Pedro Alvarez: Cuba hungry for American food imports.

A little-known commodities expert just a few years ago, Pedro Alvarez has rapidly become one of the most important bureaucrats in Cuba.

These days, it seems Alvarez is quoted more frequently in the U.S. media than any other Cuban official including Fidel Castro.

That's because of a barrage of press releases issued every time a U.S. port signs a "memo of understanding" with the Cuban government, or a prominent state governor or member of Congress visits the island and urges an end to the embargo.

As chairman and CEO of the Cuban Ministry of Foreign Trade's Empresa Comercializadora de Alimentos (Alimport), Alvarez is one of the very few Cuban officials authorized to sign contracts directly with U.S. companies.

Since late 2001, Alvarez claims Alimport has purchased $612.5 million worth of U.S. commodities ranging from fresh fruit and fertilizer to peas and powdered milk (see table below). This total, which includes $36 million in shipping and $38.5 million in finance costs, could easily reach $1 billion by the end of this year, he says.

"Business continues, because despite everything that's happened with U.S.-Cuba relations, American law permits these exports," he said. "And ports want this business."

Alvarez spoke to CubaNews in an exclusive, one-hour interview at his office on the third floor of the Ministry of Foreign Trade, in Havana's Vedado district.

ALIMPORT STATISTICS STIR CONTROVERSY

The official, who will host over 100 U.S. companies Apr. 13-16 for a conference on business opportunities in Cuba, has worked in the Ministry of Foreign Trade since 1960. Among other things, he's served as vice-commercial counselor at the Cuban Embassy in Moscow and commercial counselor at the Cuban Embassy in Sofia, Bulgaria.

From 1990 to 1998, he was vice-minister of foreign trade, and in 1988 took over the presidency of Alimport.

Alvarez, 60, had no way of knowing that within two years, Congress would pass a bill known as the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), one of the few loopholes in Washington's 43-year-old trade embargo against Cuba.

This legislation--passed in the wake of Hurricane Michelle--allowed Cuba for the first time to buy U.S. farm commodities on a cash-only basis to help feed its 11.2 million people. Alimport was quickly designated the sole authorized buyer for such food.

"After Hurricane Michelle, the U.S. offered to help Cuba for the first time," said Alvarez. "Michelle provoked the beginning of trade, but the goodwill of U.S. companies, together with our goodwill in offering the U.S. help after 9/11 without expecting anything in return, is what made it possible."

Since then, U.S. farm sales to Cuba have skyrocketed, from $4.4 million in 2001 to $175.8 million in 2002 to $343.9 million last year (see chart, page 9). So far this year, U.S. companies have sold Alimport around $100 million worth of commodities, with the total this year expected to top $400 million.

But are these numbers to be trusted?

No, says John Kavulich, president of the New York-based U.S.-Cuba Trade and Economic Council. He insists that TSRA-authorized food and commodity exports to Cuba since December 2001 have totaled only $430.1 million, not $612.5 million.

Asked to explain the discrepancy, Kavulich told CubaNews that "Alimport includes all sorts of additional items that they have yet to provide data to support. They also include the value of potential purchases that have been discussed, as well as transportation, insurance and currency costs. None of this has publicly been confirmed."

Kavulich, who helped organize the September 2002 U.S. Food & Agribusiness Exhibition in Havana but has not been back to Cuba since then, claims Alimport is under "substantial pressure from certain entities within the Cuban government" to exaggerate.

"Pedro Alvarez is a capable manager, but he's been thrust into a political role, and every transaction must be seen within a political context," he said. "Companies are increasingly resentful of the political pressure that's being put upon them to engage in advocacy regarding U.S. policy toward Cuba. Some companies have had their contracts reduced because the Cuban government told them they weren't being active enough in opposing the U.S. embargo. That doesn't make for a healthy commercial environment."

CUBA NOW 35th IN PURCHASES OF U.S. FOOD

Controversies aside, both Alvarez and his critics agree that over 95% of Cuba's purchases from the United States until now have consisted of 10 basic commodites such as wheat, flour, rice, frozen poultry and soy products.

In total, Alimport has contracted for 2.8 million metric tons of food, paper, wood products and fertilizers (this includes 76.3 million eggs) delivered on 184 cargo shipments--70% of them on U.S. vessels or those hired by U.S. companies.

These shipments were sent from 18 Gulf of Mexico and Atlantic ports, including five in Florida: Port Everglades, Pensacola, Tampa, Port Manatee and Jacksonville.

Last year, Cuba was the 35th-largest market in the world for U.S. food exports, up from 50th in 2002 and 144th in 2000. The United States is now Cuba's No. 5 source of imports and its 7th-largest overall trading partner.

One conglomerate alone, Archer Daniels Midland of Decatur, Ill., accounts for roughly 30% of the value of total contracts signed with Alimport; other commodities giants that have benefitted from TSRA-authorized food exports include Cargill, FCStone, Tyson Foods, Goldkist and Boston Agrex.

Smaller companies have also gotten a piece of the pie; these range from Sun-Maid California raisins and Kentucky burley tobacco to a $180,000 contract by City Seafoods of Los Angeles for 35,000 pounds of smoked salmon, frozen shrimp and other delicacies.

Alvarez said Alimport would soon sign its first urea contract, worth $1.2 million, with a Florida company, though he declined to name the company or say where it was based.

"To date, we have contacted 2,900 companies and have signed with 125 of them," he said. "I want to buy all the products that are authorized for us to buy, as well as those that aren't authorized."

How does Alvarez decide who to do business with, and what to buy?

"When a businessman comes to Cuba, we consider whether his products are what we need to buy," explained Alvarez, who has 140 employees working under him. "We have purchased 300 different commodities, and we're ready to buy more. But we lack knowledge about U.S. companies, and those companies are limited in showing their products because the procedure to participate in trade fairs and exhibitions is so complicated."

Alvarez told CubaNews that U.S. law forces Alimport to pay 20% more for food than it should, because of the TRSA requirement that all purchases must be in cash, up front.

"U.S. companies can't give us credit, and banks in the U.S. cannot do business with Cuba. So I can't pay directly to U.S. companies," he complained. "We have to go through Europe. If the procedure is through a bank in Europe, there's a time difference, and that causes delays of five or six days."

He added: "The boat may be in Cuba, but it can't unload merchandise until I pay. Cuba has lost more than $18 million because of delays and currency exchange since trade began. This means less food for our children."

It also puts American firms at a disadvantage vis-a-vis their Canadian, European and Asian rivals.

"U.S. law punishes U.S. companies more than it punishes Cuba. They're handing a silver platter to the competition," he said. "That's why there's interest on both sides to do away with restrictions. I've heard many Americans including businessmen, congressmen, senators and port officials say you have to be blind not to see that there's a natural need to eliminate the restrictions."

If that happened, he said, Alimport could source up to 60% of its $1.2 billion annual food bill from the United States.

"It's evident that it is in the interests of the United States and Cuba to normalize relations," Alvarez told us. "Commerce will benefit both countries. It generates jobs, and won't hurt U.S. companies to be able to supply products to Cuba. It also wouldn't hurt if people were able to travel to Cuba. We care about tourism because to be able to buy food for the people, we need money, and that money comes from tourism and exports."

LOOKING TO LATIN AMERICA 

Alvarez isn't pushing only for the right of U.S. citizens to travel to Cuba. He also wants the right to visit the U.S. on official business.

"I have been to 45 countries, and twice in the United States. Unfortunately, the last few times I've applied for a visa, I was denied," he said. "Once they gave me the visa and then withdrew it. For me, being able to visit the U.S. would allow me to widen our business ties. I am simply a businessman, but I have the possibility of buying tens of millions of dollars of products."

In the meantime, Alimport is also turning to Latin America. Thanks to the recent election of two Castro allies--Argentina's Nestor Kirchner and Brazil's Luiz Inacio "Lula" da Silva--both countries have seen a jump in food purchases by Cuba.

Last November, Alimport bought 50,000 tons of Argentine wheat for nearly $9 million, which it paid for in cash. It's also negotiating to buy meat products, mainly chicken and sausages, as well as cereals, soy and dairy products, canned food and cattle, from both Argentina and Brazil.

Asked about persistent allegations that Alimport has stiffed its loyal Canadian and European food suppliers in order to pay cash to U.S. commodity exporters for political reasons, Alvarez had this to say:

"Alimport is complying with its obligations to our suppliers, and even better than in previous years. We respect the commitments we have with suppliers from other countries. Nevertheless, trade with U.S. companies will continue to grow and grow."

This year, says Alvarez, Cuba will buy $250 million more from all sources than last year, reaching $1.2 billion in total food purchases.

And where does all this food end up?

"More than 95% of the purchases that we make in the U.S. are destined to the subsidized peso market," he said. "The remaining 4-5% are products that are sold in the dollar stores. These products are more expensive, and that difference helps pay for the subsidized products."

Alvarez acknowledges that Alimport charges a substantial markup in the dollar stores--sometimes as high as 240%.

"The markup varies according to the product," he said. "But that difference goes to pay for subsidized food. In other countries, it would line the pockets of corrupt officials."

ALIMPORT TO BUY MORE CATTLE FROM FLORIDA FIRM

Naples-based J.P. Wright & Co. said Mar. 26 it has reached an agreement with food purchasing agency Alimport to add 50 Florida cattle to its existing deal for 250 animals. The shipment of the 300 head will be the first of its kind from Florida to Cuba in over 40 years.

"We're continuing to rekindle the historic trade relationship Florida once had with Cuba," CEO Parke Wright said in a prepared statement. "Through this cattle shipment, we're rebuilding a foundation for the supply and transportation of agricultural commodities and livestock from Florida to Cuba."

Wright originally planned to ship the 250 head in March or April in a deal worth $300,000, but the shipment was delayed because of a single case of mad-cow disease discovered in Washington state late last year.

"Cuban ranchers will find our Black Angus to be strong and healthy," said Leroy Baldwin, owner of the Baldwin Ranch in Ocala, which is providing the additional 50 cattle.

In addition to the Baldwin Ranch, 80 Brangus heifers will come from the Strickland Ranch in Manatee County, 80 Brafords from the Adams Ranch in Ft. Pierce, 81 Beef Masters from other Florida ranches and three bulls from each breed.

The total shipment, which now includes 288 head of cattle and 12 bulls, is scheduled to depart from either Tampa or Port Manatee in the second quarter of 2004.

Wright, whose family had extensive business ties with pre-revolutionary Cuba, last August sent a total of 150 head of New York and Pennsylvania dairy cattle to the island in two shipments, one from the Port of Jacksonville and the other from Port Everglades.

Details: J.P. Wright & Company, PO Box 649, Naples, FL 34106. Tel: [phone]. Fax: [phone]. E-mail: [e-mail].

TOP 15 U.S. EXPORTS TO CUBA *

COMMODITY                          VALUE

1. soy products                   $137.9
2. poultry and derivatives         117.9
3. wheat                            98.0
4. yellow rice                      87.6
5. soybean oil                      64.2
6. peas and beans                   13.0
7. paper                            11.9
8. powdered milk                    10.4
9. branded supermarket products      7.0
10. flour                            5.6
11. wood and derivatives             4.3
12. dicalcium phosphate              4.0
13. eggs                             3.1
14. pork and other meat              2.2
15. fresh fruit                      1.3

* total exports since 2001 in millions of dollars. Source: Alimport.

U.S. FOOD PURCHASES BY ALIMPORT

In millions of dollars

2001       4.4
2002     175.8
2003     343.9
2004 *   100.0

* First quarter

Note: Table made from bar graph.