Friday, March 23, 2012

Doing Business with Cuba, Despite Embargo

Doing Business with Cuba, Despite Embargo
Published: Friday, 23 Mar 2012 | 11:54 AM ET
By: Justin Solomon

In Corpus Christi, Texas, beans are being bagged by the thousands and
shipped off to a country that for decades was considered forbidden. That
country is, of course, Cuba and the beans being sent there are grown in
North Dakota, according to WestStar Food President Pat Wallesen.

"When I tell people, they'll ask, 'What do you do?' And we tell them we
export some beans to Cuba and they're like, 'Well you can't do that, can
ya?'" he said.

He not only can, he has. For the past nine years, Wallesen has been
filling entire container ships with 10,000 bags of beans at a time. He
says the last shipment he sent to Cuba was worth $3.2 million.

So, how is this legal with an embargo in place? In 2000, Congress passed
reforms to that embargo allowing U.S.-based companies to export approved
products to Cuba. And it's not just beans. In fact, there are hundreds
of items on a United States Commerce Department list of goods that can
be exported to Cuba.

According to AgriLIFE Extension at Texas A&M, U.S. exports to Cuba
peaked in 2008 at $711 million, but that number has declined in recent
years. In 2010, AgriLIFE Extension says $94.8 million in corn, $99.8
million in frozen chicken and $17.8 million in wheat were exported from
the United States to Cuba.

That's not surprising to Jose Azel, senior research associate at the
University of Miami.

"The United States is Cuba's 4th- or 5th-largest trading partner today,"
he said.

Many of the products leaving the U.S. on a 16-hour journey to Cuba hitch
a ride on a Crowley Liner Services ship. The company sends one vessel a
week to Cuba from Port Everglades in Fort Lauderdale, Fla., loaded with
nearly 40 containers packed with goods.

Crowley Vice President Jay Brickman says doing business with Cuba is
tricky because of U.S. law; goods must be paid for in advance.

"If you think about normal terms of trade, you have 30 days' credit or
60 days' credit. In the case of shipments from the U.S. to Cuba, Cuba
has to pay for these goods before they leave the United States,"
Brickman said. "If they don't pay, the goods don't go."

All of this business is going on with the embargo in place, which leaves
many to wonder what kind of boom a lifted embargo could have on the
United States.

Azel believes there will be significant opportunities, especially if
there is a major government transition in Cuba.

""If [the embargo] is lifted, that implies that there is a genuine
transition to democracy on the political side and to a free market
economy," he said. "So if we do make the assumption that, indeed, there
has been, not just a succession from one general to another, but a
genuine transition towards democracy and free markets, there will be a
significant opportunity for American enterprises in Cuba."

Many companies already doing business with Cuba also see endless

"It's almost like adding another state onto the U.S., 11 million people.
That's taking half of Texas and opening up a whole new market for us,"
WestStar Foods' Wallesen said.

Glenn Wiltshire, deputy port director at Port Everglades, agrees,
telling CNBC if the embargo were to be lifted, his port would see a big
boost in business.

"We believe there would be an increase in demand for cargo movement and
an increased interest in passengers that want to visit Cuba," he said.

Wiltshire estimates activity at the port would increase 10 percent

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