United States | America and Cuba

Cuban deals

Despite the embargo, America exports plenty of goods to its erstwhile enemy

|CHICAGO

“WE LEARNED that the steps taken by President Obama to re-engage with Cuba have launched a bit of a global race […] to leave as little as possible for American business when the restrictions are lifted altogether.” Arne Sorenson, the boss of Marriott, a hotel chain, sounded frustrated after he returned from his first trip to Cuba last month. American business is losing out, he says, because European and Latin American companies can cater to the millions of American tourists who are expected to travel to Cuba soon, whereas Marriott and other American companies are still barred by law from doing business there.

Before the Cuban revolution in 1959, the island’s farm exports to America amounted to $2.2 billion a year (at current commodity prices) while American agricultural exports to Cuba stood at $600m, according to the United States Department of Agriculture. Cuba supplied its big neighbour with molasses, cane sugar, tobacco and coffee. America shipped rice, pork, lard and wheat flour across the Florida straits. The embargo ended all imports from Cuba but, just as the United States traded with the Soviet Union during the cold war, American farm products, some pharmaceuticals and medical equipment can be bought on the island—for a price (see chart).

America is a big supplier of food to Cuba (which imports 80% of what it needs). By 2008 it was exporting $685m-worth of corn, soyabeans and poultry to the island. Since then, that figure has declined; last year food exports were only $286m, and this year is shaping up to be especially disappointing. One reason is that Cuba is paying down its debts to Russia, Japan and Mexico and so has less money to spend. Another is Cuba’s decision to stop importing American poultry after an outbreak of bird flu. And a third is that Cubans must pay American exporters in cash because they are not allowed to give them credit, which puts Americans at a disadvantage to exporters in other countries. Mr Obama has helpfully redefined Cubans’ obligation to pay cash in advance as “cash before transfer of title”, but it remains a cumbersome process.

Despite these discouragements, several companies are venturing into the socialist paradise. As well as allowing more Americans to visit Cuba without special permits and to send more remittances to relatives on the island, Mr Obama’s administration has let telecoms firms as well as banks take steps towards operating in Cuba. In February IDT, a telecoms firm in New Jersey, said it had reached an agreement with Empresa de Telecomunicaciones de Cuba, the national telecom provider, to exchange long-distance traffic. (Other telecoms firms are likely to find suspicion of the NSA an impediment to doing business.) In May banks felt easier about doing business in Cuba when the State Department took it off the list of state sponsors of terror. In July Stonegate, a Florida-based bank, signed a correspondent banking agreement with Banco Internacional de Comercio, a government-controlled Cuban bank.

Timeline: Cuba and the United States

For trade to return to anything like its pre-revolutionary health, though, the embargo will have to go. According to a Pew poll published on July 21st, 72% of Americans would like to end it. More surprisingly, 55% of conservative Republicans now agree, compared with just 40% in January. Among Republican presidential hopefuls, Marco Rubio, Ted Cruz and Jeb Bush (all with strong connections to Cuban exile groups in Miami) want the embargo to stay. Hillary Clinton, who has a keen sense of what voters want to hear, once backed the embargo (her husband Bill signed the Helms-Burton Act, which toughened it, in 1996, though he later regretted having done so). She now wants to scrap it.

America’s farmers look forward to that day. According to Parr Rosson of Texas A&M University, agricultural exports to Cuba could exceed $1 billion annually, which, he says, would create an extra 6,000 jobs in America. Yet this will only happen if Cubans become a bit more prosperous and if Raúl Castro’s government, which has done little to make trade easier since the thaw in December, embraces commerce with the old enemy (see article). Until then American hoteliers, and most of the American business travellers they would like to profit from, will continue to fret that they are missing out.

This article appeared in the United States section of the print edition under the headline "Cuban deals"

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