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HavanaJournal.com: Cuba Business

Reuters Analysis: Will politics chill US-Cuba grain trade?

Posted June 18, 2003 by publisher in Cuba Business.
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By K.T. Arasu | Reuters

CHICAGO, June 17 (Reuters) - The diplomatic chill between Washington and Havana that followed Cuba’s crackdown on political dissidents in April threatens to close a market for U.S. farm goods that has been slowly opening for the last two years, U.S. agriculture sources say.

But the trade continues over two months after a new wave of political repression spread over the communist country south of Florida, leaving anxious observers to wonder which will prevail: free trade or strong-arm diplomacy.

“Obviously, these events are going to play into the hands of those who are against lifting the embargo on Cuba,” said Jim Willis of the U.S. Rice Producers Association.

Since U.S. farm-state politicians succeeded two years ago in their quest to thaw the 42-year-old U.S. trade embargo, the Caribbean island has bloomed into a lucrative cash market for U.S. farm goods.

John Kavulich, president of the U.S.-Cuba Trade and Economic Council, said Cuba became the 46th largest export market for U.S. farm goods in 2002, leaping from 144th in just one year after buying $189 million worth of U.S. products.

But efforts by farm and business groups to further ease U.S. trade sanctions and end a ban on American tourism have been brought to a standstill by Cuba’s worst wave of political repression in decades.

DISSIDENTS JAILED

On April 7, Cuba jailed 75 dissidents for terms of up to 28 years. Four days later, Cuba executed three men who had hijacked a ferry in a failed bid to reach the United States.

The U.S government reacted by expelling 14 Cuban diplomats, and Secretary of State Colin Powell said on May 15 that the U.S. policy of isolating Cuba to force political change will continue.

But in that same week U.S. exporters sold over a million dollars worth of farm goods to Cuba, suggesting that the political isolation does not extend to food trade—yet.

Since mid-April, Cuba has continued to buy U.S. grains, including 106,900 tonnes of corn and 15,700 tonnes of rice. It had bought and shipped 113,600 tonnes of U.S. soybean meal and 52,700 tonnes of soyoil in the current trade season up to June 5. It bought another 20,000 tonnes of U.S. wheat last week.

“They have not stopped buying,” said one exporter who works for a company that has been selling farm goods to Cuba. He said Cuba had even bought corn that won’t be harvested until fall.

The fact that the Bush Administration has not tightened up on grain sales and Cuba has continued to reach out for U.S. farm goods appears to reflect quiet acknowledgment on both sides that a fundamental connection has been formed.

Iowa Senator Tom Harkin, a vocal backer of both human rights issues and farm exports, said during an April 24 visit to Havana that Cuba should free the dissidents but also keep buying American farm goods.

“Some said I should not come here under these circumstances, but a policy of isolation and the embargo of 42 years has not achieved any U.S. objectives nor made life better for the average Cuban citizen,” Harkin told reporters.

A BRIDGE OF FOOD?

Neil Harl, agricultural economist at Iowa State University, said agricultural trade was a well-established bridge-maker.

“There have been renewed concerns over human rights in Cuba, but there have also been such concerns with China, and we continue to trade with China,” he said. “Basically, trade and politics will be on two different tracks.”

The U.S. embargo on trade with Cuba was loosened two years ago after storms devastated the island, allowing Havana to buy U.S. food for cash.

George Ryan, then governor of farm state Illinois, promoted farm trade in a ground-breaking trip to Cuba in 1999. Illinois-based Archer Daniels Midland Co. has sold much of grain bought by Cuba over the last two years, traders say.

Farm analysts said Cuba’s interest in U.S. grain may be partly political, but it is also strongly economic.

Grain market analyst Shaw n McCambridge of Prudential Securities tied Cuba’s interest to Havana’s loss of privileged trade relations with long-time communist ally Russia.

“They have become cost-conscious, in that they are going to look for the best deal, best price,” McCambridge said.

Rick Tolman, chief executive of the National Corn Growers Association, said Cuba could buy up to 300,000 tonnes of U.S. corn a year—about the amount that top customer Japan buys each week. This season, Cuba has so far bought 308,300 tonnes of U.S. corn versus 150,900 tonnes last year.

“Although we believe politics and trade should be kept separate, I do foresee politics having some impact on trade,” Tolman said. But, he added, “We have seen that trade embargoes don’t work. The reality is we have to engage them.”

Reporting by K.T. Arasu, editing by Jim Marshall 06/17/2003 01:48 p.m.CDT

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