May 27, 2007 / 11:58 AM / 12 years ago

U.S.-Cuba food trade survives political hurdles

HAVANA (Reuters) - Cuba expects to sign deals worth $150 million with American food producers at talks starting on Monday that point to sustained U.S. interest in the Cuban market despite political hurdles.

A picture of Cuba's President Fidel Castro hangs on a window in Havana April 30, 2007. Cuba expects to sign deals worth $150 million with American food producers at talks starting on Monday that point to sustained U.S. interest in the Cuban market despite political hurdles. REUTERS/Claudia Daut

Uncertainty over the fate of ailing Cuban leader Fidel Castro caused a “hiccup,” trade consultant Kirby Jones said, but business has continued seamlessly under the caretaker government of his brother Raul Castro, and is picking up.

One U.S. farm state delegation after another has gone to Havana this year to pitch sales of wheat, corn, beans, peas, lentils, chicken and other products needed by communist Cuba to feed its people.

The governors of Nebraska and Idaho visited Havana and Delaware sent its first trade mission eyeing a new market. Last week, North Dakota won agreements to supply seed potatoes and red spring wheat. A delegation from Alabama arrived on Friday.

U.S. sales to Cuba are allowed on a cash-only basis under an exception to the embargo enforced against Castro’s leftist government since 1962. Despite the hostility between Washington and Havana, exports have totaled $1.55 billion since 2001.

But sales fell 10 percent in 2005 to $350 million, and dipped further last year to $340 million, a decline blamed on a 2005 decision by the Bush administration to require Cuba to pay before its foods shipments can leave U.S. ports.

Pedro Alvarez, head of Cuba’s food import agency Alimport, is confident that sales will grow this year. He said 250 agribusiness executives, food exporters and farm group leaders will meet in Havana for three days to negotiate new contracts.

“We expect to spend more than $500 million on U.S. products this year,” Alvarez said, using Cuban figures that include shipping, insurance and financial costs.

“That could double in two or three years if U.S. restrictions are lifted,” he said. “This trade is very difficult. It is only one-way and subject to so many obstacles.”

HIGHER SHIPPING COSTS

Under the embargo, ships that go to Cuba cannot enter a U.S. port for six months, which pushes up Cuban freight costs. The lack of direct banking services means Cuba has to obtain letters of credit in a third country, increasing transaction costs, Alvarez said.

Product and travel licenses required by U.S. authorities further complicate business with Cuba.

Jones, who heads the U.S.-Cuba Trade Association, a consultancy based in Washington, still sees a spike in interest in Cuba because it is a natural market for U.S. food producers with great potential. Besides, there is no risk of not getting paid in the cash-only business.

But sales are at a plateau due to U.S. hurdles, he said.

U.S. rice producers are competing with Vietnam and China in Cuba — once their biggest and closest foreign market. On May 17 they issued a statement calling for an end to all sanctions on Cuba, and the lifting of a travel ban. Allowing American tourists to travel to Cuba would increase U.S. food exports there and provide Cuba income to buy more, they argued.

The restrictions on trade with Cuba are being scrutinized in Washington by the U.S. International Trade Commission at the request of the Senate Finance Committee. The commission will issue its study by the end of June.

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