Friday, December 11, 2009

Ag Exporters Court Cuba's Biggest Buyer: Its Government

Ag Exporters Court Cuba's Biggest Buyer: Its Government
Trevor Williams
Atlanta - 12.10.09

Cuba has 11 million people, but Georgia food exporters learned on a
recent trip that they only need to reach one buyer to do considerable
business in the island nation: its government.

About 15 Georgia legislators, farmers and exporters traveled last month
to Havana for an annual trade show hosted by Alimport, a government-run
company that buys the communist country's entire imported food supply.

Alimport buys for restaurants and hotels engaged in the tourist trade,
Cuba's main industry, as well as for its citizens, who get beans, rice,
wheat, poultry and other staples in monthly rations from the government.

As the sole food buyer for a population nearly three times that of
Puerto Rico, Cuba's government has become a significant customer for
Georgia exporters since 2000, when the U.S. modified its embargo against
Fidel Castro's regime to exclude agricultural and medical products, said
Terry Coleman, Georgia's deputy agriculture commissioner.

On the trip, growers brought pecans and peanuts, Georgia crops that
remain largely unknown in Cuba. The response was good, but right now
those relatively expensive products would only be viable for the tourist
trade. That niche could eventually become profitable for individual
farmers, but the real money for Georgia firms in impoverished Cuba so
far has come from meeting needs, not providing luxuries, Mr. Coleman said.

"This market is probably a half-million people larger than Georgia. The
average per capita income is certainly a lot lower, but for selling the
basics, it's a great opportunity," said Mr. Coleman, who led the recent
trip and has traveled to Cuba more than 10 times in the past nine years.

Poultry has been the main boon for exporters in Cuba. Frozen chicken
makes up about 90 percent of everything Georgia sells there, said Mr.
Coleman, a 34-year veteran of the state legislature who was speaker of
the Georgia House of Representatives in 2003-04.

Pilgrim's Pride, the Texas-based chicken giant that has multiple
facilities in Georgia, supplies nearly half of Cuba's poultry.

Poultry exports from Georgia to Cuba were worth more than $21 million
last year, according to the Atlanta-based U.S. Poultry and Egg Export

Atlanta-based global food exporter AJC International sent 35,000 metric
tons of frozen meat to Cuba last year that it bought mostly from
suppliers around the Southeast. The ratio was about 95 percent chicken
to 5 percent pork, said Sebastien Mangiagli, who handles sales in the
Caribbean region.

Cuba makes up more than half the company's Caribbean volume excluding
Puerto Rico, which at 53,000 metric tons is large enough to merit its
own region for AJC, an exporter and marketer of frozen food products
with 11 offices around the world.

The company had its own booth at the Havana trade show manned by Mr.
Mangiagli, who was not a part of the state's delegation.

He said that dealing with one customer to reach the whole nation has
benefited AJC tremendously, but as with any country, doing business in
Cuba has its challenges.

Phone systems are outdated, and customs paperwork is more intensive than
in other Caribbean nations, he said.

"The decision making process is very, very slow most of the time," Mr.
Mangiagli said.

On top of all that, the embargo presents hurdles on the U.S. side.
American banks can't give credit to Cuba. Its government must get
letters of credit from foreign banks, most often in Europe, to pay the
balance of a transaction in full before the U.S. exporter can put the
goods on a ship to the island, which at some points is less than 100
miles from the tip of Florida.

If this continues, U.S. firms stand to lose business to other countries
like Canada that are beginning to extend limited credit to Cuba as its
government struggles to maintain cash flow in the face of declining
tourism revenues, said Mr. Mangiagli.

Cuba wants to buy from the U.S., where it can get quality goods for
competitive prices quickly, Georgia officials said. Mr. Mangiagli said
poultry shipments from Brazil can take up to 25 days, compared to one
day for an order barged to Havana from a port in the Gulf of Mexico.

State Rep. Tony Sellier, R-Fort Valley, said Cuban officials he met on
the recent trip were lobbying hard for stateside help on the credit issue.

Mr. Sellier, who is fluent in Spanish, dealt with many Latin American
countries including Cuba during a 37-year career with Fort Valley-based
school bus manufacturer Blue Bird Corp. He said the slow credit process
saps productivity.

"They're campaigning with us, that if we can get that part of it worked
out, they can do more business with us, but that's a big nut to crack,"
said Mr. Sellier, who on the recent trip returned to Cuba for the first
time in nearly 50 years.

Born in Trinidad, Mr. Sellier spent his childhood in Venezuela, where
his French father worked for Mobil Oil. In route to boarding school in
Florida in 1960, his plane landed in Cuba to pick up passengers fleeing
the country. Through the windows, he saw people stripped of their
belongings by men with machine guns.

Five decades later, the airport in Havana seemed unchanged, epitomizing
the fact that Cuba's development has fallen behind the times in both
infrastructure and agriculture, Mr. Sellier said.

"I actually saw farmers plowing with wooden plows and oxen and mules,"
he said, noting that the country still hasn't fully recovered from
collapse of the Soviet Union, which helped bankroll the Cuban regime for

But the Cubans are ready to do business with Americans, Mr. Sellier said.

Contrary to critics, who say abolishing the embargo would bolster a
regime that has crushed dissidents, Mr. Sellier says opening trade and
tourism would do more to change Cuban society than current U.S. policy
of isolation. His conversations with top officials revealed that Cubans
trust the quality of American products and that they'd be ready to buy
considerably more if the embargo were repealed.

"It would be a far greater service to our country, and particularly
Georgia, if (the U.S. government) would let us do more business with
them, and obviously the effect in Cuba would be a positive one; the
people like us anyway," he said.

Mr. Coleman agrees. It's an inconsistency, he said, to trade with
countries like China, Libya and Russia, while using human rights as an
excuse to shun a similar regime nearby.

"Over and over I think we're making a bad mistake; they're our
neighbors," he said. "Sooner or later when they see how business is
done, we think they'll feel like capitalism is a better answer."

For now, Cuba will have a hard time buying anything beyond necessities,
Mr. Coleman said. The country relies on tourism revenues for cash, but
the downturn has crimped the number of visitors from Europe and Asia,
depleting government coffers.

When things turn around, Mr. Coleman hopes to promote Georgia peanut
butter, as well as canned vegetables like tomatoes and green beans.

Robert Ray, a pecan grower in Fort Valley and a former state
representative who went on the trip, said Cuba's cash crunch dims the
prospects for selling pecans in Cuba in the short term.

Things could open up in the next decade, but in the meantime, it's good
for growers to get their feet in the door with the government, he said.

"It's something slow that you work on. You try to make relationships
with groups like that before you're really pushing for too much," said
Mr. Ray, who has traveled on many trade missions to Latin American
countries and sells hefty quantities of pecans to China. "You want them
to know you're really listening to them."

Signs that both sides are softening have emerged, but the Cuba issue
remains contentious in the U.S.

In April, President Obama lifted all travel restrictions for
Cuban-Americans, allowing them to go to the island as often as they wish
and to send back an unlimited amount in remittances. At a hearing in the
U.S. House of Representatives on Nov. 20, legislators heatedly debated
the issue of lifting the ban on all American tourist travel to Cuba,
news services reported. Bills to that effect have been introduced in
both houses, but neither has come to a vote.

The Georgia delegation has begun a concerted effort to lobby national
legislators to lift the embargo and travel restrictions.

Ag Exporters Court Cuba's Biggest Buyer: Its Government (10 December 2009)

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