Cuba trade on the table

EXPORTS

Cuba trade on the table

United States has become island's top food supplier

By Ian Katz
Havana Bureau

June 18, 2006

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 Brazil.

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.

Copyright © 2006, South Florida Sun-Sentinel
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