US trade group outlines steps to potentially improve market access to Cuba

By Aerin Einstein-Curtis

- Last updated on GMT

© GettyImages/ ThorstenSchmitt
© GettyImages/ ThorstenSchmitt
The US-Cuba Trade and Economic Council seeks to expand feed ingredient, food and agricultural exports to Cuba through a streamlining of the payment process, says president.

The New York-based trade promotion organization released details of market interaction and potential in a recent report​. It also is suggesting steps to potentially remove barriers on trade with Cuba that could support an expansion of the export market.

As feed and agricultural product exports to China have decreased, there has been an uptick in the amount of products going to a geographically closer trading partner, the council reported. Feed ingredients, agricultural products and food exports to Cuba have increased 15.4% in 2018.

There could be a non-legislative path to support additional exports, said John Kavulich, president of the council. Efforts could be made to complete the establishment of “direct correspondent banking.”

The process would allow for money to be sent directly by a purchaser, rather than having to use a third company, he told FeedNavigator. The change could save about 1-3% on each transaction.

“Even though it’s marginal – that is something that this bank in Arkansas [Home BancShares] could do today and help US exporters,”​ he added.

“This year we’re ahead of last year,” ​he said of exports. “We’re not where we were in 2007/8, but Cuba at its current levels is still ranked from 50-55 largest agricultural export market in the world for US companies – that’s impressive.”

“If we could get another 1-3% out of it, why are people taking that casually?” ​he added. “If you’re a corn grower, or soy grower or wheat grower or poultry producer and someone says, ‘How about another 1-3%?’ I don’t think they’d walk away.”  

Market development and potential expansion support

Since 2001, Cuba has purchased more than $5.65bn in agricultural commodities like feed grains and animal proteins from the US, the trade organization reported. The country has spent about $1.4bn on soybean products, $1.15bn on corn, $631m on soybeans, and more than $531m on soybean oil cake.

This year Cuba has bought $27m in soybeans and oil, up from about $8.5m by the same point last year, the organization said. The country also has imported about $19m in corn – a slight drop from last year.

Currently, Cuba has imported more agricultural and food products from the US than several countries within the EU, it added.

Cuba’s largest purchases include soybeans, corn and poultry products – which are areas that have been hit with trade tariffs, said Kavulich.

A licensing change could help producers expand the export market, still, the amount of potential expansion would not completely offset the loss of exports to China, he said.

The trade organization is calling for a US bank to seek the remaining piece of a correspondent-banking license from the Office of Foreign Assets Control (OFAC), which would allow it to receive and transfer funds to the Republic of Cuba and reduce transaction costs, the council said. The bank was authorized to have an account with Cuba’s government-operated Banco Intenacional de Comercia SA (BISCA) in 2015, but BICSA has not been authorized with a general OFAC license or in the license sent to the bank.

The arrangement means that payments for exports are sent through the third-party Panama City-based Multibank, the council said. The process also means that the payment plan for feed ingredient exports is triangular rather than bilateral.  

The council said the change could reduce the cost of exporting to Cuba and boost exports through ports in Alabama, Florida, Georgia, Louisiana, Mississippi, Texas and Virginia.

“Our hope is first that all parties use everything that is available to them as opposed to constantly seeking what they don’t have – that goes on the US side and the Cuban side,”​ said Kavulich, of improving export relations. There have been challenges to the market relationship between both countries on each side, he added.

“It would benefit us if the US exporters would focus narrowly rather than expansively – advocate for Stonegate Bank [owned by Home BancShares] to get that direct correspondent banking, which could result in an increase in value of what US exporters send to Cuba,”​ he said. “It doesn’t require changing any laws.”

However, an additional part of improving market access includes asking exporters or supporting organizations to advocate to Cuba that it makes full use of the laws in place, he said.

“Sometimes there’s more political value in saying no than saying yes,” ​he said. “It’s frustrating because it’s the farmers who are hostage to weather, international politics, commodity prices, hostage to fuel prices and they look to the organizations that represent them, the politicians that represent them [and] the cooperatives that represent them to do whatever can be done to help them sell their products. It’s frustrating when there are some options that are available but politicians, organizations and some exporters choose not to use them – that’s tragic.”

It is unclear if the bank has made a request to expand the license at this time. A request for comment was not answered by press time.

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