“Mules” stretch limits of U.S. trade embargo on Cuba

(Reuters) – It all starts with a description given over a mobile phone: “Look for a woman with long blonde hair, blue jeans, silver heels and a black T-shirt arriving on the next flight from Miami.”

When the woman emerges from Havana’s international airport pushing a cart loaded with bulky black duffel bags, she is greeted effusively by a man she has never seen before.

“They hug as if they had known each other all their lives. Once in the parking lot, the woman hands over the bags and says goodbye,” says Yanet, a Miami resident.

She is describing the tactics of growing numbers of human “mules” who regularly travel between the United States and Cuba carrying in their bags loads of clothes, food, consumer goods, electrical appliances and millions of U.S. dollars to the communist-ruled Caribbean island. They deliver the goods for a fee or free ticket, often to complete strangers.

“The system works beautifully,” said Yanet, making her second trip as a “mule” to Havana in less than a month.

“But you have to stage a little show because you never know who may be watching,” she added.

This burgeoning informal commerce between two neighbors whose governments have maintained a Cold War-era enmity for half a century belies the 48-year-old U.S. trade embargo against Cuba — but also reflects recent relaxations of it.

Since 1962, the U.S. embargo’s intended aim has been to force the Cuban government to abandon its communist rule.

But informal trafficking of cash and goods to Cuba has boomed since President Barack Obama last year lifted restrictions on Cuban Americans traveling to their homeland and significantly increased the amount of money they could take.

His calibrated measures, part of a process of promoting “people-to-people” contacts Washington believes can foster political change in Cuba, also increased the type of consumer items that could be included in gift parcels for Cuba.

Also authorized under a telecoms initiative was the export or re-export to Cuba by visitors of donated personal telecoms devices, such as mobile phones, computers and software.

Travelers to Havana were already able to bring parcels of food and medicines, and the embargo has for some years allowed the export of U.S. farm products to the island.


On the U.S. side, from where daily two-way charter flights ferry more and more Cuban Americans to Cuba on family visits, there is significant tolerance for passengers to load up with consumer goods.

But the mules also need to outsmart tight Cuban customs restrictions, where taxes are levied for baggage over certain limits and luggage contents are frequently inspected.

Chronic scarcity and the high prices of the narrow range of imported goods that are sold in Cuba’s state-run dollar stores have prompted thousands of Cubans to use the human “mules” to import everything from clothing to toiletries, electronics and money.

John Kavulich, who monitors commerce between the two nations at the New York-based U.S.-Cuba Trade and Economic Council, says it is impossible to accurately quantify this informal trade.

“But more travelers means more money and more expenditure in Cuba,” he said.

Manuel Orozco, a remittances expert with the Inter-American Dialogue think-tank in Washington, says Cuban exiles in the United States sent to the island some $636 million in 2008 and probably slightly less in 2009 due to the economic downturn.

“About 60 percent of that money is sent through informal channels or mules. That is quite a lot,” he said.

Bureaucratic requirements in the United States, a lack of competition for services and a charge on foreign exchange charge levied by Cuba on transferred dollars make formal money transfers through financial agencies like Western Union costly.


Formal transfers cost 17 percent of the money sent, whereas mules cost around 13 percent, says Orozco, adding they deliver the money much faster.

The mules are part of an emerging underground industry of financial services offering credit and installment payments otherwise unthinkable in Cuba’s state-run economy.

There are no figures available for the size of the informal trade in goods, but it has become quite organized. There are even privately run places in Havana where Cubans can shop from catalogues sent by email. They pick an item, make a 50 percent down payment and 15 days later they get their order. All for a 25 percent commission.

Most of these informal businesses are family-run. A Havana resident, for example, sends a list of products to a relative in Miami, who then finds a Cuban American willing to transport them as a mule in exchange for a free ticket.

Cubans are crazy for big brands, says Diana, who sends items from Miami to Havana. “They ask me for instance to send sunglasses that say Dolce & Gabbana or Gucci. They’re cheap replicas, of course, but they sell very well because of the brands. Cubans love that,” she explained.

Profit margins are striking when it comes to high-end electronics. A flat screen TV bought in Miami for $700 can be sold in Cuba for up to $2,000. Such a television would likely cost $2,500 in a state store, if it were available.

The informal trade also feeds an endless network of informal vendors who receive small commissions.

But the “mule” business is not without risks.

“You need to be careful and make sure you don’t bring too many of the same products, because Cuban customs officers are not stupid and if they realize it is for sale they will take it away on the spot,” said Yanet.


Cuban Plastic Goods in the Caribbean Market

Havana, Jul 9 (Prensa Latina) Plastic articles prepared by a Cuban plant won the Caribbean market with sales of over US $50,000 so far this year, reported company sources on Thursday.

Nations like the Dominican Republic and Mexico purchased brooms, buckets and brushes for various uses, with great acceptance for their quality and design, said Geanny Bello, director of the company Juan Antonio Marquez.

Located in Ciego de Avila, 400 km (250 miles) of the capital, it is the only institution in Cuba that produces plastic toothbrushes and other supplies for home and personal hygiene, according to the National Information Agency.

The wide range of offerings from the factory, he said, allowed the substitution of imports during the first six months in the areas of health and tourism to the value of more than US $ 400,000.

The specialist of the Wholesaler Trading Company for Tourism Tania Díaz said the production is also for the domestic market and the tourism sector.

The brush factory known as CEPILL was founded on February 13, 1963 by the Argentine-Cuban guerrilla Ernesto Che Guevara and it applies a system for quality management since 2001 which has enabled it to penetrate into the Caribbean market.

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Houston’s port has a Cuba connection

Chron.com: For the first time in nearly half a century, a shipping line will provide weekly transport from Houston’s docks to Cuba. Local officials view this as the beginning of increased exports to a Latin American nation that still faces a partial trade embargo with the U.S.

“What we’re witnessing is the important first step,” said Jeff Moseley, president and CEO of the Greater Houston Partnership.

Shipping company CMA CGM of Marseille, France, recently began hauling food, medical products and other items allowed by the U.S. government to two Cuban ports from Houston. Every week, the vessels will stop in Kingston, Jamaica, before moving on to Havana and Santiago de Cuba from Houston’s Bayport terminal.

“This would definitely be easier for our people to get their product to Cuba out of the port and into a potential other market,” said Ron Hufford, executive vice president of the Texas Forestry Association, which hopes to sell railroad ties, utility poles, furniture and other items. Two years ago, a top Cuban official toured Texas mills to see the state’s wood products, Hufford said.

CMA CGM received a U.S. government license through October 2011 to move cargo to Cuba from the U.S. Texas officials have been urging a carrier to seek such approval for years.

For Texas, this means another market for some goods, and for Cuba, the new shipping route means faster delivery of products. Instead of waiting weeks or months for goods from other continents, Texas goods can arrive in Cuba much sooner.

‘Just-in-time delivery’

“Shipping from Texas, they can pretty much do just-in-time delivery of produce,” said Cynthia Thomas, president of Dallas consulting company TriDimension Strategies. She’s visited Cuba 40 times with clients and trade missions.

She said Texas companies can market their goods as fresher than their competitors’ products, which may have sat on a boat longer.

Prior to this new route, Texas producers seeking regular service had to haul their Cuban-bound products to Florida ports. That added costs and delays. Or companies had to charter an entire vessel for the occasional shipment to Cuba.

“That would make them less competitive,” said Ricky Kunz, the port’s vice president of origination.

“That would make them less competitive,” said Ricky Kunz, the port’s vice president of origination.

In 2000, the U.S. began allowing Americans to sell agricultural and medical products to Cuba. Since then, food makers, exporters and port officials have traveled there to try to convince Cubans to buy from them.

“When a marketplace opens up, everybody wants to get into the action,” said Port Chairman Jim Edmonds, who represented the port on a trade mission in 2005. “Cuba is attractive to us from the standpoint of its proximity.”

Port officials have visited Cuba a few times already and plan to attend a Texas-Cuba Trade Alliance meeting that will be held at the partnership in March.

The island, 900 miles from Houston, was once a buyer of Texas rice and other agricultural products until the Kennedy administration imposed a trade embargo.

In 2008, $143 million worth of food and agricultural products moved to Cuba through Texas ports, nearly 50 percent higher than in 2007, said Parr Rosson, extension economist of the Texas Agrilife Extension Service. But exports from the U.S. to Cuba slowed because of hurricanes that pummeled the island in 2008; the decline in prices of nickel, one of Cuba’s exports; and a decline in tourism because of the global economic slowdown.

In 2008, 274,000 tons of goods were shipped from Houston to Cuba. That’s a “minuscule” amount of the port’s business, Kunz said, since 225 million tons typically move through the port annually. But the port hopes to expand that business.

With the Obama administration already easing some of the restrictions on trade and travel with Cuba, Moseley said: “We’re very optimistic that the embargo could be lifted during the first term of the administration, if not sooner. The effect is going to be tremendous.”

If the embargo is lifted, he predicted Houston companies would sell goods for Cuba’s energy business and the rebuilding of its roads and homes.

Castro’s regime

However, Cuban exiles still oppose easing trade restrictions because of their opposition to Fidel Castro’s communist regime and its human rights record.

“We’ve always seen that as the only way to protest,” said Houston business consultant Andres Puello, who left Cuba 40 years ago. “There’s going to be no benefit for the Cuban people. I don’t think because they make these concessions there will be an improvement in Cuba.”

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Restrictions hurting exports to Cuba

Agweek.com: Agricultural sales to Cuba would have been as much as one-third higher in 2008 if U.S. restrictions on financing of the exports and travel by Americans to Cuba had been lifted, a top U.S. International Trade Commission member said.
Speaking at a Center for International Policy conference promoting easier U.S.-Cuban relations, Jonathan Coleman, the head of the ITC agricultural and fisheries division, said if the restrictions had been lifted, U.S. sales would have risen from $707 million to between $925 million and $1.2 billion.
Coleman said the study assumed the lifting of all the complicated arrangements for payment required under the 2000 Trade Sanctions Reform and Export Enhancement Act that allowed the sale of U.S. agriculture products to Cuba for the first time since the embargo on trade was established in the early 1960s.
Coleman also said the study assumed that if all travel restrictions had been lifted, 500,000 to 1 million Americans would have traveled to Cuba in 2008. Coleman said the statistics were an update of a larger study that the ITC, a federal agency that analyzes trade problems, had conducted in 2007 at the request of Senate Finance Committee Chairman Max Baucus, D-Mont.
Missing opportunities Coleman said the increase in sales would have amounted to $225 million to $475 million and that the U.S. percentage of the Cuban import market would have risen from 38 percent to between 49 percent and 64 percent. He also said that requiring Cuba to buy letters of credit through banks in third countries and requiring cash payment before shipment make the U.S. products 2.5 percent to 7 percent more expensive than if Cuba were able to use normal banking channels. Some analysts have said that U.S. producers have fared better with cash sales than if U.S. firms could grant credit arrangements to Cuba because Cuba has been late in paying for its agricultural imports from other countries. But Coleman said his analysis did not include that issue.
Daniel Griswold of the Cato Institute, a libertarian think tank, noted that Cuba is the No. 6 customer for U.S. agricultural products in Latin America and that sales to Cuba, a country with 11.5 million people are higher, than sales to Brazil, which has 200 million people.
If the restrictions were lifted and Cuba spent the same share of its GDP on farm exports as other Caribbean islands, “we
could be exporting $1.5 billion a year, more than double our current exports,” Griswold said.
USA Rice Federation CEO Betsy Ward said U.S. rice producers have lost sales to Cuba because Vietnam has extended credit to Cuba for rice purchases.
Several farm group representatives at the conference they hope President Obama’s recent overtures to Cuba lead to an easing of trade and travel restrictions.
“Resuming normal commercial relations with Cuba is the top priority for our organization,” Ward said, noting that the United States was the No. 1 rice supplier to Cuba in 1961 before the embargo was imposed.
Alan Tracy, president of U.S. Wheat Associates, a wheat promotion group, said he was disappointed Obama’s statement did not include an easing of Bush administration regulations requiring that Cuba pay cash in advance prior to shipment. But Tracy said farm groups still are looking for a legislative vehicle to push for more liberalization.
Tracy said since 2001, Cuba has bought U.S. what valued at $383 million, but that if commercial relations had been normal, Cuba would have bought wheat valued at $1.1 billion.
Wayne Smith, a former chief of the U.S. Interests Section in Havana, said he is working with Cuban and U.S. officials in
Galveston, Texas, and Louisiana to set up a better system to exchange information on hurricanes.
Two diplomats from the Cuban Interests Section in Washington attended the conference, but said they were there as observers and declined to comment.

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Cuba says foreign trade down 36 percent in 2009

HAVANA (Reuters) – Cuba opened its annual international trade fair on Monday with the news its foreign trade was down 36 percent this year as the communist-ruled island battles the effects of the global economic recession.

Cuban Minister of Foreign Trade and Investment Rodrigo Malmierca told diplomats and business people at the ExpoCuba exhibition center in suburban Havana that most of the decline was due to decreased imports, reflecting Cuba’s attempts to tighten its financial belt.

“Statistics show that at the close of the third quarter of 2009, the trade of goods was down 36 percent in relation to the same period the year before,” he said.

Total trade for the first nine months was “around $10 billion,” Malmierca said.

Cuba’s economy has been battered by the global recession, damaging hurricanes in late 2008 and productivity problems that President Raul Castro is trying to fix by cutting government handouts and giving financial incentives for harder work.

Cuba’s trade deficit soared to $11.4 billion in 2008 as rising import costs and lower prices for Cuban exports depleted cash reserves.

In response, Cuba took several measures, including stopping payments to many foreign suppliers. Malmierca said Cuba planned to pay up eventually.

“I can assure you that we have the greatest willingness for dialogue with our economic partners and that Cuba will continue to be a reliable partner,” he said.

The Cuban government said 54 countries were participating in the fair, with large, prominent pavilions filled by allies such as Venezuela, China and Brazil.

Far in the back of the sprawling exposition center were booths for about 35 U.S. businesses and organizations that included delegations from states including Alabama, Georgia, Virginia and Maryland.

The Americans said they looked forward to the day the United States and Cuba, just 90 miles apart but ideological foes since Cuba’s 1959 revolution, resume normal trading relations.

The United States has had a trade embargo against Cuba for 47 years, but sales of agricultural products and medicine are allowed.

“This is not just about business,” said Paul Johnson, president of Chicago Foods International. “I want to help bridge the gap between the United States and Cuba.”

“People who want to normalize trade feel like our embargo is hypocritical,” said Terry Coleman, Georgia’s deputy agricultural commissioner.

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1000´s of Spanish exporters to Cuba fall prey to an ingenious method to default on payments

The Cuba Blog: Shocking news

from Valencia Spain reveals today that 90% of companies who have exported goods to Cuba have not been paid in over 12 months.

This situation, which has also occurred in other areas of Spain, appears to be the knock on effect of Cuba stripping its banks of money from foreign company´s accounts. The Valencian Chamber of Commerce has urged the Valencian Financial Institute (IVF) to create a special emergency line of credit to cover commercial transactions while transfers the Cuban central bank has failed to make on behalf of foreign entities are investigated along with Cuban entities who have ordered the payments which have not been processed.

Cuba is located in thirty-fourth place in Valencian destinations of exports, with sales growing, which in 2008 exceeded 77.6 million, according to sources in the Foreign Trade Institute (ICEX ). Most of these sales have remained unpaid because Cuba has recently stalled wire transfers from the island (see previous article) and told those firms with offices in Havana that they can “request” transfers to be made from their accounts but there is no date when they will be made by Cuba´s central bank.

Over the past four years exports have increased to Cuba, but have now encountered the problem of lack of payment and will probably cease depriving Cuba of the goods it needs.
This circumstance is suffering the virulence with particular sector of machinery and mechanical appliances, which accounts for the bulk of exports from Spain.

Manufacturers of electrical equipment and appliances, with 7.4 million, with manufacturing plastic (5.6 million), paintings (5.1 million) and footwear (4.7 million), also part of the list of Cuba’s victim’s of payment delinquencies.
A total of thirty sectors send part of their international sales to Cuba. Valencia is also the fourth largest Spanish autonomy that exports to Cuba.

Specialists advise, it appears that Cuba´s has modified its strategy concerning non payments to obvert the impossibility of attracting imports, due to past unpaid debts. Previously Cuban companies would be used like chess pawns to delay payments to exporters worldwide and become the proverbial scapegoats of the central government. But, as 1000´s of foreign companies who exported to Cuba have boycotted the island through lack of payment, cutting off supplies of essentials, Cuba has used a new strategy since late 2008 and 2009 where it guarantees payment upon arrival of goods but ONLY into the importers local Bank account in Cuba but, when the importer attempts to repatriate the funds back to his country to pay for the imported items he is unable to transfer the money. Transfers are being placed on “a list” which must be approved by the central bank so; while the money is technically paid it cannot be withdrawn or transferred from the island. Cuba also introduced a law this year under the guise of anti money laundering where it prohibits cash withdrawals from foreign held accounts on the island. Most consider this law was introduced to compliment the transfer restrictions to stop foreign entities simply withdrawing the monies therefore, the money in the accounts is technically confiscated, albeit hopefully temporarily.  It is thought that 1000´s of companies with over 100 million Euros in goods have fallen for this new strategy to obtain imports but not pay for them.

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Cuba-Panama Trade Expands

HAVANA TIMES, Jan. 25 — Panama expects to export US $400 million in products to Cuba in 2009, up from around $180 million, as well as import at least two or three times the $28 million last year, stated Severo Sousa, vice minister of Commerce at the end of a bilateral meeting on services and investments. Earlier in the month Panamanian President Martin Torrijos paid an official visit to the island and met with President Raul Castro and other high officials