Posted May 06, 2004 by publisher in Cuba Business.
By Larry Luxner | [url=http://www.CubaNews.com]http://www.CubaNews.com[/url]
Some 405 representatives of U.S. food companies, farm cooperatives, state agricultural commissions and non-profit groups jammed Havana’s Palacio de Convenciones last month for four days of negotiations that generated $106.7 million worth of contracts.
The event was largely a public-relations show organized by Alimport, Cuba’s state-run food purchasing agency. The 173 companies attending the conference ranged from a tiny Vermont outfit hawking maple syrup to Archer Daniels Midland (ADM), a $20 billion conglomerate based in Decatur, Ill.
Many of the contracts had already been approved beforehand, with five large commodity companies walking away with 80% of the sales.
In fact, ADM and Minneapolis-based Cargill have each sold Alimport over $200 million worth of commodities, together accounting for over half of the $736 million in food Alimport claims to have purchased from the United States in cash since late 2001, when those sales became legal.
“U.S. suppliers, whether branded companies or commodity companies, all appreciate the Cuban market and the potential it represents,” said Thomas Rahn, commercial director at Cargill Americas, during an impromptu interview in Havana. “All the business that has happened in Cuba has been very straightforward, transparent and well-executed. Cuba has performed as a first-class trading partner.”
According to Rahn, Alimport awarded Cargill a $13 million contract for 40,000 metric tons of corn, 25,000 tons of wheat, 10,000 tons of flour and 5,000 tons of feed phosphates. To date, Cargill has sold Alimport over 500,000 tons of commodities.
“I think all U.S. companies would like to see trade normalized,” he said. “The day that happens, we’ll be able to have direct financial relationships, which you’re not allowed to have today. I hope that all trade barriers will be taken away.”
Chris Aberle, sales director at FCStone, said his Iowa company ó owned by 750 Midwestern grain cooperatives ó signed four contracts with Alimport: three for 50,000 metric tons of corn worth $6 million, and one for 20,000 tons of soybeans worth $7 million.
He said his Cuba sales to date come to $75 million, representing almost 400,000 tons of corn, soybeans and wheat. That puts FCStone in third place after ADM and Cargill. Other companies announcing contracts at the Alimport meet include The Rice Company of Roseville, Calif. ($14 million) and the U.S. subsidiary of Paris-based Louis Dreyfus ($16 million).
Several Florida companies also snared contracts, ranging from Splash Tropical Drinks of Fort Lauderdale (see box below) to Naples-based J.P. Wright & Co., which is in the process of shipping 250 beef cattle to Cuba.
“It doesn’t make sense for us any longer to be conducting essentially an economic war,” said John Rice, vice president of Rice Fruit Co. of Gardner, Pa., from which Cuba committed to buy up to 20 containers of apples at up to $300,000 within a year.
Robert M. Hudak, president of Ag Biotech Inc. in Lakeville, N.Y., left Havana with a $100,000 deal to supply Alimport with Vitazyme, which he says is “an all-natural biostimulant that increases the natural fertility of soil as well as crop yield without compromising soil quality.”
Hudak said the Cubans have been successfully testing Vitazyme for two years on citrus, bananas, grapes, papayas, potatoes, tomatoes and onions.
And although Hudak has sold Vitazyme in Trinidad, St. Vincent and other Caribbean islands, he calls the signed contract with Alimport the crowning achievement of his career.
“I’m convinced that when this product is fully integrated into Cuban agriculture, they’ll greatly reduce foreign imports of food,” he told CubaNews. “I’m not here to sell an expendable commodity. I’m here to provide means to help the Cuban people produce more food for themselves.”
But Alimport will have to pay cash, up front, for Hudak’s organic fertilizer ó just like it has for everything else on its shopping list.
That’s because the 2000 Trade Sanctions and Reform Export Enhancement Act, which authorizes U.S. food sales to Cuba in the first place, denies the Cuban government the possibility of financing those purchases on credit.
“The Yanks are the luckiest people in the world,” says one Havana-based foreign banker who asked not to be named. “They’re getting paid cash, so they don’t have to think about credit. I can’t think of a single export market for the United States other than Cuba where they get paid cash. The reason they don’t talk about it is that they don’t need to.”
He adds: “Absent politics, all imported food in Cuba would be sourced in the U.S. because of proximity in every sense of the word. Just look at Jamaica or the Dominican Republic. How much French wheat is sold in the D.R.? Zero.”
Asked about the cash-only requirement, FCStone’s Aberle said it definitely hurts Cuba.
“For us, it certainly makes things a lot easier, though it puts Alimport at a disadvantage, because it’s unique in the industry to be almost on a cash-on-delivery basis,” Aberle told us. “But we see things changing. We’d certainly like the current administration to revisit its policy regarding trade and travel to Cuba.”
Fat chance, says James Cason.
The chief of the U.S. Interests Section in Havana ó who has criticized such conferences in the past as “all bull and no beef,” claims that to support its political interests, is looking for a way to manipulate the political process in the United States through purchases.”
Cason, in a communique timed to coincide with the Alimport conference, said that at present, U.S. agricultural producers “are receiving the best contractual terms possible in their trade with Cuba,” while “many non-U.S. companies that extended credit to Cuba have not been paid.”
Cason noted that the Castro government had “admitted to using purchases of food and agricultural products for political purposes” as a way “to influence internal debate in the United States concerning the embargo.”
Alimport’s chairman and CEO, Pedro Alvarez, told delegates that even before this latest event, Cuba had purchased $629.7 million in products from the United States. The most important commodities by volume were corn (around one million tons); wheat (811,589 tons); soy products (around 800,000 tons); rice (294,328 tons) and poultry (234,771 tons).
In an exclusive interview published last month, Alvarez told us cumulative sales could easily reach $1 billion by the end of this year (see CubaNews, April 2004, page 8).
As it is, the United States already ranks as Cuba’s 7th-largest trading partner, and Cuba is the nation’s 35th-largest market for farm exports. It’s also the Caribbean’s biggest importer of American wheat and one of the region’s top buyers of U.S. corn, say farm industry analysts.
Don Mason is director of grower services at the Iowa Corn Growers Association in Des Moines. He said his group looks at Cuba as an emerging market, and that it needs to participate in these events in order to win contracts.
“I would agree wholeheartedly that there’s a major PR element to the way they go about this,” Mason told CubaNews after the event was over. “They’re making use of the deals they’re signing for public-relations purposes. I think that’s fairly obvious, and they’re not trying to hide it. But that doesn’t mean companies shouldn’t participate.”
In fact, Alimport did score a minor public-relations coup when Pennsylvania ó the 10th state to send a trade mission to Cuba, and the first one in the Northeast ó pledged to lobby for an end to the embargo. In return, Alimport promised to buy $10 million worth of fresh fruit and vegetables, frozen processed food, milk, livestock feed and other food products.
At the same time, the Port of Philadelphia, once the No. 2 importer of Cuban sugar, signed a memo of understanding to reopen its docks to trade with Cuba.
“We intend to talk to our congressional delegation [in Washington] and encourage them to consider lifting the trade and travel restrictions,” said Pennsylvania Agriculture Secretary Dennis Wolff, whose 18-member delegation sat through an eight-hour lunch with Castro.
Not all the speeches at the four-day event were made by adults.
Cliff Kaehler, the 14-year-old son of Minnesota cattle rancher Ralph Kaehler, told delegates that “Cuba wants to trade, and we put up obstacles. To me, it seems the embargo is in place only because of the hardline exiles in South Florida.”
The boy became something of a local celebrity in St. Charles, Minn., after he and his 15-year-old brother Seth were befriended by Castro during the 2002 U.S. Food & Agribusiness Exhibition in Havana. So were the six cows brought to Cuba by Kaehler’s Homedale Farms, the family business.
Since then, Kaehler has shipped 140 cattle and bison to the island, with another 225 on contract. At $2,000 a head, this represents about $730,000 worth of business for the family.
On May 06, 2004, publisher wrote:
Larry, great article.
Always right on the money. We subscribe to Cuba News and recommend it for anyone serious about staying informed about important events IN Cuba, not just ABOUT Cuba.
On September 07, 2004, Eric Lund wrote:
We are an export services company called L.A. Markom de Mexico, Inc. We represent many USA food companies. Our specialty is shelf-stable snack foods of many varieties. Since 1978 our gepgraphic focus has been the Mexican market. We are interested in establishing commercial relationships with Cuban based food importers and distributors. As a first step, we want to develop a short list of food/snack distributors from which we can open dialogs.
How can you assist us in developing a reseller list?