Cuba Market Talking Points

Cuba Overview

  • Cuba's population is approximately 11,075,244; with a growth rate of -0.115%.
  • The Cuban government predicts population will remain in steady decline through 2020.
  • Cuba's current median age is 38, but 25% of the population will be aged 65 or olderby 2025.
  • Illicit emigration (primarily to the U.S.) also factors in to Cuba's declining population.
  • Education is free at all levels. Cuba's 99.8% literacy ratemakes for well-educated consumers.
  • Cuba depends on exports, tourism, and remittances as key earners of foreign exchange.
  • Nickel exports earn $1.5-2.0 billion annually (35% of export earnings).
  • Tourism accounts for $1.5-2.0 billion annually.
  • Remittances from American relatives provide $2.0 billion annually.
  • Remittances are predicted to climb through2012.
  • More than 10% of all Caribbean tourist arrivals are to Cuba (mainly from Canada and Europe). Canadians account for 35-40% of all visitors to Cuba.
  • 60% of the Cuban population has access to foreign currency via tourism (taxi drivers, service staff, tour guides, etc.)

Agriculture

  • Declining trends in Cuban agriculture suggest agricultural imports will remain important to feeding the Cuban population.
  • In 2008, it was publicly stated that 80% of Cuba’s total food supply was imported.
  • Smaller scale production of fruits and vegetables in urban areas works to utilize excess labor in cities and improve food availability for the urban population.
  • Before the collapse of the Soviet Union, Cuba was producing 8 million tons of raw sugar a year. By 2010, this was down to only 1.2 million tons.
  • Cuba is trying to gradually increase raw sugar production -- to about 2.5 million tons by 2015.

U.S. - Cuba Trade

Agriculture Trade History:

  • Before the collapse of the Soviet Union, Cuba had no reason to change its agriculture policies. Sugar drove the economy and the ag sector was highly mechanized and input-intensive.
  • Food distribution ran on an expensive ration system, with most of the food being imported from the Soviet Union. Agriculture products produced in Cuba were grown on state-run farms.
  • When the Soviet Union collapsed, Cuba’s state-run farms broke up into co-ops, and agriculture markets were opened. After these initial gains; productivity in the agricultural sector ceased.

Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000:

  • Act allows U.S. firms to sell food and medicine to Cuba as a humanitarian gesture.
  • TSRA did not make a big impact until 2001 when much of the Cuban food stocks were lost due to Hurricane Michelle. As a result, the U.S. shipped more than $4 million worth of food and agricultural products to Cuba. After the hurricane, Cuba continued to buy from the U.S.
  • Another major hurricane, Hurricane Ike, did major damage to both stored food stocks and fields in Cuba in 2008. That year was the peak in recent U.S. ag exports to Cuba.
  • Because of close geographic proximity, it was easy for the U.S. to supply the food and agricultural products Cuba needed.

Exporting to Cuba

  • All U.S. exports to Cuba must be shipped under cash-in-advance terms or be financed by a non-U.S./non-Cuban institution. Under cash-in-advance, payment must be received by the U.S. exporter before title to the goods is transferred to Cuba.
  • Cuba ranks among top ten export markets for U.S. soybean oil, dry peas, lentils, dry beans, rice, powered milk, and poultry meat. Cuba also a major market for U.S. corn, wheat, and soybeans.
  • An estimated $1.25 billion is lost annually in agricultural exports due to travel and trade restrictions with Cuba.
  • Removal of Travel and Finance Restrictions on Exports to Cuba would result in 6,004 new jobs nationwide.
  • Today, other countries are investing in Cuba while the U.S. is losing its opportunity to have a major role there. For example, Brazil has been investing heavily in the Cuban agricultural sector and was Cuba’s #1 food and agricultural import supplier in 2011.
  • Cuba’s biggest concern is that U.S. policy regarding trade between the two countries might hurt the ability of U.S. exporters to adequately meet the needs of Cubans.

Illinois - Cuba Trade

  • Illinois ranks 6th nationwide in terms of lost opportunities to its agricultural sector due to the Cuban embargo.
  • Removal of U.S. travel and financial restrictions would increase Illinois agricultural exports to Cuba by $6.6 million annually; a 15% increase from Illinois exports to Cuba in 2009. These new exports would create 47 new jobs in Illinois.
  • Additional business activity created:
  • Corn and Wheat: $3.3 million
  • Soy Complex: $1.3 million
  • Planting Seeds and other crops: $761,000
  • Pork and Beef: $720,000
  • Dairy: $280,000
  • Supporting sections of the Illinois economy that are not exported to Cuba, but would receive increased activity:
  • Real Estate: $620,000
  • Financial Services: $410,000
  • Other Agriculture: $407,000
  • Business Services: $390,000
  • Oil, Gas, and Petroleum Products: $357,000
  • Wholesale Trade: $321,000
  • Other Supporting Sectors: $1.4 million
  • Overall, the Illinois economy would gain $10.9 million in additional business activity.
  • About 65% of these gains are in sectors that produce and export products to Cuba.
  • About 40% of gains would occur specifically in the corn and soy complex.
  • Because of the significant gains to the Illinois economy, Cuba is worth pursuing as an export market.

Sources: AgriLIFE Research,CIA World Factbook, CUBANEWS Newsletter, FAS/USDA, Illinois Soybean Association, Texas A&M University and University of Florida.

1