Creating Ag Trade Opportunities In Cuba

Removing the U.S. embargo on Cuba would create a large market for U.S. ag. However, two-way trade is key.

Published on: Jun 26, 2012

When Fidel Castro seized power from former Cuban president (and a dictator himself) Fulgencio Batistsa in 1959, it wasn't long before he began nationalizing foreign investments.

Of course, many U.S. business interests were lost in the transition. Additionally, many Cuban refugees who landed in Miami also had their land stripped from their families courtesy of the Castro regime. In 1960, the U.S. enacted a trade embargo on Cuba, which is still in place today.

In 2000, the embargo was eased ever so slightly when the U.S. Congress passed and President Clinton signed the Trade Sanctions Reform and Export Enhancement Act of 2000, explains William Messina, Jr., an economist with the University of Florida. This act allows U.S. firms to sell food and medicine to Cuba as a humanitarian gesture.

CUBAN AG INFO: Members of the Illinois Farm Bureaus Market Study Tour listen as Miguel Salcines explains how urban co-ops work to provide much of Havana with food.
CUBAN AG INFO: Members of the Illinois Farm Bureau's Market Study Tour listen as Miguel Salcines explains how urban co-ops work to provide much of Havana with food.

It comes with strings attached. Any exports must be paid for in cash prior to being unloaded in Havana. Additionally, the trade is one-way only. Cuba still cannot ship products to the U.S. Castro promptly denounced the U.S. in 2000 for the gesture.

In November 2001, Hurricane Michelle raked across the entire Cuban island causing massive damage. According to Messina, the U.S. offered food aid, but the Cuban government rejected the proposition, preferring instead to purchase food under the terms of Clinton's 2000 trade reform act.

U.S. firms shipped more than $4 million worth of food and ag products to Cuba in the last six weeks of 2001, Messina notes. In 2003, the U.S. supplied about 1/3 of Cuba's food import needs. It made the U.S. the fourth largest supplier of total imports after Venezuela, China and Spain, Messina notes.

More recently, Cuba has gravitated toward Brazil as its preferred food supplier. Brazil is willing to extend industry-standard terms of credit toward Cuba. Plus, the two countries are co-investing in numerous port upgrades in Havana.

Market Study Perspective

When the Illinois Farm Bureau Market Study team met with the Cuban Ministry of Agriculture, Chamber of Commerce and ALIMPORT (the governmental agency responsible for all Cuban imports), one theme was pervasive – Cuba wants two-way trade with the U.S.

Knox County farmer Grant Strom agrees two-way trade is a necessity to provide Cuba with the cash reserves to purchase U.S. products. This sparks the question – What does Cuba have that U.S. customers want to purchase?

"We are the wealthiest nation in the world and we love our luxury products," Strom notes. Cigars, rum and coffee would sell easily in the U.S., Strom says. With a little work, he expects Cuba could establish a solid fruit and vegetable business in the U.S. Of course, quite a few antique U.S. cars would probably find their way back north.

Long-term, Strom says Cuba may want to revert back to a premier sugar supplier. Cuba parted ways with the sugar industry when the Soviet Union collapsed, along with their preferential trade terms for sugar.

"They were so reliant on it before, I could definitely see where there would be some hesitancy to go back to a sugar-driven economy," Strom adds.

While not technically a Cuban export, U.S. tourism could also bolster the country's bottom line very quickly, Strom notes. Along with tourism, U.S. investment in Cuba could be another gold mine. Again, there would likely be a fair amount of hesitancy, as many Cubans remember how the Batista regime unfairly handled foreign investment during the 1950s.