Citation
Challenges and opportunities for Florida agriculture from future trade with Cuba

Material Information

Title:
Challenges and opportunities for Florida agriculture from future trade with Cuba preliminary findings and justification for further research
Series Title:
International working paper series ;
Creator:
Alvarez, Jose, 1940-
Messina, William A
University of Florida -- Food and Resource Economics Dept
Place of Publication:
Gainesville, Fla
Publisher:
Food and Resource Economics Dept., Institute of Food and Agricultural Sciences, University of Florida
Publication Date:
Language:
English
Physical Description:
vii, 69 p. : ill. ; 28 cm.

Subjects

Subjects / Keywords:
Agriculture -- Economic aspects -- Florida ( lcsh )
Produce trade -- Forecasting -- Florida ( lcsh )
Foreign economic relations -- United States -- Cuba ( lcsh )
Foreign economic relations -- Cuba -- United States ( lcsh )
Agriculture -- Economic aspects ( fast )
International economic relations ( fast )
Produce trade -- Forecasting. ( fast )
Cuba ( fast )
Florida ( fast )
United States ( fast )
Agricultura -- Aspectos económicos ( qlsp )
Relaciones economicas internacionales ( qlsp )
Productos agrícolas -- Comercio -- Pronóstico ( bidex )
Estados Unidos ( fast )
Genre:
bibliography ( marcgt )

Notes

Bibliography:
Includes bibliographical references (p. 54-59).
General Note:
Cover title.
General Note:
"March 1993."
Statement of Responsibility:
by Jose Alvarez and William A. Messina, Jr.

Record Information

Source Institution:
University of Florida
Holding Location:
UF Marston Science Library
Rights Management:
Copyright, Cuba. Permission granted to University of Florida to digitize and display this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Resource Identifier:
036245408 ( ALEPH )
1043357199 ( OCLC )

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CHALLENGES AND OPPORTUNITIES FOR FLORIDA AGRICULTURE FROM FUTURE TRADE WITH CUBA:
PRELIMINARY FINDINGS AND JUSTIFICATION FOR FURTHER RESEARCH
Abstract
Anticipating possible changes in U.S.-Cuba relations, this report represents an effort to provide background information for
policy makers and private sector agribusiness to draw upon in their discussions and deliberations on the issue, with specific reference to trade of agricultural commodities and inputs. The f irst section of the report summarizes the findings of a series of preliminary sector studies for commodities produced in Cuba which could
potentially be exported to the United States; these commodities are especially relevant to Florida agricultural producers and include
citrus, seafood products, sugar and vegetables. The second section provides summaries of a series of preliminary sector studies for
agricultural products which could potentially be exported from Florida to Cuba; these products include field crops (rice, corn, cereals, cotton and potatoes) and agricultural inputs such as fertilizers, pesticides, animal feed, and machinery and equipment. The final section describes the need for further research based upon the importance of the issue of U.S.-Cuba trade, and the lack of solid analytical research on the potential impact (both costs
and benefits) of such trade on Florida's agricultural economy. The report ends with two appendices: the first appendix describes the
current debate on U.S.-Cuba relations, and the second summarizes the Florida-Cuba trade project being initiated at the University of Florida, Institute of Food and Agricultural Sciences, Department of Food and Resource Economics, International Agricultural Trade and Policy Center, under a grant provided by the John D. and Catherine T. MacArthur Foundation.
Key words: Cuba, U.S.-Cuba relations, trade, citrus, seafood,
fisheries, sugar, vegetables, agricultural inputs,
field crops




TABLE OF CONTENTS
Page
LIST OF TABLES...................................iv
LIST OF FIGURES................................iv
PREFACE.....................................v
INTRODUCTION...................................1
SECTION I
POTENTIAL FLORIDA IMPORTS........................2
citrus .. .................................................2
Industry Organization and Production...........2
Cuban Citrus Trade Prospects.................5
Fisheries..................................7
Industry Overview.........................7
Trade Opportunities with Florida.............9
Sugar .. ............................................10
Past and Current Status of Cuba's*Sugar Industry .. 10 Past and Recent Trading Patterns of Cuban Sugar .. 12 The Future of U.S.-Cuba Sugar Relations .. .........13
Vegetables..............................16
Industry Overview..........................16
Cuban Vegetable Trade Prospects .................17
Summary....................................18
SECTION II
POTENTIAL FLORIDA EXPORTS.......................19
Agricultural Inputs........................19
Fertilizers and Pesticides...................20
Animal Feed...........................21
Agricultural Machinery.....................21
Field Crops................................22
Corn. ..*.....................................22
Other Cereals................................22
Cotton...................................23
Potatoes..............................23
ii




Rice 24
Cuba's Rice Industry . . . . 24
Florida's Rice Industry . 25
Potential Cuban Rice Imports From Florida: . 26
Summary 26
SECTION III
JUSTIFICATION FOR FURTHER RESEARCH . . . 28
The Interest in U.S.-Cuba Trade . . . 29
The Late 1970s 29
The Present 31
In professional circles . . . 31
In the news media . . . . 37
The Lack of Quantitative Evidence . . 41
SUMMARY AND CONCLUSIONS . . . . 52
REFERENCES 54
.APPENDICES
1. THE CURRENT DEBATE ON U.S.-CUBA RELATIONS . 60
2. THE FLORIDA-CUBA TRADE PROJECT AT THE UNIVERSITY OF
FLORIDA 66




LIST OF TABLES
Table Pacre
1 Potential surpluses of Cuban sugar in the near
future at different levels of production (minus
consumption) and exports, as calculated from
projections made by international sugar
analysts 14
2 Potential surpluses of Cuban sugar in the near
future at different levels of production (minus
consumption) and exports, as calculated from
official Cuban announcements . . . 14
LIST OF FIGURES
Fig. Page
1 Value of potential selected Florida exports to
Cuba based on recent Cuban imports . . 27
iv




PREFACE
The sweeping changes that have taken place in the Eastern European countries and the former Soviet Union have worsened an already weak Cuban economy. Lack of foreign exchange, decreasing supplies from the former Soviet republics (including oil,
foodstuffs, animal feed, fertilizer, and other inputs), and a declining demand for some of its exports from previous trading partners have placed Cuba at a crossroads. Political changes may
lead to a resumption of diplomatic and commercial relations between the United States and Cuba. Florida's agricultural production and
geographical proximity to Cuba will make her a major player if commercial ties are re-established.
When the restoration of diplomatic and commercial relations
with Cuba was discussed during the Carter Administration, a heated debate on that issue (mostly based on speculations about potential
costs and benefits) took place in the media throughout the State of Florida. Since that possibility may materialize in the near future, Florida producers and decision-makers need to be prepared to face both challenges and opportunities.
Given the potential for change in U.S.-Cuba trade relations,
the Food and Resource Economics (FRE) Department at the University of Florida (UF) is conducting research aimed at elucidating the issues involved. The research is being coordinated through the International Agricultural Trade and Policy Center, a part of the FRE Department within the Institute of Food and Agricultural Sciences at UF.
v




Sugar, citrus, seafood and vegetables are likely to become Cuban exports to the United States. As a part of this research program, preliminary work has already been conducted on citrus (Behr and Albrigo, 1991), sugar (Alvarez, 1992a; 1992b), fisheries (Adams, 1992) and vegetables (VanSickle and Messina, 1993).
Agricultural inputs (fertilizers, chemicals, animal feed and machinery), rice, field crops (corn, wheat, barley, oats, cotton, and potatoes), are potential Cuban imports from the United States. Preliminary work has been conducted on rice (Alvarez and Messina,
1992a) agricultural inputs (Alvarez and Messina, 1992b) and field crops (Messina and Alvarez, 1992).
This publication finalizes the first phase of these research
efforts. It contains summaries of the preliminary work conducted on each commodity (or groups of commodities) as well as a brief review of the literature on the subject of U.S.-Cuba trade. Updated
information about the current debate on U.S.-Cuba relations is included in Appendix 1.
The second phase of this research project will estimate the
potential economic impact (benefits and costs) of such trade on Florida's agricultural economy. The study will include the most important potential imports and exports. A description of phase two of the Florida-Cuba trade project is contained in Appendix 2.
Although it is obvious that the results of such a study will contain a number of policy implications, the policy issues should be resolved in eventual negotiations between the two governments.
Our role as investigators of this sensitive issue is to provide vi




producers and policy makers with the best available data and analyses on which they can base their decisions.
vii




CHALLENGES AND OPPORTUNITIES FOR FLORIDA AGRICULTURE FROM FUTURE TRADE WITH CUBA:
PRELIMINARY FINDINGS AND JUSTIFICATION FOR FURTHER RESEARCH
Jose Alvarez and William A. Messina, Jr.
INTRODUCTION
The publication series on U.S.-Cuba trade mentioned in the Pref ace was intended to provide baseline studies of the commodities which are likely to be traded if and when the Cuban embargo is lifted and commercial relations between the two countries are reestablished. The purpose of this report is to summarize the
preliminary findings of those studies to set the stage for more indepth research on the potential economic impact (benefits and costs) that trade with Cuba would have on Florida's agricultural economy.
As documented in the last section of this report, further research is needed for two main reasons: (a) the continued interest that producers, public officials, the media, and the general public have shown in this issue throughout the years; and (b) the lack of
analytical evidence related to Florida provided by previous studies and personal accounts.
The report also includes an update of a previous publication
(Alvarez, 1992a) on the current debate on U.S.-Cuba relations
JOSE ALVAREZ is Professor and Extension Economist, Everglades Research and Education Center, University of Florida, Belle Glade, FL 33430-8003. WILLIAM A. MESSINA, Jr. is Executive Coordinator, International Agricultural Trade and Policy Center, Food and
Resource Economics Department, University of Florida, Gainesville, FL 32611-0240.
1




(Appendix 1), and a summary of the Florida-Cuba trade project at the University of Florida (Appendix 2).
SECTION I: POTENTIAL FLORIDA IMPORTS citrus'
After rapid development into an important world producer and exporter of citrus, Cuba's citrus industry is now at a crossroads.
Following the 1959 revolution, Cuba invested heavily to develop its citrus industry in order to diversify its sugar-dominated economy
and expand exports to trade partners in the now defunct Council for Mutual Economic Assistance (CMEA) .2 citrus acreage expanded over 100% after the revolution to more than 350,000 gross acres today,
of which 21% is non-bearing. Production is scattered throughout the Cuban provinces and the Isle of Youth but the largest concentration is in the western and central areas. Industry Organization and Production
The organizational structure and management of resources within Cuba's citrus industry reflect the centrally planned nature of the Cuban economy. In Cuba, production units are called
enterprises and are managed by the Central Planning Board (Junta Central de Planificaci6n, JUCEPLAN). There are 13 separate citrus'This commodity summary was prepared by Karen Bedigian based
upon a previous report (Behr and Albrigo, 1991). Some of the information was obtained during a fact-finding trip of Dr. Robert Behr while attending the United Nations Food and Agriculture organization citrus outlook conference in Cuba in 1991.
2 CMEA included Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, Romania, Cuba, Mongolia, the USSR and Viet Nam.
2




producing enterprises, which account for about 90% of total citrus
production. The balance of Cuba's citrus acreage is held by the non-State sector.
According to Cuban officials, the country produced about 25
million 90-lb boxes of citrus in 1990, almost 70% above levels produced during the mid-1980s. Despite the increase, Cuba continues to be a relatively small producer, raking 14th among the world's
citrus producers and accounting for less than 2% of total world production. oranges, mostly Valencia, account for about 60% of Cuba's citrus production, while grapefruit accounts for slightly more than 30% of total production. At the present time white seedless grapefruit is the most important variety, accounting for 80% of grapefruit production. However, the Cubans are planting and replanting mostly red and pink varieties. Limes account for slightly more than 6% of production, while tangerines account for almost 2%. Although Cuba has considerable technological know-how,
productivity is rather low. Citrus production is hindered by delays in delivery of important inputs such as herbicides, diesel fuel,
fertilizer, pesticides, and spare parts. The average per acre yield for bearing orange trees of all ages in Cuba is estimated to be about 110 90-lb boxes while the average yield for bearing orange acreage in Florida is around 350 90-lb boxes per acre.
Future production of Cuban citrus will depend upon continued yield improvement. Cuba has set a production goal of 1.6 million metric tons by the year 1995, 60% above 1990 levels. Since only 21% of Cuba's citrus acreage is non-bearing and the prospects for
3




increased availability of inputs are doubtful, Cuba would have to increase yields substantially to achieve the 1995 production
targets. Grapefruit is likely to show the greatest gains because of a relatively large amount of non-bearing acreage.
Cuba's fresh citrus season typically runs from August to March: the peak grapefruit harvest normally runs from August
through December, while oranges are harvested from December to March. Most of Cuba's citrus production is utilized for the fresh
fruit market and is exported. For oranges, Cuban officials indicate that 6.6 million 90-lb boxes, or 44.4% of total orange production
in 1990, were utilized for the fresh export market. For grapefruit, 4.9 million 85-lb boxes, or about 57% of total grapefruit production, were utilized for the fresh export market in 1990. In total, there are 20 packinghouses scattered throughout the citrusproducing areas that pack citrus for the fresh market.
According to Cuban officials, an increasing amount of Cuba's fruit production is being processed. It is estimated that about 5.0 million boxes are being processed annually. It is believed that most of Cuba's processed citrus utilization is for the manufacture of concentrated juices for export, primarily to former CMEA countries. The industry now has the capacity to process about 11
million 90-lb boxes of citrus during the season, which normally runs parallel to the fresh citrus season. Most of the fruit for processing comes from packinghouse eliminations. Presently, less than 20% of the processed citrus is "field run" although this is expected to increase in future years.
4




Processing yields in Cuba are generally low, averaging about 4.5 pounds solids per box. officials indicated the low yields were
caused primarily by poor extraction capability. It is believed that yields would be significantly improved if the plants had better equipment.
Cuban Citrus Trade Prospects
Historically, the CMEA countries were the principal beneficiaries of Cuba's export growth as more than 90% of Cuba's
citrus exports went to these countries. On December 27, 1991, contractual agreements between Cuba and the former CMEA countries expired. This will affect Cuba's export prospects to these countries due to the economic turmoil caused by the breakup of the
Soviet Union and the democratic reforms taking place there and throughout Eastern Europe. Even if trade were to continue, it would be likely that Cuba would not receive the previous favorable terms of trade; and, because of hard currency needs, Cuba is likely to
divert an increasing amount of its citrus exports to Western markets, which could affect other producing and consuming countries as well.
As part of their response to potential sale losses to former CMEA countries, Cuban citrus officials are developing third-party "marketing arrangements" to assist the exportation of Cuban fresh
citrus in export markets such as Western Europe. One example is the marketing, arrangement between Cuba and a Chilean exporter, who provides marketing expertise and some supplies, while the Cubans provide the fruit, packing facilities and labor. Since the Cubans
5




have had very little experience in marketing citrus outside the CMEA countries, joint ventures provide an avenue to develop other
markets. It would not be surprising to see a significant portion of Cuba's citrus production being marketed this way in the future.
In addition to its plans for fresh citrus exports, Cuba is planning to increase processing capacity and to divert a greater
portion of fruit production into juice production for the export market. Cuban officials also indicate that, in the event of reduced export sales for the former CMEA countries, more of Cuba's citrus production would be made available for domestic consumption. However, it must be emphasized that Cuba will likely seek means to increase its hard currency earnings, which will limit how much is made available for domestic consumption.
Today, U.S. foreign policy does not permit trade with Cuba. If this policy were to change, Cuba would likely find the U.S. an attractive market outlet for its fresh and processed citrus
products. (Before the U.S. embargo was imposed, almost all of Cuba's fresh orange exports and about 87% of its fresh grapefruit
exports came to the United States.) Even if current policy were to remain in place, Cuba's fresh and processed citrus products will
likely compete overseas with Floridals. For example, Cuban fresh grapefruit has historically been available in the European
Community (EC) markets in relatively small quantities one to two months prior to fruit from the Mediterranean or the United States, primarily Florida. Once exports from these competing areas became
available, demand for the Cuban fruit fell off because of its
6




poorer quality. While Cuban fruit has not had a particularly good reputation in the EC markets, this perception will likely change
with the influence of the Chilean and new joint ventures. This would make Cuban fresh grapefruit more competitive beyond the early-season window they now enjoy.
Fisheries3
Industry Overview
The commercial f ishing industry of Cuba is an important source of seafood products originating from the Gulf of Mexico and
Caribbean region, as well as other global f ishing regions. However, this important role in the world seafood market was attained via two decades of evolution in Cuba's fishing industry. Following the 1959 revolution, the nation's fishing industry underwent
significant development. The technological improvements and capital investment which occurred were funded in large part by a bilateral fishery agreement with the Soviet Union. Cuba's fishing industry rapidly developed a large-capacity distant-water fleet, which produced large quantities of low-value fishery products for
domestic consumption, as well as export. Cuba also produces a significant quantity of high-value finfish and shellfish from the Gulf of Mexico and Caribbean region. Cuba ranks second among all
Caribbean and Central American nations in terms of landings of finfish, crustaceans, mollusks, and other marine and freshwater species. In 1989, Cuba landed over 192, 000 metric tons of fisheries
3This commodity summary was prepared by Chuck Adams based upon a previous report (Adams, 1992).
7




products, or 10% of the total fishery landings in the Caribbean and Central American region. Only Mexico exceeds Cuba in the volume of fishery products landed within the region. Approximately 90% of Cuba's fishery production is landed by the distant-water fleet, which fishes in many regions in the Pacific and Atlantic Oceans. The most important regions in terms of volumes landed are the southeast Pacific and the west-central Atlantic. Given the dissolution of the Soviet Union and the removal of important subsidies for fuel and technology, the future viability of Cuba's distant-water fleet is in serious question.
Cuba's fishery landings are extremely diverse, and composed of at least 135 different species or species groups. This diversity is exceeded worldwide only by the United States and Canada. The most important species of finfish (volume basis) landed by Cuba include hake, horse mackerel, snappers/groupers, herrings, "redfishes", and shark/rays. The more important species of crustaceans, mollusks, and other marine organisms include spiny lobster, shrimp, oysters, clams, crab, and squid. The spiny lobster, shrimp, snapper, and grouper represent the more valuable species, which are typically dedicated for lucrative export markets. Cuba has a growing aquaculture industry, which historically focused on inland production of freshwater species such as catfish and tilapia. However, the potential for marine species such as penaeid shrimp and oysters is beginning to be realized.
Cuba has also a significant seafood processing sector. The most important categories of processed seafood include frozen
8




finfish products, frozen spiny lobster, frozen shrimp, canned fish, and fish meal, in order of importance. In 1989, Cuba produced approximately 88,000 metric tons of frozen finfish, 7,500 metric tons of frozen lobster, 3,300 metric tons of frozen shrimp, 5,500 metric tons of canned fish, and 6,800 metric tons of fish meal.
Cuba is also a net exporter of fishery products. Cuba exported approximately $130 million (21,000 metric tons) of fishery products in 1989, while importing $54 million (60,000 metric tons) the same year. The seafood export market for Cuba is dominated by shrimp and lobster, while the imported product volume is composed primarily of finfish products.
Trade Opportunities with Florida
Cuba has maintained a role as an important supplier of highvalued seafood products originating from the Gulf of Mexico and Caribbean region. Species such as spiny lobster, shrimp, snapper, and grouper are species that Cuba has historically produced in nearshore waters. These species are also of importance to the domestic U.S. markets and to the commercial fishing industry in the southeastern United States. However, given declining stocks in U.S. waters and the recent imposition of more restrictive U.S. fishery management regulations for most of these species, domestic demand has been met only through the availability of imported products. This is particularly true for shrimp, spiny lobster, and snapper. Currently, over three-fourths of the total U.S. supply of these and other important and traditional species is imported. Cuba may find a ready market for some of these same species and species groups in
9




the United States under a scenario of open trade and commercial relations. In addition, the potential for joint venture processing with U.S. firms may exist, particularly given the high cost environment in which U.S. seafood processors currently operate.
Sucfar 4
Sugarcane has been, and continues to be, the dominant crop in Cuba's economy and sugar the main source of foreign exchange. Past and Current Status of Cuba's Sugar Industry
During the 1950s, Cuba milled an average of 43.9 million metric tons of sugarcane (not all the production was milled) at a
rate of 507,000 tons per day to produce 5.63 million metric tons of sugar with a recovery rate of 12.85% and 97.29 polarization in 86.8 days.
Performance data in the 1960s reflect the consequences of the anti-sugar policy followed at the outset of the 1959 revolution. Excluding the 1969-70 season, the average of all indicators
dropped: sugarcane production fell to 42.31 million tons, cane milled per day decreased to 483,000 million tons, and sugar production averaged 5.19 million tons.
The 1969-70 sugar season was a turning point in Cuban sugar
policy. After 10 years of neglect, Castro himself declared that sugar was the backbone of the economy and challenged his people to produce 10 million metric tons of sugar. Although a record crop of
4 This commodity summary updates previous reports (Alvarez, 1992a; 1992b; 1992c).
10




8.54 million tons was produced, the harvest lasted 217 days (143
days of actual grinding) milled sugarcane from upcoming crops, and inflicted staggering costs to the rest of the economy.
Data from the 1970s and 1980s reflect the increased attention given to the sugar industry after the 1970 campaign. Average sugarcane production increased to 55.27 and 70.24 million tons in
the 1970s and 1980s, respectively; milling rates increased to 530,000 in the 1970s and to 639,000 tons per day in the 1980s; and average annual sugar production increased to 6.24 and 7.65 million
tons in the 1970s and 1980s, respectively. Different trends are observed for recovery rate (decreasing) and polarization
(increasing) in both decades. The average length of the season increased to 103.7 days in the 1970s and to 110.2 days in the 1980s.
Cuba's ability to maintain production at the levels achieved
during the 1980s began to be questioned in international sugar circles in late 1989 as political developments in Eastern Europe and the former Soviet Union impacted Cuba's previous preferential
trading arrangements. The reasons included Cuba's outdated mill machinery and equipment, lack of spare parts, shortages of oil, and lack of foreign exchange to purchase inputs. The 1991-92 season,
normally underway by mid-November, did not start until mid-January when the sugarcane that had not received any fertilizer or herbicide began to be sent to mills that had received poor maintenance and repairs during the off-season. The material difficulties faced by the Cuban government during the harvest were 11




exacerbated by natural disasters in a harvest extended into the rainy season. The sugar campaign ended on August 1 and, Fidel Castro's announcement on September 5 of a total output of 7 million tons, was received with skepticism by international sugar analysts. Past and Recent Trading Patterns of Cuban Sugar
Prior to the revolution of 1959, the United States and Cuba
had been major trading partners and sugar was Cuba's most important export to the United States. Cuba provided over one-third of the
total U.S. sugar requirements (about 3 million tons per year) until the Cuban sugar quota was suspended in 1960. Cuba, who had sold over 50% of its sugar exports to the United States for many years,
redirected its sugar exports to the Soviet Union, China, and Eastern European countries. In 1959, only 5.5% of the 4.95 million tons exported went to the U.S.S.R., while the remaining 94.5% was
exported to other countries, including the United States. Those figures changed dramatically in 1960 when Cuba sent 28.1% of its
sugar exports to the U.S.S.R., 8.5% to China, 4.1% to Eastern Europe, and 59.3% to other countries. By 1965, the Soviet Union was purchasing 46.2% of Cuban sugar exports while other countries (not including China and Eastern Europe, with 7.5% and 12.7%,
respectively) imported only 33.6% of the total. That allocation, with some minor shifts, remained essentially unchanged until the late 1980s.
The collapse of socialism in Eastern Europe in 1989 and the
demise of the Soviet Union at the end of 1991, initiated a new phase in the direction of Cuban sugar exports. In 1991, the
12




breakdown was as follows: Eastern Europe, 1% (a lost outlet); Asia
and Oceania, 19%; Middle East and Africa, 11%; countries in the Western Hemisphere, 9.2%; Western Europe, 3.2%; and the Soviet Union, 56.7%, with drastic reductions in 1992. The Future of U.S.-Cuba Sugar Relations
Abstracting from the political environment within which those relations could take place, and the implications of returning the Cuban sugar quota, both discussed in the original sources, let us
show the potential amounts of Cuban sugar that may become available for the U.S. and world markets under two scenarios of an entire range of alternative outcomes.
The first scenario has been calculated from predictions made
by international sugar analysts (shaded area in Table 1). It assumes: (a) sugar production at 5.5 million tons as the result of the dismal conditions of the industry and the lack of optimism on
the possibilities of improvement; (b) domestic consumption at 900,000 tons, slightly above the one officially reported for 1989; and (c) exports at around 4.5 million tons.
The second scenario reflects the official announcement made by Castro on September 5, 1992 (shaded area in Table 2). It assumes:
(a) sugar production at 7.0 million tons; (b) domestic consumption at 700,000 tons, or 200,000 tons less than in previous years; and
(c) maximum exports at 6.3 million tons.
Faced with these two contrasting scenarios, the following facts must be considered when projecting Cuba's future production
and exporting capabilities. Concerning production: 1) At the 13




Table 1. Potential surpluses of Cuban sugar in the near future at
different levels of production (minus consumption) and exports, as calculated from projections made by
international sugar analysts.
Production (million metric tons)
4.00 4.25 4.50 4.75 5.00 5.25 5.50
Production minus consumption (million metric tons)
Exports 3.10 3.35 3.60 3.85 4.10 4.35 4.60
----- --------Million metric tons------ -- --- -- -5.00 -1.90 -1.65 -1.40 -1.15 -0.90 -0.65 -0.40
4.75 -1.65 -1.40 -1.15 -0.90 -0.65 -0.40 -0.15
4.25 -1.15 -0.90 -0.65 -0.40 -0.15 0.10 0.35
4.00 -0.90 -0.65 -0.40 -0.15 0.10 0.35 0.60
3.75 -0.65 -0.40 -0.15 0.10 0.35 0.60 0.85
3.50 -0.40 -0.15 0.10 0.35 0.60 0.85 1.10
Table 2. Potential surpluses of Cuban sugar in the near future at
different levels of production (minus consumption) and exports, as calculated from official Cuban announcements.
Production (million metric tons)
4.00 4.50 5.00 5.50 6.00 6.50 7.00
Production minus consumption (million metric tons)
Exports 3.30 3.80 4.30 4.80 5.30 5.80 6.30
----- --------Million metric tons------ -- --- -- -5.50 -2.20 -1.70 -1.20 -0.70 -0.20 0.30 0.80
5.00 -1.70 -1.20 -0.70 -0.20 0.30 0.80 1.30
4.50 -1.20 -0.70 -0.20 0.30 0.80 1.30 1.80
4.00 -0.70 -0.20 0.30 0.80 1.30 1.80 2.30
3.50 -0.20 0.30 0.80 1.30 1.80 2.30 2.80
14




beginning of the 1991-92 season, a Cuban official stated that, because of the "material difficulties" the harvest was facing, it was impossible to "even get close" to their 7.5 million ton goal. (The 1991-92 production announced by Castro is only 7% below this target.) 2) At the end of the harvest, Castro announced that the
sugar output had been reached without using any fertilizers and herbicides and with only 30% of the resources available in the previous harvest when 7.6 million tons of sugar were produced. 3)
Domestic sugar available in the rationed market was reduced by 200,000 metric tons. 4) The 200,000 metric tons reported to the International Sugar Organization for the last quarter of 1991 were
not produced since the harvest did not start until mid-January 1992.
Concerning exports: 1) The traditional buyers of Cuban sugar, from Japan to CIS countries, are turning to Thailand to solve their sugar needs, while countries such as South Korea, Malaysia and Iran are considering doing the same (Tim, 1992). 2) Cuba could sell at
a discount from world prices to recover some markets but, in competing for significant Asian outlets against more closely located suppliers, Cuba operates under the disadvantage of higher transportation costs (Hagelberg, 1992).
Since a positive outcome in the Uruguay Round under the GATT would be years away from full implementation, the short-run solution would be access to the U.S. market. However, there is no
reason to believe that the United States can absorb Cuban sugar surpluses of the magnitude shown in this study.
15




Vecretables5
Industry Overview
Cuba was a major supplier of fresh vegetables to the U.S. market prior to the 1961 Cuban embargo. Tomatoes and cucumbers were the two most significant vegetables imported into the United States from Cuba, with avocados, peppers, eggplant and a number of other
tropical vegetables also being imported. These imports occurred primarily in the months from January to March when Florida and Mexico are major suppliers of vegetables to the U.S. market.
Consumption and commercial trade of vegetables in the United
States have increased dramatically since the Cuban embargo was imposed. Despite not being able to capitalize on this growth in the U.S. market, Cuba increased it horticultural crop production
substantially over the past 30 years. While official statistics are limited, they indicate that Cuba increased area planted to
horticultural crops from 91,600 acres to 384,500 acres between 1970 and 1989 alone. Most of the increase in acreage planted to
horticultural crops in Cuba occurred in the non-state sector. Acreage committed to the production of tomatoes, cucumbers, boniato and malanga in Cuba exceed planted acreage for each crop, respectively, in Florida.
Horticultural crop yields in Cuba have generally decreased from levels achieved in the early 1970s. Yields in the non-state sector may exceed those in the state sector although data
5 This commodity summary was prepared by William A. Messina, Jr. based upon a previous report (VanSickle and Messina, 1993).
16




limitations and marketing practices of non-state producers preclude accurate measurement thereof. Lack of advanced technology and limited access to production inputs (fertilizer, pesticides, etc.) in Cuba appear to be restricting yields and production more than land, labor and water constraints at this time. Cuban Vegetable Trade Prospects
Limited statistical analysis would suggest that the Cuban vegetable industry is capable of responding quickly and significantly to an opening of trade between the United States and Cuba. However, developments in Eastern Europe and the Soviet Union since 1989 (the last year for which Cuban data are available) have had a dramatic impact on all sectors of the Cuban economy.
Resulting shortages have undoubtedly hindered vegetable production in Cuba.
A resumption of commercial relations between Cuba and the United States would likely encourage partnerships between U.S. companies and production units in Cuba. Such partnerships were common prior to the imposition of the embargo by the United States
and would be similar to those presently in operation between Mexican vegetable producers and U.S. shippers. The resulting
increase in investment in horticultural production in Cuba would generate increased yields which could have important implications for the winter fresh vegetable market in the United States.
However, more recent data are needed to accurately assess the current status of vegetable production in Cuba.
17




Summary
A fairly consistent picture emerges, concerning potential costs and benefits to Florida agricultural producers, from future
trade with Cuba with reference to the commodities described in this section. These preliminary studies seem to indicate the existence of potential costs, in terms of larger supplies and greater competition in the U.S. market, for Florida citrus, sugar, vegetable and seafood producers.
If the embargo is lifted, Cuba would likely find the United States an attractive market and has the capacity to export large
quantities of fresh and processed citrus products to this country. Even under current policy, Cuba's citrus products will likely compete with Florida citrus products in overseas markets.
Despite the different outcomes from several scenarios about Cuba's future sugar production and exporting capabilities, the issue would be the return of the Cuban sugar quota. That policy decision will affect U.S. domestic sugar producers as well as foreign sugar producers with quota access to the U.S. market.
A resumption of commercial relations between the two countries woula likely encourage partnerships between U.S. companies and production units in Cuba. The resulting increase in investment in
horticultural production in Cuba, however, would generate increased yields which could have important implications for the winter fresh vegetable market in the United States.
Given declining stocks in U.S. waters and more restrictive fishery management regulations for most of the species that Cuba




produces in nearshore waters, Cuba may f ind a ready market for these species in the United States. In addition, the potential for joint venture processing with U.S. firms may exist, given the high cost environment in which U.S. seafood processors currently operate.
SECTION II: POTENTIAL FLORIDA EXPORTS6 Agricultural Inputs7
The large State farms that were organized in Cuba after the
1959 revolution required a heavy use of agricultural machinery and other inputs. The emphasis on modern technology was the result of a rural labor shortage and the desire to take advantage of economies of scale. Capital inputs were imported in large quantities, mainly from the Soviet Union, Eastern European
countries and some countries in Western Europe, and local plants were built or expanded to satisfy the growing demand.
The collapse of socialism in Eastern Europe and the demise of
the Soviet Union deprived Cuba of its main source of supply for most agricultural inputs as preferential trade agreements were canceled. This section shows the potential market for Florida exports if the embargo is lifted and commercial relations between Cuba and the United States are re-established.
6 The value of Cuban imports described in this section are given in Cuban pesos. The Cuban peso is not a convertible currency but
the Cuban National Bank publishes official exchange rates. For example, $1.09 = 1 peso in 1985; $1.21 = 1 peso in 1986; and $1=
1 peso in 1987-89.
'This section summarizes a previous report (Alvarez and Messina, 1992b).
19




.Fertilizers and Pesticides
Cuban fertilizer imports include urea, simple and triple
superphosphate, ammonium sulfate, potassium chloride, potassium sulfate, ammonium nitrate and mixed fertilizers, with the latter two showing no imports since the late 1970s. Volume reached over
one million metric tons in the late 1970s for a total value of over 120 million Cuban pesos. Growth in volume of these imports was over 900% from 1958 to 1989.
Imports of anhydrous ammonia reached 73,000 metric tons in 1989, for a value of over 18 million pesos. Their volume increased by more than 600% from 1965 to 1989.
Imports of sulphur in bulk in 1989 surpassed 154,000 metric tons for a value of over 18 million pesos. The volume imported in 1989 represents a 200% increase from 1965 imports.
Until 1989, the majority of the fertilizers were imported from the U.S.S.R. although some quantities were purchased from the German Democratic Republic and a few Western countries.
Herbicides and other pesticides show more dramatic increases in imports. More than 10,000 metric tons of herbicides were imported per year during the 1984-89 period, representing over 50
million Cuban pesos. In just ten years (1965-75) the volume of herbicide imports increased by 2,700%, while the growth from 1965 to 1989 was of 3,310%. Imports of other pesticides, however, show a less dramatic increase. In 1989, Cuba imported close to 10,000 metric tons for a value of over 25 million pesos. The increase in volume from 1965 to 1989 was close to 200%.
20




Herbicides and other pesticides were purchased mainly f rom Switzerland, both the Democratic and Federal German Republics, the United Kingdom and other Western countries. Animal Feed
The growth in the volume of these imports was in the magnitude of slightly over 900% from 1965 to 1989. Imports of vegetable meal and animal meal totaled close to 400,000 metric tons in 1989 for a value of over 122 million Cuban pesos.
The U.S.S.R. was the main supplier of animal feed while the
Netherlands sold substantial quantities in several years. Other supplying countries include the German Federal Republic, France, Peru, Chile and others.
Agricultural Machinery
The value of imports of machinery and equipment used only in the agricultural sector reached a peak at 526 million Cuban pesos in 1984, but remained close to 300 million pesos per year in the rest of the last decade. In the 15 years covering the period 197084, the value of these imports grew by close to 500%, while the growth between 1970 and 1989 was over 250%.
Most of the machinery and equipment was imported from the U.S.S.R. Other supplying countries include Spain, Italy, the German Democratic Republic, France, Japan, United Kingdom, Sweden, Bulgaria, Romania, and others.
21




Field Crops
This section quantifies potential Cuban imports of corn, cereals other than rice (wheat grain and flour, barley, oats, and lactic and prepared cereals), cotton and potatoes. Corn
Although around 90,000 hectares of corn were planted in Cuba
in 1989, imports represented 94% of total domestic consumption. The 720,000 metric tons of corn imported that year had a value of over
100 million Cuban pesos and represented an increase of over 400% in volume and 960% in value from 1970.
Most of the imported corn in the last decades came from the
U.S.S.R. although, in some years, quantities were imported from Bulgaria, Argentina, and other western countries. Cuba was not an important buyer of U.S. corn before the 1959 revolution. Other Cereals
Since Cuba only produces small amounts of other cereals, imports are the main source of supply. Imports of wheat grain, wheat flour, barley, oats, and lactic and prepared cereals, amounted to around 1.3 million metric tons in 1989 for a value of 200 million Cuban pesos, which represented close to 300% and 500% more in volume and value, respectively, than in 1965.
Wheat grain and wheat flour were imported mainly from the U.S.S.R., although small quantities of wheat grain were purchased
8 This section summarizes a previous report (Messina and Alvarez, 1992).
22




from Canada and Bulgaria. Before the 1959 revolution, Cuba was not an important importer of U.S. wheat grain or wheat flour.
Cotton
The volume and value of Cuban cotton fiber imports increased by a factor of four and six, respectively, from the mid-1960s to the mid-1980s and have remained relatively stable since that time. In 1989 Cuba imported more than 40,000 metric tons of cotton with a value of around 70 million Cuban pesos. Almost all those imports came from the U.S.S.R. Cuba imported small amounts of cotton from the United States before the 1959 revolution. Potatoes
Around 17,000 hectares are planted to potatoes in Cuba every
year. Potato imports have decreased in the last f ew years f rom close to 40,000 metric tons in 1980 to less than 10,000 tons in 1989, while the value of those imports has stayed between 2.5 and
6.5 million Cuban pesos from 1965 to 1989. The ratio of imports over consumption has fallen from 29% in 1970 to 3.4% in 1989.
Cuba has imported potatoes for consumption mainly from the Soviet Union, while potato seeds have been purchased in Canada, the Netherlands, France and, sometimes, in Scotland. Cuba was an
important purchaser of U.S. potatoes before the 1959 revolution, accounting for more than 20% of the total volume of U.S. potato exports and for over 25% of their value.
23




Rice9
Rice is the most important grain in the Cuban diet and another potential Florida export to Cuba. Cuba's Rice Industry
Although rice plantings decreased by over 14% from 1970 to 1989, there were 205,800 hectares devoted to rice production in 1989. The State sector accounts for 88% of the planted area and the non-State sector for the remaining 12%. Most of the rice area in the State sector is irrigated while the figure for the non-State sector is not available.
Statistics show that very small areas of land are abandoned since harvested area has historically been at least 91% of planted area, and that State managers are giving increasing attention to ratoon crops. Rough rice production in both sectors has been increasing since 1970 with total production reaching over 500,000 metric tons since 1982.
Since Cuba is not self-sufficient in rice production, imports
are needed to satisfy total domestic consumption. Imports have remained relatively stable during the past three decades, at around 200,000 metric tons of milled rice', which is very similar to pre1959 levels. (Rice, however, is rationed in Cuba today at f ive pounds per person per month.) Imports account for about 30-40% of total consumption.
9This section summarizes a previous report (Alvarez and Messina, 1992a) .
24




Florida's Rice Industry
Although rice had been used as a cover crop for many years in the Everglades Agricultural Area (EAA), it was not harvested for
grain until 1977. Since rice has played the role of a complementary crop (being grown in rotation with sugarcane and vegetables), its
acreage has been increasing slowly. Planted acreage grew from a few acres in 1977 to 22,400 acres in 1992, with some of the growers harvesting a ration crop. One of the two existing mills has just
finished an expansion of its processing capacity and additional increases in capacity are underway.
Acreage expansion of up to approximately 41,500 acres is feasible within current production systems without disrupting operations of the primary crops. At current yields and rationing
practices, they would represent an additional 68,000 metric tons of milled rice, or approximately 32% of Cuba's current import requirements.
Further expansion of rice production in Florida could be expected for the following reasons: (a) Relative price ratios of sugar and rice could change enough to induce producers to plant more rice in land previously successively replanted to sugarcane;
(b) the same outcome would be possible if marketing allotments for
sugar were enforced because of continued increased U.S. sugar production; (c) year-round production of rice in areas that, because of soil subsidence, are becoming too shallow for conventional crop production; (d) rice plantings in other Florida
areas; and (e) the implementation of rice as a Best Management 25




Practice (BMP) for phosphorus removal in the EAA. Potential Cuban Rice Imports From Florida
Cuba was an important consumer of U.S. rice prior to the 1959 revolution, accounting for about 25% of the volume of total U.S. rice exports and for over 30% of their value.
Current Cuban rice imports average around 200,000 metric tons per year. The main suppliers have included China, the European Community, Pakistan, Thailand and Viet Nam. Florida has price and transportation cost advantages over these countries and other U.S. rice producing areas.
Projections of future Florida rice production increases, from acreage expansion between 41,500 and 100,000 acres, would be
between 68,000 and 163,800 metric tons of rice that could be exported to Cuba. At $15/cwt, total gross sales would range from $23 million to $55 million per year.
Summary
Potential Florida exports to Cuba examined in this section included agricultural inputs (fertilizers, pesticides, animal feed, and machinery and equipment), field crops (cereals, cotton and potatoes), and rice. The average value of these Cuban imports during the 1985-89 period was $976 million per year for a total of approximately $4.9 billion in the last five years for which data
are available (Fig. 1). These figures, however, represent only total gross sales. Additional indirect economic impacts from expanded income and employment would also result.
26




Value (Million Pesos) 1400
1200
1000
800 .
600
4oo
200
0 >4-_41970 1975 1980 1984 1985 1986 1987 1988 1989 Year
Mach. & equip=i Cereals Fertilizers M Pesticides
L Animal feed = Cotton Potatoes
Fig. 1. Value of potential selected Florida exports to Cuba based on recent Cuban imports.




Florida could be competing for a market larger than the one
described for several reasons. First, the list of potential imports did not include machinery, equipment, and other inputs that can be
used in both the agricultural and industrial sectors. Second, current food imports are based on Cuba's rationing system and increases in food consumption are expected once rationing is
abolished. Third, most machinery and equipment imported by Cuba from previous trading partners are becoming obsolete and are lacking spare parts, thus new replacement purchases would be
expected. Finally, fertilizer and pesticide imports should increase dramatically in a revitalized agricultural sector.
Because of its geographical proximity, which translates in lower transportation costs and other advantages, Florida will be in a better position than other areas of the United States and other countries to capture a large share of the Cuban market. Although
potential benefits would be spread throughout the entire State, the primary beneficiaries of most field crop exports would be the small farmers located in Florida's northern and northwestern regions.
SECTION III: JUSTIFICATION FOR FURTHER RESEARCH
The material in this section is not complete by any means. The news and events covered are just a few examples, selected from a
large amount of reference material in the authors' files, that show the degree of interest on the issue of U.S.-Cuba trade relations.
Although some references from other areas of the United States have been included, the material is largely composed of news in the Florida press. Rather than engaging in a lengthy analysis of the 28




news media coverage, the articles are only briefly described, and
professional association activities, events, and studies are given more emphasis because of their relevance to this project.
The Interest in U.S.-Cuba Trade
The Late 1970s
Negotiations and agreements signed by the Cuban Government and the Carter Administration nearly brought about resumption of full
diplomatic and commercial relations between the two countries. However, the issue of the presence of Cuban troops in Angola stalled the talks.
The early enthusiasm shown by the American business community, however, did not disappear. At the height of that discussion, about 50 companies attended a New York meeting on "Trade with Cuba" sponsored by the American Management Association on February 11, 1976. More companies gathered at another meeting sponsored by Business International in New York on April 28, 1976, entitled "Doing Business with Cuba" (Jones, 1976)."
In summarizing what was learned from the visit of 52 Minnesota businessmen to Cuba, Business Latin America (1977) pointed out the areas in which the Cubans had demonstrated the most interest and their way of conducting business, but also the lack of a consensus on the part of the U.S. business community regarding the issue of
1OIn the same publication, Jones (1976) summarized the U.S. trade loss resulting from the embargo, the Cuban position, the interest in some U.S. business circles in trading with Cuba, and
the impediments emanating from both U.S. legislation and claims against Cuba from the expropriation of U.S. assets in 1960.
29




compensation for assets taken over by the Cuban government in 1960.
Contacts with the island continued." Representative Richard Kelly (R-FL) visited Cuba with a delegation of 26 Florida newsmen and businessmen, which included citrus and sugar producers, at the end of November of 1977. The trip was given extensive coverage in the Florida press because of the red-carpet treatment given by the Cuban government to the Floridians and a debate between Rep. Kelly and Castro's oldest brother Ram6n at the dairy farm managed by the latter (See, for example, Page 1977b, 1977c).
Although the Floridians were given assurances that Cuban citrus and sugar exports were no threats to Florida, three members of the delegation expressed opposing views when reporting on their visit to Florida citrus growers and processors (Citrus & Vegetable
Magazine, 1978). The same concerns were voiced by a sugar executive when reporting his trip findings to a group of Florida sugar producers, processors and technologists (Fairbanks, 1978).
The U.S.-Cuba trade issue continued to be discussed throughout 1978 and early 1979 with articles ranging from an imminent outcome
in U.S.-Cuba negotiations (UPI, 1978), the expansion of business contacts with the island (New York Times, 1978), the planning of more trips to Cuba (AP, 1978; Flores, 1979), the opposition of some Florida producers to the lifting of the embargo (UPI, 1979), and
reassurances from Cuban officials about their intentions of playing
"It is important to point out that, during this time period,
the Cuban government was also inviting academics and other scientists to visit Cuba. For example, Hannon (1978) reported on his visit to the citrus growing areas.
30




on a leveled field (Lezcano, 1979).
The talks between the Carter administration and the Cuban
government were interrupted and the issue of trade relations
between the two countries faded away for several years.
The Present
Interest in the issue resurfaced in the late 1980s. Perhaps as
the result of the collapse of socialism in Eastern European
countries and the Soviet Union, with its tremendous implications
for the Cuban economy, the interest in Cuba in professional and
news media circles became stronger than ten years before.
In professional circles12
Interest in the subject of the likely changes that may be
forthcoming in Cuba has reached professional and academic circles
12U.S. academics have had a long record of activities that show their interest in Cuba. The Latin American Studies Association (LASA) has a "Task Force on Scholarly Relations with Cuba". A few
of the formal academic exchange agreements between American and Cuban institutions of higher learning include: The Smithsonian and the Cuban Academy of Sciences since 1979; the Johns Hopkins University School of Advanced International Studies and the University of Havana since 1980; the University of Pittsburgh and the University of Havana since 1985; LASA and several Cuban
institutions; the Massachusetts College of Art in Boston and Cuba's Instituto Superior de Arte in 1985 in addition to several exchanges previously conducted; and the North American-Cuban Scientific
Exchange between Brandeis University and Boston University with the Cuban Academy of Sciences since 1982. Other U.S. institutions that have had ad hoc exchanges without signing formal agreements
include: Harvard University, Columbia University, The American University, The Center for Cuban Studies in New York, Hunter College, Brown University, and the State University of New York at Old Westbury (Smith, 1986). After 1986, additional formal academic exchange agreements and ad hoc exchanges between these and other
American and Cuban institutions of higher learning have taken place.
31




in the United States and other countries. The following are just a few of the organizations established and events that have taken place in anticipation of those changes. Events and organizations of a political nature have been deliberately excluded.
The Association for the Study of the Cuban Economy (ASCE) was incorporated in Maryland on August 7, 1990. It was officially affiliated with the American Economic Association on December 29, 1990. Mainly composed of, but not restricted to, Cuban American economists, its membership has risen to 130 individuals in 13 states of the United States and 12 other countries.13
The main objectives of ASCE are to promote interest in the study of the Cuban economy and economic scholarship by Cuban Americans. In addition to special sessions within other professional organizations, and other events, ASCE has already held two annual meetings. The first took place at Florida International University (FIU) on August 15-17, 1991, and the proceedings were published under the title Cuba in Transition (1991). The second annual meeting was also held at FIU, on August 13-15, 1992, and its proceedings are in the process of being published.
The Fundaci6n Sociedad Econ6mica de Amigos del Pais (The Economic Society of Friends of the Country) was established in
13Those interested in becoming more familiar with ASCE's activities should write to: The Association for the Study of the Cuban Economy, c/o Armando Lago, 8225 Gainsborough Court West, Potomac, Maryland 20854.
32




London as a non-profit organization in early 1991.14 Following the path of economic scholarship of the first society founded in Spain in 1765, and in Cuba in 1787, its main objectives are to encourage the research and analysis of economic policies that will aid, speed and ease Cuba's transition to a market economy; to circulate work conducted by other groups focusing on the Cuban situation; and to publish and distribute clear and simply written studies on specific Cuban themes.
This society has focused on the dissemination of material related to transition policies in the Eastern European countries and the former Soviet Union as well as specific studies on the Cuban economy. The society also sponsored a meeting of experts on Cuban sugar held in the Dominican Republic on February 4-6, 1992, to discuss the future of the Cuban sugar industry.
The Sociedad Econ6mica de Reconstrucci6n Cubana (SERCA) (The Economic Society for Cuban Reconstruction) was established in Long Beach, California.15 Mainly aimed at the Cuban business community in southern California, this non-political organization gathers and disseminates information on current economic developments in Cuba and efforts that may be undertaken towards Cuba's reconstruction. It also publishes a monthly newsletter, "The Cuban Information Network," with information about national and international
14Those interested in the publications of this association should write to: La Sociedad Econ6mica, c/o J.P. Rathbone, P.O. Box 927, London SWIP 2ND, England.
15Those interested in the activities of SERCA should write to: Peter Sanchez, SERCA, One World Trade Center, Suite 800, Long Beach, CA 90831.
33




developments concerning Cuba and their impact on potential
investors.
The Cuban American Research Group, Inc. (CARG), a nonpolitical not-for-profit organization, has been formed by a group of Cuban American professionals.16 Its objective is to join recognized specialists from different walks of life in an effort to promote a better Cuba. It will publish a newsletter with analysis of current developments in Cuba and internationally which may in some manner assist or affect Cuba's transition to a market economy.
A monthly, non-political, international-oriented business newsletter entitled "The Cuba Report" is being published to provide information on the domestic economic developments in Cuba and other related topics.17 "Cuba Survey" is another monthly newsletter that contains similar information with an additional annual report analyzing development prospects in Cuba's key industry sectors.8
Two periodicals are being published by the Washington law firm of Shaw, Pittman, Potts & Trowbridge. The first, "Free Market Cuba Business Journal," analyzes a wide range of topics relating to Cuba. The second, "LegiWatch Cuba," reports on U.S. government
16Information about CARG may be requested from: Cuban American Research Group, Inc., c/o Enrique Urizar, North-South Center, University of Miami, 1500 Monza Avenue, Coral Gables, FL 33146.
17For more information about this newsletter, contact: James D. Whisenand, Cuba Publications Group, 501 Brickell Key Drive, Suite 200, Miami, FL 33131.
"8More information about this newsletter can be obtained from: The Cuban American National Foundation, 1000 Thomas Jefferson Street, N.W., Suite 505, Washington, DC 20007.
34




actions that affect Cuba.19
The Cuban American National Foundation, The Center for Strategic and International Studies, The University of Miami
Institute f or Soviet and Eastern European Studies, and The USCanada Institute of the USSR joined in sponsoring a conference in
Miami on November 21-23, 1991. Numerous presentations were made under the general topic "Cuba's Economic Reconstruction: Lessons from the Former Soviet Block".
The Americas Society held a session entitled "Cuba at the Turning Point" in New York, on March 13, 1992. Several panels discussed Cuba's current situation and alternative scenarios for the future.
The Center for Latin American Studies at the University of Pittsburgh sponsored a conference in April 27-28, 1992, entitled
"Cuba in the Post Cold War Era". Most of the papers presented dealt with the repercussions of the changes in Eastern Europe and the problems of transition to a market economy in Cuba.
The Woodrow Wilson International Center for Scholars held a
symposium in Washington, DC, on April 29, 1992. Several papers were presented under the general theme "The Impact of Soviet and East European Reforms on Cuba and Their Consequences for U.S. Foreign Policy in Latin America".
The Florida Bar, through its International Law Section, has
established a Cuban Affairs Committee. In conjunction with the
19Additional information on these publications can be requested from: Matias F. Travieso-Diaz, Shaw, Pittman, Potts & Trowbridge, 2300 N Street, N.W., Washington, DC 20037-1128.
35




University of Miami and the Greater Miami Chamber of Commerce, the
Committee held a conference in Miami, on May 7-8, 1992. The general theme was "Post-Castro Cuba: Dealing with the Transition -Legal, commercial and Economic Issues".
The Caribbean Basin Leadership Forum held a conference in Miami on December 3, 1992. One of the workshops, entitled "Cuba", dealt with the impact of a free Cuba on key sectors in Caribbean countries and on trade and investment in the region, among other issues .20 Another workshop, entitled "Sugar", explored the future of the Cuban sugar industry in the Caribbean Basin.
The Cuban Banking Study Group was established by a small group of Cuban American bankers in December 1992. The objectives include
to study the history of the Cuban banking sector and develop recommendations for its future (Reyes, 1993).11
The Greater Miami Chamber of Commerce held a conference
entitled "Post Castro Miami -The Impact on Miami of a Free Cuba', in Miami on January 8-9, 1993. The program was divided into six sections: overview; federal agencies; state and local governments
agencies; finance and investments; local (Miami) infrastructure; and industry impact.
Another conference, "Cuba's Economic Reconstruction", has been 200ne of the presentations, based on a study by the Center for Strategic and International Studies, predicted that Cuba's foreign
exchange earnings would jump from an estimated $2.7 billion in 1992 to $9.7 billion within five years after implementing a free market economy and trading with the United States (Bohning, 1992).
21The same article includes statements made by banking experts on the possibilities of international lending for Cuba's reconstruction.
36




announced in Miami for February 1993.
The College of Law's Center for Governmental Responsibility and the Center for Latin American Studies at the University of Florida are working with the International Section of the Florida Bar on a r esearch project on property laws in Cuba entitled "Evaluation of Property Claims as Cuba Reintegrates into the International Community" *22
The Cuban Research Institute at Florida International
University is conducting a study entitled "Cuba in Transition" with funding from the U.S. Department of State. The final product, to be delivered in June of 1993, will contain alternative policy options
that would help the U.S. government in delineating its policy toward Cuba. In addition to political and other economic topics,
the report will contain a section on legal and commercial issues in the business environment.
In the news media
Even before the events in Eastern Europe, attention was again focused on the issue of U.S. -Cuba trade relations. The Washington
Riceletter (1987) analyzed the Bill introduced by Rep. B. Alexander (D-AR) that would lift the Cuban embargo. The article included quotes from Rep. Alexander and comments on the obstacles for that
Bill to be signed into law. In the state of Tennessee, Rice Farming Magazine (1987) reported the results of a survey in which most of
22Additional information on this project can be requested from: Jon Mills, Director, Center for Governmental Responsibility, College of Law, 230 Bruton-Geer, University of Florida, Gainesville, FL 32611-2016.
37




Arkansas rice growers were in favor of Alexander's Bill. An
editorial in The Palm Beach Post (1987) also called for the lifting of the embargo.
The issue of the impact of resumption of trade relations with
Cuba on Florida's sugar industry also received attention. Schuchman (1990a) presented several points of view. A Florida sugar executive stated that importing large amounts of Cuban sugar could kill Florida's $1.6 billion sugar industry. The U.S. Trade Representative confirmed that Cuba would get a quota if the trade embargo were lifted. The head of the sweetener section of the USDA
Economic Research Service believed that the restoration of the Cuban quota would have no effect on the domestic industry because
the U.S. government would just take away some of the quota from other countries to give Cuba its share. Marquis (1992) interviewed experts with a wide array of opinions on the issue of potential Cuban sugar exports to the United States. They included Cuban American exiles, representatives of the Florida industry, policy experts, and consumer advocates.
Discussions outlining the opportunities for trade once the embargo is lifted have filled pages of newspapers throughout the United States. 23 Chardy (1991) summarized the contents of the report published by the Greater Miami Chamber of Commerce (New
23The interest has also reached private organizations such as The Heritage Foundation. For example, Johnson (1992) gave an exhaustive analysis of current and future prospects for the Cuban
economy, including investment opportunities. one of his U.S. policy recommendations included the restoration of the Cuban sugar quota to near its 1958 level.
38




Opportunities Committee, 1991) describing trade opportunities for southern Florida. Schuchman (1990b) and Chardy and Alvarez (1991)
contain several estimates of the trade impact f rom a variety of people interviewed as well as the reasons why southern Floridians would reap most of the benefits. Friedland (1991), however, described the plans of Cuban Americans living in the Jacksonville
area and the port authorities to take away some of the future business from southern Florida. Bussey (1992b) reported the results of a survey conducted by the Cuba Trade Committee of the World Trade Center among 1,000 U.S. private companies. Some of the results included: (a) while 66% said they would conduct other business in the island, a higher percentage of the firms would prefer trading with (88%) rather than investing in (63%) Cuba; (b)
about 53% would renew business with Cuba within the first year, 26.5% in one to two years, and 3% would wait three years or more;
(c) the lifting of the embargo was only one condition since other political and economic considerations were given more importance.
In summary, the enthusiasm emanating from the possibilities of U.S.-Cuba trade has ranged from the nostalgia of the mythic Cuban cigar revived by U.S. smokers (Willwerth, 1992), to the more
mundane profit expectations of a Cuban exile planning to export Cuban bananas to the United States (Reyes, 1992a) Although listing potential areas for future business with the island, Billitteri (1990) reasoned that the enthusiasm was not well founded and that it may take a while for those plans to materialize. Nevertheless, some traders and investors appear to be ready. Corzo (1992)
39




reported the creation of a $3 million fund called "Fund New Cuba 1" managed in Miami by Cuba/USA Enterprises, Inc. The group promises
high rates of return from the selling of machinery, equipment, technology and managerial skills to Cuba once the embargo is lifted. The author recalls the registration of two previous mutual funds ("Fund Cuba" and "First Cuba Fund") in October of 1991 for similar purposes.
Perhaps the most divisive issue among potential traders and investors has been not "what" but "when" to trade with and invest in Cuba.2 Main (1991) contains excerpts from an interview with the
president of the Cuban Chamber of Commerce (a group supported by State enterprises and a few joint ventures) on the movement towards a free market with companies not subject to central control.
Alfonso (1992a) described the study conducted by Business International Corporation of New York, a subsidiary of The Economist Group, on current foreign investment in Cuba and plans
for the future. The study, entitled "Developing Business Strategies for Cuba," discussed current investments by foreign firms and trade by U.S. subsidiaries in foreign countries.
Participants in a business conference, held in Miami on May
19, 1992, under the title "A Global Perspective of Foreign Investment in Cuba" reported by Bussey (1992a) and Reyes (1992b),
24Although the Cuban legislation allowing foreign participation in joint ventures dates from 1982, it did not gain momentum until recent years when the need for foreign exchange placed additional pressure on Cuba's economy.
40




deviated from the original theme to discuss whether American business was losing ground to investors from other countries who are not barred from dealing with Cuba.
The debate on the issue reached to its highest with the announcement that the British firm Euromoney and the Cuban government would co-sponsor a three-day meeting in Cancun, Mexico,
and Havana, in early June of 1992, to discuss trading and investing opportunities in Cuba (Alfonso, 1992b) Statements made by Cuban officials and conference participants (including several potential investors from the United States) and a detailed account of activities can be found in Whitefield (1992).
The Lack of quantitative Evidence
Despite the general interest on the subject by the media, very few studies are found in the professional literature. Still more
important, there is not one single quantitative study addressing the potential impact of U.S.-Cuba trade on Florida's agricultural
economy. The following chronological review of the literature testifies to that fact and reinforces the need for an objective research effort to update results and eliminate bias and anecdotal accounts not supported by analysis of hard data.
Bates (1968) estimated the effects of the embargo on Cuban sugar on the United States at the time of his writing to be: (a) an increase of 10.7% in U.S. sugar production; (b) a shift in foreign
sugar supply sources from nearby to more distant countries; and (c) an increase of $2.50 per metric ton in the cost of sugar (p. 534).
Results of his modeling efforts also showed what he calls the 41




inef f iciencies of the U. S. sugar program in a world context. Examples of these inefficiencies include: (a) the estimated cost of sugar in the United States under the Sugar Program in 1970,
including Cuba as a source, would have been 38.5% higher than under a purely competitive scenario; (b) with the Cuban embargo still in
effect in 1970, the cost of sugar under the Sugar Program would exceed the cost of a competitive model excluding Cuba by 34.3%; (c) domestic production of sugar in 1970 under legislation at that time would have been 4,319,132 metric tons, which was considerably in excess of the production estimate of 1,686,000 metric tons under
the competitive model which included Cuba and 1,866,000 metric tons under the competitive model which excluded Cuba; and (d) the total cost per metric ton of sugar in the United States in 1970, under
the Sugar Program, would have been $148.67 if Cuba was included and $147.39 if Cuba was excluded, compared to costs of $102.94 and $105.44 in the competitive models including and excluding Cuba, respectively (pp. 534-535).
Among other issues, Gemmill (1977) examined the trade impact
of the U.S. embargo on Cuban sugar simulating the world sugar economy with a spatial-equilibrium model in which various trade barriers were imposed (p. 609). His work attempted to overcome several limitations imposed in Bates' model. His results included:
(a) A switch to free trade by the United States alone implied a 24% decline in U.S. production but, if Cuban sugar was excluded, the
decline was limited to 17% (p. 612); (b) Florida I s share of the decline in U.S. production would be in the order of 48% but, under 42




the Sugar Program, the discrimination against Cuban sugar reduced the contraction in Florida to 36% (pp. 612-613);"5 (c) international free trade and unilateral free trade by the United States would result in Cuba exporting substantial amounts of sugar
to the United States because "Cuba is the natural supplier for the U.S. market" (p. 613); (d) Cuba was also likely to gain
substantially from different policy scenarios, including the end of the embargo, because existing Cuban markets were more distant than the United States (pp. 613-615); (e) it was not only necessary to
bar Cuban exports to the United States in computing some of the equilibria but also to prevent the "laundering" of Cuban sugar via the Dominican Republic, Mexico, and Colombia (p. 615); (f) the pattern of trade in sugar is economically inefficient. For example, the U.S. price of excluding Cuban sugar was estimated to be an additional 0.5(, per pound, equivalent to 5%, whereas the effect in Cuba was a loss of 2.04(', per pound, equivalent to 22%. Although Bates had estimated a 2% premium in U.S. price for 1959 if Cuban sugar was excluded, but less than 1% decline in the Cuban price, Gemmill's results suggested "that the U.S. ability to 'hurt' Cuba (was] much larger than previously recognized" (p. 615).
The expiration of the Sugar Act in 1974, and the possible lifting of the U.S. embargo on Cuban sugar imports into the United
25Although Geinmill acknowledged that these specific results may seem unrealistically high, he explained that they refer to the long run in which all inputs (including capital in cane and mills) are variable (pp. 612-613). However, they are also based on his computed supply elasticities for Florida, which have been recently challenged by Advincula et al. (1992).
43




States, led Roy and Jordan (1977) to analyze the import-export status of raw sugar trade throughout the world assuming least-cost
transport arrangements. Different world trade patterns resulted from their models, which also included and excluded U.S. imports of Cuban sugar. As their final conclusion the authors believed that
"permitting Cuban sugar into the U.S. would help restore more economical trading patterns but would not substantially affect or lower the cost of sugar to U.S. consumers" (p. 8).
Based on the possibility of a resumption of trade relations
between Cuba and the United States under the Carter Administration, Betancourt wrote two reports on the nature of the potential
trade.26 The first (1977a) presented an overview of the Cuban economy and its foreign trade, marketing possibilities for U.S. exports and Cuban imports, and the main obstacles to trade.
The second report (1977b) addressed the potential impact of that trade on Florida's employment and income, including possible competition from Cuban exports for some industries in the state.
The list of potential Florida benefits included exports of farm products, raw materials, manufactured goods, and transportation through the use of Florida seaports and airports for transshipment from and to Cuba.
The final section of the second report examined the potential
26These reports were carried by international news agencies and prompted a heated debate in the media throughout the State of Florida. Producer groups were mainly concerned about the
implications of the statements concerning sugar and citrus. See, for example, Packett (1977); Page (1977a); The Gainesville Sun (1977); UPI (1977).
44




impact on Florida's sugar and citrus industries, concerning sugar, Betancourt concluded that the U.S. sugar industry was not expected to be adversely affected by imports of Cuban sugar for the following reasons: (a) Under the quota system, Cuba would be competing with other foreign sources of supply and not with
domestic producers; (b) while the main market f or Florida sugar was in the Southeast region, where imported sugar accounted f or a small component, Cuban raw sugar was historically refined and marketed in the Northeast; and (c) future expansion of Florida sugarcane acreage was severely limited for various reasons.
Concerning citrus, Betancourt also minimized the potential negative impact of Cuban imports for the following reasons: (a) Rough estimates made at that time by a University of Florida agricultural economist showed that, if Cuba exported one million boxes of fresh fruit to the United States, grower returns would decline by 4 to 4.5 cents per box, while a 1980 Cuban production of 9 million boxes (with 75% exported to the United States or
displacing U.S. citrus exports abroad) would decrease prices by 21 to 23 cents per box; (b) while most of the increased Cuban
production would go to Europe and the socialist block and would probably affect U.S. exports, he argued that this fact had to be considered independent of the Cuban embargo; and (c) the levels of protection on citrus imports were already high.
Zimbalist (1978) described Cuba's trading patterns after the
1959 revolution and the trade developments with the West at the time of his writing "with the intention of shedding some light on 45




the prospects for and the impact of U.S.-Cuban trade" (p. 51). He discussed Cuba's trading patterns, obstacles to normalized relations, and steps that Cuba was expected to take before being
granted most f avored nation status. However, his discussion of potential Cuban exports to and imports from the United States was very shallow, when compared with Betancourt's more thorough description, and the new insights about potential economic impacts were based on different assumptions about shifting trade patterns
at that time. Trade volume, according to Zimbalist, "would not approach pre-Revolution levels but it could be sizeable
nonetheless" (p. 53) Although "some mutual economic benefits would be derived" he gave more weight to the "ending [of ] nearly two decades of discriminatory and inconsistent U.S. foreign policy toward Cuba" (p. 54).
The main objective of a paper by Alvarez (1978) was to show
the influence of politics versus economics in U.S. -Cuba sugar trade relations. Although it contained a description of how the embargo took place, a summary of some of the resulting economic impacts on both Cuba and the United States previously estimated, and a
discussion of the problems posed by a possible resumption of trade, it did not include the estimation of any potential economic impacts on the Florida sugar industry. on the contrary, the paper ended with a call for further research that would lead to "appropriate measures to avoid unfair competition [to] help minimize the influence of politics in the Politics vs. Economics dilemma" (p. 13).
46




Concerns about the potential re-establishment of trade relations between Cuba and the United States, and the exclusion of Cuban supplies in previous studies, led Zepp (1979) to analyze the potential impact of new sources of supplies of fresh tomatoes and cucumbers from Cuba or other Caribbean countries. A spatial price and quantity equilibrium model, cast in the reactive programming framework, was developed for the winter fresh tomato and cucumber
sectors. Under his model, the assumption of three levels of new supplies (average imports from Cuba prior to 1961, and 50 and 200% of pre-1961 volumes) ,produced the following estimated impacts: (a) the effects would be greater on Mexico than on Florida in terms of
reduced volumes and values, because the monthly pattern of new supplies coincided rather closely with the pattern of Mexican imports (pp. 116-117); (b) with few exceptions, the price effects would tend to be the same over all demand areas (p. 117); and (c)
there would be significant increases in the consumption of both winter tomatoes and cucumbers in the United States (p. 117). However, Florida producers shipping during the mid-winter months would be more affected than the majority who ship throughout the season with their largest volume of shipping taking place before
and after mid-season when the bulk of new imports would be expected to arrive (p. 118).
Several years elapsed before new studies began to appear for different reasons. In the late 1980s, the Cuban Studies Program of
the Johns Hopkins University's School of Advanced International Studies published a comprehensive study on the opportunities for
47




U. S.-Cuban trade (1988) Based on of ficial U. S. and Cuban data, and numerous trips to Cuba, the authors' main objectives were to focus
"on the ef ficacy of the U. S. embargo, on the cost to the United States of maintaining it, and on the gains that might result from its lifting" (p. 1) .
After describing Cuba's changing trading system and patterns
(with both socialist and non-socialist nations and the recent trade with overseas subsidiaries of U.S. corporations), and quantifying
the cost of the U.S. embargo on U.S. firms, the study looked at the potential range and scope of future trade between the United States and Cuba. Several U.S. trading shares in the long list of exports and imports were discussed based on estimates made by Cuban
officials.27 Three groups of commodities in their list of potential U.S. imports from Cuba are of interest to Florida: fruits and vegetables, seafood, and sugar. The following unqualified
statements are worth ,quoting because of their importance to Florida.
On fruits and vegetables:
U.S. citrus importers currently import 200-250,000 tons of concentrate from Brazil per year. Cuban traders estimate that U.S. importers of frozen concentrate could save $150 per ton of concentrate if they bought from Cuba. This is an aggregate
savings of $34 million per year (p. 17).
Cuba currently does not export a significant amount of fresh
fruits and vegetables since these products do not travel well over the long distances to Europe and Asia. If the embargo were lifted, however, Cuban officials said that they would be willing to devote more land to citrus production aimed specifically at the U.S. market. Cubans estimate that fruit
27Notice that the study was conducted before the changes in Eastern Europe and the collapse of the Soviet Union.
48




and vegetable production yields 2 1/2 times what sugar yields
in hard currency per hectare (p. 17).
For U.S. importers, Cuba could essentially be an expanded East Coast supplier of such products as tomatoes, avocados, lettuce, green peppers, and sweet potatoes. Since Cuba's season begins two months earlier, it would allow U.S.
suppliers to offer an additional two months a year to U.S.
consumers (p. 17).
On seafood:
Cuba is one of the world's largest suppliers of high-quality
lobster and shrimp. In exchange for valuable foreign currency, the Cuban empress CARIBEX exports 100% of its products to Western markets. Cuba currently sells about 12,000 tons of lobster, 5,000 tons of shrimp, 1,000 tons of tuna and other
quantities of hake, mackerel and red fish (p. 17).
With demand for seafood increasing in the country, the U.S.
could absorb whatever quantity Cuba could provide to the U.S.
Additional imports would serve to reduce the price for
consumers and benefit U.S. importers (p. 17).
on sugar:
Cuban sugar dealers predict the U.S. will import no cane sugar within the next five years. U.S. quotas have dramatically decreased in the last few years because of the increase in the use of other sweeteners. U.S. refiners now refine raw sugar
for export (p. 18).
U.S. refiners buy raw sugar from domestic suppliers in Florida, Louisiana and Texas but the amount isn't sufficient to enable them to operate their plants at full capacity (p.
18).
Cuban supplies would represent a marked savings in freight over current foreign suppliers who currently make up this shortfall. Freight from present Far Eastern suppliers to North America costs about $35 per ton to ship. Freight costs to transport Cuban raw sugar to New York is $12 per ton, which is a savings of $23 per ton or more than one cent per pound (p.
18).
Cuba could expect to be able to make available to U.S.
refiners about 500,000 tons per year, which would save the
U.S. refiners about $6.5 million (p. 18).
Ten years ago, sugar trade was a highly charged political issue because sugar was tied up by U.S. quotas and because sugar involved the interests not only of domestic U.S.
49




industry but of foreign governments as well. Because of the competing political forces, it would have been highly contentious for Cuban sugar to enter the U.S. in the 1970s.
Settlement of this issue could have held up other trading possibilities. This is no longer the case. Sugar may have been effectively removed as a political issue and in fact probably represents a product that would benefit the U.S. industry (p.
18).
A similar study, aimed at quantifying the economic impact of the Cuban embargo on selected agricultural commodities, and on the U.S. and Arkansas economies, was conducted by Kaminarides (1988). The commodities selected included corn, cotton, potatoes, rice (of
special interest to Arkansas) wheat, wheat flour, dry milk, poultry, and f ish and f ish products. Inf ormation came f rom. U. S. and Cuban statistics and interviews with Cuban officials. Income and employment ef fects were also computed. In terms of future trade between the two countries, Cuban officials expressed concern about
their contractual obligations with trading partners in the mid1980s, their currency problems, and the benefits of initial credit
being extended by the United States to expedite and facilitate trade.
The New Opportunities Committee of the Greater Miami Chamber of Commerce (1991) published a report on the trade impact that a
free Cuba would have on Dade County. Although a good source of background materials f or those planning to conduct future business in and with Cuba, the study lacked a methodology f or estimating economic impacts. It described potential areas of interest to investors and traders by portraying the current status of Cuban sectors such as industry, agriculture, health care, housing and real estate, biotechnology, transportation, tourism, and others.
50




The f act that, second to sugar, rice is the most tradedistorted world agricultural market led Cramer et al. (1991) to simulate total and partial trade liberalization on both major and
minor world rice market participants by utilizing a general spatial equilibrium model (p. iii) Cuba was included in the dif f erentiated model of low-quality indica rice and in the three versions of the homogeneous rice model. The four scenarios analyzed included: (a)
The world rice market under 1986-87 market conditions; (b) total trade liberalization of world rice market; (c) total trade liberalization but with U.S. producer subsidies included; and (d)
trade liberalization of only industrialized market economies. It is interesting to note that, under the different scenarios and models, the range of Cuban rice imports fell between 168,000 and 225,000
metric tons, which is very close to their current import level. Price figures varied widely depending on the main exporting countries under each scenario.
Finally, Rodriguez (1992), observing "a debate building up as to what impact trade with Cuba and a revitalization of its winter vegetable industry would have on the U.S. and Mexican agricultural
industries" (p. 48), wrote a few personal observations on that subject. After describing the current status of Cuba's agricultural sector, and what will be needed to revitalize its winter vegetable
industry, Rodriguez stated that Florida growers could benefit in two ways: (a) by having a hand in the Cuban deal, they could influence planting dates and market windows so that they would not
conflict with their Florida operations and disrupt the orderly
51




marketing system; and (b) by transferring technology to areas in Cuba similar to Florida's and adapting them to Cuban cultural practices. He feels that "Florida growers need not fear the Cuban winter vegetable industry" since it "will not have any major cost
advantage over Florida" and it "may complement the Florida industry in times of short supplies caused by freezes and other natural disasters" (p. 48). The major losers, according to Rodriguez, would be the Mexican growers who would be pushed back only to the western markets because of freight costs.
SUMMARY AND CONCLUSIONS
The commodity reports summarized in the first section of this publication on potential Cuban exports to the United States imply potential costs for the citrus, sugar, vegetable and seafood industries in Florida. The commodity reports on potential Florida exports to Cuba, on the other hand, reveal trade opportunities of a large magnitude.
The extensive media coverage summarized in this report, although full of conflicting opinions and expectations, reflects the long-standing interest of different sectors of our society in the subject of U.S.-Cuba trade. The interest in professional and academic circles in the likely changes that may be forthcoming in Cuba has also been documented.
The review of the professional literature reinforces the need
for further research on the subject of U.S.-Cuba trade. The general reason is the lack of comprehensive analytical evidence of the
52




likely impact of such trade on most sectors of Florida's agricultural economy. Some of the specific reasons include:
1. The existence of numerous contradictory statements,
assumptions and findings among the different studies.
2. Some of the reported results only emphasize benefits to
U.S. consumers without considering potential costs to Florida producers and processors. Furthermore, no studies have been conducted on the potential gains to be realized by large groups of Florida producers, processors, and
distributors.
3. All of the assumptions about Cuba's trading patterns were
made bef ore the changes that took place in the Eastern
European countries and the former Soviet Union.
4. Some of the studies identify potential implications which
show a complete lack of knowledge about Florida's
agricultural economy.
5. All of the studies are outdated because of new trading
patterns, in both Cuba and the United States, as well as
structural changes in U.S. agricultural industries; and
6. Some of the publications are based on anecdotal accounts
which may reflect the authors' personal biases.
These observations are not intended to convey the idea that the previous studies have no useful value at present. On the contrary, they comprise a good set of materials that can be used as a starting point for the testing of different hypotheses. That will be the main objective of the next phase of this research project.
53




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Willwerth, James. "What This Country Needs is a Good $5 Cigar,"
Time 139:19 (May 11, 1992), p. 56.
Zepp, G.A. "Potential Effects of New Caribbean-Area Winter Fresh
Tomato and Cucumber Supplies on the U.S. Industry," Southern Journal of Agricultural Economics 11:1 (July 1979), pp. 113118.
Zimbalist, Andrew. "The Prospects for U.S.-Cuba Trade," Challenge
(January-February 1978), pp. 51-54.
59




APPENDIX 1'
THE CURRENT DEBATE ON U.S.-CUBA RELATIONS
For over 30 years, Cuba was a focal point in the cold war between the United States and the Soviet Union. Although the end of the cold war and the demise of the Soviet Union have not changed the status of U.S.-Cuba relations, they have added intensity to a
long-lasting debate. Arguments from both sides (negotiations or continued confrontation) have been selected from recent statements appearing in newspapers; they are not intended to convey support for particular individuals or organizations.
Maintain the Current Policy of Confrontation
In a debate that took place at the beginning of 1992, a University of Miami professor explained the economic and political
reasons that support the position that the United States should continue its policy of isolating Cuba. On the economic side, he stated:
From the U.S. point of view, the reestablishment of commercial ties with Cuba would be at best problematic. Cuba could provide the U.S. market with products that are of little value and in abundant supply. moreover, given the opportunity, Cuba would dump its main products -citrus, vegetables, shellfish, tobacco, rum and nickel- at below-market prices, thus competing unfairly with other foreign exporters and domestic
producers. U.S.-Cuba trade would also create severe market distortions -in sugar and tourism, for example- in the already precarious Caribbean and Central American regional economy.
Some American firms would benefit from a resumed trading relationship, of course, but the overall U.S. economy would not be helped significantly. Cuba, unlike China, does not have the ability or resources to become an important potential 'The original version of this appendix appeared in Alvarez (1992a). It was slightly modified to fit the format of this paper and updated to reflect current U.S. legislation.
60




client (Suchlicki, 1992, p. 6C).
The political reasons were explained as follows:
The United States, then, faces a quandary. To lift the embargo and normalize relations with the Castro regime, thus ending the island's isolation, would benefit the United States little. It would, however, provide new life to Castro's revolution at a time when it is facing its most serious crisis. But to maintain the present policy, or even to tighten the embargo, may lead to continued deterioration on the island that could spark violence and unrest or, in the best of scenarios, a quick and bloodless end to the Castro regime.
Notwithstanding the risks, the United States should hold fast.
U.S. policy should aim at establishing a free and democratic Cuba. Appeasing a ruthless dictator will only prolong the
agony of the Cuban people (Suchlicki, 1992, p. 6C).
Supporters of this position also advocate tightening the U.S. embargo against Cuba. Senator Connie Mack (R-FL) sponsored
legislation to prohibit U.S. subsidiaries located in foreign countries from trading with Cuba (Mack, 1992). Rep. Robert
Torricelli (D-NJ) proposed cutting off U.S. aid to countries "that subsidize the Castro government" (Gehrke, 1992, p. 8A). The "Cuban Democracy Act of 1992," co-sponsored by Rep. Torricelli and Senator Graham (D-FL), was passed by Congress in late September of 1992. President Bush signed it into law in Miami on October 23, 1992. The bill had received the early support of President Bill Clinton.
Normalize Relations
Until recently, the main objective of most advocates of the position that the United States should normalize relations with Cuba was not a change in Cuba's government. However, the recent events in Eastern Europe and the former Soviet Union have led some to believe that normalizing relations with Cuba may be the appropriate U.S. policy to bring about a peaceful transition.
61




The Old Approach
Supporters of this position cite also political and economic arguments. The political reasons were stated in a conference held in Havana in early 1992, where representatives of Cuba, the United
States, and the f ormer Soviet Union analyzed the Cuban missile crisis of 1962. Former U.S. Secretary of Defense Robert McNamara
stated that the United States and Cuba are no longer a security threat and should take steps to improve relations and leave behind 30 years of fear and hostility. The Cubans agreed on the feasibility of an open dialogue on an equal basis but complained
about the U.S. economic embargo and the possibility of a U.S. aggression (El Nuevo Herald, January 13, 1992, p. 4A).
The economic argument involves not only the trade potential but also the possibility of joint ventures with Castro's Cuba. For
example, and related to Florida's commodities, Jenkins (1991) reported that a Canadian sugar company was planning a $50-$60 million investment in the Cuban industry, and the British trader E. D. & F. Man and the French trader Sucres et Denrees (Sucden) were also holding discussions. In addition to a Chilean company already involved in developing new markets for Cuban citrus (see Behr and Albrigo, 1991), the list also included Italian and British companies interested in investing in citrus and other fresh fruits
and vegetables, and the Italian company Fiat investing in the manufacturing of machinery and agricultural equipment. U.S.
businessmen are worried about other Western companies winning more contracts before the U.S. embargo is lifted.
62




Around 200 U.S. companies have been involved in licensed trade with Cuba after such prohibition was relaxed in the late 1970s during the period of attempted rapprochement. Recent legislation, however, banned such trade.
The New Approach
The new version of this position suggests that normalized relations would encourage a peaceful transition in Cuba. For
example, Jeff Bergner, a Georgetown University professor who was Republican staff director of the Senate Committee on Foreign Relations, wrote an article for The Washington Post that was reprinted in many newspapers throughout the United States.
According to Bergner, history has proved that, where contact between East and West was made and expanded, "we have seen the erosion of the tools by which communism maintains itself" as opposed to cases where isolation has prevailed (1992, p. 6C) In the case of Cuba he stated:
The United States has sent a long, steady signal of opposition to Fidel Castro. We should not waiver in opposing him now that the socialist world is collapsing. But let's begin at the same time to prepare for the new Cuba. Let's take active steps to
inundate the island with American goods and services, with American investment, with access to more and better
information, and -above all- with Americans (p. 6C).
After stating that his recommendation should not be taken as
an argument for a policy of gradualism, he explains why this position is likely to succeed:
Based upon many examples in the past several years, there is
no reason to suppose that a Marxist regime will be able to arrest the process of liberalization just enough to benefit and to preserve itself. There is every reason to suppose that
a policy of liberalization will hasten the happy day when Cuba 63




is freed of Castro's grip (p. 6C).
The Likely Outcome in the Short-Run
Alexander (1991) summarized the Bush Administration's position which seemed to indicate what could be expected during his last year in office. After stating that President Bush had little to gain politically from improving ties with Cuba, he enumerated Washington's four previous principal conditions for normalizing ties with Cuba, namely: (a) the removal of Cuban forces from African countries like Angola, where they were aiding the Sovietbacked socialist government; (b) an end to Cuban efforts to overthrow other governments in the Western Hemisphere; (c) reduced
Cuban ties to the Soviet Union; and (d) improved human rights conditions. Regardless of what one may think about the fulfillment of these conditions (Alexander stated that "even Cuban experts in the State Department privately admit that (they] have been met"), he added:
President Bush has erected three new formidable hurdles to normalization. In a March 1990 statement, Bush said Castro must shift to a market economy, reduce the size of his military and hold democratic, internationally supervised
elections (p. SA).
President Bush, in the words of some experts, "moved the goal posts". The original version of this Appendix stated that there was every reason to believe that they would remain there, at least until after the November elections. In fact they did. However, there is uncertainty about the U.S. policy towards Cuba under the
Clinton Administration. Although President Clinton was an early supporter of the Torricelli-Graham Bill, his emphasis on "change"
64




may include a re-evaluation of U.S. policy towards Cuba.
65




APPENDIX 2
THE FLORIDA-CUBA TRADE PROJECT AT THE UNIVERSITY OF FLORIDA Title
Challenges and Opportunities for Florida Agriculture from Potential Changes in Trade Relations with Cuba Objectives
Phase I:
To conduct preliminary studies on Cuban agricultural commodities relevant to Florida that might be involved in future trade (both exports and imports) with the United States. Phase II:
(1) To use the information gathered in Phase I, and additional
data, to:
(a) quantify the potential economic impact (both benefits and
costs) of U.S.-Cuba trade on Florida's agricultural
economy; and
(b) estimate the potential implications of the North America
Free Trade Agreement for U.S.-Cuba trade.
(2) To develop a comprehensive bibliography on Cuban agriculture
to support current and future research efforts; and
(3) To conduct a series of Extension educational programs to
communicate the results of the study to the agricultural
community, policy makers, consumers, and the media.
Funding Institution (Phase II)
The John D. and Catherine T. MacArthur Foundation Chicago, Illinois
Project Management
International Agricultural Trade and Policy Center
Food and Resource Economics Department
Institute of Food and Agricultural Sciences University of Florida, Gainesville, Florida 66




University of Florida Faculty Participants
Phase I
Dr. Charles M. Adams, Associate Professor, Food and Resource Economics Department (Fisheries).
Dr. Jose Alvarez, Professor and Extension Economist, Everglades Research and Education Center (Sugar and potential Florida exports).
Dr. Chris 0. Andrew, Professor, Food and Resource Economics Department (Agricultural trade and policy).
Dr. Robert M. Behr, Adjunct Associate Professor, Food and Resource Economics Department, and Economic Research Director, Florida Department of Citrus (Citrus).
Dr. Lawrence W. Libby, Professor and Chair, Food and Resource Economics Department (Administration).
Mr. William A. Messina, Jr., Executive Coordinator, International Agricultural Trade and Policy Center, Food and Resource Economics Department (Project coordinator, potential Florida exports, and international trade policy).
Dr. John J. VanSickle, Professor, Food and Resource Economics Department (Vegetables).
Phase II
In addition to the previous individuals:
Ms. Anne E. Moseley, Food and Resource Economics Department (Project management).
Dr. W. Steven Otwell, Professor, Department of Food Science and Human Nutrition (Fisheries technology).
Dr. James L. Seale, Jr., Associate Professor, Food and Resource Economics Department (International trade policy).
Dr. Thomas H. Spreen, Professor, Food and Resource Economics Department (International trade modeling).
Dr. Eric M. Thunberg, Assistant Professor, Food and Resource Economics Department (Fisheries).
other faculty members in the Food and Resource Economics Department and the Center for Latin American Studies.
67




Publications Available From Phase I
Potential Florida Imports
Behr, Robert M. and Gene Albrigo. Cuba's Citrus Industry, Working
Paper, Economic Research Department, Florida Department of Citrus and Food and Resource Economics Department, Institute
of Food and Agricultural Sciences, University of Florida,
Gainesville, Florida, October 23, 1991.
Alvarez, Jose. Cuba's Sugar Industry in the 1990s: Potential
Exports to the U.S. and World Markets, International Working Paper 1W92-2, Food and Resource Economics Department,
Institute of Food and Agricultural Sciences, University of
Florida, Gainesville, Florida, February 1992.
Alvarez, Jose. 'Cuba's Sugiar Industry in the 1990s: Potential
Exports to the U.S. and World Markets, (Addendum to 1W92-2), Food and Resource Economics Department, Institute of Food and
Agricultural Sciences, University of Florida, Gainesville,
Florida, April 24, 1992.
Adams, Chuck. An Overview of the Cuban Commercial Fisheries
Industry, International Working Paper 1W92-28, Food and Resource Economics Department, Institute of Food and
Agricultural Sciences, University of Florida, Gainesville,
Florida, September 1992.
VanSickle, John J. and William A. Messina, Jr. Cuba's Veg~etable
Industry, International Working Paper 1W93-3, Food and Resource Economics Department, Institute of Food and
Agricultural Sciences, University of Florida, Gainesville,
Florida, February 1993.
Potential Florida Exports
Alvarez, Jose and William A. Messina, Jr. Cuba's Rice Industry:
Potential Inports From Florida, International Working Paper 1W92-27, Food and Resource Economics Department, Institute of Food and Agricultural Sciences, University of Florida,
Gainesville, Florida, September 1992.
Alvarez, Jose and William A. Messina, Jr. Potential Exports of
Florida Agiricultural Inputs to Cuba: Fertilizers. Pesticides.
Animal Feed and Machinery, International Working Paper 1W9233, Food and Resource Economics Department, Institute of Food
and Agricultural Sciences, University of Florida, Gainesville,
Florida, December 1992.
68




Messina, Jr. William A. and Jose Alvarez. Potential Cuban Imports
of Selected Florida Field Crops: Cereals. Cotton and Potatoes,
International Working Paper 1W92-34, Food and Resource Economics Department, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, Florida,
December 1992.
Summary and Future Research
Alvarez, Jose and William A. Messina, Jr. Challenges and
Opportunities for Florida Agriculture from Future Trade with Cuba: Preliminary Findingrs and Justification for Further Research, International Working Paper 1W93-5, Food and Resource Economics Department, Institute of Food and
Agricultural Sciences, University of Florida, Gainesville,
Florida, March 1993.
More Information
For copies of these publications and additional information on the project, contact:
William A. Messina, Jr., Executive Coordinator
Internatational Agricultural Trade and Policy Center
Food and Resource Economics Department
P.O. Box 110240
University of Florida
Gainesville, FL 32611-0240
Phone: (904) 392-5063 Fax: (904) 392-3646
69










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