Obama plan could boost U.S. sales to Cuba, if Congress allows it
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WASHINGTON, Dec. 17, 2014 - President Obama's plan to ease financial restrictions on trade with Cuba could help reverse a decline in agricultural exports to the island nation, but his move is likely to face stiff opposition in Congress.
The relatively high price of U.S. commodities has also discouraged Cuban purchases, industry officials say, and that is a factor that Obama's plan won't address.
Obama announced a series of executive actions that will include loosening Treasury Department restrictions that require Cuba to pay for purchases of agricultural commodities though a third-country bank. Cuba will still have to pay in cash, but U.S. banks will be allowed to deal directly with Cuban financial institutions.
“That's big. It is. It's nice to be able to do banking business in your country and your own town if you have to,” said Paul Johnson, executive director of the Illinois Cuba Working Group, a coalition of agribusiness groups working for increased U.S.-Cuba trade.
Obama also proposed lifting the 54-year-old embargo on Cuba but that would require congressional approval, unlike the executive actions unveiled Wednesday.
Johnson said the third-country banking requirement can increase the cost of transactions as well as delay sales. He used to have a business exporting processed foods to Cuba, including canned goods and cereal, but has turned it over to a Chilean company. Cuban officials complained that U.S. financial restrictions made him uncompetitive, he said.
The restrictions can't be eased right away, however. The Treasury Department's Office of Foreign Assets Control, which enforces the embargo on Cuba, will have to go through a rulemaking process to change the regulations, and Congress could intercede via the appropriations process to block any loosening of the rules.
“I won't even begin to project how many days it would take, or months or years,” for the restrictions to be loosened, said Tom Sleight, president and CEO of the U.S. Grains Council. “I think what agriculture needs to do is to respond real positively.”
Presidential politics also could be a factor since Cuban-Americans still hold significant political sway in the battleground state of Florida.
Sen. Marco Rubio, R-Fla., blasted the president's plan on Wednesday, and another Cuban American, Rep. Mario Diaz-Balart, R-Fla., is on the House Appropriations Committee.
Sen. Mitch McConnell, R-Ky., who will be the Senate majority leader in the next Congress, said Wednesday that he would defer to Rubio on U.S.-Cuba policy.
Obama's executive actions also will include allowing shipments of farm equipment to Cuba to help the country's small producers. Johnson said Cuban farmers badly need tractors and other equipment to clear land among other things.
Deere & Co. said in a statement that it sees Cuba as a potential market. “We look forward to serving customers in Cuba as we do throughout Latin America and around the world.”
U.S. agricultural sales to Cuba have fallen by half since 2008 when commodity prices spiked, and sales have been slow to rebound even as prices have softened. Cuba imported $348 million worth of U.S. farm products in 2013, and more than 40 percent of that was one commodity, frozen chicken.
In 2008, Cuba's U.S. farm exports totaled $710 million, including $196 million worth of corn, $135 million in wheat and $134 million worth of chicken.
Cuban imports of U.S. corn plunged from a peak of 811,000 metric tons to 137,000 tons.
Cuba is buying wheat now from countries such as France and Russia instead of the United States in part because of the relatively high U.S. price of the hard red winter wheat that Cubans prefer, said Alan Tracy, president of U.S. Wheat Associates, the industry's export development arm. Shipping costs also have fallen, offsetting the advantage U.S. exporters would normally have by being closer to Cuba, he said.
“We spent quite a bit of effort on Cuba and thought we'd made some pretty good inroads, but when the prices got too high they simply went elsewhere,” said Tracy.
Still, Tracy and other industry officials welcomed the administration's plan, which also includes establishment of diplomatic relations. “It bodes well for the future,” he said.
The economic benefits to Cuba from relaxing U.S. restrictions on travel and tourism, also part of Obama's plan, could increase the market for American products, said James Sumner, president of the USA Poultry and Egg Export Council. “Currently, we're shipping primarily low-cost commodity type products, because of the condition of the Cuban economy,” he said.
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