ERS: Cuba could become major player in fruit trade.

In the 1950s, the United States was Cuba's principal market for tropical fruits, a status that was lost when the United States imposed a total trade embargo in 1962. After this time, Cuba's tropical fruit export markets withered, leaving a smaller industry with a domestic focus, and attempts

to expand export production of tropical fruits since the 1960s have been disappointing. Recently, USDA's Economic Research Service (ERS) looked at the question of whether Cuba has the potential to increase production of tropical fruits for both domestic and foreign markets in the future, and concluded that lifting the embargo likely was the key to the answer.

Going back to the 1940s, ERS notes that Cuba was a major banana exporter. However, it currently produces bananas, as well as plantains, only for domestic consumption. Domestic demand for processed tropical fruit products is still constrained by Cuba's low incomes.

Cuba's growing tourist industry, however, has the potential to generate increased demand for processed tropical fruit products, says ERS. The tourist sector, in fact, may generate the hard currency needed to fund the purchase of inputs necessary to allow increased utilization of existing plants, to allow the capital upgrades needed to modernize and improve efficiency of existing facilities, and to allow expansion of sector capacities.

Several factors, however, may constrain this potential market growth: 1) Cuba's tropical fruit yields, which have historically been low, remain low because of the current economic situation; 2) Cuba's marketing infrastructure is underdeveloped; 3) Cuba's tropical fruit processing industry is characterized by equipment that is old, inefficient, high cost, low capacity, and underutilized; and 4) A lack of highquality product affects demand in Cuba's tourist industry. Therefore, says ERS, the growth of Cuba's tropical fruit industry most likely will depend on Cuba's success in exporting both fresh and processed tropical fruit, primarily to higher income countries.

If the U.S. embargo were to be lifted, says ERS, Cuba likely would start exporting tropical fruit to the United States in the longer term. U.S. demand is growing and domestic production is limited. Cuban yields of avocados, mangos, and pineapples exceed U.S. yields. Based on these factors, Cuban tropical fruit exports would be competitive in U.S. markets, particularly those in the eastern United States, says the report.

Following a lifting of the U.S. embargo, as conditions improve and Cuba's economy recovers, then grows, Cuba's comparative advantage in tropical fruit production would improve further, particularly as yields start to rebound from current low levels. ERS says Cuba has the potential to effectively compete with other U.S. market suppliers from the Caribbean and South America.

In the longer run, as Cuba's economy and agriculture recovers and with likely investment from foreign firms (including U.S. companies), its comparative advantage in tropical fruit production will begin to assert itself and both the quantity and quality of domestic tropical fruit production would increase, thereby reducing the demand for imports.

But before it could again tap into the U.S. market, Cuba would have to improve the quality of its tropical fruit to meet U.S. market standards. Significant improvements in transportation and refrigeration between Cuban producers and the U.S. market also will be needed, says ERS. Furthermore, it will take time and require a change in handling procedures for Cuba to meet the U.S. technical sanitary and phytosanitary regulations governing U.S. agricultural product imports.