Cuba trade expansion could mean good things for Alabama businesses

Maneuvers in the halls of power in Washington, D.C., could pay dividends in Alabama’s fields, forests and factories.

President Barack Obama wants to move to normalize relations with Cuba, and a big part of that is doing away with a trade embargo that went into effect in 1962. Any lifting of the embargo would have to get congressional approval, which promises to be a lengthy, hard-fought battle.

Still, Alabama could profit from a shift in Cuba policy, said Jimmy Lyons, chief operating officer for the Alabama Port Authority, which operates the Port of Mobile.

“Cuba, pre-revolution, was a key American trading partner,” he said. In fact Havana and Mobile were sister cities in the pre-revolution days. “If trade is re-established, I can see Alabama businesses sending products to the country. Everything from steel sewer pipes made in Birmingham to paint and building materials to other goods. There are a lot of good possibilities present in trade with Cuba.”

In 1959, an armed revolt led by Fidel Castro overthrew the government of Cuban President Fulgencio Batista, who had the backing of the American government. The embargo went into effect in 1962 as a way to punish Castro’s communist regime.

In 2000 the embargo was amended to allow shipment of food, medicine and other humanitarian aid to the island nation. That move has been a boon to Alabama agriculture. America ships about 200 tons of frozen chicken to Cuba a year, according to the U.S. Department of Agriculture. In 2012, about 42 tons, or about one-fourth of the yearly shipments of frozen chicken, came from Alabama.

The forests of the state also provide products for Cuba, in the form of utility poles, lumber and railroad cross ties, according to the Alabama Department of Commerce.

Trade restrictions now mean any exports to Cuba are paid for in cash, handled by third-country banks, which often tack on fees to handle the transactions. That means American products can be more expensive than commodities coming from other countries.

Farmers in the Deep South are uniquely situated to profit from relaxed trade restrictions with Cuba, said Mitt Walker, director of National Legislative Programs for the Alabama Farmers Federation.

“I think any normalization of relations with Cuba is going to be a slower process than most people think,” he said. “Expanding trade with Cuba creates exciting opportunities for Alabama farmers. And those opportunities can expand to other products made in Alabama.”

Farmers and businesses in the South benefit by being closer to Cuba, which would cut down on shipping costs, he said.

“You have the Port of Mobile down there, one of the best shipping ports in the country,” Walker said. “It’s almost a straight shot from the Port of Mobile to Cuba.”

Agriculture, including forestry products, is Alabama’s leading industry. Agriculture creates 580,295 jobs and generates a yearly economic impact of $70.4 billion, farmers federation data show. In 2006, exports to Cuba amounted to about one-fourth of Alabama’s agricultural export revenue, an Auburn University study shows.

In 2013, USDA figures show, the U.S. shipped $350 million in agriculture products to Cuba, with frozen chicken, corn and soybeans the leading commodities. That compares with $710 million of products in 2008, and $4.3 million in 2001, the first year that agriculture and humanitarian products were allowed to be shipped to Cuba.

The amount of trade fluctuates each year based on food and commodity prices, the USDA says.

Still, Cuba’s economy is weak and has to improve before Hyundais and Hondas built in Alabama are bought, said Jeff Bates, distinguished lecturer of economics at Auburn Montgomery. Cuba is about the size of Alabama, and has a population of about 11 million, he said.

Along with lifting trade restrictions, travel restrictions have to be loosened as well, he said.

“Americans can travel to Cuba now, but you have to go through Mexico or some other country and it’s a big hassle,” he said. “The key to any increase in trade is Cuba getting hard currency. The best way to do that is through tourism.”

Cuba was a tourist destination pre-revolution, he said.

“If you see American tourists return to Cuba, you will see hotel and entertainment companies begin to invest in the country,” Bates said. “It will take time, but wealth will be generated. That’s when you would see the shipments of durable and consumer goods increase.”

By Marty Roney, Montgomery Advertiser

May 18, 2015

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