Recent developments have opened the door for the U.S. food and beverage industry to capitalize on opportunities in Cuba once the trade embargo is entirely lifted.
In November, The Cuban Foreign Trade Minister showcased 326 commercial opportunities for interested foreign investment partners at the 33rd annual Havana International Fair. No fewer than 35 of these projects are in the production and commercialization of specific food products that would result in either a 100 percent foreign-owned corporation or a joint venture with the Cuban government.
Analyzing the list, most of the projects involve the existing base of agricultural products being grown on the island. The government's wish list usually starts with the need for agricultural technology to improve yields – of beef, rice, coffee, etc. – but ends with value-added processing and commercialization of these products.
For example, an opportunity for "citrus and other fruit production" calls for a partner "to install an industrial plant to process fruit and vegetables to obtain 2 tons per day chopped, 10,000 liters per day juices, 5 tons per hour of pulp and conserves." The expected necessary investment in this joint enterprise: $7.3 million. The end result is probably exports.
A confectionery and cereal production proposal asks "to diversify production of confectionery … and breakfast cereal mixes in different formats and assortments with an emphasis on nutritional values." This joint enterprise could cost $15.3 million. The goal is to reduce imports.
To put context to the state of business: The United States once held the market leadership position as the largest supplier to Cuba and the highest market share of the island’s agri imports in 9 out of the last 11 years. With increased international competition offering far better credit terms, a severe decline began after the U.S. share peaked at 42 percent in 2009. U.S. share was reported in fiscal 2014 at 16 percent, third place behind the outflanking of the European Union and Brazil. The game, however, is changing.
According to USDA, “Full liberalization of trade between the United States and Cuba would enable U.S. agricultural exports to compete on a more level playing field by allowing use of credit facilities, export and technical assistance, and market development programs.” Cuba’s new push for foreign partnerships is now a viable tool for the U.S. to regain its leadership stake across various food and beverage verticals.
The U.S. Meat Export Federation (USMEF) has wisely informed the industry that marketing will simply not be the same as it is in the rest of Latin America for a list of reasons including politics, distribution and supply chains that are much further along in other countries than Cuba. However, this may very well be the greatest attraction for a small group of new players to come in, set new standards for domestic production, and meet an existing and future growing food demand from not only a surge in the Cuban hospitality and tourism sector, but from the general population as well.
For a country that imports 80 percent of its food, accounting for a current expenditure of $2 billion annually, there is now a tangible opportunity for a small number of entities to become the exclusive domestic producers and even exporters of the same products Cuba now imports, we believe. These new factors will only serve to the U.S.’s advantage: New joint venture opportunities available, a relaxation of trade sanctions in the works, with an emerging market only a short boat ride away. Cuba is now a more tangible opportunity if interested parties begin the process now.
Of key importance is to have the right business cultural context for not only doing business in Latin America, but specifically with these Cuban players. As such, you should start due diligence now and begin preliminary conversations with the various representatives of commercial opportunities. Keep in mind that the process of becoming pre-qualified, registered and licensed to do business in Cuba will take 6-7 months and must be completed.
A new Cuba is just beginning to emerge and it’s evidenced in $8.2 billion worth of opportunities across 326 pre-approved projects. The embargo as we know it has undergone minimization and continues to be diluted in what seems like a monthly basis. Whether the final death to the embargo comes next month or in a year from now, the steps just outlined must take place before anyone can sell or produce anything in Cuba.