
Under the law, American companies may sell food and medical supplies to
anyone in Cuba — including government agencies and tourist hotels. But the
financing restrictions mean that business must be done in cash or with financing
provided by a bank in a third country. The law prohibits the United States
government from extending export credits to Cuban buyers, and no American
company or bank may provide financing.
Supporters of the restrictions called them necessary to protect United
States banks from Cuba's bad credit risk. Over the last few years, Cuba has not
paid some debts to European creditors. "We're talking about what is
essentially a deadbeat country," said Thomas M. T. Niles, president of the
U.S. Council for International Business, a business organization in Washington.
But the Cuban-American congressmen who led the effort to impose restrictions
also believed they would be so onerous that the embargo, in effect, would remain
intact.
That may not be the case. The final regulations, still under discussion, may
permit foreign subsidiaries of some American banks to extend credit to Cuba.
However, they are unlikely to be permitted to work hand in hand with their
affiliates in the United States.
Last month, Senator Byron L. Dorgan, Democrat of North Dakota, and other
senators introduced a bill to lift the financing restrictions and encourage
greater sales of food and medical products to Cuba.
Regulators are using a broad definition of food that includes not just
grains, but also livestock, meat, fish and a long list of other products derived
from basic foods. These may include beer, wine, cigarettes, seeds and
fertilizer. The list is expected to exclude pesticides, agricultural equipment
and bottled drinking water, which is not considered an agricultural product.
Processed foods like snacks, cookies and breakfast cereals are expected to
be permitted. Because these goods tend to be shipped in smaller quantities than
grains, Cubans may be more likely to pay for them in cash and not need
financing.
Despite the dire condition of the Cuban economy, the country does have
limited access to dollars. The 1.4 million people of Cuban origin in the United
States send $500 million to $800 million a year to relatives in Cuba, and those
dollars enter the Cuban economy. Cuba's growing tourism industry also gladly
accepts dollars as payment.
"We actually believe Cuba will be a good market for consumer products,
especially snack foods, breakfast cereals, sodas and things like that,"
said Sarah A. Fogarty, director of international trade at the Grocery
Manufacturers of America. "We believe we will be selling more to the
market, but under some limited conditions, and we'll be looking to the new
Congress for a bit more."
The definition of medicines and medical supplies is interpreted broadly
under the new law. It includes all pharmaceutical drugs, as well as ambulances,
operating tables and the institutional washing machines used in hospitals. It
excludes desks for doctors and other furniture that could be used outside a
hospital, as well as vitamins and supplements.
The definition, however, leaves room for confusion. For example, it is
unclear whether the Cubans can buy surgical gowns, which may be classified as
clothing, not as medical equipment.
Shipping is another confusing issue. The new law does not address older laws
that prohibit any vessel that calls on a Cuban port from entering a harbor in
the United States for 180 days. The shipping restriction currently can be waived
by the Treasury secretary, and many food producers believe those same waivers
can probably be applied under the new law. But until the regulations are
published, they cannot be sure.
Writing regulations for a federal law is always complicated. But it is
especially so in this case, because it involves sanctions and coincides with a
change in administrations with differing views.
Former President Bill Clinton favored at least a partial lifting of the ban
on American trade with Cuba that was first imposed by President Dwight
Eisenhower in 1960 and tightened by John F. Kennedy in 1962. During the
presidential campaign last year, Mr. Bush took a hard line on Cuba, saying in a
speech in August that until it "frees political prisoners, and holds free
elections and allows free speech, I will keep the sanctions in place."
Mr. Bush, however, has said he intends to pay more attention to Latin
America than did Mr. Clinton. And his new attorney general, John Ashcroft, was
one of the principal sponsors of the law lifting some of the sanctions on Cuba.
Copyright 2001 The New York Times Company | 