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Doing Business with Cuba, Despite Embargo

Justin Solomon|CNBC Producer
Friday, 23 Mar 2012 | 11:54 AM ET

In Corpus Christi, Texas, beans are being bagged by the thousands and shipped off to a country that for decades was considered forbidden. That country is, of course, Cuba and the beans being sent there are grown in North Dakota, according to WestStar Food President Pat Wallesen.

The Cuban flag flying in Park Central in Havana.
Buena Vista Images | Getty Images
The Cuban flag flying in Park Central in Havana.

“When I tell people, they’ll ask, 'What do you do?' And we tell them we export some beans to Cuba and they’re like, 'Well you can’t do that, can ya?'” he said.

He not only can, he has. For the past nine years, Wallesen has been filling entire container ships with 10,000 bags of beans at a time. He says the last shipment he sent to Cuba was worth $3.2 million.

So, how is this legal with an embargo in place? In 2000, Congress passed reforms to that embargo allowing U.S.-based companies to export approved products to Cuba. And it’s not just beans. In fact, there are hundreds of items on a United States Commerce Department list of goods that can be exported to Cuba.

According to AgriLIFE Extensionat Texas A&M, U.S. exports to Cuba peaked in 2008 at $711 million, but that number has declined in recent years. In 2010, AgriLIFE Extension says $94.8 million in corn, $99.8 million in frozen chicken and $17.8 million in wheat were exported from the United States to Cuba.

That’s not surprising to Jose Azel, senior research associate at the University of Miami.

“The United States is Cuba’s 4th- or 5th-largest trading partner today,” he said.

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Many of the products leaving the U.S. on a 16-hour journey to Cuba hitch a ride on a Crowley Liner Services ship. The company sends one vessel a week to Cuba from Port Everglades in Fort Lauderdale, Fla., loaded with nearly 40 containers packed with goods.

Crowley Vice President Jay Brickman says doing business with Cuba is tricky because of U.S. law; goods must be paid for in advance.

“If you think about normal terms of trade, you have 30 days' credit or 60 days' credit. In the case of shipments from the U.S. to Cuba, Cuba has to pay for these goods before they leave the United States," Brickman said. “If they don’t pay, the goods don’t go.”

All of this business is going on with the embargo in place, which leaves many to wonder what kind of boom a lifted embargo could have on the United States.

Azel believes there will be significant opportunities, especially if there is a major government transition in Cuba.

"“If [the embargo] is lifted, that implies that there is a genuine transition to democracy on the political side and to a free market economy," he said. "So if we do make the assumption that, indeed, there has been, not just a succession from one general to another, but a genuine transition towards democracy and free markets, there will be a significant opportunity for American enterprises in Cuba.”

Many companies already doing business with Cuba also see endless possibilities.

“It’s almost like adding another state onto the U.S., 11 million people. That’s taking half of Texas and opening up a whole new market for us," WestStar Foods' Wallesen said.

Glenn Wiltshire, deputy port director at Port Everglades, agrees, telling CNBC if the embargo were to be lifted, his port would see a big boost in business.

“We believe there would be an increase in demand for cargo movement and an increased interest in passengers that want to visit Cuba,” he said.

Wiltshire estimates activity at the port would increase 10 percent instantly.

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