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HavanaJournal.com: Cuba Business

US Agricultural sales to Cuba trailing off

Posted October 18, 2007 by publisher in Cuba Business.
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The Associated Press

Ralph Kaehler and farmers like him have done millions of dollars in business with Cuba over the past five years, riding out the ups and downs of the Communist-ruled island’s turbulent relations with its capitalist neighbor to the north.

Kaehler has been to Cuba a dozen times since his sons, Cliff and Seth, became special guests at Fidel Castro’s 2002 trade show. He says the Cubans are still buying, just not as much.

Next month, Minnesota Agriculture Commissioner Gene Hugoson will visit to Havana to check on the state’s declining business prospects there and to see what a post-Castro business environment might look like.

“A lot of it is just showing interest,” Hugoson said. “I believe there will be more openness down the road.”

Hugoson, who was part of then-Gov. Jesse Ventura’s trade mission in 2002, is likely to see a very different Cuba this time.

“The communications back from Havana have been quiet lately,” said Kaehler, a St. Charles farmer and a pioneer in cattle sales to Cuba.

Kaehler and other frequent business visitors to Cuba say the country is still hungry for food buys, but has grown weary about depending on U.S. suppliers who have to battle bureaucratic obstacles at home.

“We’re seeing a post-Castro era unfold before our very eyes,” said Kirby Jones, president of the U.S. Cuba Trade Association, a Washington group that promotes open trade with Cuba.

Minnesota’s agricultural exports to Cuba grew to $22 million in 2005 but dropped to $18 million last year. Total U.S. farm exports to Cuba dropped to $321 million last year, down from $346 million in 2005.

The reason, said Kaehler and others who do business with Cuba, is part price-squeeze and part politics.

While soybeans and corn are Minnesota’s leading farm exports to Cuba, soaring prices have limited what the cash-strapped regime can buy. Spiking oil prices have pushed shipping costs up, too. And the Bush administration requires sales to be paid for in cash up front.

“It’s not easy,” said Tim Courneya, vice president of the Frazee-based Northarvest Bean Growers Association, which has seen U.S. sales of dried beans to Cuba level off to around 10 percent of the 80,000- to 100,000-ton market they once hoped it could be.

Ventura’s trip came at something of a high-water mark in trade relations between Cuba and the U.S.

As Ventura announced his trip, Congress was considering easing travel restrictions, and Minnesota food companies such as Hormel Foods Corp. and Cargill Inc. were filling cash orders that had been legalized in 2000. The 2002 trade expo was sanctioned by the U.S. government, even though top Bush administration officials remained critical of U.S. business ties to Cuba.

Things started to backslide the next year. The regime imprisoned dozens of dissidents and journalists and executed three men accused of trying to hijack a ferry to leave Cuba. Support for loosening the trade embargo that was imposed after the 1959 revolution seemed to evaporate in Congress.

John Kavulich, a trade analyst involved in the 2002 expo with Ventura, said the White House nixed efforts to revive the show in 2003.

The U.S. House voted 245-182 this year to reject easing restrictions on farm sales to Cuba, including a proposal to allow Cuba to pay for goods after they are shipped from a U.S. port instead of ahead of time as the law now requires.

While Cuba once preferred to buy U.S. food products in hopes of normalizing relations with the United States, it has been diversifying its base of suppliers in hopes of pressuring the Bush administration to ease trade restrictions, Kavulich said.

Nearly 2,000 companies from around the world are expected to attend the Nov. 5-10 trade show that Hugoson plans to attend.

Pedro Alvarez Borrego, chairman of Alimport, Cuba’s food-purchasing arm, has called it “a great opportunity to take the pulse of the Cuban market.”

For Minnesota exporters like Kaehler, that means more competition for Cuba’s limited food dollars.

“All those other countries are sucking the money out,” he said.

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