Cuba relies on imports for 75 percent of its food, creating a huge potential market for U.S. farmers and ranchers, says Parr Rosson, head, Texas A&M Agricultural Economics Department and AgriLife Extension economist.
U.S. producers have been able to take advantage of some of that demand with the passage of a 2000 law allowing limited trade with Cuba, in spite of a trade, travel and economic embargo that has been in place since 1962.
Rosson, speaking at the Texas Plant Protection Association’s annual conference in Bryan, Texas, said ag exports to Cuba could reach $450 million for 2012, short of the more than $700 million exported to Cuba in 2008, when numerous hurricanes hammered the island nation and increased the need for imported food.
Rosson said key U.S. ag exports to Cuba include corn, poultry, soy and soy products, feeds, pork and wheat. Potential exists for increased export of higher quality cuts of beef, which currently are limited to use in the Cuban tourist industry.
Since 2000, U.S ag suppliers fill some of those needs.
The Trade Sanctions Reform and Export Enhancement Act of 2000, “created exceptions,” Rosson said. The act permits exports of food, medicines and some chemicals into Cuba although the embargo remains in place for most trade. Also banned are imports from Cuba, including Cuban cigars. U.S. banking with Cuba is prohibited as is tourism and spending money in Cuba.
Reforms do allow exporters to travel to Cuba.
“The United States is stringent about the embargo,” Rosson said.
And that embargo is likely to remain in place, he added, “as long as a Castro is in power.”
Top 35 trading partner
With the easing of restrictions, Cuba has become one of the U.S. top 35 trading partners. The U.S. supplies a significant percentage of Cuba’s food supply.
Rosson said Cuba is a decent trading partner. Terms of the trade reform require cash payment before delivery, for instance, so credit is not an issue.
Rosson said Cuba’s population, 11 million, has been stagnant or declining for the past few years, due to a lower birth rate and people leaving the country, “when they can sneak out.”
But Cuban trade also presents challenges. Wages are relatively low. “Most Cubans work for the government, for about $20 per month. But about 60 percent of the population is involved in the tourist industry — hotel workers, taxi drivers, etc. — and have access to tips.
Also, anything that has to do with food or agriculture is controlled by the government. “Cuba is a Communist country,” Rosson said.
Tourism, nickel and remittances make up the key economic foundation for Cuba. Canadians are the top country for the Cuban tourist industry. Europe accounts for the second largest tourist block and Latin America is next.
The nickel industry has been good at times, but prices have declined in recent years. Remittances, money sent back to Cuba from relatives who have moved to other countries, also add significantly to the Cuban economy, Rosson said.
Oil and gas exploration has not been successful so far.
No commercial flights are currently available from the U.S. to Cuba. Some charters are available and it is legal to fly to Mexico and then to Cuba. “Travel and business restrictions are typically imposed by the U.S., not Cuba,” Rosson said.
The U.S. has no embassy in Havana but does maintain a “U.S. interest section.”
He said farmers markets are popular but that grocery store shelves are sparsely stocked. Cubans receive food ration cards and can use those to buy from national stores, where prices are cheap, 1 cent per pound for rice compared to 35 cents per pound in commercial markets.
But when Cuban citizens use up their ration cards they have to buy the more expensive goods from the local economy.
The trade reform act has improved Cuban trade but not to the position that existed before the embargo. “Prior to the embargo, 25 percent of all the arable land in Cuba was owned by U.S. interests. The U.S. was THE major player in Cuba.”