Cuba: A Long Line of Sugar Daddies – Time for a Real Partner? – DTN

Cuba has had a long line of sugar daddies. Spain, which conquered the island in the 15th century, was first to provide Cuba with infrastructure. In exchange, the island shipped minerals, sugar and other agricultural goods.

After the Spanish American war in 1898, a freed Cuba became an unofficial ward of the U.S. Corrupt strongmen helped create Fidel Castro’s 1959 revolution, which pushed Cuba into the arms of the Soviet Union. The communists supplied Cuba with ugly buildings, machinery, fertilizer and oil. They also bought Cuban sugar for inflated prices to help the island’s economy. In return, Cuba offered the Soviets its fealty and a strategic location on the doorstep of the American Cold War enemy.

When the USSR collapsed in 1989, Cuba was devastated. Its economy was tied tightly to the Soviets, and now it was untethered and without prospects. Oil-rich Venezuela helped stabilize the economy for a few years. In exchange, Cuba sent medical expertise and doctors. But when petroleum markets dried up, so did Venezuela’s assistance.

Which brings us to today.

Raul Castro succeeded his brother Fidel in 2008 and had to begin cleaning up the mess extreme socialism had made of the economy. He said that Cuba will not abandon socialism, but it has taken steps toward a freer economy. Raul relaxed restrictions on privately owned businesses, instituted land reforms and sought foreign investors. Some say Fidel still played a role in Raul’s rule, perhaps holding back a transition to a freer economy. Now that Fidel has died, Raul has total control. But he has announced he will step down in two years. Plans for his successor are unclear.

In the meantime, Raul is unlikely to lead Cuba into another sugar daddy situation. Instead, he is reaching out to several potential partners. Europeans, especially Spanish companies, are building resorts, and Brazil has helped with new port facilities. In September, the president of Iran visited Havana, and observers speculate that the oil-rich Middle East country is shopping oil. China also sent a delegation to Cuba in the fall. If they follow a pattern they have established in other developing regions, the Chinese will invest in Cuba’s infrastructure to help build another market for its manufactured goods.

Meanwhile, the U.S. waits for the next president and Congress to act. Cuban officials frankly admit that buying agricultural goods from Americans would be a first option because of the proximity of American ports and the volume U.S. farmers could supply.

For instance, Cuba buys rice from Vietnam and China. Shipments from the other side of the international dateline take five weeks or more to arrive, and they tie up large storage facilities. Meanwhile ships from the Port of New Orleans are less than a week from Havana. Smaller, more frequent shipments would be cost effective and require less Cuban storage space.

Under the embargo, U.S. companies can sell food to Cuba, but only for cash. Since Cuba cannot trade directly with American banks for U.S. dollars, it purchases Euros and converts them to dollars. That increases the cost of American goods for Cuba. The U.S. now sells only about $150 million in food products to Cuba, which buys $2 billion in foreign food annually. A healthier share of the market could directly benefit, for instance, Louisiana rice producers, Georgia poultry growers and North Carolina pork producers.

In addition, agricultural input suppliers could find markets in Cuba, and farm machinery manufacturers would love to help replace some of Cuba’s ancient tractors.

Jim Patrico can be reached at jim.patrico@dtn.com

Photo: Public Domain – Fidel Castro, former president of the Republic of Cuba, embraces Yuri Gagarin, Russian Soviet pilot and cosmonaut.


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