With the first U.S. agricultural and food trade fair opening here next month, the Americans are looking to make a big impression on Cubans at a time when the Bush administration is warning merchants to think twice about doing business in the communist nation.
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In addition to stacks of canned goods, breakfast cereals and other samples, the Americans are airlifting two Jersey dairy cows from Illinois, two 400-plus-pound bison from North Dakota and a few hearty porkers from North Carolina.
Archer Daniels Midland Co., the fair’s primary sponsor, is building a mock-up of a 1950s diner to show off its products, while a U.S. egg producer is flying in one of the world’s great omelet-makers to serve up breakfast for visitors to the expo.
Minnesota Gov. Jesse Ventura is planning on being here, too, to press the locals on the benefits of his state’s products, while the Illinois state pavilion will host a live radio broadcast back to the United States.
The agricultural fair, which is expected to draw more than 180 of the biggest U.S. food companies and other exhibitors, is the most visible sign of the exploding U.S. interest in the Cuban market and the rising calls in Washington to further ease or lift the 40-year-old embargo.
Some businesses are excited about trying to break into a new market, while others are seeking to significantly increase sales in a market that they feel the U.S. should rightfully dominate. But the Bush administration and others who favor the embargo as a way to punish Cuban President Fidel Castro are frantically trying to turn back the rising commercial tide.
Otto Reich, the Cuban-born anti-communist hard-liner who heads the State Department’s bureau for Western Hemisphere affairs, is issuing somber warnings that Americans trading with Cuba are helping bolster an enemy regime.
“Castro is still the same one who in 1962 begged Nikita Khrushchev to launch a pre-emptive nuclear strike against the United States,” Reich said. “That shows to me the pathological hatred of the United States on the part of Fidel Castro. I’m citing it for motivational purposes.”
Moreover, Reich said, Castro consorts with terrorists worldwide, and the State Department declared earlier this year that the regime has a “developmental biological-weapons capability.” The Cubans flatly deny such charges. But just in case those anti-terrorism appeals aren’t persuasive, Reich hastens to add a warning: American farmers who trade with Cuba are sure to get fleeced.
“At the present time, with the present form of government, it [Cuba] does not represent any kind of major market for U.S. products,” Reich said. “And in fact, I think it represents a trap. What he [Castro] does is the equivalent of a Ponzi scheme. There’s a long list of countries to whom Castro owes very large amounts of money.”
Cuba has responded to such talk with dollars and cents.
Already this year, the Cubans have paid more than $110 million for U.S. chicken, corn, apples, eggs, wheat and other products under an easing of the U.S. embargo approved by Congress two years ago. The law allows for the direct sale of agricultural items as long as the deals are done in cash and no American credit is extended.
The Cubans are promising boatloads more cash if the United States lifts the travel ban and allows some credit financing for Cuban purchases.
A majority in Congress favors easing the embargo, but President Bush has vowed to veto any such attempts unless Castro implements radical democratic reforms. Pedro Alvarez, chairman of the Cuban government-run food-importing agency Alimport, said that if the current ban on financing is lifted, U.S. companies could capture up to 70 percent of Cuba’s annual food purchases, which he estimated could grow to $1.5 billion in the next few years.
“The fact that more American products are sold here … doesn’t harm anybody,” Alvarez said as he watched the latest shipment of U.S. food products being unloaded in Havana. “It benefits U.S. farmers. It benefits dock workers. It benefits the transporters. And it also benefits our people who receive products from a neighboring country.
“It’s a challenge for U.S. producers to recover a traditional market at a moment when markets are scarce.”
Making right moves
Experts say Cuban officials such as Alvarez are pressing all the right buttons, enticing powerful farm-state political interests in their quest to get the embargo lifted. At the same time, they say the instinct of American companies to get in early, while Castro is still in power, is on target, even if the current market in Cuba is less than robust.
But experts also say the Bush administration is correct in warning U.S. exporters that Cuba has a history of stiffing creditors. Cuba’s economy has stagnated in the past 18 months, and the country doesn’t have the cash or credit to significantly increase its purchases from the United States or anywhere else.
“Cuba is in a tight spot,” said Wayne Smith, who headed the U.S. Interests Section in Cuba from 1979 to 1982. “The money just isn’t coming in at this point.”
Experts and government officials have long debated how much the embargo has hurt Cuba and what lifting it would mean for U.S. businesses and others.
Cuban officials say the sanctions have crippled the economy, denying exporters a natural market while forcing a developing country to spend more on imports from distant places. The U.S. has tried to pressure its allies away from doing business with Cuba, something officials here say has complicated Cuba’s relations with the rest of the world.
“The embargo is an economic war,” said Miguel Alvarez, an adviser to the Cuban National Assembly. But others, including Reich, say the centrally planned Cuban economy has never worked and that the only thing that kept the country afloat was the $5 billion annual subsidy from the former Soviet Union.
When that vanished a decade ago, Cuba went into a downward economic spiral that tailed off only after officials in Havana decided to allow some private enterprise and foreign investment. Cuban leaders also decided to pump huge resources into the tourist industry, which now is the nation’s largest income earner, along with remittances from friends and relatives in the U.S.
A report last year by the U.S. International Trade Commission concluded that the embargo has cost U.S. businesses less than $1 billion in annual exports while arguing that even if the sanctions were lifted, the economic benefit to the United States would be limited.
“Cuba most likely would have many economic difficulties today even in the absence of U.S. economic sanctions,” the report said. “Foreign business guides indicate that Cuba presents both business opportunities and challenges. However, most of those challenges appear to be independent of U.S. sanctions and to stem from Cuban domestic economic policies.”
European interest
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The Europeans have found that out the hard way. When the Soviets pulled out, the Europeans came rushing in, entering joint ventures in the tourist industry and elsewhere and lending the Cubans tens of millions of dollars, according to diplomats and others.
But while the tourist business has been promising, other efforts have fared less well, and the Cubans are balking at paying back the loans. The Europeans have responded by cutting off some major lines of credit.
“They are constantly rescheduling and taking longer and longer to pay,” said one Western diplomat.
Now the Cubans are looking to the United States, and U.S. businesses–always eager to plow new territory–seem eager to respond. The questions are how big is the market and how big are the risks.
Dan Glickman, agriculture secretary under President Bill Clinton, said Cuba, with 11 million people, is a “substantial but not gigantic” market. With U.S. agricultural exports running $50 billion annually, American farmers and food companies could see their exports jump about 1 percent if they captured half the estimated $1 billion Cuban market.
“That’s a significant amount,” said Tony DeLio, vice president of marketing at ADM. “A 1 percent increase in the market doesn’t occur every day.”
Cubans seem eager for U.S. products. Two years ago, at the first exhibit of U.S. health-care products, Cubans lined up for free vision tests and samples of Vicks lozenges. In recent months, the Cubans have bought items such as Washington-grown apples and Tyson frozen chicken.
Yet, with a sagging economy and little or no credit, it’s hard to see how Cuba could significantly increase U.S. imports much without a major easing of the embargo and access to U.S. credit to facilitate sales.
“American suppliers are pushing and pushing to get credit, but there is no reason to believe that U.S. creditors would be paid [back] any more than creditors from other countries,” said the Western diplomat.
Mohamed Bouras, a top official at Marsh International Inc., an Indianapolis-based supermarket chain that has sold breakfast cereals, butter and other products to Cuba, said that is not a problem for now.
Bouras said Cuban officials are so eager to lure U.S. businesses that they paid his company even before the products–California wine, Budweiser beer, Coca-Cola and Tabasco sauce–arrived in Havana.