Voluntary Report - public distribution

**Date:** 9/24/2003

**GAIN Report Number:** C13010

C13010

**Caribbean Basin**

Market Development Reports

**Cuba\'s Dollar Food Market and U.S. Exports**

2003

**Approved by:**

![](media/image1.wmf)Margie Bauer, Director

#### Caribbean Basin ATO

**Prepared by:**

James E. Ross and Maria Fernandez Mayo

**Report Highlights:**

This report, prepared by James E. Ross of the University of Florida, and
Maria Antonia Fernandez Mayo, Research Associate in Havana, Cuba, shows
that the dollars earnings from sales of imported and domestically
produced food in Cuba more than cover the amount of foreign exchange
used to import food into the country. It provides an excellent roadmap
to the retail and food service sectors in Cuba. Including a through
history of the political side and the dollar side on U.S. food exports
to Cuba.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Miami \[C11\]

\[C1\]

**CUBA\'S DOLLAR FOOD MARKET**

**AND U.S. EXPORTS**

**James E. Ross**

**Courtesy Professor**

**University of Florida**

**Maria Antonia Fernandez Mayo**

**Research Associate**

**Havana, Cuba**

**Department of Food and Resource Economics**

**Institute of Food and Agricultural Sciences**

**University of Florida, Gainesville, Florida**

<jeross@ufl.edu>

**Paper presented at the Thirteenth Annual Meeting of the Association
for the Study of the Cuban Economy, Coral Gables, Florida, August 8,
2003.**

**CONTENTS**

**INTRODUCTION**

**Cuba\'s Food Markets**

**Sources of Dollars**

**CUBA\'S DOLLAR FOOD SUPPLY POLICY**

**National Origin**

**Fresh Produce**

**Processed Foods**

**Mixed Enterprises**

**Foreign Sources**

**Food and Beverage Importers**

**Food and Beverage Imports**

**MAJOR MARKETING OUTLETS FOR DOLLAR FOODS**

**Retail Dollar Stores**

**Holding Companies Serving Dollar Stores**

**Purchases and Sales of Dollar Stores**

**Tourist Hotels and Restaurants**

**Holding Companies Serving Tourism**

**Principal Supplier for Tourism**

**Food Purchases, Sales and Tourism Revenue**

**ESTIMATED VALUE OF DOLLAR FOOD**

**Value and Sources of Domestic Supplies**

**Value and Sources of Foreign Supplies**

**U.S. Share of Cuba\'s Food Market**

**CONCLUSION and COMMENTS**

**Attachment A \-- Cuba\'s Food and Beverage Imports**

**Attachment B \-- Companies Authorized to Import Meat**

**Attachment C \-- Food Purchases of One Dollar Store Holding Company**

**Attachment D \-- Holding Companies Serving Tourism**

**Attachment E \-- Food Purchases of One Tourist Hotel**

**Attachment F \-- Value of Food Sold for Dollars and Dollars Earned**

**Attachment G \-- U.S. Food and Agricultural Sales to Cuba**

**Cuba\'s Dollar Food Market and U.S. Exports**

James E. Ross and Maria Antonia Fernandez Mayo[^1]

Cuban visitors and residents have the option of buying certain types of
food with either pesos or dollars. They may use one of four different
currencies and have access to more than eight different types of
official food markets. Cuban pesos are used in the ration stores, and
various agricultural markets. U.S. dollars and, to a lesser extent,
convertible pesos and euros are used to purchase food in retail stores
authorized to recover foreign exchange (divisas).[^2]

Currencies are not interchangeable at point of purchase. Cuban pesos are
not accepted in tourist facilities and dollars cannot be used in ration
stores. Dollars and pesos, however, may be exchanged before the sale.
For purposes of this paper, food that can be purchased only with U.S.
dollars, Cuba\'s convertible peso or euros is referred to as \"dollar
food.\" The thesis of the paper is that the hard currency cost of
Cuba\'s imported food is offset by sales in Cuba of food for dollars.
That is, the amount of dollars spent by Cubans and foreign visitors in
Cuba for food at the consumer level is equal to, or greater than, the
amount of dollars spent by the government to import food.

**Cuba\'s Food Markets**

Food markets in Cuba can be placed in two general categories, the peso
food market and the dollar food market. [^3] Peso food markets are not
meant to compete with food being sold in dollar stores; however, the
same or similar products may be available in both markets. Of Cuba\'s
official food markets, only the dollar stores (tiendas en divisas, also
referred to as TRDs\--tiendas de recuperacion de divisas and \"la
chopin\") trade in dollars.

Other internal food markets include: ration stores (Mercado de Alimentos
Racionados); free agricultural markets (Mercado Libre
Agropecuario\--MLA); Ministry of Agriculture markets selling food at
fixed prices (Mercado de Agricolas a Precios Topados); agricultural
\"fairs\" held on the last Sunday of each month (Las Ferias
Agropecuarias); urban garden markets (ventas en los huertos y
organoponicos); places of sale direct to the consumer by the
Cooperatives of Agricultural Production (Cooperativas de Produccion
Agropecuaria\--CPA) and the EJT (Youth Work Army); and the Cadena de
Tiendas Imagenes\--stores selling processed foods under the jurisdiction
of the Ministry of Internal Trade (Ministerio de Comerico
Interior\--MINCIN). Other food outlets include fish shops, bread stores,
and the unofficial \"mercado subterraneo\" or the black market .[^4]

**Sources of Dollars**

Cubans who do not have dollars, or adequate pesos to exchange for
convertible pesos, do not participate in the government\'s dollar food
market. Reportedly, this applies to about one-third of the population.
Another one-third has access to dollars from time to time. The remaining
one-third has access to dollars on a continuing basis. Those Cubans
living in Havana, about 20% of the 11.2 million, account for the highest
percentage of the people with access to dollars.

Cubans who do not have direct access to dollars may purchase convertible
pesos. One convertible peso in Cuba is equal in value to one U.S.
dollar. Convertible pesos may be purchased at government operated Cajas
de Cambio, S.A. (CADECA). During 2002, and until the present, Cajas de
Cambio have sold the convertible peso for 27 pesos and purchased U.S.
dollars for 26 pesos. The peso and the dollar circulate freely in
Cuba.[^5]

There are three major sources for Cuban consumers to gain access to
dollars: remittances, tourism and foreign businesses. Cuban nationals
obtain dollars primarily through remittances, funds sent to them by
family members living abroad. While the flow of remittances to Cuba is
less than to many other Latin American or Caribbean countries, the
amount is growing. Data from the Inter-American Bank show a 22% increase
in 2002. Dollars sent to family members by the one million Cubans in the
United States, and the thousands living in other countries, totaled
\$1.138 billion in 2002.

In addition to remittances, Cubans providing services for tourists may
receive tips in dollars. Cubans working for foreign businesses operating
in Cuba sometimes receive bonuses in dollars. Some mixed enterprises
supplement workers\' income with dollars, either through negotiated
arrangements with the Cuban government or through other means. Private
enterprises, such as in-home restaurants and home-room rentals, also
earn dollars for Cuban families.[^6]

**CUBA\'S DOLLAR FOOD SUPPLY POLICY**

Cuba\'s purchasing and distribution system supplying the dollar food
market is decentralized and complex. It is an intricate network of
organizations authorized to purchase, from domestic production and
importation, and distribute food products in Cuba for dollars and/or
pesos. Organizations include government agencies, state-owned companies,
mixed enterprises, associated foreign firms and licensed private
restaurants. All of the following buy and/or sell food in Cuba for
dollars.

1)  retail stores trading only with dollars, and the holding companies
    supplying those market outlets;

2)  government-owned and foreign-associated hotels and restaurants
    catering to tourists for dollars, and the companies servicing those
    establishments;

3)  food processing companies purchasing both domestic and imported
    products and selling a portion of their production within Cuba for
    dollars;

4)  government agencies and mixed enterprises supplying the system
    and/or purchasing for their own account, or for other companies, and
    wholesale and retail for either dollars or pesos;

5)  small in-home restaurants servicing customers for dollars; and

6)  the unofficial underground (black) market.

Dollar foods purchased and sold in Cuba are both produced domestically
and imported.

The government\'s priority for supplying the dollar food market is to
buy and sell fresh produce, processed foods and other food products that
are of national origin. The second priority is to purchase production
from mixed enterprises. When products are not available through national
production or from mixed enterprises, the government will import
products to supply the dollar food market.

Much of the food imported from the United States, Canada and the
European Union is sold in Cuba for dollars. In addition, some fresh
produce and manufactured foods originating in Cuba earn hard currency
through sales in Cuba\'s dollar stores, the tourist industry and via
other market outlets.

**National Origin**

State production units include state farms, state-controlled
agricultural cooperatives, and national food manufacturers. State farms
and the Basic Units of Cooperative Production (UBPC) are the main
national sources of fresh produce for the dollar market. They operate
under the authority of the Ministry of Agriculture (Ministerio de
Agricultura - MINAGRI). Processed products of national origin are
provided by manufacturers operating under the jurisdiction of the
Ministry of Food Industries (Ministerio de la Industria Alimenticia -
MINAL).

**Fresh Produce:** Fresh fruit and vegetables of national origin are
supplied by state-owned companies such as Frutas Selectas S.A. The
semi-autonomous company, within the Ministry of Agriculture, selects the
best fruits and vegetables produced by state-owned farms and
state-controlled cooperatives. Frutas Selectas then markets the products
to tourist hotels and restaurants.

Several other companies, under the jurisdiction of the Ministry of
Agriculture, supply food and agricultural products for sale to the
tourist trade. Companies include: Citricos Ceiba, Citricos Ciego de
Avila, Citricos Caribe, CAN, La Cuba, Apicultura, Labiofam, Empresas
Porcino, Empresa de Tabacos y Cigarros, Hoticolas, OROCA, CAI Arrocero,
Acopio, Empreas Pecuarias, Cuba Café and Suministros Agropecuarios.

**Processed Foods:** All food manufacturers in Cuba are under the
jurisdiction of the Ministry of Food Industries, created in 1965. MINAL
oversees industries manufacturing milk and meat products, cereals,
confections, bread, biscuits and crackers, pastries, fruit and vegetable
products, alcoholic beverages, water, soft drinks, beer and other
products. Industries milling bulk commodities, such as wheat and rice,
also are under the jurisdiction of MINAL.

At the time of the establishment of the Ministry of Food Industries,
Cuba was importing most of the processed food consumed in the country.
In addition, most of the primary material used by the existing national
food manufacturing industry was imported. There was little growth in
food processing until food research centers were introduced. Between
1970 and 1975, the Food and Agricultural Organization of the United
Nations and the governments of Sweden and the Netherlands provided
financing for pilot plants devoted to applied research in the lactic,
meat-processing, and vegetable and fruit-preserving branches.[^7]

International assistance from 1975 to 1990 for research and development
in Cuba\'s food industry led to substantial growth in food
manufacturing. Production increases during this period included: canned
meats, 157%; canned fruits and vegetables, 66%; cheeses, 143%; and wheat
flour, 126%. The number of production lines had grown from 57 in 1975 to
more than one thousand by 1989.

With the loss of Soviet and Eastern Block trade preferences in 1989 and
1990, there was a progressive decline in Cuban production in general
until the mid-1990s. Food industry executives were forced to introduce
products that made it possible to raise production volumes through
increased use of extenders and substitutes in products destined for the
domestic market. The imperative was to maintain nutritional values
despite a reduction in agricultural production, especially of meat
products.

Between 1990 and 1994, the worst period for the Cuban economy, the food
processing industry registered a dramatic decline of 42% in the value of
its output, along with a reduction of 74% in national raw-material
supplies from the agricultural sector, and a 34% drop in imported raw
materials.[^8]

In 1994, Cuba\'s production of manufactured food products was 45% of the
output in 1989. The output of beverages was 56%. By 2001, beverage
production had increased to 83% of the 1989 level. Food manufacturing
increased more slowly, reaching only 52%. While the food industry has
had significant growth since 1994, production remains substantially less
than the output level of more than a decade earlier.[^9]

Production lines that are growing the most include: beer, soft drinks,
mineral water, alcoholic beverages for export, powdered milk, pastas,
flour, soft cheese, ice cream, and yogurt. Wheat flour production also
showed some increase, while milled rice production decreased
substantially.

**Mixed Enterprises**

A mixed enterprise generating dollar sales of food products may include
a food manufacturer or an agricultural production unit. Enterprises
producing dollar foods may take the form of a joint-venture investment,
an international economic association, or a cooperative production
agreement. There are no totally foreign owned food production or
manufacturing operations in Cuba.

Mixed enterprises, the second highest priority, include
foreign-associated companies such as Sherritt Green. The joint venture
company, formed with Sherritt International of Canada, produces fruit
and vegetables for sale to tourist hotels and restaurants. Mixed
enterprises producing for the tourist trade, in addition to Sherritt
Green, include AGRO King of Canada, Grupo BM of Israel, and others.

Sixteen of Cuba\'s food-manufacturing companies are joint ventures and
12 are Cooperative Production Agreements.[^10] Each of the 16 mixed
enterprises are associated with Coralsa (La Corporacion
Alimentaria\--CORAL S.A.), a holding company constituted within MINAL in
1996. The Ministry restructured in the mid-1990s to promote increased
support for food industry firms operating with foreign capital.
Participation of Coralsa in the 16 enterprises ranges from 40% to 50%.
Fixed assets of the companies at the time of restructuring were placed
at \$36 million. They had \$4 million in working capital and \$25.5
million in the process of investment.

Enterprises associated with Coralsa produce and market sausages, candies
and confections, products derived from wheat, instant beverages, wines,
beers, soft drinks and mineral waters, as well as technological and
refrigeration equipment for the food industry. In 1994 the mixed
enterprises had a combined value of production of \$20 million. By 2000
the value of production of the mixed enterprises had reached \$140
million, representing 6% of national production.[^11]

Another area of activity in the Cuban food industries sector has been
the overseas food processing operations in which there is Cuban capital
and technology. A portion of the earnings from these industries is
returned to Cuba. Cia. de Tasajo de Uruguay, for example, was
established in Uruguay to process jerked beef and other meat products
for export to Cuba and other Latin American and African countries. A
Coralsa-owned company, Carnes del Mercosur S.A., located in Cuba,
imports and markets the products in Cuba for the internal market.

**Foreign Sources**

Historically, before and after the revolution, imported food has been an
important factor in feeding Cuba\'s population. During the years of
favored trade with the Soviet Union and the Eastern Bloc countries, Cuba
had the financial means to continue importing many of the bulk and U.S.
branded food items that its consumers preferred. With the loss of Soviet
aid beginning in the 1990s, food imports declined significantly in
dollar value but increased dramatically as a percent of total imports.

In 1990 food and beverage imports were 11% of total imports. In the
early1990s those imports increased to 20% or more and did not recede
until economic reforms were initiated in the middle 1990s. During the
past three years, a decade after the loss of Soviet support, food
imports have averaged about 16% of total imports. The higher percentage
at the beginning of the 1990s was a result of a reduction in total
imports and a continuing need for Cuba to import food to feed its
people. The lower percentage at the beginning of this century is a
result of the government\'s effort to increase food production and to
feed its population with lower-value imported food products. (See
Attachment A)

Foods sold or made available direct to consumers and the tourist
industry for dollars, generally, include those products that can be
classified as consumer-oriented, but may also include intermediate
products. Most bulk products require processing. Grains are an example
of bulk products. Processed products, such as flour and vegetable oils,
are an example of intermediate products, and meats and poultry products
are examples of consumer-oriented foods.

Cuba\'s Ministry of Agriculture is responsible for regulating
importation of bulk and intermediate agricultural products.
Consumer-oriented products are imported under the jurisdiction of the
Cuban Ministry of Public Health (Ministerio de Salud
Publica\--MINSAP).[^12]

**Food and Beverage Importers:** Decentralization in Cuban foreign trade
started in 1992, allowing state and private enterprises, joint ventures
and international economic associations as well, direct access to
external markets. Numbers of foreign businessmen opening branch offices
in Cuba increased or were represented by agents. Many warehouses were
established and duty free zones and industrial parks were opened.
Authorizations increased for companies to import food, for example 30
companies are currently authorized to import meat. (See Attachment B)

Meat and other consumer-oriented foods may be imported through several
different agencies and companies. Most intermediate products and bulk
commodities are imported through Alimport (Empresa Cubana Importadora de
Alimentos, under the auspices of the Ministerio del Comercio Exterior).
Consumer-oriented foods may also be imported by Alimport, normally, to
supply the peso market, such as ration stores, school lunch programs,
hospitals and other institutions. Alimport also imports food ingredients
for the food industry sector. In addition, dollar stores and other
government-owned companies may receive food products imported by
Alimport.

Alimport decides who to do business with, what quantity to buy based on
end customers\' needs, and negotiates and fixes prices. It also decides
buying terms depending on: seller, delivery terms and place, financial
facilities, and freight advantages.[^13]

For FAS and FOB operations, Alimport relies on a logistics group in
charge of chartering vessels and monitoring the entire process of
transportation from the operational standpoint. Alimport works with
Cuban flag vessels, brokers, or directly with foreign flagship owners,
and agrees on terms and operates with them as per international practice
standards.

For CFR, CIF, CPT and CIP operations, the Alimport logistics group
ensures shipping terms are in accordance with contract terms. It also
follows up on shipment and carriage of goods until delivery at port of
destination. Alimport negotiates and agrees on discharging terms with
port terminal and stevedoring companies. According to Alimport\'s
president, Alimport looks after needs of its end-customers and its
purchasing strategy is based on such needs.[^14]

Other official importing agencies of dollar foods include
government-owned holding companies that supply retail dollar stores and
government-owned companies and mixed enterprises that own or operate
tourist facilities.

**Food and Beverage Imports:** Food and beverage imports, in terms of
total value, are currently at the level of the beginning of the 1990s.
Food imports in 1990 were \$827 million and beverage imports totaled \$4
million. In 2001 food imports were valued at \$754 and beverage imports
at \$16 million. Wine at \$5.7 million in 2001 accounted for 35% of the
beverage imports. From 1991 to 1995 wine imports were negligible.

Increased wine imports since 1995 reflect the government\'s emphasis on
tourism, which has become the driving force of the economy. Tourism also
requires importation of higher value foods. With the return of tourism
forecast, Cuba may increase the value of food and beverage imports in
2003 over the \$832 million estimated for 2002.

**MAJOR MARKETING OUTLETS FOR DOLLAR FOODS**

There are two principal marketing outlets for food sold for dollars in
Cuba. They are the dollar stores and the tourist trade. Other entities
involved in the dollar food chain include in-home family restaurants
(restaurantes particulares), known generally as Paladares[^15] and the
underground or black market. The importance of the black market, which
deals in both pesos and dollars, has fluctuated with the availability of
food through official channels and economic reforms and regulations
imposed by the government.

In-home restaurants are limited to family employment and may serve only
12 customers at one time. They may charge their customers in either
pesos or dollars; however, most paladares request dollars for payment.
Paladares do not import food products, but purchase those products
through the retail dollar stores, state-operated agricultural markets,
semi-private agromercados, and from other sources using both pesos and
dollars. Economic impact of the private restaurants has been reported to
be negligible.[^16]

Impact of paladares on the dollar food market, however, may be of
greater proportional importance than for the total economy. In addition
to purchasing food for dollars at retail dollar stores, Paladares owners
may exchange dollars for pesos at CADECAs in order to purchase food in
the peso agricultural markets.

**Retail Dollar Stores**

Retail stores selling food and beverage products for dollars are
scattered throughout the country. Dollar stores are owned by the Cuban
government. No foreign investment in these stores has been permitted. In
all of these retail stores, food products that have been imported or
produced domestically are sold for dollars.

In Havana there are approximately 300 dollar stores, and in the entire
country roughly 1,000. Most of the dollar stores outside Havana are
located in the tourist areas of Varadero (140 kilometers east of Havana)
and Jardines del Rey en Cayo Coco-Guillermo (500 kilometers east of
Havana), Norte de Camaguey, Norte de Holguin, Santiago de Cuba, Costa
Sur y Archipielago de los Canarraeos.

**Holding Companies Serving Dollar Stores:** Companies servicing the
dollar stores are government-owned, but operate as semi-autonomous
private companies. The companies are incorporated and have the Sociedad
Anonima (S.A.) designation. Generally, the companies control their own
hard-currency revenues and can make purchases on their own account.
Sociedad Anonima companies must remit a monthly payment to the
government. The amount is negotiated between the government and the
company directors.[^17]

Names of the major dollar store chains and the government corporations
owning them include: 1) Tiendas Panamericanas (CIMEX, S.A.), (2) Tiendas
Universo (CUBANACAN, S.A.), (3) Tiendas Caracol (CARACOL, S.A.), (4)
Tiendas Meridiano (CUBALSE, S.A.), (5) Tiendas TRD Caribe (CARIBE,
S.A.), and (6) Tiendas Habaguanex (HABAGUANEX, S.A.). (For the food
purchases of one dollar store holding company in 2001, see Attachment C)

**Purchases and Sales of Dollar Stores:** Based on data obtained
pertaining to some of the dollar store purchases, it is estimated by the
authors that approximately 40% to 60% of the value of food products
purchased for sale in dollar stores are imported. Remaining needed
supplies are provided from national production.

Prices of products sold in the dollar stores are normally higher than
those offered in other internal food markets. The consumer may pay a
price that is 200% or more above the imported price or the price in one
of the internal food markets.[^18] Products similar to those available
in the dollar stores may be found at lower prices in other internal
markets. Dollar stores, reportedly, sell imported products at 240% of
cost, and products of national origin at 170%.

**Tourist Hotels and Restaurants**

Cuba rates its hotels on a star basis, ranging from one to five stars. A
five-star hotel is better than a four-star, etc. The rating system does
not compare facilities and services to comparable stars of hotels in
other countries, but is used only to compare quality of hotels within
Cuba. With current standards, most international tourism and the
resulting market for dollar foods, is concentrated in three, four and
five-star hotels. While two-star and one-star hotels provide a limited
market for imported dollar food products, the major source of food for
these hotels is the domestic market.

Cuba has approximately 300 tourist properties with about 40,000 rooms.
Five-star and four-star hotels account for approximately 40% of the
hotels and 70% of room occupancy. Three-star hotels account for about
35% of the hotels and one-fifth of the rooms, while two star-hotels
account for 25% of the hotels and 10% of room occupancy. Annual growth
in tourism in the 1990s was more than 15%, but in 2001 the number of
tourists was only slightly more than the year before, approximately 1.8
million. A slow start for tourism in 2002 resulted in even fewer
tourists, 1.7 million, than recorded each of the previous two years.

In the early 1990s, when tourists numbered some 300,000, only 12% of the
products and services required for the tourist industry were provided
through national production. Almost all food products needed for tourist
hotels and restaurants were imported. All of the beer and bottled water
served to tourists was imported. As a result of economic reforms in the
mid-1990s, pursuit of a policy of import substitution, and international
assistance to the food industry, the supply situation was reversed and
Cuba now supports, according to a Cuban study, some 65% of the tourist
hotel and restaurant needs through national production. One national
brewery, a joint venture, supplies about 95% of the tourist market for
beer and another joint venture supplies almost all of the bottled
water.[^19]

**Holding Companies Serving Tourism:** Several semi-autonomous holding
companies service the tourist industry. They include: Corporacion
Cubanacan, Grupo Hotelero Gran Caribe, Horizontes Hoteles, Habaguanex,
Grupo de Turismo Gaviota., Isla Azul, Grupo de Recreacion y Turismo
Rumbos, Compania de Marinas Puerto Sol, and the Complejo de
Convenciones. To some extent, all of the companies compete with each
other, but they concentrate on different segments of the tourist market.
No foreign investment has been introduced in the ownership of these
companies. (For additional description of each company, see Attachment
D)

A few foreign companies have negotiated contract agreements that permit
them to import food directly for their tourist facilities. Foreign
companies having arrangements under Foreign Investment Law No. 77 with
the Cuban companies often operate as hotel administrators and assume
responsibility for food and beverage services. Some have taken equity
positions in the hotels owned by the holding companies. These include,
among others: Grupo Sol Melia and Hoteles C from Spain; Accor and Club
Med from France; LTI and RIU from Germany; Delta Hotels and Resorts,
Commonwealth Hospitality, Ltd., and Leisure Canada, Inc. from Canada;
Viaggi di Ventaglio and Press Tours from Italy; and SuperClubs from
Jamaica. About 30% of Cuba\'s hotels involve investments with foreign
companies. There are no totally foreign owned hotels in Cuba.

**Principal Supplier for Tourism:** Comercializadora ITH, S.A. is the
principal company importing supplies for tourist hotels and restaurants.
ITH operates under the auspices of the Ministry of Tourism (Ministerio
del Turismo\--MINTUR) importing products for government-owned tourism
holding companies, mixed enterprises, and individual hotels and
restaurants. It is the only company supplying food and other items for
tourist facilities throughout the country. Food products may be imported
directly by ITH, or it may import through Alimport, or any of the
official importing agencies. Products are purchased by ITH from both
domestic and foreign sources.

Some joint-venture hotels have agreements under the foreign investment
law to import direct, without going through a government purchasing
company. At times, because of the foreign company\'s supplier contacts
and expertise, government-owned hotels may import through the joint
venture or contract agreement companies. The supply and quality of food
products available through the importing company may determine which
source is used.[^20]

**Food Purchases, Sales and Tourism Revenue:** Gross revenues from
tourism in 2002 from 1.7 million tourists totaled \$1.5 billion, with
\$350 million in gross profits. Cuba has projected 3.1 million visitors
in 2005, and revenue from tourism at \$2.5 billion. For 2010, Cuba has
projected 6.2 million visitors and \$10 billion in revenue. In view of
factors affecting tourism in Cuba and worldwide, it is highly doubtful
theses figures will be achieved.

Increased tourism of this magnitude obviously would affect the demand
for food, both from domestic production and imported. The proportional
increase would probably favor imported food. Increased demand for
imported food would impact the need for additional hard currency. With
the high markup policy on food sold through tourist hotels and
restaurants, however, the country may advance the foreign currency
needed to import the food needed for tourism. Food is sold through
tourist hotels and restaurants, generally, at 300% of the imported
dollar cost. As in dollar stores, food of national origin transacted
through tourism is sold at a lower price markup.

Cubanacan, S.A. accounts for a large percentage of the tourist market.
It is comprised of 15 companies registered in Cuba, including Cubanacan
Hoteles administering 28 hotels. Other Cubanacan companies include
Palmares Restaurantes, operating 50 restaurants and numerous cafeterias.
Tiendas Universo owns a network of commercial centers and stores
catering to the tourist trade. Cubanacan, and the mixed enterprises in
which Cubanacan maintains interest, represent 34% of Cuba\'s tourism
receipts.

(See Attachment E for a description and value of products purchased for
sale through one restaurant in Havana.)

**VALUE OF PRODUCTS ENTERING THE DOLLAR FOOD MARKET**

# 

# Complete data are not available to the authors stating the value of food, imported or produced domestically, sold for dollars through dollar stores or tourism. Estimates of the value of food distributed through dollar stores and the tourist industry are made based on both official and unofficial sources. (See Attachment F)

**Value and Sources of Domestic Supplies**

Domestic supplies of dollar food originate with the Ministry of
Agriculture, the Ministry of Food Industries and mixed enterprises.

Food production, mostly fresh produce, sold through the Ministry of
Agriculture to the tourist sector and dollar stores in 2001 totaled
\$168 million, an increase of 3.5% compared to gross revenues of US\$162
million reported in 2000.[^21] In 1998 and 1999, MINAGRI reported gross
revenues from marketing agricultural commodities to the tourism sector
of US\$59 million and US\$70 million, respectively. Information is not
available to explain the large increase from \$70 million in 1999 to
\$162 million in 2000. Assuming the higher level of food supply will
continue to be available for sale to the tourist industry; however, an
estimated value of food produced under the auspices of the Ministry of
Agriculture and sold for dollars through tourism could range from \$160
million to \$180 million in 2003.

Sales of processed food for the tourist sector and dollar stores in 1998
totaled \$171 million, 21% more than the year before. Production was
three times greater than in 1994, when the food processing industry
began focusing on the dollar market. Approximately 15% of total output
of the food processing industry were destined for the tourist trade and
export. By 1999, the dollar market represented 20% of production sales.
Processed foods sold through the Ministry of Food Industries to the
tourist sector and dollar stores, assuming most of the mixed enterprise
production and some of the national company production enter the dollar
market, could range from \$150 million to \$180 million.

Data are not available on the value of food produced in Cuba, largely
fresh fruit and vegetables, for the tourist market by mixed enterprises,
but could range from \$5 million to \$10 million.

**Value and Sources of Foreign Supplies**

The European Union and Canada in the 1990s provided about half of
Cuba\'s food imports, while Mexico, and Latin American (Argentina and
Brazil for soybean products) and Asian countries (China, Thailand and
Vietnam for rice imports) were also important sources of food imports.
More than half of Europe's agricultural exports to Cuba, which totaled
\$185 million in 1999, consisted of wheat flour, vegetable oils and
consumer-ready products, primarily dairy products and poultry meat.
Wheat accounted for about 45% of the total. Canada's agricultural
exports to Cuba, \$115 million in 1999, were largely (83%) pulses and
consumer-oriented products, such as red meat, poultry and dairy
products.

# Official data show food and beverage imports in recent years ranging from \$700 million to \$800 million. Approximately half of the food imported by Cuba meets the classifications of intermediate and consumer-ready products. The remaining half consists of bulk commodities, such as wheat, coarse grains, pulses, and rice. Most of the bulk and some of the intermediate products imported by Alimport are for the accounts of the ration stores, institutions and food manufacturing companies. A large percentage of the imported food products classified as intermediate and consumer-oriented, is sold direct to consumers through dollar stores, government-owned restaurants, and tourist hotel cafeterias and restaurants. 

**U.S. Share of Cuba\'s Food Market**

With changes in U.S. policy regarding food and agricultural exports to
Cuba and Cuba\'s reduced food supply as a result of tropical storms,
food imports from the United States have been initiated in the new
century. In the year 2001, the United States exported \$4.6 million in
food to Cuba. In 2002, U.S. food exports to Cuba increased to \$140
million. (See Attachment G)

The Cuban government has designated Alimport as the sole importer of
food and agricultural products from the United States. Dollar store and
tourism holding companies must obtain authorization from Alimport before
importing food from the United States. This procedure is not required
for other countries.

Excluding political considerations, it is anticipated Cuba will continue
buying U.S. food because of lower transportation costs and a competitive
U.S. agricultural sector that wants to trade with Cuba. Another factor,
less obvious, is that Cubans are familiar with U.S. brands and
appreciate the quality of U.S. food products. Until 1992, soon after the
loss of favored trade with the Soviet Bloc countries, Cuba purchased
U.S. branded foods directly from foreign subsidiaries of U.S. based
companies. With passage of the 1992 Cuban Democracy Act (the
\"Torricelli Act\"), U.S. Treasury authority to issue licenses for most
U.S. subsidiary trade with Cuba was revoked. (The Torricelli Act also
banned for 180 days vessels that had entered a Cuban port from loading
or unloading in U.S. ports.)

In 1996 the Cuban Liberty and Democratic Solidarity Act (the
\"Helms-Burton Act\") further tightened the embargo. Although trade
between Cuba and U.S. foreign-based subsidiaries was not legal,
according to U.S. law, food products with popular U.S. brands continued
to be available in Cuba throughout the 1990s. It was not until January
1999, when President Clinton announced substantial changes in U.S.
commercial policy toward Cuba, before prospects improved for food and
agricultural exports to Cuba.

The Executive Order President Clinton signed in 1999, although
interpretation was questionable, permitted U.S. food sales in Cuba to
small private farmers, private cooperatives, individual Cuban nationals,
private home-based restaurants, non-government organizations (NGOs), and
the government-formed Basic Units of Cooperative Production (UBPCs).
Although these private sales opportunities were permitted, there were no
significant sales of food to Cuba until 2001. In fact, there were no
significant sales of U.S. food and agricultural products to Cuba for
more than 40 years, from 1960 to 2001.

More recent action, the Trade Sanctions Reform and Export Enhancement
Act (TSRA), was signed into law late in 2000. It was not until July 12,
2001, however, that the implementing regulations were published. One of
the primary purposes of TSRA was to require the U.S. Government to
license commercial sales of agricultural commodities to purchasers in
Cuba. All sales by U.S. companies would be authorized only in U.S.
dollars\--no credit transactions would to be permitted.

Initially, Cuba cast aside offers of U.S. food products, including
donations for disaster assistance. Following Hurricane Michelle in
November 2001, however, Cuba\'s food reserve was depleted and Cuba
turned to the United States for food, especially bulk commodities, such
as rice, to replenish its ration stores and to furnish institutional
food. All purchases have been for cash.

In May 2002, the Cuban government designated Alimport as the exclusive
purchasing agent for U.S. based companies that want to export food
products direct from the United States to Cuba. Alimport purchases
agricultural and branded food products from U.S. based companies and
re-sells, or transfers, the products to other Cuba-based companies or
institutions.[^22]

Cuba has indicated it will continue a high level of food imports from
the United States in 2003. Cuba seems to be doing this. During the first
five months of 2003, Cuba has increased imports of U.S. food 61% over
imports in 2002. Since exports of U.S. food to Cuba began in December
2001, Cuba has purchased U.S. food valued at \$233 million.

U.S. bulk agricultural exports to Cuba from December 2001 through May
2003 totaled \$111 million, intermediate product exports were \$78
million, and consumer-oriented exports reached \$44 million. Major
commodity exports were: soybean oil, \$45 million; coarse grains, \$40
million; poultry meat, \$39 million; soybean meal, \$32 million;
soybeans, \$29 million and wheat, \$28 million.

With prospects for regaining a higher level of tourism, Cuba\'s need for
high-value food may increase. A study by the Cuba Policy Foundation[^23]
states that expenditures of \$30 per day for food by U.S. tourists would
require \$126 million in food imports annually by Cuba, based on 1.5
million tourists staying seven days in Cuba. Higher estimates of dollar
food expenditures and larger numbers of tourists, whether from the
United States or other countries, would result in higher estimates of
food import needs.

**CONCLUSION AND COMMENTS**

Combining estimates of domestic and foreign food supplies entering
Cuba\'s dollar food market provides a total of all foods sold in Cuba
for dollars at roughly \$400 million to \$500 million. The value of
dollar earnings from food being sold for dollars could range from \$750
million to \$950 million. Allowing for the cost of imported food sold in
the dollar market would provide adjusted dollar earnings of \$650
million to \$800 million. (Attachment F)

Based on the findings, the hard currency cost of imported food appears
to be offset, in general, by sales in Cuba of food for dollars. In other
words, dollar earnings from sales in Cuba of imported and domestically
produced food appear to be equal to or greater than the amount of
foreign exchange used to import food.

Estimating the dollar value of food sales at dollar stores and tourist
facilities provides a check on the value of dollar food entering those
outlets. Dollar store sales totaled \$1.22 billion in 2001.[^24] If the
level of sales continues in 2003 and half of the dollar store sales is
for food, the value of dollar food sold would be about \$600 million.
Tourism in 2001 was reported at 1.8 million and in 2002 at 1.7 million.
If tourism returns in 2003 to the 2001 level and each tourist stays
seven days and spends \$30 to \$45 per day for food, the range in value
of food sold would be \$360 million to \$540 million. Combined, dollar
food sales in tourist facilities and dollar stores would total roughly
\$1 billion.

In addition to the dollar expenditures for food sold in dollar stores
and through tourist hotels and restaurants, Cubans exchange dollars for
pesos to buy food at the agricultural peso food markets. CADECAs often
are located at or near agricultural markets to exchange dollars for
pesos. The dollars then become hard currency generated from the sale of
domestic food.

Growth of Cuba\'s dollar food market, to a large extent, is contingent
on continuation of a relatively high level of remittances, and increases
in tourism and foreign investment. With elevated security concern
worldwide following events on September 11, 2001 in the United States,
and economic recession in Canada and Europe, growth of tourism in Cuba
decreased in 2002 but has risen in the first part of 2003. Foreign
investment appears to be continuing on a descending trend.

With a lower rate of tourist growth and shrinkage of disposable income
worldwide for tourists, as well as reduced foreign investment, Cuba\'s
dollar food market could be affected negatively. On the other hand, if
there is sustained international economic recovery, tourism increases
and Cuba implements effective growth policies, the demand in Cuba for
dollar food could increase. The United States, in particular, would be
in a favorable position because of its competitive prices and lower
freight costs.

Perhaps the greatest unknown is the future of travel restrictions for
U.S. tourists to Cuba. Lifting the U.S. imposed restrictions on travel
to Cuba could result in a substantial increase in the number of tourists
going to Cuba. This would create an increased demand in Cuba for
imported, as well as domestically produced, dollar food and beverage
products.

**ATTACHMENT A**

**Cuba\'s Food and Beverage Imports, in Thousand Cuban Pesos\***

**and as Percent of Total Imports**

  ---------- --------------- --------------- ------------- --------------- ----------
  **YEAR**   **TOTAL         **FOOD          **BEVERAGE    **FOOD & BEV.   **F&B as %
             IMPORTS**       IMPORTS\*\***   IMPORTS**     IMPORTS**       of TOTAL**

  **1990**   **7,416,525**   **827,341**     **3,728**     **831,069**     **11.2**

  **1991**   **4,233,752**   **825,377**     **908**       **826,285**     **19.5**

  **1992**   **2,314,916**   **498,569**     **12**        **498,851**     **21.5**

  **1993**   **2,008,215**   **474,176**     **155**       **474,131**     **23.6**

  **1994**   **2,016,821**   **467,331**     **2,760**     **470,091**     **23.3**

  **1995**   **2,882,530**   **610,883**     **14,068**    **624,951**     **21.7**

  **1996**   **3,480,608**   **689,108**     **11,676**    **700,784**     **20.1**

  **1997**   **3,987,256**   **724,463**     **27,367**    **751,830**     **18.9**

  **1998**   **4,181,192**   **703,940**     **21,208**    **725,148**     **17.3**

  **1999**   **4,349,090**   **721,168**     **21,508**    **742,676**     **17.1**

  **2000**   **4,759,613**   **671,569**     **16,853**    **688,422**     **14.5**

  **2001**   **4,787,753**   **754,356**     **16,138**    **770,494**     **16.1**

  **2002     **4,838,000**   **\--**         **\--**       **832,000**     **17.2**
  est.**                                                                   
  ---------- --------------- --------------- ------------- --------------- ----------

\* **Official Cuban Exchange Rate is One Cuban Peso Equal to One U.S.
Dollar.**

**\*\* Data from Cuba\'s Anuario Estadistico classification of Seccion
0, Productos alimenticios y animales vivos. Live animals are excluded
from data used in this table. Beverage data were obtained from Seccion
1, Anuario Estadistico.**

**ATTACHMENT B**

**Cuban Companies Authorized To Import Meat**

+-------------------------------------------+------------+-------------+
| **NAME OF IMPORTING COMPANY**             | *          | **FACSIMILE |
|                                           | *TELEPHONE | NUMBER**    |
|                                           | NUMBER**   |             |
+-------------------------------------------+------------+-------------+
| **Residencial Turistico Marina Hemingway, | **         | *           |
| S.A.**                                    | 271-8000** | *204-1149** |
+-------------------------------------------+------------+-------------+
| **Compania Hoteles CUBANACAN, S.A.**      | **204      | *           |
|                                           | -7649-51** | *204-7634** |
+-------------------------------------------+------------+-------------+
| **Grandes Hoteles del CARIBE, S.A.**      | **         | *           |
|                                           | 204-6206** | *204-0205** |
+-------------------------------------------+------------+-------------+
| **Compania de Tiendas Universo, S.A.**    | *          | **33-9485** |
|                                           | *33-1541** |             |
+-------------------------------------------+------------+-------------+
| **Grupo de Exportacion E Importacion de   | *          | *           |
| la Oficina del Historiador de Ciudad de   | *66-9103** | *861-3060** |
| la Habana**                               |            |             |
|                                           | *          |             |
|                                           | *8611187** |             |
+-------------------------------------------+------------+-------------+
| **Palmares, S.A.**                        | *          | **33-9107** |
|                                           | *33-0859** |             |
+-------------------------------------------+------------+-------------+
| **Inversiones Locarinos, S.A.**           | **         | *           |
|                                           | 204-2310** | *204-2336** |
+-------------------------------------------+------------+-------------+
| **Parque Central, S.A.**                  | **         | *           |
|                                           | 862-4104** | *862-1618** |
+-------------------------------------------+------------+-------------+
| **Comercializadora D\' Leone**            | *          | **66-9880** |
|                                           | *66-9879** |             |
+-------------------------------------------+------------+-------------+
| **Aerocatering, S.A.**                    | *          | **33-0406** |
|                                           | *66-6164** |             |
+-------------------------------------------+------------+-------------+
| **Servicios Comerciales Argos, S.A.**     | **         | *           |
|                                           | 204-0802** | *204-9027** |
+-------------------------------------------+------------+-------------+
| **Suministro Maritimo-Portuario, A.C.**   | **         | **33-8661** |
|                                           | 861-7557** |             |
+-------------------------------------------+------------+-------------+
| **Comercializadora ITH, S.A.**            | **         | **33-3642** |
|                                           | 832-0571** |             |
+-------------------------------------------+------------+-------------+
| **Cadenas de Tiendas TRD CARIBE**         | *          | **66-6641** |
|                                           | *66-6640** |             |
+-------------------------------------------+------------+-------------+
| **Firma Comercial Importadora             | **         | **55-1729** |
| \"PESMAR\"**                              | 830-3770** |             |
+-------------------------------------------+------------+-------------+
| **CUBALSE**                               | **         | *           |
|                                           | 204-6419** | *204-3936** |
+-------------------------------------------+------------+-------------+
| **Importadora del Mar**                   | **         | **66-9786** |
|                                           | 862-4025** |             |
+-------------------------------------------+------------+-------------+
| **Cadenas de Tiendas CARACOL, S.A.**      | **         | *           |
|                                           | 202-8283** | *204-0629** |
+-------------------------------------------+------------+-------------+
| **Firma Comercial Importadora EMSUNEX**   | **         | *           |
|                                           | 873-8170** | *873-8170** |
+-------------------------------------------+------------+-------------+
| **SERVIMPORT**                            | **         | *           |
|                                           | 208-0653** | *208-0291** |
+-------------------------------------------+------------+-------------+
| **Comercial Mayorista de Alimentos        | *          | **33-5147** |
| \"CASABE\"**                              | *33-5433** |             |
+-------------------------------------------+------------+-------------+
| **Empresa Cubana Exportadora E            | **         | **66-6270** |
| Importadora de Servicios, Articulos Y     | 861-5526** |             |
| Productos Tecnicos Especializados**       |            |             |
+-------------------------------------------+------------+-------------+
| **Empresa Cubana Importadora Y            | **         | **66-9777** |
| Exportadora de Productos Tecnicos**       | 861-2666** |             |
+-------------------------------------------+------------+-------------+
| **AT Comercial, S.A.**                    | *          | **66-9848** |
|                                           | *66-9848** |             |
+-------------------------------------------+------------+-------------+
| **Gaviota, S.A.**                         | *          | **66-9848** |
|                                           | *66-6777** |             |
+-------------------------------------------+------------+-------------+
| **CORATUR, S.A.**                         | **         | *           |
|                                           | 204-1274** | *204-1376** |
+-------------------------------------------+------------+-------------+
| **Empresa Cubana Importadora de           | *          | **33-3151** |
| Alimentos**                               | *54-2174** |             |
+-------------------------------------------+------------+-------------+
| **Empresa Importadora de Abastecimientos  | *          | *           |
| Tecnicos**                                | *22-0213** | *204-9353** |
+-------------------------------------------+------------+-------------+
| **Distribuidora CIMEX, S.A.**             | **         | *           |
|                                           | 204-0462** | *204-1996** |
+-------------------------------------------+------------+-------------+
| **CUBACAN, S.A.**                         | **         | *           |
|                                           | 204-2485** | *204-0222** |
+-------------------------------------------+------------+-------------+

**ATTACHMENT C**

**Food, Beverage and Tobacco Products Purchased by One Holding Company
for Sale Through its Chain of Dollar Stores**

**By Quantity, Value and Percent, 2001**

+-----------------------+----------------+-------------+--------------+
| **PRODUCT**           | **QUANTITY**   | **VALUE     | **PERCENT**  |
|                       |                | (\$1,000)** |              |
|                       | **(Metric      |             |              |
|                       | Tons)**        |             |              |
+-----------------------+----------------+-------------+--------------+
| **Red Meat, fresh\*** | **882.0**      | **1,584.5** | **1.12**     |
+-----------------------+----------------+-------------+--------------+
| **Poultry Meat,       | **5,631.1**    | *           | **11.05**    |
| fresh\***             |                | *15,485.5** |              |
+-----------------------+----------------+-------------+--------------+
| **Pork, fresh**       | **471.4**      | **765.3**   | **0.55**     |
+-----------------------+----------------+-------------+--------------+
| **Other Meat,         | **1,580.2**    | **5,887.3** | **4.10**     |
| Preserved\***         |                |             |              |
+-----------------------+----------------+-------------+--------------+
| **Seafood, fresh**    | **4.4**        | **30.8**    | **0.02**     |
+-----------------------+----------------+-------------+--------------+
| **Seafood,preserved** | **159.2**      | **738.5**   | **0.53**     |
+-----------------------+----------------+-------------+--------------+
| **Dairy Products\***  |                | **9,745.9** | **6.95**     |
+-----------------------+----------------+-------------+--------------+
| **Rice\***            | **103.9**      | **174.8**   | **0.12**     |
+-----------------------+----------------+-------------+--------------+
| **Grains\***          | **260.2**      | **784.5**   | **0.56**     |
+-----------------------+----------------+-------------+--------------+
| **Vegetable Oil\***   | **5,151.1**    | *           | **8.35**     |
|                       |                | *11,703.6** |              |
+-----------------------+----------------+-------------+--------------+
| **Fats\***            | **151.7**      | **307.6**   | **0.22**     |
+-----------------------+----------------+-------------+--------------+
| **Tomato Paste\***    | **2,406.6**    | **4,989.3** | **3.56**     |
+-----------------------+----------------+-------------+--------------+
| **Pastas\***          | **1577**       | **2984.0**  | **2.13**     |
+-----------------------+----------------+-------------+--------------+
| **Bread/Sweets**      |                | **1,289.5** | **0.92**     |
+-----------------------+----------------+-------------+--------------+
| **Confections**       |                | *           | **10.70**    |
|                       |                | *14,994.7** |              |
+-----------------------+----------------+-------------+--------------+
| **Eggs\* (1,000       | **21,211.2**   | **2,120.0** | **1.51**     |
| units)**              |                |             |              |
+-----------------------+----------------+-------------+--------------+
| **Beverages, NA**     |                | *           | **16.25**    |
|                       |                | *22,785.4** |              |
+-----------------------+----------------+-------------+--------------+
| **Beer**              |                | *           | **14.53**    |
|                       |                | *20,374.7** |              |
+-----------------------+----------------+-------------+--------------+
| **Alcoholic           |                | *           | **7.96**     |
| Beverages**           |                | *11,163.0** |              |
+-----------------------+----------------+-------------+--------------+
| **Tobacco/ Cigars**   |                | *           | **8.80**     |
|                       |                | *12,333.5** |              |
+-----------------------+----------------+-------------+--------------+
| **TOTAL ALL           |                | **          | **100.0**    |
| PRODUCTS**            |                | 140,202.6** |              |
+-----------------------+----------------+-------------+--------------+
| **TOTAL FOOD &        |                | **          | **100.00**   |
| BEVERAGE PRODUCTS**   |                | 127,869.1** |              |
+-----------------------+----------------+-------------+--------------+

1.  **Products which are largely imported by Cuba. If 60% of the
    products largely imported by Cuba were actually imported by the
    holding company, the value of imported products distributed through
    the holding company\'s chain of dollar stores would be valued at
    \$34 million (60% of \$56 million). Therefore, the value of imported
    food and beverages sold through the holding company\'s chain of
    dollar stores would account for approximately one-fourth of the
    value of all food and beverage products being sold by the holding
    company.**

**ATTACHMENT D**

**Holding Companies Supplying the Tourist Trade**

[Corporacion Cubanacan, S.A.]{.underline} was formed to operate four and
five star hotels, restaurants, cafeterias, retail stores, water
recreation centers, tourist health facilities, and tourist reception and
other recreation centers. Cubanacan also produces and sells artisan
handicrafts and operates a transportation company that provides tour
buses and rents automobiles.

Many of the tourist hotels, administered as either international
economic association contracts or joint ventures, involve Cubanacan.
Joint investment arrangements under Foreign Investment Law No. 77 have
been developed by Cubanacan with Grupo Sol Melia (Spain), LTI (Germany),
Golden Tulip (Holland), and SuperClubs (Jamaica).

[Grupo Hotelero Gran Caribe, S.A.]{.underline} operates more than 40
hotels classified as four and five star hotels. Gran Caribe hotels have
9,500 rooms for tourists scattered throughout the country, but are
located mainly in Havana and Varadero. In addition, the group operates
three primary tourist attractions in Havana, the Restaurant La Bodeguita
del Medio, Bar and Restaurant La Floridita and the Cabaret Tropicana.

[Horizontes Hoteles, S.A.]{.underline} is a hotel chain, mostly three
and four stars, with more than 7,000 rooms. Horizontes also operates
facilities with mineral water baths, treatment for stress, etc. One spa
(centro hospitalario que atiende multiples enfermedades) treats patients
with health problems characteristic of the Caribbean.

[Grupo de Recreacion y Turismo Rumbos, S.A.]{.underline}, founded in
1994, has grown approximately 20% annually. It operates facilities for
both national and international tourists in Cuba\'s major tourist cities
and rustic locations. Rumbos is diversified, and has established
businesses in: a travel agency; various types of restaurants, including
fast food (comidas rapidas, restaurantes y parrilladas); small lodges in
cities, on beaches, in the country, at golf courses, airports, and
marinas; and eco-tourism with 40 routes. Currently, Rumbos is planning
eight new golf courses to meet the standards for both international golf
amateurs and professionals.

[Compania de Marinas Puerto Sol, S.A.]{.underline} was created to
develop marinas, piers, recreational boat activities, etc. The company
owns 390 two star and local hotels to meet the needs of tourists and
nationals.

[Grupo de Turismo Gaviota, S.A.]{.underline} is a tourism company
controlled by the Revolutionary Armed Forces. It is dedicated to
operation of four and five star hotels, development of marinas,
restaurants and cafeterias, recreational water facilities, and health
facilities for tourists. It also operates a transportation company that
offers tourist buses and rental of automobiles and taxis.

[Habaguanex, S.A.]{.underline} belongs to the historical office of
Havana (Oficina del Historiador de la Ciudad). It was established to
develop three and four star hotels for international tourists in the
Historic Center of Old Havana (Centro Historico de la Habana Vieja).
Currently, it is renovating various hotels and opening restaurants in
the oldest part of the city.

[Isla Azul, S.A.]{.underline} was established to develop two and three
star hotels for international tourists seeking low-cost accommodations.

[Complejo de Convenciones]{.underline} includes operation of the Palace
of Conventions (Palacio de las Convenciones), Hotel Palco, the
restaurants, Rancho Palco and El Palenque, and Club Habana. It also
administers the Sala de Expocisiones (PABEXPO), the Mansion Residencial
(Casa de Protocol \-- House of Protocol), and the auto rental agency,
Palcocar. Basically, the complex specializes in the development of
tourist events and conventions.

**ATTACHMENT E**

**Dollar Value of Imported Food and Beverage Products Purchased by One
Tourist Restaurant During a Seven-Month Period**

**and Projected for One Year, 2001**

+--------------------------+------------------------+------------------+
| **PRODUCT**              | **ACCUMULATED          | **PERCENT OF     |
|                          | PURCHASES**            | TOTAL**          |
+--------------------------+------------------------+------------------+
| **Meat, fresh &          | **\$320,473**          | **39.1**         |
| preserved**              |                        |                  |
+--------------------------+------------------------+------------------+
| **Beverages, alcoholic** | **154,235**            | **18.8**         |
+--------------------------+------------------------+------------------+
| **Fruit & Vegetables,    | **75,514**             | **9.2**          |
| fresh**                  |                        |                  |
+--------------------------+------------------------+------------------+
| **Dairy Products**       | **60,165**             | **7.3**          |
+--------------------------+------------------------+------------------+
| **Beverages,             | **58,144**             | **7.1**          |
| non-alcoholic**          |                        |                  |
+--------------------------+------------------------+------------------+
| **Miscellaneous food**   | **43,920**             | **5.4**          |
|                          |                        |                  |
| **Products**             |                        |                  |
+--------------------------+------------------------+------------------+
| **Grains & Cereals**     | **42,552**             | **5.2**          |
+--------------------------+------------------------+------------------+
| **Fats & Oils**          | **31,158**             | **3.8**          |
+--------------------------+------------------------+------------------+
| **Fruit & Vegetable      | **21,273**             | **2.6**          |
| Juices, fresh &          |                        |                  |
| processed**              |                        |                  |
+--------------------------+------------------------+------------------+
| **Sauces**               | **11,983**             | **1.5**          |
+--------------------------+------------------------+------------------+
| **TOTAL, Seven Months**  | **\$819,417**          | **100**          |
+--------------------------+------------------------+------------------+
| **TOTAL, Projected for   | **\$1,404,715**        | **100**          |
| Twelve Months**          |                        |                  |
+--------------------------+------------------------+------------------+

> **ATTACHMENT F**

**Estimate of Annual Value of Food Sold in the Dollar Food Market, Value
of Dollar Earnings from Food Sales in the Dollar Food Market, and the
Sources of Food Entering the Dollar Market,**

**Million U.S. Dollars**

+-------------+-------------+-------------+-------------+-------------+
| **SOURCE of | **DOLLAR**  | **VALUE OF  | **M         | **VALUE OF  |
| FOOD SOLD** |             | FOOD at     | ULTIPLIER** | DOLLAR      |
|             | **MARKET**  | \"Wh        |             | EARNINGS**  |
|             |             | olesale\"** |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *           | **Dollar    | **40 - 60** | **2.4**     | **100 -     |
| *Imported** | Stores**    |             |             | 140**       |
+-------------+-------------+-------------+-------------+-------------+
| *           | **Tourist   | **40 - 60** | **3.0**     | **120 -     |
| *Imported** | Industry**  |             |             | 180**       |
+-------------+-------------+-------------+-------------+-------------+
| **Ministry  | **Dollar    | **150 -     | **1.7**     | **250 -     |
| of Food     | Stores**    | 180**       |             | 300**       |
| I           |             |             |             |             |
| ndustries** | **&         |             |             |             |
|             | Tourism**   |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Ministry  | **Dollar    | **160 -     | **1.7**     | **270 -     |
| of          | Stores &    | 180**       |             | 300**       |
| Ag          | Tourism**   |             |             |             |
| riculture** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Mixed     | **Tourist   | **5 - 10**  | **1.7**     | **10 - 15** |
| En          | Hotels &    |             |             |             |
| terprises** | Re          |             |             |             |
|             | staurants** |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **A         | **          | **5 - 10**  | **- 0-**    | **5 - 10**  |
| gricultural | CADECAs\*** |             |             |             |
| Markets**   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **TOTAL**   |             | **400 -     |             | **750 -     |
|             |             | 500**       |             | 950**       |
+-------------+-------------+-------------+-------------+-------------+
| *           |             |             |             | **650       |
| *Earnings** |             |             |             | -800**      |
|             |             |             |             |             |
| **Adj       |             |             |             |             |
| usted\*\*** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

**\* CADECAs located at various agricultural markets exchange dollars
for pesos. Individuals who have exchanged dollars for pesos may then
purchase food with those pesos for their own private use and/or for sale
through their private restaurants (paladares). Dollars exchanged through
all CADECAs in 2001 earned \$100 million for the government, of which it
is estimated by the authors 5% to 10% was used for food. It is an
indirect use of dollars to purchase food.**

**\*\* Dollar earnings adjusted to compensate for the import cost of
food (bulk and intermediate) used in the manufacture of food products
sold in the dollar market, and the import cost of food sold through
tourism and in the dollar stores.**

**ATTACHMENT G**

**U.S. Food and Agricultural Sales to Cuba, 2001-2002,**

**and January through May, 2002-2003**

**(\$1,000)**

+--------------+--------------+-----+-------+-------+-------+-------+
| **CUMULATIVE | **PRODUCT**  | **  | **2   | **2   | **2   | **Pe  |
| RANKING**    |              | 200 | 002** | 002** | 003** | rcent |
|              |              | 1** |       |       |       | Cha   |
|              |              |     |       | *     | *     | nge** |
|              |              |     |       | *Jan- | *Jan- |       |
|              |              |     |       | May** | May** |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **Bulk       |              | **2 | **72, | **38, | **36, | **-   |
| Total**      |              | ,32 | 774** | 605** | 099** | 6.5** |
|              |              | 7** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **3**        | **Wheat**    | *   | **22, | **16, | **4,  | **-6  |
|              |              | *\- | 789** | 005** | 832** | 9.8** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **1**        | **Coarse     | **2 | **22, | **6,  | **14, | **12  |
|              | Grains**     | ,32 | 739** | 538** | 746** | 5.5** |
|              |              | 7** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **4**        | **Rice**     | *   | **6,  | **6,  | **8,  | **2   |
|              |              | *\- | 266** | 266** | 077** | 8.9** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **2**        | **Soybeans** | *   | **20, | **9,  | **8,  | **-1  |
|              |              | *\- | 922** | 796** | 213** | 6.2** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **5**        | **Pulses**   | *   | *     | **    | **    | **    |
|              |              | *\- | *58** | \--** | 230** | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **In         |              | **  | **41, | **7,  | **36, | **37  |
| termediate** |              | \-- | 316** | 812** | 796** | 3.3** |
|              |              | 0\- |       |       |       |       |
| **Total\***  |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **2**        | **Soybean    | *   | **19, | **3,  | **12, | **23  |
|              | Meal**       | *\- | 281** | 807** | 745** | 4.8** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **1**        | **Soybean    | *   | **21, | **3,  | **23, | **55  |
|              | Oil**        | *\- | 438** | 577** | 403** | 4.3** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **3**        | **Animal     | *   | **    | **    | *     | **-9  |
|              | Fats**       | *\- | 428** | 428** | *17** | 6.0** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **4**        | **Other**    | *   | **    | **0** | **    | **    |
|              |              | *\- | 165** |       | 489** | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **Consu      |              | **2 | **25, | **8,  | **15, | **8   |
| mer-Oriented |              | ,24 | 723** | 554** | 575** | 2.1** |
| Total**      |              | 7** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **7**        | **Snack      | *   | **    | **0** | *     | **    |
|              | Foods**      | *\- | 176** |       | *83** | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **9**        | **Breakfast  | *   | *     | **0** | **0** | **    |
|              | Cereal**     | *\- | *41** |       |       | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **5**        | **Red        | *   | **    | **0** | *     | **    |
|              | Meats**      | *\- | 254** |       | *32** | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **1**        | **Poultry    | **1 | **22, | **7,  | **13, | **7   |
|              | Meat**       | ,95 | 946** | 713** | 597** | 6.3** |
|              |              | 9** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **4**        | **Dairy      | *   | **    | **    | *     | **-7  |
|              | Products**   | *28 | 336** | 265** | *67** | 4.7** |
|              |              | 8** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **2**        | **Eggs &     | *   | **    | **    | **    | **14  |
|              | Products**   | *\- | 767** | 267** | 641** | 0.1** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **3**        | **Fresh      | *   | **    | **0** | **    | **    |
|              | Fruit**      | *\- | 366** |       | 501** | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **10**       | **Fresh      | *   | *     | **0** | **0** | **    |
|              | Vegetables** | *\- | *28** |       |       | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **6**        | **Processed  | *   | **    | **0** | *     | **    |
|              | F&V**        | *\- | 189** |       | *92** | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **12**       | **F&V        | *   | **3** | **0** | **0** | **    |
|              | Juices**     | *\- |       |       |       | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **11**       | **Tree       | *   | *     | **0** | *     | **    |
|              | Nuts**       | *\- | *11** |       | *38** | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **8**        | **Wine &     | *   | *     | **0** | **0** | **    |
|              | Beer**       | *\- | *46** |       |       | \--** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
|              | **Other**    | *   | **    | **    | **    | **7   |
|              |              | *\- | 562** | 308** | 524** | 0.1** |
|              |              | -** |       |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+
| **TOTAL**    |              | **4 | *     | **54, | **88, | **6   |
|              |              | ,57 | *139, | 971** | 650** | 1.3** |
|              |              | 4** | 814** |       |       |       |
+--------------+--------------+-----+-------+-------+-------+-------+

**\*Excludes live animals (\$3 million in 2002).**

**\* Cumulative ranking for major products from December 2001-May 2003
in million dollars: soybean oil, 45; coarse grains, 40; poultry meat,
39; soybean meal, 32; soybeans, 29; wheat, 28; rice, 14; eggs and
products, 1.4; and fresh fruit, 0.9.**

[^1]: Ross is Courtesy Professor, Department of Food and Resource
    Economics, Institute of Food and Agricultural Sciences, University
    of Florida. Fernandez Mayo, Research Associate, lives in Havana,
    Cuba. (This paper is an update, revision and expansion of the
    presentation made at the Twelfth Annual Meeting of the Association
    for the Study of the Cuban Economy, Coral Gables, Florida, August
    1-3, 2002.)

[^2]: Euros are being accepted in dollar stores, tourist hotels and
    restaurants in Varadero, but currently not in Havana or other
    tourist areas.

[^3]: As used in this paper, the term \"dollar food market\" refers to
    the buying and selling in Cuba of food and beverage products,
    whether imported or produced domestically, for dollars.

[^4]: For detailed information on the internal markets, including price
    comparisons and an explanation of why consumers buy at dollar stores
    when the same product can be purchased for less at other markets,
    see Jose Alvarez\'s paper on page 305 of Cuba in Transition, Volume
    11, ASCE, Washington, D.C., 2001. Also, Nova Gonzalex, Armando, \"El
    Mercado Interno de los Alimentos.\" Reflexiones Sobre Su Economia,
    Universidad de La Habana, 2002, p. 193.

[^5]: The government of Cuba maintains a fixed exchange rate for its
    international dealings and a more flexible exchange rate for
    domestic use. Cuba\'s government does not fluctuate the value of the
    peso for commercial transactions regardless of any fluctuation with
    the value of the U.S. dollar or other currencies on the
    international market. \"Economic Eye on Cuba,\" U.S.-Cuba Trade and
    Economic Council, Inc.

[^6]: For detailed information on main sources of hard currency and
    possible uses by the Cuban population, see Paolo Spadoni\'s paper,
    \"The Role of the United States in the Cuban Economy,\" presented at
    ASCE\'s Thirteenth Annual Meeting, Coral Gables, Florida, August
    7-9, 2003.

[^7]: Business Tips on Cuba, Oficina Nacional TIPS-CUBA, Ciudad de La
    Habana, Cuba, August 1996, p. 20.

[^8]: op. cit., p. 18.

[^9]: Anuario Estadisticas de Cuba 2002. Capitulo VIII Sector Industria.

[^10]: Dr. Omar Everleny Perez Villanueva. Cuba\--Reflexiones Sobre su
    Economia, 2002 p. 90.

[^11]: Perez Villanueva. op. cit., p. 90.

[^12]: Caribbean Basin Agricultural Trade Office of the USDA/Foreign
    Agricultural Service in Miami. See recent reports on food laws and
    the food service sector, GAIN Reports #CU2001, 2002, and 2003.

[^13]: Presentation by Mr. Pedro Alvarez Borrego, President of Alimport,
    Agricultural Sales Conference, Cancun, Mexico, Jan. 30-Feb. 2, 2002.

[^14]: ibid.

[^15]: Paladar, translated means palate or taste, but origin of the use
    for Cuban family restaurants is said to be taken from a Brazilian
    soap opera. The main character goes to the capital and establishes a
    chain of small restaurants called Paladares.

[^16]: Henken, Ted. Tulane University. Proceedings of the Tenth Annual
    Meeting of the Association for the Study of the Cuban Economy
    (ASCE), Miami, Florida, Aug. 3-5, 2000, p. 331.

[^17]: Cuba: A Guide for Canadian Businesses. Department of Foreign
    Affairs and International Trade. The Canadian Trade Commissioner
    Service, June 1999.

[^18]: Dr. Armando Nova Gonzalez, Profesor Titular Adjunto de la
    Universidad de La Habana, Cuba\--Reflexiones Sobre su Economia,
    2002, p. 193.

[^19]: Dr. Miguel Alejandro Figueras Perez. Cuba\--Reflexiones sobre su
    Economia, 2002 p. 111 and 112. (Cuban data on national supply,
    however, may consider a food product manufactured with imported food
    ingredients, or a repackaged foreign product as national origin.)

[^20]: Caribbean Agricultural Trade Office, USDA/FAS, Miami.

[^21]: U.S.-Cuba Trade and Economic Council, \"Economic Eye on Cuba\",
    March 18, 2002.

[^22]: On May 12, 2002, the president of Alimport reported that Alimport
    would be the exclusive agent in Cuba for U.S. based companies.
    U.S.-Cuba Trade and Economic Council, council@cubatrade.org.

[^23]: Cuba Policy Foundation, \"Estimated Agricultural Economic Impacts
    of Expanded U.S. Tourism to Cuba\",
    [www.cubafoundation.org](http://www.cubafoundation.org/),
    Washington, D.C., February 2003.

[^24]: Spadoni, Paolo. University of Florida. Paper prepared for
    presentation at the Thirteenth Annual Meeting of the Association for
    the Study of the Cuban Economy (ASCE), Coral Gables, Florida,
    August, 7-9, 2003, p. 11.