Should Ex-Im Finance Exports to Cuba?

Thursday, February 5, 2015
From The Daily Caller:

Should Ex-Im Finance Exports to Cuba?

Agricultural interests are asking Congress to formalize President Obama’s easing of the U.S. embargo on Cuba, which would open the door to government support for exports to the island.

In a blog post for The Hill on Tuesday, Mauricio Claver-Carone noted that, “the newly formed U.S. Agriculture Coalition on Cuba is pushing Congress to instruct the Export-Import Bank to finance expanded agricultural sales to the Castro dictatorship in Cuba.”

Obama announced in December that he would use executive authority to ease travel and trade restrictions against Cuba, but full repeal requires an act of Congress, which the coalition began advocating for in January.

According to The Associated Press, “U.S. law still prohibits any form of credit to Cuba’s state-run import agencies,” a restriction that American farmers consider “the main barrier to sales to Cuba.”

“It’s going to take Congress to end this embargo for the U.S. to be competitive in Cuba,” Paul Johnson, vice-chairman of the newly formed U.S. Agriculture Coalition for Cuba, told the AP. “Our products can’t compete with Brazil, Argentina, the EU, and China because of the credit issue.”

Congress relaxed certain restrictions on Cuban-American trade in 2000, allowing agricultural exports on a “cash-in-advance” basis. But after a promising start, sales have slowed in recent years, and the most recent data suggest “2014 could be the worst year for U.S. exports to Cuba since 2004.”

The coalition believes that allowing exporters to secure financing for sales to Cuba would do much to reverse that trend, by putting U.S. products on an even footing with foreign competitors whose governments already allow Cuba to make purchases on credit.

However, Claver-Carone points out that such a move would entail certain risks, insofar as “Cuba ranks among the world’s worst credit-risks and debtor nations,” with a Moody’s credit rating of Caa2, or “very high credit risk.”

Given that the Cuban market has just one official customer—the Cuban government—”the question becomes: Is that customer credit-worthy?”

“It’s one thing to lobby to do business with one of the world’s last remaining totalitarian dictatorships for the sake of profit,” he says, but argues that “it’s quite another to peddle the deceit to the American public that trade with Cuba serves some public interest here or in Cuba.”

Claver-Carone also considers it “somewhat ironic” that, with Ex-Im’s fate still hanging in the balance as the June expiration of its charter approaches, “agribusiness conglomerates who have benefited most from the Ex-Im Bank’s export credits and loan guarantees are lining up to drive the final nail in the bank’s coffin.”