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Vol. XII, No. 5 <ul style="display: flex;"><li style="flex:1"><a href="/goto?url=http://www.cubatradenews.com" target="_blank">www.cubatradenews.com </a></li><li style="flex:1">May 2010 </li></ul>Ag debate shifts to privatizing distribution radually moving the focus of reform Selling potatoes in Trinidad, Cuba Gdebate from state decentralization to part-privatization, private farmers at a threeday congress of the National Association of Small Farmers (ANAP) blamed the state for bottlenecks in food production and distribution in Cuba, and — while not using the p-word — proposed more privatization of distribution. In a 37-point resolution, the organization representing some 362,000 private farmers supports the expansion of suburban agriculture with direct distribution to Also see: city outlets, and suggests allowing the direct sale of cattle to slaughterhouses by cooperatives, direct farm sales to the tourist sector, and that the state promote and support farm-based Opinion page 3 micro-processing plants for local crops, whose products should be freely sold on markets. Private farmers — ranging from small landowners leasing state land to cooperative Cont’d on page 5 U.S. grants Cuba travel license to Houston-based oil group <ul style="display: flex;"><li style="flex:1">he International Association of Drilling Contractors </li><li style="flex:1">Treasury’s Office of ForeignAssets Control rejected IADC’s </li></ul>Treceived a travel license from the U.S. Department of first license application in December. Al Fox and the group Continued on next page Treasury May 19, allowing the Houston-based group to send appealed and reapplied in March; OFAC granted the license a delegation to Cuba within three months, Tampa lobbyist and businessman Al Fox told Cuba Trade & Investment News. This marks the first time a U.S. oil industry delegation will visit the island, another stepping-stone event in the gradually rising and increasingly public opposition of the industry to the U.S. embargo. INSIDE Agricultural co-ops getting profitable...............................5 State-church talks hint at political thaw............................7 U.S. diplomats briefing Cuba on oil spill.........................7 Repsol contracts rig..........................................................8 Sugar harvest ‘awful,’ minister resigns..........................10 “It’s now up to the Cubans to find time for us,” says Brian Petty, IADC’s executive vice president for government affairs. “They’ve indicated they wanted us to come, but that was last broached in October.” Analysis: The Supreme Court and the travel ban.......3 with Cuba, and the time to do it is now.” Oil group gets Cuba permit, from previous page According to Reuters, Spanish oil company Repsol YPF SA contracted an exploratory deepwater rig from a subsidiary of Italy’s Eni SpA. The rig is being in the second round. “I think it was this blowout in the Gulf of Mexico that changed minds in the Obama Administration,” Petty says. “They realized we can’t say ‘no’ to the Cubans.” More on oil, see pages 7&8 built in China. Repsol, which leads an offshore consortium in Cuba, has been trying to obtain a rig for drilling in Cuban waters since 2004. The IADC is an international organization, but According to Fox, who has been chipping it is headquartered in Houston, chartered as a U.S. non-profit, the bulk of its members are U.S. companies, and the delegation will consist exclusively of U.S. citizens, Petty says. The trip comes just as public confidence in deepwater drilling is at a low point, after theApril 22 Deepwater Horizon spill on the U.S. side of the Gulf of Mexico. But the association is fielding the disaster as an argument in favor of allowing Cuba access to U.S. technology and techniques. In a white paper arguing the need to open up Cuba to U.S. oil industry standards, the IADC lays out a horror scenario of a Deepwater Horizon-style blowout without the safety standards, response teams and logistical support for damage control provided by the U.S. oil industry. “It’s inevitable that Cuba will explore and exploit their offshore hydrocarbon resources, and it would benefit both the American public and the Cuban people to make sure it is done right,” the paper concludes. “It is in our national interest to have a constructive, educational and informational exchange away at the embargo from behind the scenes in Washington by engaging oil industry and other groups, the Cuban government had been seeking U.S. participation in offshore drilling as far back as five years ago. In 2005, the Cubans, in what Fox calls “an amazing concession,” said they were willing to operate joint ventures under U.S. standards and had requested a seminar introducing Cuban industry officials to U.S. state-of-the-art techniques and regulations. Back then, the IADC chose not to go. The group has yet to figure out details of the trip. “The intent [is] to take a delegation of technical experts to engage Cuban offshore regulatory authorities in a dialogue on offshore safety,” the white paper says. The IADC would like to make Cuban authorities “aware of global standards and best practices regarding accident and blowout prevention, environmental mitigation and protection, safety procedures, hurricane preparation and personnel training,” according to the white paper. Fox says he expects the trip to last three days. Note from the Publisher Sometimes, a monthly can be ahead of real-time news services: In this issue, Cuba Trade & Investment News is first to report that the Obama Administration granted a Houston-based oil group a travel license to visit Cuba – an unprecedented breakthrough in the soon 50-year history of the U.S. embargo. My point? Cuba Trade & Investment News does not pursue copycat coverage. Cuba Trade & Investment News is a monthly publication of Trade & Investment Publications LLC (TIPs), Tampa, FL, USA. CTIN is distributed to subscribers via mail or e-mail. <ul style="display: flex;"><li style="flex:1">Publisher </li><li style="flex:1">Andrew Goddard </li></ul>P.O. Box 13752 Nor do we think that the W a shington and Miami narratives define Cuba. W e t une out the high-volume static about dissidents and prisoners (as we do with Havana ’ s e vil- imperialism narrative), and go straight to the core of economic issues: Note the exciting discussions at the farmers ’ c ongress about part-privatizing food distribution. We s trive to be no-nonsense and select the “data points” that an info-saturated and time-constrained business public cares most about. Tampa, FL 33681-3752 USA Tel: 813 839 6988 Fax: 813 831 3811 <a href="mailto:[email protected]" target="_blank">[email protected] </a><a href="/goto?url=http://www.cubatradenews.com" target="_blank">www.cubatradenews.com </a>Johannes Werner Tel: 941 330 0303 <a href="mailto:[email protected]" target="_blank">[email protected] </a>Editor Editorial Advisors That is probably why some readers have told us they “read it in bed,” or “start the week” with it. “ Y o u don ’ t h ave to do anything else, just read Cuba Trade & Investment News,” one business reader said. Chris Aberle, FCStone, Des Moines Kirby Jones, US-Cuba Trade Assn., Wash. DC David Lyons, Daily Bus. Review, Miami John McAuliff, FFRD, New York Phil Peters, Lexington Institute, Washington I always look forward to your comments. SUBSCRIPTIONS Call 813 839 6988. One year $375. In Canada and Mexico, add $15 postage. COPYRIGHT NOTICE may be copied, photographed or duplicated without TIPs’ consent. No part of this publication Andrew Goddard — [email protected] 2Analysis Florida Strait The U.S. Supreme Court and the travel ban What if the latest assault on the U.S. travel ban against Cuba in Congress fails? The ban — and the embargo — are also vulnerable on the judicial front; the nomination of Elena Kagan to the U.S. Supreme Court spotlights this. The following analysis was written by Anya Landau French and first appeared in the Havana Note blog. By Anya Landau French eased under the Carter Administration). In a 5-4 decision, the Supreme Court By Johannes W e rner ith President Obama’s Wnomination of Elena Kagan to replace Justice John Paul Stevens, the U.S. Supreme Court is changing (although this change should not significantly alter the ideological balance of the Court). While the Judiciary is usually considered the least pertinent of our government’s affirmed the President’s authority to issue travel bans in the interest of national security, although they might infringe upon Americans’Constitutional rights to travel and move freely. The rise of Cuba’s new entrepreneurial class he recent congress of the T National Association of Small Farmers (ANAP) dragged into the light a new Cuba — a country that aims to be middle class and entrepreneurial. Raising food production has become a matter of national security, and that puts the small farmers and ANAP in a politically powerful position. And ANAP is using this moment, raising issues that makes the organization look like a trade association rather than a mass movement. As Progreso Weekly analyst Jorge Gómez Barata put it very eloquently: The 860 ANAP delegates during the high-profile meeting at the — of all places — Revolutionary Armed Forces ministry in Havana didn ’ t petition the government for clinics, schools, roads or electricity, as the ANAP had done for decades. They already have all that. This time around, ANAP asked for space to do business, and be allowed to get more involved in the distribution and sale of what Cuba ’ s 3 00,000-plus small farmers make. That ’ s a n amazing shift of focus, coming from a mass organization. What ’ s b ehind this shift is a story of unintended consequences. When the revolution won in 1959, Cuba ’ s countryside was firmly in the hands of a tiny group of large landowners and foreign corporations, Economy Minister Marino Murillo pointed out during his opening speech at The United States, Cuba, and the Supreme Court have all undergone significant changes since that 1984 ruling. The Cold War is over and Cuba is no longer a security threat (and thus the original rationale for the travel ban has ended). Meanwhile, with Justice Stevens’retirement, there will no longer be any current Justices on the Supreme Court that were three branches to foreign policy issues, the Supreme Court does get to weigh in on international issues from time. Cuba is no exception, and over the nearly 50 years that the U.S. embargo on Cuba Supreme Court nominee Elena Kagan has existed, the Supreme Court has heard several cases that challenged the Constitutionality of the travel ban on Cuba. serving at the time of the 1984 ruling. In addition to the original concerns of those who opposed the travel ban, a new twist has also developed in the travel ban since the 1984 ruling. Now, the travel ban is not a general ban on all Americans, but rather, the ban discriminates against ordinary Americans and allows CubanAmericans with family in Cuba to freely travel to the island. Opponents cite the Equal Protection Clause of the Fourteenth Amendment, which holds that no state shall “deny to any persons in its jurisdiction the equal protection of the laws” and ask how one category of Americans is permitted the right to travel while others are denied it. I am by no means a Constitutional Law scholar and explaining the legal nitty gritty of this is out of my league. However, the famous words of Justice Stewart come to mind: “I can’t define pornography, but I know it when I see it.” Similarly, I do not know how legal minds define discrimination, but I know it when I see it. Zemel v. Rusk was the first case heard by the Supreme Court that challenged the travel ban to Cuba. Previously, the Court had ruled in Kent v. Douglas that the freedom to travel is a right protected by the Fifth Amendment, so after several denied requests to travel to Cuba as a tourist, one citizen challenged the travel ban to Cuba. The proceedings took place in 1965 just four years after the travel ban was imposed on Cuba in 1961, and in a 6-3 decision, the majority ruled that the State Department did have the authority to impose such a ban and that the ban is Constitutional. The Supreme Court again heard a case (Regan v. Wald) challenging the travel ban or more specifically the restrictions on travel-related transactions with Cuba in 1984 after the Reagan Administration had reimposed the travel ban (which had been Continued on next page 3O p i n i o n <ul style="display: flex;"><li style="flex:1">‘Florida Strait,’ f rom previous page </li><li style="flex:1">surrounding the spill. Also, Cuba has actively sought </li></ul>information from U.S. institutions such as T e xas A&M University ’ s H arte Institute for Gulf of Mexico Studies. But the event with the biggest implications for the embargo and U.S. business has been this: The Obama Administration granted the Houston-based International Association of Drilling Contractors and license to travel to Cuba and brief officials there about U.S. technology and standards. If this trip happens, it will make the U.S. oil industry ’ s i ncreasingly public anti-embargo stance obvious for everyone. the congress. Most small farmers belonged to the illiterate masses of the Cuban precariate. Fast-forward half a century, and the picture has changed dramatically. Many of the state farms that took over the large sugar estates and cattle ranches have disappeared, and most of the remaining ones are woefully dysfunctional. Privately owned co-ops and small farmers have picked up the slack, producing the majority of food in Cuba. At the same time, we’re witnessing the rise of a well- educated, rural well-to-do class. Thanks to direct distribution arrangements, a dairy farmer with two dozen cows near a city ca n n o w m ak e $ 7,00 0 a y ea r , a n a stronomica l i ncom e c ompared to the few hundred bucks a neurosurgeon or cabinet minister earn in salaries. And these small farmers are increasingly entrepreneurial. Cuban officials maintain they don ’ t e xpect Cuban waters and beaches to be affected by the Deepwater Horizon spill. Howeve r , s hould Cuba beaches be soiled, another challenge to the U.S. embargo will arise: How will the U.S. subsidiary of BP compensate Cuba? The absurdity of the embargo is becoming more evident by the day, but this would be a crowning moment. Now , t h e 3 7 r esolutions ANAP passed during the recent congress — s uggesting direct produce sales to hotels and restaurants, direct cattle sales to Restless money, discovering Cuba Sign of the times: Within a short time period, I have been contacted by three groups of investors from three different countries that are putting together modest funds to invest in all things Cuban. Money is in an increasingly restless search around the globe to find those 10-percent-plus margins investors have grown accustomed to. slaughterhouses, an expansion of suburban agriculture with direct The biggest obvious challenge to these potential Cuba investors: The island doesn ’ t o ffer any ready-made institutional investment vehicles. My answer: Don ’ t e xpect to see anything like it within your lifetime. The Cuban state has a different set of economic priorities. Foreign investors shouldn ’ t e xpect to make a clever pick, lean back, and reap 20 percen t a t t h e e n d o f t h e d ay. Eve n t houg h i t ’ s i n d esperat e n eed of hard currency, Cuba isn ’ t a bout derivatives, short-selling or golf course condo flipping. It isn ’ t e ven about interests and dividends (even though a handful foreign investors have made handsome profits bankrolling hotel construction in Cuba). It ’ s a bout producing milk, yoghurt, rice, ethanol, suga r , nickel and oil and gas, about making cholera, hepatitis and HIV drugs, about developing cost-effective medical systems, about generating electricity at low cost in a sustainable way, about efficiently coping with disasters, about rebuilding a deteriorated infrastructure, and about building workforce housing and tourism infrastructure. If you want to bet your money on such down-to-earth undertakings, Cuba is your market. But that requires finding a well-positioned foreign company to invest in, imagination and flexibility as to being reliably compensated, a long-term perspective, rolling up your sleeves and getting entrepreneurial, rather than being a passive investo r . Disappointed? Think about the possibilities: Because Cuba is cutting-edge in many areas, it is becoming a gateway to other developing markets. distribution to cities, and farm-based micro-processing plants that can freely sell their products — are just suggestions. The biggest concession the government has announced so far is allowing private farmers to buy their implements on state markets, instead of having to cope with centrally allocated supplies. The top brass is all for allowing freer play of entrepreneurial forces; in fact, no one in Cuba is speaking out publicly against reforms. But there ’ s p assive resistance that shouldn ’ t b e underestimated: Mid- and low-level party functionaries are suspiciously eyeing the rural new rich, and I bet my retirement funds that bureaucrats at Acopio, the state food distribution monopoly, are ferociously defending their turf. ANAP President Orlando Lugo Fonte knows that all too well — and here is how he reacts to it: By sending a clear signal to the country ’ s l eadership that his organization wants reforms to be confined to the economic realm. While the 37 resolutions of ANAP ’ s e conomic commission are eye-catching, another work group produced an elaborate document highlighting small farmers’unwavering allegiance to party and revolution. Oil, positive fallout The oil spill in the Gulf — terrible as it is — also brought movement into U.S.-Cuban relations. For one, U.S. diplomats are apparently briefing Cuban officials about developments Johannes Werner is editor of Cuba Trade & Investment News 4E c o n o m y ‘Ag reform debate,’ from page 1 State down, private up Food production, Jan.-March 2010 (‘000 metric tons) Applause from the president: ANAP leader Orlando Lugo Fonte during the congress. Prod. %chg. total %chg. private Viands Tubers & roots 273.9 -9 <ul style="display: flex;"><li style="flex:1">374.6 +4.5 </li><li style="flex:1">+29.3 </li></ul>+13.6 -34.9 +94.6 -22.5 -31.3 +5.4 Potatoes Bananas Garden veget. Tomato Garlic <ul style="display: flex;"><li style="flex:1">80.8 </li><li style="flex:1">-34.4 </li></ul>100.6 +74.9 425.5 -25.1 170.5 -34.9 8.8 27.3 9.7 Photo: Granma members — generate nearly 70 percent of Cuba’s food production, on just 41 percent of the island’s arable land, and their numbers are rising fast. -17.3 +1.5 -24.9 -19.1 +45.7 +5 <ul style="display: flex;"><li style="flex:1">Onion </li><li style="flex:1">+4 </li></ul>Peppers Cucumber Rice -20.2 -15.9 +76.6 +9.1 The level of official attention to theANAPcongress — held in the armed forces ministry in Havana, 10 years since the last such meeting, and featuring a closing speech by Raúl Castro — is high, partly because the state’s massive, three-year old reform process in agriculture is sputtering. The most recent official figures suggest that food production is falling off again, after gradual rises last year. This year’s sugar harvest dropped to a historical low, while all other crops plummeted 13 percent during the January-March period, and cattle production dropped 3.1 percent. Official daily Juventud Rebelde quoted one of the delegates at the congress suggesting direct farm sales to the city. “It’s not that now there are fewer tomatoes, the problem is they don’t make it” to market, the newspaper quotes Lázaro Hernández, president of the Antonio Maceo cooperative near Havana. “Then, they ripen on the field, we have to take them to processing, and the people won’t get to eat” fresh tomatoes. He suggested that in Havana, where the government reduced the number of points of sale from 1,300 to 600, there need to be 2,000 outlets. “The cooperatives should bring their goods directly there. Today they’re limited. Commerce should be diversified. There can’t be just one centralized system when we’re talking about a diversified agriculture.” According to Economy Minister Marino Murillo, half of the 920,000 hectares of state land recently leased to private farmers still remain fallow. Also, in the resolution, the ANAP calls on the state to “solve the problems of loans to new farmers,” and speed up a water-use plan for agriculture. 9.4 25.6 21.3 19.6 Corn <ul style="display: flex;"><li style="flex:1">Beans </li><li style="flex:1">-30.5 </li><li style="flex:1">-25 </li></ul>Tobacco Cocoa Citrus Other fruit Pork Beef 13.7* -39 10.5** +187.8 131.7 -21.6 -46.9 +234.4 +19.2 +14.4 +64.3 +592.6 -4.6 46.8 35.6 30.1 2.8 +16.1 -3.3 -3 <ul style="display: flex;"><li style="flex:1">+28.2 </li><li style="flex:1">Poultry </li></ul><ul style="display: flex;"><li style="flex:1">Eggs </li><li style="flex:1">456.6***-1.1 </li></ul>89,742.2-5.9 +18 <ul style="display: flex;"><li style="flex:1">+3 </li><li style="flex:1">Milk**** </li></ul>

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