Tuesday, November 6, 2007

Declining U.S. farm exports?

Cuban purchases of U.S. farm products may be dropping. Reporting from the trade fair now under way in Havana, AP notes a Cuban pledge to sign $450 million in contracts with exporters from around the world. Reuters says U.S. food sales are “dwindling,” citing a decline in purchases of U.S. rice (175,000 tons in 2005; 80,000 last year; a similar amount this year) while Cuba planned to sign a contract for 200,000 tons of Vietnamese rice at the event. A purchase of 150,000 tons of Canadian wheat is also expected to displace U.S. sales.

In the Cuban market, U.S. exporters have the advantages of lower shipping costs, price (at times), and convenience, in that Cuba can buy on shorter notice and in smaller lots than it does with more distant trading partners. Other countries’ advantages include an ability to extend credit and to carry out transactions without the cost and complications that U.S. sanctions impose on U.S. sales.

Cuba’s U.S. purchases began at the end of 2001, peaked at $392 million in 2004, and dropped to $351 million in 2005 and $337 million in 2006, according to figures in the U.S. International Trade Commission’s report from last July. (Here’s the press release announcing that report, and the entire report (pdf, 180 pages) is here.)

It may be, as is speculated in the Reuters story, that U.S. actions against international banks that do business with Cuba, and other U.S. sanctions, are taking their toll. For no good reason, Cuba is not permitted to pay U.S. vendors by wiring money directly to their accounts in U.S. banks. Instead the payment must be sent to Europe in Euros, converted into dollars, and paid from a European bank to the U.S. vendor’s account. And only when the payment arrives may the U.S. shipment leave for Cuba. (The USITC report details all this.)

I’ll speculate that there may be another factor at work. Cuban officials had high hopes that, following the opening of agricultural sales, Congress would chip away at other parts of the embargo, with the U.S. agricultural sector leading the charge. It is accepted wisdom among many who follow this issue that the U.S. farm lobby fights fiercely to end the embargo and travel restrictions – but nothing could be further from the truth. American agriculture opposes the embargo but does not work against it, for reasons that have to do with simple self-interest. This has been the case more than ever this year, with the farm bill under consideration in Congress, and with billions in crop subsidies, disaster payments, and other government benefits in play. Bigger fish to fry.

My guess is that Cuba bought American products for sound commercial reasons, and bought a little something extra in the hope that it would energize a key American constituency for change. Cuban officials are realists. With that hope gone, my guess is that the little something extra is gone too.

(Photo of Escambray mountains.)


Troglo said...

Eso es que el gobierno cubano esta dando un tamaño de bola para que sepan que se puede vivir sin superman. Y que Juan Cuellar diga lo contrario. Tok

leftside said...

Also, Cuba is relying more on import substitution, with imports flat across the board. This is compared to a 44% increase in exports last year. That is quite a figure and helps explain why the economy is faring so well.

Anonymous said...

import substitution? another idea from the graveyard...

"why the economy is faring so well" -- please stop insulting us leftside...and don't cite your googled statistics, which have absolutely no bearing on the Cuban people's lives.

leftside said...

When South America and Mexico was using import substitution, their economies grew faster than they ever have. Or ask South Korea how IS and high tarrifs worked for them...

So the CIA-derived 11.1% GDP growth for 2006 has no bearing on people's lives. Ok...

Mambi_Watch said...

Phil Peters wrote:

"For no good reason, Cuba is not permitted to pay U.S. vendors by wiring money directly to their accounts in U.S. banks."

Actually, there's an official reason, but I don't know if its a "good reason". According to OFAC (from their 2005 clarification of rules on agricultural sales):

"Economic sanctions against rogue nations -- including denying them access to the U.S. financial system and hard currency -- can prompt real and positive change by pressuring regimes to change behavior or policies."


In other words, the US is just trying to ruin the business between US farmers and Cuba. When this "clarification" was made, farmers with US Wheat Associates was clearly angry, making their positions very clear in their newsletters.

But, the Peter's position does propose a good argument over what US farmers see as priorities: US embargo or US subsidies. But, to say that US farmers don't "work against" the embargo is very subjective. You would have to make comparisons to other lobbying efforts and calculate a degree of "work." But, upon this analysis, one would easily conclude that the embargo has always been a secondary or marginal priority in the face of larger international business.

But, neither do US farmers stand with their arms crossed and frowning at US restrictions on ag sales. They stood with the recent Rangel amendment to remove the banking restrictions, and even though they lost, they most likely will try again.

In the meantime, they will continue to make independent projections about how ag sales with Cuba can double (or more) once the restrictions are lifted. Some of the projections might entice some to overlook their needs from the US government.

Anonymous said...

the more I read leftside the more Dumb and Dumber he gets

leftside said...

Why don't you come out from behind your anonomous mask and say that? That way you can leave a record on the actual issues, like I do.

I was waiting for these attacks to start coming out of the woodwork. I mean for a while here, it was actually civil and on-issue.

Tomás Estrada-Palma said...

Why pay the U.S. cash when you can find suckers giving credit?

Juan Cuellar said...

Troglo, Santo Domingo te tiene loco. Los cambios son forzosos y la juventud no aguanta. Lean entre lineas los parrafos torcidos de la prensa castrista. Ahora vayan a Progreso Semanal y lean lo que acaba de escribir el agenton seguroso de Manuel Alberto Ramy. La cosa pinta mala y lo que se sabra cuando se abran los archivos. No se vayan a creer que haran lo mismo a lo que hicieron con los documentos de la STASI. Ya estan muchos requeteguardados. !A correr Liberales del Perico! Ya me parece oirlos: "Obligatto Giulanno, Obligatto."