Cuba should be a bountiful island with an excellent growing season. But the workers’ paradise has to import $2 billion in food each year to prevent the workers from starving. American farmers have been able to get a small piece of the market since food sales were allowed as an exemption to the 1962 trade embargo in 2000. But with Obama Administration moving to normalize relationships, California, as America’s top food producing state, looks forward to serving a market of 11 million new consumers.
Despite the exemption, agricultural exports have still been subject to cumbersome rules–such as requiring cash payments up front before products are shipped, and that the payments go through banks in other countries that charge hefty transaction fees.
This is one of the reasons that California did not send its first agricultural trade commission to Cuba until 2006. While other states had pushed forward in selling Cuba an average $350 million per year in grains each year, California was only selling Cuba about $735,000 in powdered milk, rice, some wine and a few apples.
U.S. agricultural product sales to Cuba peaked just at over $710 million in 2008, but have fallen back as Cuba has remained in a grim recession. Frozen chicken, soybeans and soy products, and corn are the main products Cuba now buys from the U.S.
But removal of the trade barriers will make U.S. agricultural products “far more price competitive” in Cuba, U.S. Agriculture Secretary Tom Vilsack said Wednesday, as the Obama Administration announced on December 17, 2014 plans to restore diplomatic relations and to try to persuade Congress to lift the embargo.
The Soviet Union fell apart in 1991 and within a few years the Soviet bloc satellites spun out of Moscow’s claws. Once Cuba lost trade with its Soviet sugar-daddy, Cuban GDP shrank by a third and country has not been able to feed its people ever since.
Facing a crisis, Cuba opened the nation to unlimited remittances in 1993. The annual remittances from the U.S. to Cuban family members in 2012 were $5.1 billion, or 8% of GDP. That equals more than the $4.9 billion revenue from Cuba’s four largest industries combined–including tourism and exports of sugar, nickel and medications.
Despite having some of the most fertile farmland in the world, much of the Cuban fields are not planted. The reason collectivist workers have little work is that Cuba operates with two separate currencies in parallel. The wages of Cuban workers are paid in pesos, which can be used to buy basic necessities and domestic foodstuffs. But because of the huge U.S. dollar remittances, Cuba also has a convertible peso (CUC) that is worth about 25 pesos and is directly pegged to the U.S. dollar.
Although CUC can be used for purchasing imported goods and necessities not covered by subsidies, foreign investors in Cuba must hire workers from the government and sell their production to the domestic market in pesos. Since no investor wants to earn pesos, 80% of Cuba’s food is now imported.
California is the world leader in the production of grapes, raisins, almonds and tree fruits. These agricultural products are usually too expensive for failed Marxist states. The opening up of Cuba will bring back a tidal wave of tourism and economic development. Hotels and restaurants that cater to the tourist trade will provide the initial demand for the type of high quality fresh fruits and vegetables that California produces. But as the opening of the economy pushes more people into the middle class, California agricultural exports to Cuba may flourish.