U.S. – Cuban TradeU.S. – Cuban Trade

Governmental Influence on Trade

A Case Study of International Business Management

Presented By:-

Shubhank GuptaTrimester VIGHS - IMR

Capital Capital Havana HavanaOfficial languages Official languages SpanishSpanishGovernment Government Socialist Republic, Socialist Republic, Single-party communist stateSingle-party communist statePresident President Fidel CastroFidel CastroIndependence Independence Spain Spain  October 10, 1868 October 10, 1868 Republic May 20, 1902 from Republic May 20, 1902 from United StatesUnited StatesCuban Revolution January 1, 1959 Cuban Revolution January 1, 1959 PopulationPopulation  2008 11,423,952 (73rd)  2008 11,423,952 (73rd)GDPGDP (PPP) 2008 Total$144.6 billion  (PPP) 2008 Total$144.6 billion      Per capita$12,700 (70th)Per capita$12,700 (70th)GDPGDP (nominal)2008  Total $55.18 billion  (nominal)2008  Total $55.18 billion  Per capita$4,830Per capita$4,830HDIHDI (2008) 0.855 (high) (48th) (2008) 0.855 (high) (48th)Currency Currency Cuban peso (CUP)Cuban peso (CUP)

Cuban Economic History Cuban Economic History

Before 1959 the U.S. was Cuba’s main trading Before 1959 the U.S. was Cuba’s main trading partner. partner.

Florida was Cuba’s largest U.S. State trade Florida was Cuba’s largest U.S. State trade partner. partner.

40 percent of all cargo being routed through 40 percent of all cargo being routed through Miami’s customs district was transported to Miami’s customs district was transported to Cuba. Cuba.

85 percent of Cuba’s exports were transported 85 percent of Cuba’s exports were transported to the united states.to the united states.

Gross Domestic ProductGross Domestic Product

05

101520253035404550

2000 2001 2002 2003 2004 2005

Billion $

Foreign Trade GrowthForeign Trade Growth(1995-2005)(1995-2005)

0

2000

4000

6000

8000

10000

12000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Mill

ion

$

Top ten Import products by Cuba in Top ten Import products by Cuba in

20012001 Top Ten Import Products by Cuba in 2001

(Million U.S. Dollar)

$663

$333

$139

$119

$99

$72

$68

$63$61 $54

Petroleum oils, not crude

Crude petroleum oils

Wheat and meslin

Rice

Milk and cream, concentratedor sweetened

Meat & edible offal of poultrymeat

Cars (incl. station wagon)

Automatic data processingmachines;optical reader, etc

Dried vegetables, shelled

Wheat or meslin flour

Source: International Trade Center (ITC) Website, www.intracen.org/menus/countries.htm

Top ten Export products by Cuba in Top ten Export products by Cuba in 20012001

Top Ten Export Products by Cuba in 2001 (Million U.S. Dollar)

$543

$462

$241

$77

$50

$25 $22

$34$33 $26

Cane or beet sugar and chemically puresucrose, in solid formNickel matte,nickel oxide sinters

Cigars, cheroots, cigarillos & cigarettes

Crustaceans

Fruit & vegetable juices, unfermented

Cements, portland, aluminous, slag,supersulfateHuman & animal blood; antisera, vaccines,toxins, micro-organism culturesSemi-finished products of iron or nonalloy steel

Petroleum oils, not crude

Tobacco unmanufactured; tobacco refuse

Source: International Trade Center (ITC) Website, www.intracen.org/menus/countries.htm

Main Cuban Exports and ImportsMain Cuban Exports and ImportsMain Cuban Exports and ImportsMain Cuban Exports and Imports

EXPORTS IMPORTS

NICKEL OIL & LUBRICANTS

TOBACCO FOOD

SUGAR & By-Prod. MACHINERY /EQUIP.

FISHERIES METALS & MANUF.

CEMENT CHEMICALS

RUM VEH. /TRANSPORT.

COFFEE PHARM. & MED.DEV

OTHERS OTHERS

US strong with…US strong with…

AirplanesAirplanes

TractorsTractors

AgricultureAgriculture

Office suppliesOffice supplies

FoodFood

ComputersComputers

Changes of U.S. Export to CubaChanges of U.S. Export to Cuba(millions dollars)(millions dollars)

$1.2 $2.5 $4.6 $5.6 $5.5 $9.5 $3.5 $4.5 $6.9 $7.1

$145.6

$260.8

$0

$50

$100

$150

$200

$250

$300

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Source: USA Trade Online, U.S. Census Bureau, 2003

Allows for U.S. Food and medical Allows for U.S. Food and medical exports to Cuba under certain exports to Cuba under certain conditions. conditions.

In its first two year of In its first two year of implementation, the U.S. implementation, the U.S. Exports to Cuba rose by a factor Exports to Cuba rose by a factor of almost 40.of almost 40.

2003 U.S. EXPORT to Cuba by category2003 U.S. EXPORT to Cuba by category

Source: USA Trade Online, U.S. Census Bureau, 2003

$36.7 $38.3

$51.5

$38.8

$85.1

$7.2$3.3

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Wheat Soybeans Oilseeds, Foodoils

Meats, poultry,etc.

OtherAgircultural

Industrial Misc.

Expo

rt

96% of 2003 U.S.exports to Cuba are food related.

Compared to 2002 exports, those of 2003 rose by 79%.

Impact of free trade with Cuba in the Impact of free trade with Cuba in the U.S. EconomyU.S. Economy

Cuba is the largest Cuba is the largest and most economically and most economically viable viable market in the Caribbean and the closest market in the Caribbean and the closest one to the U.S.; Over 11 million inhabitants, one to the U.S.; Over 11 million inhabitants, plus an expanding tourist industry.plus an expanding tourist industry.

Its wealth of underutilized natural and human Its wealth of underutilized natural and human resources makes it an ideal economic trading resources makes it an ideal economic trading partner for the U.S.partner for the U.S.

Barriers to International TradeBarriers to International Trade

Several devices used to Several devices used to control international trade.control international trade.•Quota’sQuota’s•TariffsTariffs•EmbargoesEmbargoes

Cuban EmbargoCuban Embargo

US can not trade with CubaUS can not trade with Cuba Can not travel to CubaCan not travel to Cuba Places sanctions on those countries Places sanctions on those countries

that do trade with Cubathat do trade with Cuba For the purpose of showing For the purpose of showing

disapproval for their government disapproval for their government (communist nation)(communist nation)

1.1. The Energy Sector provides attractive business The Energy Sector provides attractive business Opportunities Opportunities

2.2. Increasing trade leads to Increasing communication Increasing trade leads to Increasing communication servicesservices

3.3. Lifting the travel ban and the restrictions on Cuban- Lifting the travel ban and the restrictions on Cuban- Americans visiting the Island will have an impact on Americans visiting the Island will have an impact on both, the U.S. (particularly Florida) and Cubaboth, the U.S. (particularly Florida) and Cuba

4.4. Airlines and shipping companies will benefit from two Airlines and shipping companies will benefit from two ways tradeways trade

5.5. Increased business in ports and airportsIncreased business in ports and airports

6.6. Potential opportunities in software and banking ServicesPotential opportunities in software and banking Services

7.7. Successful development of Cuban biotechnology.Successful development of Cuban biotechnology.

8.8. Business related to Environmental Protection would be Business related to Environmental Protection would be of interest for both sides.of interest for both sides.

Some Key Points

Should the U.S. Seek to Should the U.S. Seek to tighten the economic grip tighten the economic grip on Cuba ? on Cuba ? if so , why ?if so , why ?

Question 1

Since the rest of the world is trading with Cuba, the U.S. Since the rest of the world is trading with Cuba, the U.S. embargo does not stand anywhere in the row . embargo does not stand anywhere in the row .

It does not impact the trade of Cuba with other countries.It does not impact the trade of Cuba with other countries.

The complete scenario looks like a Cold War The complete scenario looks like a Cold War

However, the U.S. is being consistent with its policy on human However, the U.S. is being consistent with its policy on human rights, and who knows it just might work.rights, and who knows it just might work.

Specifically, only US, Israel and Uzbekistan are rejecting the Specifically, only US, Israel and Uzbekistan are rejecting the voice of the United Nations General Assembly to seize this type voice of the United Nations General Assembly to seize this type of trade treatment. of trade treatment.

More cases appear every year in the news regarding the US More cases appear every year in the news regarding the US embargo consequences on the lives of millions of Cubans. Food, embargo consequences on the lives of millions of Cubans. Food, medicine and other important supplies are withheld from the medicine and other important supplies are withheld from the citizens of this island due to its political history and recent citizens of this island due to its political history and recent communist upheaval that led Fidel Castro in powercommunist upheaval that led Fidel Castro in power

Should the U.S. Normalize Should the U.S. Normalize business relations with business relations with Cuba ? Cuba ? if so , should the U.S. if so , should the U.S. Stipulate anyStipulate anyconditions?conditions?

Question 2

In my opinion Yes, In my opinion Yes, Normal relations may lead to greater democracy.Normal relations may lead to greater democracy. No, Cuba will not necessarily trade with U.S. like No, Cuba will not necessarily trade with U.S. like

the 1950’s.the 1950’s. U.S. cant stipulate any conditions.U.S. cant stipulate any conditions. There is no guarantee that trade will bring about There is no guarantee that trade will bring about

human rights or regain lost property.human rights or regain lost property. The U.S. should end the trade and business The U.S. should end the trade and business

embargo with Cuba and move quickly to allow embargo with Cuba and move quickly to allow tourism between our two countries. Most tourism between our two countries. Most important, we should restore full diplomatic important, we should restore full diplomatic relations with Havana. Only then will we have the relations with Havana. Only then will we have the leverage to press the new Cuban leadership to leverage to press the new Cuban leadership to restore human rights, establish a free market-restore human rights, establish a free market-based economy, and move to democracy.based economy, and move to democracy.

Assume you are Fidel Assume you are Fidel Castro. What kind of trade Castro. What kind of trade relationship with the U.S. relationship with the U.S. Would be in your best Would be in your best interest ?What type would interest ?What type would you be willing to accept?you be willing to accept?

Question 3

FIDEL CASTROFIDEL CASTRO Fidel Alejandro Castro RuzFidel Alejandro Castro Ruz (born August (born August

13, 1926) is a Cuban revolutionary leader 13, 1926) is a Cuban revolutionary leader who was prime minister of Cuba from who was prime minister of Cuba from December 1959 to December 1976 and December 1959 to December 1976 and then president, premier until his resignation then president, premier until his resignation from the office in February 2008.from the office in February 2008.

Castro came to power as a result of the Castro came to power as a result of the Cuban revolution that overthrew Fulgencio Cuban revolution that overthrew Fulgencio Batista, and shortly thereafter became Batista, and shortly thereafter became Prime Minister of Cuba. Prime Minister of Cuba.

In 1965 he became First Secretary of the In 1965 he became First Secretary of the Communist Party of Cuba and led the Communist Party of Cuba and led the transformation of Cuba into a one-party transformation of Cuba into a one-party socialist republic. socialist republic.

In 1976 he became President of the Council In 1976 he became President of the Council of State as well as of the Council of of State as well as of the Council of Ministers. Ministers.

Castro would want to save and improve Castro would want to save and improve Cuba’s economy with direct aid from U.S. Cuba’s economy with direct aid from U.S. government .government .

Simultaneously, he would want to prevent Simultaneously, he would want to prevent any influence that might cause social or any influence that might cause social or political change.political change.

If Castro allows this then further growth is If Castro allows this then further growth is possible because after, when in 2000 the possible because after, when in 2000 the export to U.S was opened then Cuba became export to U.S was opened then Cuba became 2525thth largest agricultural market for U.S with largest agricultural market for U.S with sales exceeding $400 million in U.S. sales exceeding $400 million in U.S.

How does the structure How does the structure and relationships of the and relationships of the

American political system American political system influence the existence influence the existence and specification of the and specification of the

trade embargo? trade embargo?

Question 4

Structurally, Congress and the Structurally, Congress and the President listen to lobbyists and President listen to lobbyists and campaign donors who oppose campaign donors who oppose Castro’s regime. America also Castro’s regime. America also has a long standing adversarial has a long standing adversarial relationship with Communist relationship with Communist countries which makes policy countries which makes policy changes unlikely.changes unlikely.

A real potential exists for A real potential exists for significant trade in goods significant trade in goods

and services between and services between Cuba and the U.S.Cuba and the U.S.

A real potential exists for A real potential exists for significant trade in goods significant trade in goods

and services between and services between Cuba and the U.S.Cuba and the U.S.

The elimination of the blockade The elimination of the blockade and restoration of bilateral trade and restoration of bilateral trade between both countries would between both countries would benefit not only Cuba, but also benefit not only Cuba, but also the U.S. business communitythe U.S. business community

The elimination of the blockade The elimination of the blockade and restoration of bilateral trade and restoration of bilateral trade between both countries would between both countries would benefit not only Cuba, but also benefit not only Cuba, but also the U.S. business communitythe U.S. business community

Cuba’s natural resources and Cuba’s natural resources and skilled labor, as well as its skilled labor, as well as its

geographical proximity to the geographical proximity to the U.S. U.S. add up toadd up to opportunities opportunities

for American businessfor American business

Cuba’s natural resources and Cuba’s natural resources and skilled labor, as well as its skilled labor, as well as its

geographical proximity to the geographical proximity to the U.S. U.S. add up toadd up to opportunities opportunities

for American businessfor American business

Arguments have been Arguments have been raised portraying Cuba as raised portraying Cuba as

a threat for a threat for U.S. businesses, U.S. businesses,

particularly, for Florida´s...particularly, for Florida´s...

Arguments have been Arguments have been raised portraying Cuba as raised portraying Cuba as

a threat for a threat for U.S. businesses, U.S. businesses,

particularly, for Florida´s...particularly, for Florida´s...

……Florida is called Florida is called to be the most benefitted area to be the most benefitted area

in the U.S. in terms of trade in the U.S. in terms of trade and investments with Cubaand investments with Cuba

……Florida is called Florida is called to be the most benefitted area to be the most benefitted area

in the U.S. in terms of trade in the U.S. in terms of trade and investments with Cubaand investments with Cuba

Current Trade RelationsCurrent Trade Relations

Under the Trade Sanctions Reform and Under the Trade Sanctions Reform and Enhancement Act of 2000, exports from the Enhancement Act of 2000, exports from the United States to Cuba in the industries of food United States to Cuba in the industries of food and medical products is permitted with the and medical products is permitted with the proper licensing and permissions from the U.S. proper licensing and permissions from the U.S. Department of Commerce and the United States Department of Commerce and the United States Department of the Treasury. Department of the Treasury.

The U.S. embargo on Cuba will remain in place The U.S. embargo on Cuba will remain in place despite Fidel Castro's announcement that he's despite Fidel Castro's announcement that he's resigning as Cuba's leader.resigning as Cuba's leader.

Thank you..!!!!Thank you..!!!!