Who's sending chickens to Fidel Castro?

Commentary about business and finance.
Feb. 24 2004 5:59 PM

The Fox in Our Henhouse

Why is Fidel Castro buying all those American chickens?

Communist dictator or trade lobbyist?
Communist dictator or trade lobbyist?

Here's a radical strategy for lowering the United States'record $489 billion trade deficit: Globalize our Cuba policy. U.S. exports to Cuba soared nearly 80 percent in 2003, while our imports from Cuba were nil. Imagine if we had that kind of relationship with China!

Since the United States has spent the last 40 years figuring out the best way to punish Fidel Castro's regime, and since the Bush administration's anti-Castro rhetoric has been scalding hot, it might surprise most Americans that we have any trade with Cuba. But since 2000, when there was essentially no commerce, agricultural exports to the sunny Communist redoubt—essentially the only Cuban trade we allow—have been surging. Cuba is the 35th largest destination for U.S. agricultural exports, as it purchased more farm products in 2003 ($256 million worth) than either Pakistan or Ireland.

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For decades, the basic thrust of U.S. policy toward Cuba was to deny the Castro government access to foreign exchange by largely prohibiting tourism and trade. But in the 1990s, with the end of the Cold War, President Clinton embraced a policy of ¡Tourism Si,Trade No! In January 1999, he issued the People to People executive order, which gave Americans the ability to travel to Cuba with relatively few hassles. But Clinton left largely untouched the 1992 Cuban Democracy Act, which permitted American companies to export health-care products to Cuba—and nothing else. "The Clintons were fairly open with the travel regulations, and were reluctant to allow actual food trade," said Lissa Weinmann, executive director of Americans for Humanitarian Trade with Cuba. (For a backgrounder on the '90s Cuba travel and trade policy changes, click here.)

In the final months of his presidency, Clinton shifted gears. In the fall of 2000, Clinton signed the Trade Sanctions Reform and Exports Enhancement Act, which permitted the direct export of food to Cuba, provided Cuba paid in dollars. Initially, however, Castro showed no interest in using precious hard currency to buy American corn.

The Bush administration essentially reversed the Clinton policy. Under Bush, the trend has been ¡Trade Si, Tourism No! In November 2001, after Hurricane Michelle ravaged Cuban crops, the Castro government decided to buy some American corn. That was followed by the purchase of the basic ingredients for arroz con pollo.

U.S. agribusinesses large and small quickly seized upon the promise of the new market.In September 2002, about 300 American food companies attended a large food exposition in Havana. According to these statistics (see page 53), Cuba imported $144 million of U.S. products in 2002.

U.S. agricultural exports to Cuba boomed 78 percent in 2003. Alimport, Cuba's food import agency, purchased soybeans, groats, lumber, apples, and chickens. "In both 2002 and 2003, the U.S. was the single largest source of food and agricultural products to Cuba," said John Kavulich, U.S.-Cuba Trade and Economic Council. "Cuba is one of the safest export markets for U.S. companies because it requires cash-only payments." The United States still permits the export of only food and medical products to Cuba. The volume of medical trade remains miniscule.

Some of the American food winds up in Cuba's dollar-based parallel economy, which is fueled by tourists, diplomats, and Cuban consumers armed with remittances from American relatives. "I was just down there last week in a dollar grocery store, and they had chicken and onions from the U.S.," said William Messina, an agricultural economist with the University of Florida.

The U.S. Department of Agriculture provides guidelines to potential exporters to Cuba. Still, the trade is a political problem for the Bush administration, which is getting squeezed by two constituencies it needs this fall: Cuban-Americans in Florida, who view the 40-year effort to strangle Castro's Cuba of foreign currency, goods, and services as paramount; and agribusinesses that see Cuba as a potential market. Organizations such as the Cuban-American National Foundation and Cuban Liberty Council—crucial interest groups in Florida—oppose the expansion of trade. In part to appease exile groups, President Bush last year cracked down significantly on the People to People program, thus curtailing the flow of American tourists to Cuba's beaches. The administration has also supported the long-standing U.S. bans on Cuban imports.

Castro and his regime have become clever trade lobbyists. Alimport has shrewdly spread around its purchases of American products in an effort to build up constituencies around the country, much in the same way defense contractors plant factories in every state. "The Cubans have distributed the deals in such a way that it has had an impact across the economy," said the AHTC's Weinmann. "Cuba is now the 14th largest foreign market for Iowa corn." So while the anti-Castro lobby remains strong in South Florida, pro-Cuba lobbies are growing in the port cities of the South, in the grain-rich Great Plains, and in the chicken farms of the Ozarks.

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