If trade restriction ease, the United States will have a strong competitive edge with Cuba. In fact, agricultural trade has increased significantly already, following a 2002 policy change that allows sales of food, medicine and lumber, all on a cash basis.
“Cuba and Texas could forge an important trade partnership,” says Jaime Malaga, with the Texas Tech Department of Agricultural and Applied Economics’ Center for North American Studies.
Malaga discussed potential for increased business with Cuba during a recent seminar in Amarillo, held in conjunction with the Amarillo Farm Show.
“Cuba and Texas agricultural sectors are complementary,” Malaga says. Commodities with export potential include: beef, beef products, other meat and livestock genetics, grain sorghum, corn, dairy products, and high value processed products.
“Cuban food and agricultural imports stand at $1.2 to $1.5 million per year with significant growth potential,” Malaga says.
Until 1960, Cuba and the United States enjoyed strong ties, including trade. That relationship died with the Cuban revolution and ascension of Fidel Castro and communism. Until 1989, Cuba traded mostly with Russia and Eastern European nations.
“During the 1990s, Cuba suffered an economic collapse,” Malaga says. “In recent years, they have seen some recovery with more open trade and a growing tourism industry. But the U.S. embargo continues. Since 2001, U.S. export of food is allowed but only on a cash basis.”
Malaga says Cuba imports much of its food supplies including rice, meat and meat products, soybean products, wheat, corn, beans, dairy products and processed high value goods. Cuba produces some sugar, coffee, tobacco, tropical fruits and citrus.
“Cuba historically has a food trade deficit and food accounts for their second largest import group, 30 percent or more of the total import value.”
With limited U.S. trade and following the collapse of the USSR, France, Canada, China, Spain, Vietnam, New Zealand, Argentina, Brazil, Chile, Netherlands, Italy and Mexico accounted for most of Cuba’s agricultural trading partners until 2001.
Following the policy change, the United States now holds the top spot, followed by Vietnam, China, Canada, Brazil, Venezuela and Spain.
Malaga says the United States’ share of the Cuban food export market has grown significantly since the change. In 2001, U.S./Cuba trade was only $5 billion. In 2002, that jumped to $141 billion and increased to $254 billion in 2003 and to $394 billion in 2004.
“The United States has significant competitive advantages,” Malaga says. “Quality, transportation costs, response time (hours or days instead of weeks), price and status and USDA inspections favor U.S. food products.”
He says tourism has been the driving force for increased demand in Cuba. In 1973, estimates show only 3,000 tourists to Cuba. In 1989, the number was up to 326,000, increasing to 1.8 million in 2002 and 2.3 million in 2005.
“Revenues from tourism are about $2.5 billion (U.S.) per year. That could increase, especially with improved relationship with the United States and easing of travel restrictions.”
Malaga says tourists expect high quality food and that drives demand.
“Also, changes in Cuba’s food consumption patterns come with income growth and allowing more imports. Exports may grow even more with normal trade financing conditions.”
Improved Cuba/U.S. relations also could increase export potential, he says.
U.S. companies have found opportunities already. Malaga says a 2002 Food and Agricultural Exhibition in Cuba attracted 291 U.S. companies or agencies and representatives from 33 states with some 3,000 product brands on display. The exhibition resulted in $90 million in U.S. sales and even more in contracts.
A trade fair in November 2005 attracted 188 U.S. companies and 370 U.S. executives from 31 states. Sales topped $270 million in ag food products.
“We see good signs that the Cuban economic recovery will continue,” Malaga says. “The potential includes a country 90 miles away with a population of 11.5 million.”
And he sees good potential for Southwest agriculture. Cuba needs beef and livestock to rebuild herds that have been decimated over the past two decades.
“They also need grain sorghum. Currently, they buy sorghum from China. That market offers significant potential for the Southwest.”