Monday, November 26, 2012

Virginia finds trading partner in Cuba

Virginia finds trading partner in Cuba
By Laura Vozzella, Monday, November 26, 1:28 AM

RICHMOND — Queen Victoria is said to have had a bite of an Albemarle
Pippin and — poof! — away went the British tariff on the juicy,
Virginia-grown apple.

Trade barriers haven't tumbled quite so quickly for Henry Chiles, whose
two grandfathers started shipping Pippins overseas in wooden barrels 100
years ago.

The Charlottesville orchardman has managed without too much trouble to
peddle the apples he grows next door to Thomas Jefferson's Monticello
across Europe, Mexico and Central America. But as he expands into his
newest market, Cuba, he faces substantial obstacles — ones that would
stay stubbornly in place even if Fidel or Raul Castro suddenly took a
passionate liking to his Pippins.

"Always a lot of challenges, a lot of paperwork, holdups," said Chiles,
77, patriarch of the family-owned Crown Orchard and Carter Mountain
Orchard. "It's difficult."

It's been 12 years since the United States relaxed a trade embargo with
the communist nation to allow exports of food and medical products, but
strings were attached that make doing business more cumbersome and
expensive. Cuba cannot buy on credit from U.S. companies. And sales must
be handled through a third-party bank, since there is no direct banking
between the countries.

Chiles and other Virginia farmers nevertheless see great promise in the
island, so much so that Virginia Secretary of Agriculture and Forestry
Todd Haymore this month led his sixth annual trade mission to Havana.
And the commonwealth's willingness to put up with the hassles seems to
be paying off.

While total U.S. sales to Cuba have plummeted by nearly half since the
start of the recession — from $711.5 million in 2008 to $363.3 million
last year, according to the Commerce Department — Virginia's have grown.
State agricultural exports to the island have shot up from $25 million
to $30 million before the recession to $65 million last year. Most of
the exports are soybeans, for use in animal feed, and apples, which are
regarded as a small luxury.

Those sales make Cuba Virginia's seventh-largest export market, more
than twice as large as 20th-ranked Britain. And it puts the commonwealth
behind just two states — Louisiana and Florida — in trade with Cuba.

Maryland has had more modest exports to the island, but those have held
fairly steady. The state sold $12.3 million in soybeans to Cuba in 2008
and $11 million in 2010, the last year for which figures were available.

Credit restrictions on trade became especially onerous during the
recession, when a drop-off in European tourism left the already strapped
Cuba even more short of cash. That drove Cuba toward suppliers in Asia
and South America, said Kirby Jones, president of Alamar Associates, an
Arizona-based consulting company that works with companies doing
business in Cuba.

"Brazil has offered several hundred million in credits for soybeans.
Vietnam and China extended credits to buy their rice," Jones said. "They
have not bought any rice from us in several years. Not a grain."

But Virginia has been able to expand its business during that period by
actively courting the Cubans as other states have pulled back on
international marketing efforts.

"Some of them backed off simply because trade has fallen," Jones said.
"Virginia has been one of the most active. . . . The Cuban officials are
like anybody else: They like to do business with people they know. . . .
So many products are so competitive, and they're priced by the world
market anyway. It comes down to two suppliers at basically the same
price — that's where the personal contact becomes very important."

Reaching out to communist Cuba was not the most obvious course for a
conservative state — even when the object was promoting agribusiness.
Then-governor Mark R. Warner (D) was itching to lead a Virginia trade
mission to the island when he took office in 2002, not long after
President Clinton signed the Trade Sanctions Reform and Export
Enhancement Act. Warner was dissuaded by advisers who were worried about
the optics of a potential sit-down with Fidel Castro.

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