Dispatch From Havana: Georgia’s Trading Interests in Cuba

With the Trump administration taking control in Washington D.C. last Friday, there will be a new debate on the sanctions against Cuba, and a softening of the trade restrictions could have a big impact on the developing humanitarian and financial relationship between Georgia businesses and the Cuban people. However, the new administration will need to balance the economic benefits of free trade with the negative consequences of indirectly offering stability to a Cuban government with an infamously poor record on human rights.

Ask the average Cuban on the streets of Havana if there is a shortage of food in Cuba, and they tell you that everyone goes to sleep with full bellies. Walk into any grocery store, however, and you see empty shelves. Take a few days to build relationships, and you learn the whole story.

While a minimalistic allotment of food is available to all Cubans, many Cubans still struggle to find enough food. According to the United Nations World Food Programme, the largest humanitarian agency fighting hunger worldwide, in Cuba food based security programs, like monthly rations for the entire population and school feeding programs, provide a safety net to prevent starvation. However, the food they are given to survive allows for only that, survival, and most Cubans can’t get the necessary nutrition they need. Meat and other necessary stables of a healthy diet are expensive, especially when compared to the low salaries Cubans are paid by their government.

However, increased trade with the United States could cure this problem at both ends. Many Cubans believe this, at least. The theory is that trade with the United States would increase Cuban salaries while also lowering the price of all goods, including food.

One young Cuban enrolled at the University of Havana, who wished to remain unnamed, noted that the problem is the embargo. Agricultural trade from the United States is legal but comes with several restrictions. “The problem is the credit, the United States makes us pay for everything in cash,” he said with some frustration. “It makes meat very expensive.”

Due to the embargo, private firms in the United States cannot extend credit to the Cuban government when they purchase goods, forcing them to either pay for it in cash or use a third party financier, both of which make it more expensive to raise the capital to buy the food.

Should the embargo lift, many Georgia agribusinesses would jump at the opportunity to do business with the island without restrictions, as the Cubans would likely welcome a new and expanded trading partner offering cheaper prices.

Georgia’s poultry farmers are particularly eager to do their part to end the meat shortage in Cuba. The Cuban market offers rich possibilities both due to their preferences in meat and because Cuba has to import such a large amount of the food Cubans eat, with the UNWFP estimating the island imports 70% to 80% of its domestic food requirement.

The poultry industry was one of the first, if not the first, to establish trading channels with the island when agricultural trade became legal in the early 2000’s. Mike Giles, president of Georgia’s Poultry Federation, said that even under the current restrictions, Cuba has become the fifth or sixth largest export market for Georgia’s poultry farmers.

And if something is good for Georgia’s poultry industry, it will have statewide implications. According to the Georgia Poultry Federation, poultry is the largest sector of Georgia’s agriculture, making up 47% of the Georgia agricultural industry and employing 138,000 individuals in 2014. If Georgia were its own country, it would be the seventh largest chicken supplier in the entire world.

With such a large production, Georgia’s poultry suppliers are a huge part of the state’s economy and always looking for more trading partners. Beyond the sheer size of the untapped market, an added benefit, Giles said, is the Cuban a preference for dark meat, which is harder to sell in the United States given the American partiality for white meat.

Engage Cuba, a coalition of business and political leaders based in Washington, D.C., seeks to end the embargo. The group, which is supported by Georgia’s Agricultural Commissioner Gary Black, stated in an early 2016 press release: “Georgia exports, specifically poultry, have significant room for growth if changes in U.S. policies open opportunities for trade with Cuba and allow U.S. exporters to extend private credit to Cuba.”

But it’s not just the extension of credit that will make food more accessible to Cubans. As tourism and trade have increased over the last few years, Cubans expect to see a rise in incomes as well. There is a genuine feeling on the island that if the embargo lifts, incomes and wealth will rise to levels not seen since Cuba lost its Soviet trading partner at the end of the 1980s. This would come both from tourism and unfettered access to the U.S. trade market.

“A doctor only gets paid $30 a month in Cuba. A hotel worker, changing bed sheets in Havana, can make $40, $50, a day in tips,” Havana resident and budding entrepreneur Felix Alberto said, while riding inside his red 1955 English Standard. “Doctors used to be highly respected, but since the fall of the Soviet Union, they (the government) have not been able to pay them enough.”

Felix graduated from Havana University with a doctorate in veterinarian medicine but chooses not to practice. He instead rents rooms in his home to travelers and fixes electronics for a living, and he has good reason to do so.

With the boom of tourism over the last four years, lots of new money has entered Cuba’s economy. This money has brought wealth and luxuries unreachable since the fall of the Soviet Union to Cubans like Felix, luxuries like TV’s, Xbox’s, and travel.

Should the embargo fully lift, trade with Cuba is expected to grow and that means more money for Georgia poultry farmers and more food for the Cuban people.

Moreover, poultry farmers are not the only Georgia agribusiness that stand to benefit from normalized trading relations. Georgia also trades smaller quantities of other agricultural products like pork, sausage, and margarine that have the potential for expansion.

And while the only existing trade relations we have with Cuba are agricultural, other business interests could help rebuild the slowly crumbling island.

Apartments in Havana have fallen into disrepair over the last half century and there aren’t many new buildings visible outside of the tourist-heavy area of Old Havana. Fifty years of unmodified infrastructure has taken its toll. While Georgia-based companies have yet to officially commit to trade with Cuba should the embargo lift, there is a clear demand for the goods they sell on the island.

While you can buy an apartment in Havana fairly cheaply from the government, it currently can take years to raise the money to repair it. “The problem is the material to fix the home, it is expensive. I began the repairs in 2006,” says Felix, “We finished last year.” Construction companies like Caterpillar, who owns a plant in Athens, Georgia, and Atlanta-based Home Depot could play a pivotal role in repairing the infrastructure and offering cheaper supplies for the island.

Furthermore, the rise in tourism spells good possibilities for Delta, which has begun offering direct flights from Hartsfield-Jackson, and Coca Cola, which is already smuggled into many tourist hotels in Havana and would have a clear foothold in Cuba through those hotels.

All of this amounts to Georgia industries and businesses being well positioned to make a profit while offering needed aid to a poor island but that depends largely on how US policy shifts in the coming months and years. There are some recent indicators that the new administration is not ready to end the embargo without further concessions from the Cuban government, and is willing to roll back the policies laid out by the previous administration. On November 28th, 2016, the President expressed his willingness to cut off relations with the island tweeting “If Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate the deal.” And on January 11^th of this year, Secretary of State nominee Rex Tillerson’s stated at his confirmation hearing that he would advise the president to veto any measure trying to end the embargo without democratic changes on the island of Cuba.