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Texas Agriculture Archive

June 6, 2003

Cuba trade looks
promising for Texas farmers

By Mike Barnett
Editor

The Cuban market didn't open up totally with the passage a couple of years ago of the Trade Sanctions and Economic Export Enhancement Act, but it is allowing some new moves into a formerly forbidden market for both U.S. and Texas producers.

"Our total exports to Cuba since we really began commercial shipments in December of 2001 is about $166 million," according to Dr. Parr Rosson, director of the Center for North American Studies at Texas A&M University and an economist with Texas Cooperative Extension. "The bulk of that occurred last year."

Rosson spoke at the "Doing Business with Cuba" conference in mid-May. The conference, sponsored by the Texas-Cuba Trade Alliance, whose purpose is to increase trade to that island nation, featured firsthand knowledge of those familiar with trading with Cuba and offered a glimpse of trade potential. Texas Farm Bureau is a founding member of that alliance.

Despite recent political bouts between the U.S. and Cuba over political dissidents and the executions of three hijackers by the Cuban government, Rosson and others said they believe trade looks promising.

The economist said the passage of the Trade Sanctions and Economic Export Enhancement Act allowed food, agricultural products and medicine to be exported to Cuba. It does not allow Cuba to ship goods to the United States and the act excludes agricultural machinery, irrigation equipment and other implements. Also, financing is prohibited directly through the United States as well as tourism.

Rosson said the Cuba potential isn't huge, but could be a significant market. In terms of population, Cuba has some 12 million people living in a country about the size of Guatemala. The size of food and agricultural imports into that market—both foods as well as implement and equipment—ranges from $600 to $800 million per year.

"Compare that to total U.S. ag exports of $55, $56 billion a year, that's not huge," Rosson said. "But it's significant in the sense that as it grows it will become much more important."

A little over half of the exports from the U.S. to Cuba in 2002 were bulk commodities, evenly split between wheat and corn, with the balance in soybeans and rice. About a third of exports were intermediate goods, primarily soybean meal to feed chickens, but also including soybean oil and other vegetable oils.

The remaining exports—about $20 million—were consumer goods, composed primarily of chicken meat but also including eggs, fresh fruits and snacks.

"Having observed Latin American countries for a number of years and travelled in a lot of them, it's really interesting to watch how quickly the transition can occur from a bulk commodity market to one of a higher value mix," Rosson said. "There is some optimism in terms of what we might expect in the future."

So what's the potential?

Looking toward the next three to five years, based on market growth assumptions, Rosson said the market for U.S. products could approach $500 million.

In the near future grains and oilseeds will continue to predominate, but over time he predicts more meats will come into demand, as well as a great potential for implements, tractors and irrigation systems if authority is granted to move those products into the marketplace.

As far as Texas, the economist predicted exports to Cuba could approach $57 million a year in a three to five year period.

"Those exports will generate another $132 million in business activity throughout the state," Rosson said. "Much of that will go towards the support of industry to produce the products that we'll be moving to Cuba. It will generate an additional $39 million in household income and it would add value and that really translates directly in another $72 million and create about 1,500 jobs. It's not a huge market but the impacts—particularly those in the industries that are shipping products—could be significant and quite important to the state."

A big kicker that could further increase trade for the U.S. is opening up Cuba to U.S. tourists. Cuba is already the number two Caribbean destination for tourism behind the Dominican Republic.

"So already the rest of the world...particularly Canada, Southern European countries as well as Mexico...it's the preferred place to go, so there is some demand in the tourist industry to generate additional demand for food," Rosson said.

"There are some good strengths on tourism short term," Rosson added, explaining that the potential for U.S. exports for the tourist industry alone is $150 to $200 million. "Intermediate and long term, if things open up, they'll be strong."

Rosson said the U.S. and Texas, in particular, is an ideal position to compete because of quicker response time, good quality products, and "of course, when we've had the missions from Texas to Cuba, they always talk price, price, price."

He offered Texas agribusiness a word of advice: "When we get those opportunities, we need to make sure we're ready to respond and react to those as far as product and specifications. At this point they are very price sensitive. That may be one of the things that's really driving the interest in trying to do business here."