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Will life after Fidel bring ties between U.S. and Cuba closer? What role will U.S. agriculture play?

Mike Wilson, Senior Executive Editor

November 30, 2016

11 Min Read

In September I was fortunate to travel to Cuba on the first-ever U.S. trade mission for agricultural journalists, sponsored in part by the American Agricultural Editor’s Association. We discovered a land already in transformation. With Fidel Castro gone, the question on everyone’s mind — and the topic of thousands of mainstream news stories the past few weeks — is what will happen to this proud Caribbean nation now? Will Cuba experience another revolution, this time focused on capitalism and prosperity?

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A few key points will bring you up to speed. First, the obvious: Centrally planned economies rarely work well. Without profit incentive there is no profit, no capital and no GDP; Cuban taxi drivers earn more money than doctors, and the average monthly salary here is $30. Socialism has produced two good things: great health care and first-class public education. Literacy here is on par with the United States. So you might say that Cuba, which is roughly the size of Virginia, has a first world population stuck in a Third World economy.

Earlier this decade, Cuba began making policy changes in an effort to right the ship. Some rules were relaxed, including entrepreneurship restrictions for privately owned restaurants, and buying and selling homes.

“The problem they face is moving all these people off the government dole and turning them into taxpayers,” says Paul Johnson, co-chairman of the U.S. Agriculture Coalition for Cuba and our tour guide. “They want to create prosperity but also keep socialist programs like free health care and education. That’s going to be very difficult, but not impossible.”

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Remember, it’s not just socialism and poor economic planning that keeps Cubans impoverished; the U.S. embargo has been a real hardship on everyday Cubans. It has made it far more expensive for Cuba to produce the food it needs to survive. That was especially true after the Soviet Bloc dissolved, leaving Cubans in the early 1990s hungry and without a major trading partner.

Cuba’s economy got a boost when President Barack Obama in 2014 relaxed tourism restrictions and moved to normalize relations between our countries. Castro’s brother and the country’s president, 85-year-old Raúl, could make historic policy changes before he steps down in 2018 for a yet-to-be-named successor. Fidel Castro was a charismatic, stubborn ideologue; Raúl is a pragmatist. Since Obama’s 2014 declaration, tourism has jumped 18%, but U.S. President-elect Donald Trump has threatened to unwind that progress.

Without a distinct move toward capitalism and free enterprise, tourism will be the only way Cuba moves its economy forward in the near future.

Cuba’s ag challenges
Before the 1959 revolution, Cuba’s land was owned primarily by foreign companies and individuals. The main crop was sugar, exported to the United States and Great Britain. After the revolution, private property was confiscated, the sugar tycoons were banished, and the industry collapsed. The new government made a deal with the Soviet Union and converted farms to large Soviet-style operations.

Then in 1989 Cuba’s agriculture nearly collapsed after the Soviet Union and the communist bloc of countries fell apart. Imports of fertilizers, animal feed, seed and tools all disappeared overnight.

Eventually, the government developed a new style of agriculture, one not focused on large-scale inputs and commodities, but rather organics and biodiversity. Many of the farms today are organic, mainly because fertilizers simply are too expensive after shipping costs are included.

What's next for Cuba

Today, around 20% of Cuba’s 11 million people are active in agriculture; of that, 43% are women, says Moraima Cespedes Morales (at right), director of international affairs at the Ministry of Agriculture. Of the people working on farms, 47% of farmers have benefited from higher education, especially in recent years.

Four of every 5 acres is owned by the state. Four-fifths of the state-owned land is run by various kinds of cooperatives. In some cases, the owners “gave” land to the state and were given membership in a cooperative.

“Our country is updating the management model so there’s been a lot of transformation,” says Morales. “These changes are focused on developing agriculture and increasing yield and efficiency, and incorporating the sector into the overall economy.”

Six million acres can be farmed, and only 7% is under irrigation. Cuban agriculture fails for many reasons. Here are four:

1. Socialist policies discourage profit and, thus, production (farmers must give, on average, 80% of their production back to the government).

2. Those same policies make it impossible for the nation as a whole to build financial strength needed for foreign exchange.

3. A stable nearby trading partner is needed. (The U.S. embargo is still known here as “the blockade” and Venezuela, Cuba’s current investment partner, is now near its own economic collapse).

4. Dicey weather threatens yields even beyond the usual problems associated with tropical agriculture. (When we visited in September, Cuba was just getting out of a major drought brought on by climate change, say ag officials we spoke with.)

The Cuban diet is dominated by rice and beans, along with pork and perhaps some chicken. For the growing number of tourists, seafood is common. We had fish nearly every meal during our week in Cuba.

In 2014 the country approved a plan to increase collaboration and improve foreign investment. Cuba has signed letters of cooperation with several countries. That includes the U.S., where both parties set out a two-year plan to identified areas for a bilateral relationship. Phytosanitary issues, the basis for future trade, are still being debated. Other shared interests include scientific and academic exchange through research centers and universities. “Another of our interests is climate change and efficient use of water, especially now that we’ve suffered from some drought,” says Morales.

“With this transformation we intend to obtain better results in ag production, and our staff can benefit from introduction of new technology,” she says. “We’d like to have access to more technology and work to improve results in our ag sector, while making it possible for our products to substitute for imports.”

This is a key point that should not be forgotten by U.S. ag interests anxious to start shipping goods to Cuba. This country wants to grow its own agriculture economy to reduce food insecurity. If we have the Cubans’ best interests at heart, more success will arrive on both shores.

Cuba’s agricultural is dominated by more than 400 state-owned “companies.” Huge companies specialize in production of grains and rice, as well as seed production. Cattle companies specialize in meat and milk. Agroforestry companies specialize in wood or honey. There are companies for pigs and poultry, as well as animal feed.

“Since we are an island, we have worked hard on animal and plant health,” Morales says. “There’s representation on all government levels. We are trying to have more highly trained personnel, but we have had some technology challenges impact us in the last year.”

Future ag trade
Among its many guests, Cuba has had visits with congressmen and U.S. farm groups interested in trade. There are areas that could benefit from trade, which is allowed but restricted to cash in advance — no credit, which makes us less competitive.

That limits options for Cuba. Right now it might take 25 days for a shipload of corn to arrive in Havana from, say, China, when a similar voyage would take mere days out of New Orleans. 

“We are able to export honey, tobacco, fruits and certain types of vegetables, some juices,” says Morales. “We could benefit from the import of fertilizers and machinery.” In fact, a recent executive regulatory rule change now clarifies that both tractors and fertilizers are not “commodities” and can be exported to Cuba on credit — one small step toward trade normalization between our countries.

What's next for Cuba

And any time you talk trade with Cuba you will hear from Gecomex, a powerful group inside the country’s Ministry of Foreign Trade. “We do foreign trade; we facilitate your business,” says Aurelio Mollineda Martinez (at left), the group’s general director. The group is composed of 18 foreign trade enterprises and carries out more than 36% of imports and 60% of exports. “We are not exactly in one specific sector of the Cuban economy. We have clients all over the Cuban economy,” he says.

Cuba gets fertilizer from Mexico, as well as Asia and Europe; it imports pesticides from Costa Rica. Clearly, imports from nearby locations shave costs.

“We have to program a lot of time for transportation of the products,” says Martinez. “Sometimes if we have quality problems en route, it gets very complicated and takes even longer to get the product here.”

Among all of Cuba’s imports, food and agriculture products dominate. A special group representing fertilizer and machinery accounts for 36% of all Cuban imports. But sugar, honey, coffee and cocoa, along with rum and tobacco, are also exported.

Cuban officials claim the country produces 170,000 tons of pork annually — enough to feed its population — so pork has not been imported for five years. Cuban pigs eat a ration that includes corn, soy and other products brought in from other countries. The bulk of hog feed comes from South America, along with Canada. Raw materials may come in and be processed by Cuba’s feed processing industry. Wheat may be imported and processed into bread. The country also imports powdered milk and frozen chicken.

“Every year we import 100,000 to 150,000 tons of chicken,” Martinez says. “Most of that chicken we are buying is from U.S. companies. Chicken hindquarters have a very low price, and logistics are favorable. What we don’t buy from the U.S., we buy from Brazil. That 150,000 tons includes growth in tourism, and Cubans are consuming it in higher levels.”

Cash flow is problematic in a poor country, so the U.S. law that does not allow trade on credit is an ongoing complaint among the Cubans.

“There are some products; the entire amount that is imported is through credit,” says Martinez. “These are credits that can be given by governments or banks. That’s one of the main obstacles we have with trade with the United States. It’s very limiting, where the money for each transaction has to be paid upfront and in cash.”

Grain sales from ADM, Cargill or Bunge offices, even those based in Brazil or Argentina, are allowed but not on credit, so Cuba ends up purchasing less from those companies. U.S. food purchases by Cuba over the last 13 years had to include a license from the U.S. Bureau of Industry and Security at the U.S. Department of Commerce.

“We have to ask permission to do business,” says Martinez. “It also limits the participation of everyone who would like to offer their products to us. Even if more want to participate, they now need a permit, and many are not willing to go through that process. We could go on and on about this.”

U.S. sales to Cuba have actually fallen off in recent years, because other countries offer financing. Another reason is low commodity prices, making other countries more competitive. Last year U.S. chicken purchases dropped dramatically because of bird flu. 

Life after embargo
Assuming that at some point the embargo, or blockade, is lifted and credit terms are normalized, what would be Cuba’s first priority?

“When there are positive trading conditions, it will be for the U.S. companies to compete to see where we would buy products,” Martinez says. “The U.S. economy has most of what we need to buy. It would be very beneficial for a Cuban company, whether it’s going to buy a tractor or fertilizer or food, to have U.S. companies within the list of companies we could buy from.”

When Cuban officials visit the United States and Washington, D.C., they come away with positive impressions. Meetings with U.S. companies are also smooth sailing.

“We’ve had no disagreements in those meetings,” says Martinez. “When dealing with businessmen, it’s a lot easier, because they come to talk about their product and what we could do together.”

“Businessmen in Cuba are all open and willing to do our job and work on this,” Martinez concludes. “Congress and decisions made within and outside Congress are limiting the population of the United States from being linked to our businesses and our people. We are open to trade and to do business with U.S. companies.

“I do believe that we would all win. It’s time.”

About the Author(s)

Mike Wilson

Senior Executive Editor, Farm Progress

Mike Wilson is the senior executive editor for Farm Progress. He grew up on a grain and livestock farm in Ogle County, Ill., and earned a bachelor's degree in agricultural journalism from the University of Illinois. He was twice named Writer of the Year by the American Agricultural Editors’ Association and is a past president of the organization. He is also past president of the International Federation of Agricultural Journalists, a global association of communicators specializing in agriculture. He has covered agriculture in 35 countries.

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