Nestle Helps Cuba Skirt the US Embargo

By Pilar Montes

Photo: foodbev.com
Photo: foodbev.com

HAVANA TIMES — It’s a well known fact that there are declarations for the grandstands, rigid and resounding, while others are different, they’re more flexible and can be negotiated, which are normally dealt with by a smaller circle of people.

In May, the US government put forward a proposal to buy Cuban coffee, as long as it came from independent producers which, of course, Havana angrily and definitively rejected, since only the State is allowed to export.

However, in July, everything seems to have worked itself out.

On July 14th, reports were published by the US-Cuba Trade and Economic Council, Inc., an organization based in New York, which confirmed that US customers would be able savor a “Cafecito de Cuba” this autumn, offered by a Swiss company that both countries already know very well, Nestle.

By way of their subsidiary in the US, Nespresso USA, Inc., the Nestle group took out an ad on June 26 in the New York Times (on the back cover of the first section of the newspaper), announcing they were offering US customers their new Cuban Nespresso Grand Cru Cafecito de Cuba.

The ad cost the Nestle group US $175,110 so it could reach over a million readers.

Nestle Nespresso bought a container of approximately 18 tons of Cuban coffee beans, which were certified as coming from the 2015-2016 coffee harvest in Cuba, for US $90,000.

After roasting the beans and processing, coffee loses 20% of its volume, leading to the production of 180,000 packets for every ton of this Cafecito de Cuba limited edition, which will bring in approximately $3,564,000 in revenue for the corporation.

ofac (2)In order to carry out the transaction between Nespresso USA and the US Office of Foreign Assets Control (OFAC), the latter accepted letters from Cuba’s Ministry of Agriculture, Nestle Nespresso USA, Cuban companies based in London, Cubana Coffee and Roastery and Cuba Mountain Coffee Company Ltd. certifying that all of the coffee purchased had been produced by independent farmers in Cuba.

In this way, demands from both parties were met and a precedent was established that will surely lead to future negotiations.

In conclusions made from this deal, the US-Cuba Trade and Economic Council values the fact that the Obama administration is focussing on creating trade opportunities rather than directly or immediately influencing this activity with Cuba’s independent farmers.

This focus is founded on the belief that in the last 190 days of Obama’s presidency, a bilateral trade agreement is on the horizon, even when it isn’t the kind of involvement for State companies that the Cuban government and its institutions want, may be seen as preferable than not having one at all.

The Economic Council said that June 26, 2016 will go down in history as the day that the Republic of Cuba returned to the map not only as a tourist destination but as the origin of consumer products too.

In the current climate, many US company could benefit from the words “Made in Cuba” to add value to their products on the market, which is backed up by Nestle Nespresso USA, Inc.

With the embargo still in place, the coffee deal is the second operation authorized by OFAC since the diplomatic relations were restored between the US and Cuba in July 2015.  The first contract to be authorized was that of Alabama’s Cleber firm to assemble small tractors in facilities located in the Mariel Special Development Zone, in the western province of Artemisa.

What does this coffee trade agreement represent?

Photo: nestle-nespresso.com
Photo: nestle-nespresso.com

None of the two governments involved have officially recognized this three party deal Cuba-Nestle-USA, possibly because Congress would strongly oppose any attempt to dissemble the trade embargo’s legal framework, and secondly, the Cuban government won’t want to go back on their statements made against the condition imposed by the US to buy coffee only from private producers.

Nestle is now getting ready to sell in the USA, candy, ice cream, drinks and other consumer products made in Cuba.

This Swiss food group, with offices in Havana, has a business relationship with the island that dates back several decades. Since the ’90s, Nestle has been involved with other state-run companies in order to develop the candy industry, has invested in producing bottled mineral water (Ciego Montero) and other soft drinks. In 2014, Nestle Nespresso presented a limited edition coffee range named Cubania, which was inspired by the passion and intensity of the Cuban coffee ritual; however it wasn’t made with coffee grown in Cuba.

The Cuban government has preferred not to get involved with companies who have business relations with the US. However, the Obama administration authorized one company of European origin based in the US to take on the task of directly importing Cuban agricultural products (until now it’s just been coffee).

Coffee picker in Santiago de Cuba. Photo: cubadebate.cu
Coffee picker in Santiago de Cuba. Photo: cubadebate.cu/AFP

This coffee transaction is unprecedented and has now established a precedent for the future to slowly break down the regulations of the US trade embargo, while the presence of something “Made in Cuba” could lead to sales of other traditional products like rum and cigars, which the US market is already familiar with.

Maybe in the future Cuba could export healthier products, such as the vaccines developed against cancer and Heberprot-P to treat diabetic feet, which are renowned the world over for their effectiveness.

The coffee deal won’t generate much revenue for the Cuban State, but it will give a boost to Cuba’s growers and should satisfy customers in the USA.

41 thoughts on “Nestle Helps Cuba Skirt the US Embargo”

  • Yes Brrr, individual farners (small-holders in world terms) do trade internally. but name one who personally exports anything?
    I am resisting the temptation to ignore you.

  • I really don’t care what it substantiates to you. What I’m telling you is a fact, not an opinion. You can choose to ignore it if you want to.

  • If you had cared to read steve websters contributions, you would have realised that he does visit Cuba and is in contact and has conversations with Cuban farmers.
    Talking to a sample of one farmer does not substantiate your claim.

  • Go to Cuba and talk to an actual farmer. That’s what I did.

  • You are so right the people can only export through government .

  • We are not able to have any of the farmers export anything yet. Please give me proof that direct exports are allowed and directions on doing [email protected]

  • We bring some items for farmers and food processors directly but it is very hard to get approval. The duty can be 0 or can be over 200%.

  • I am sorry, but all I can find says you are mistaken. Maybe they charged you the wrong price?
    I don’t want to endlessly argue this.
    Readers can decide for themselves based on what we posted.

  • My reference is I bought it, I know what it cost. You’re wrong.

  • Generally known as gouging!

  • Virtually everything which is regarded by the Castro regime as luxury which is all that which is not required to merely exist. I could similarly quote tools, air conditioners, stoves etc. Regarding L’Oreal products, they may be currently available in Havana, but not generally.

    When I wrote about Nestle and the peculiar unique relationship with the regime, I gave my reasons. Do you know of any other overseas company granted similar benefits?

  • I am extremely well informed about the reality in Cuba as I have family there.
    I am also very good at backing up what I say with references. I am honest.
    From what I have seen I can’t take your “word” for anything as you are unable / unwilling to back up what you say with a reference from another source. “I say” is your system. Mine is: the referenced data says. I pride myself in posting correct information that – if needed – I can back up. I don’t want nor need to lie. I want to provide people with the correct information. Period.

  • Yes, lots of things definitely do cost more. Not what I’m talking about.

  • You’re good at internet searches, but you don’t seem to know very much about Cuba. Obao brand Deodorant in Cuba costs less than it does in Canada. Period.

  • The data I posted stands and can be verified.
    You haven’t posted any reference.
    Let the informed reader decide.

  • You can copy and paste all that you want. Cuba is ruled by decree. People are told they can (and.or cannot) do things without a change in the laws all of the time. Farmers that I know tell me that they absolutely do sell abroad on a limited basis, as long as their quotas are met.

  • No. It’s OBAO, I still have the bottle. The same one is $6 in Canada.

  • 40″ TV in Cuba $US $1080
    40″ TV in Canada $CAN $395

  • The US hardly sells any agricultural products to Cuba. Sales have even gone down since Obama’s visit.
    People are still arrested in Cuba for creating WIFI networks. Cuban air traffic control systems are bought in Russia.

    The coffee produced in Cuba is – IMO – illegal as it hasn’t been bought from independent farmers but a state company benefiting not the farmers but the regime.
    The “cultural programs” are a sham and a propaganda money maker for the regime.

    Yes US companies (Sheraton) no have invested in Cuban hotels for US tourists.
    All I see is Cuba profiting and the US supplying cash.
    In the mean time Billions are owed for expropriations.
    A good reason to continue the embargo. It is all one-sided both on the economic side and the human rights side. Arrests are up in Cuba.

    No compromise. Another Obama “goof” in international politics (Crimea, Ukraine, Spratleys, …).

  • Also see:
    CMC, which is 10% owned by Leni Gas Cuba, is now hopeful that its coffee project in the Cuban province of Guantanamo will begin in early 2017, following agreement on the principal terms for co-operation with the Asdrubal Lopez coffee processing plant in Guantanamo.

    Note:
    Empresa Procesadora de Café Asdrúbal López is state owned.

    Source: Leni Gas Cuba Limited enthused by significant news from investee company The Cuban Mountain Coffee Company – http://www.proactiveinvestors.co.uk/companies/news/127903/leni-gas-cuba-enthused-by-developments-at-the-cuban-mountain-coffee-co-127903.html

  • Again: I have supported what I said with links to relevant Cuban legal sites and international press articles.
    Please post any corroboration you might have for this personal claim of yours.
    Friends of mine are farmers in Cuba. They back me up.
    In mijn opinion you – or your sources – are confusing export sales with national sales directly to companies in the tourism industry for with some coops and commercial farmers have received licenses (since 2011)

    “Cuban farmers can bypass the state and start selling products directly to businesses catering to tourists, state-run media said on Monday in announcing the latest market-oriented reform in the one of the world’s last communist countries.”
    http://www.reuters.com/article/uk-cuba-reform-agriculture-idUSLNE7AK03G20111121

    Maybe this news release from ANAP will convince you:
    Nadie puede pensar que un pequeño productor agrícola puede exportar directamente a los Estados Unidos. Para que esto sea posible tienen que participar empresas cubanas de co­mercio exterior ……

    Source: Declaración del Buró Nacional de la ANAP sobre medida del gobierno de EE.UU. › Cuba › Granma – Órgano oficial del PCC – http://www.granma.cu/cuba/2016-05-04/declaracion-del-buro-nacional-de-la-anap-sobre-medida-del-gobierno-de-eeuu-04-05-2016-22-05-15

    On ANAP:
    https://en.wikipedia.org/wiki/National_Association_of_Small_Farmers

  • You are far off.

    All products in the dollar shops in Cuba have a markup of 230% plus store profit and are in my experience as expensive or even more as in Europe.
    Under the new prices a liter of canola oil cost 2 CUC. In the US 1 gallon (3.79 liters) $4.83 which means $ 1.27 a liter. In Cuba the product is 57% more expensive. Note that up to a while ago the price was $2,5, near double the cost of the product in the US.

    See:
    https://cdn4.cibercuba.com/sites/default/files/pdf/modelo.pdf
    http://www.walmart.com/ip/Great-Value-Canola-Oil-1-gal/13281828

    In Santiago de Cuba (La Violeta) the OBAO costs $ 3.02. In the Riviera shopping center in Villa Clara it wasn’t available. Only the “Bonabel” brand was available starting at $1,27. You probably got that.
    At Amazon you can get it for $ 1.7, nearly half the price and far below what you quote.
    Obao:
    http://www.carlostercero.ca/santiago/Item?ProdPid=42170&depPid=46077
    https://www.amazon.com/Garnier-Obao-Deodorant-Antiperspirant-Sensitive/dp/B008UYGWCI
    Bonabel:
    http://www.carlostercero.ca/vclara/Item?ProdPid=471643&depPid=46077&page=0

    Note that the CUP prices are just the old CUC prices converted.

  • Garnier “OBAO” branded stuff is available in MN in several places. Most CUC stores have MN pricing now too, but even even in the ones that are CUC-only, it’s priced much lower than what you’ll find comparable products for in Canada. I think I paid $1.35CUC in Santa Clara for deodorant in February. They cost at least $5 at home.

  • “NO CUBAN FARMER CAN SELL DIRECTLY TO FOREIGN COMPANIES.”

    I know for a fact that they do.

  • Interesting observation!

    Cuban law is clear: the government corporations hold a monopoly on all experts & imports.

    US law is clear: it is illegal to do business with the Cuban military or the Castro family.

    And yet, the Obama administration has approved US corporations doing business with the Cuban military & the Castro crime family.

    Nestle say they are buying directly from Cuban farmers, and yet they appear to be buying from the Castro regime.

  • Cuba, where the average income is $20 per month, has a minuscule domestic market. Hardly a lost bonanza for US business. I don’t see how the US “pissed away” any money by embargoing Cuba.

  • Not meeting your quota for a Cuban farmer means that anything he “holds back” is a crime.
    NO CUBAN FARMER CAN SELL DIRECTLY TO FOREIGN COMPANIES.
    Not even if he has 12 tons of coffee in his barn. That is the law in Cuba.
    All transactions have to go via state companies or mixed companies duly licensed by the regime.
    Nestle get his coffee that way. Not from farmers. Through state export companies.

    “Nespresso purchased the coffee in Europe via Cuban state export companies. It will process and package the beans, grown by small-holder farmers, in Europe.”
    Source: Cuban coffee returning to U.S. but only for Nespresso brewers | Daily Mail Online – http://www.dailymail.co.uk/wires/reuters/article-3651289/Cuban-coffee-returning-U-S-Nespresso-brewers.html

    “Las entidades facultadas a realizar actividades de importación y exportación de mercancías están obligadas a cumplir los principios y normas básicas establecidos en la Resolución 50/2014 del Ministerio del Comercio Exterior y la Inversión Extranjera (Mincex) ¨Reglamento General sobre la Actividad de Importación y Exportación¨, de 3 de marzo del 2014.”
    Source: Para comerciar con Cuba – http://www.camaracuba.cu/index.php/es/negocios/para-comerciar-con-cuba

    Read up:
    http://www.camaracuba.cu/index.php/es/descargas/category/1-negocios?download=338:go-x-13-2014-spanish

    Resolución No. 50 del 3 de marzo del año 2014
    Source: MINJUS – Noticias: Resolución No. 50 del 3 de marzo del año 2014 – http://www.minjus.cu/news.php?readmore=61

  • Obviously not having the product to sell will curtail any sales. Having small quantities will make any appreciable foreign order unlikely as well. But never the less, Cuban farmers absolutely DO sell some products to foreign buyers.

  • “… The last remaining remnants are just silly…”

    Ditto. It’s one of the most embarrassing follies in US foreign policy ever.

  • Well. The US sells agricultural products to Cuba, they sell communications equipment, they allow tourists if they sign up to cultural programs, they have invested in hotels, they are now selling coffee produced by the state. Does the embargo have any purpose anymore? Maintaining it is just silly.

  • Part of what you say is correct. Cuban farmers can hold on to a small part of the harvest if they have met their quota for sales to the government (and only then). They can sell it nationally (often at regulated prices if the go to farmers markets) and only recently (2012) some coops were allowed to sell directly to mixed companies running hotels. Given the failed harvest of coffee (for years) I doubt many have met their quota. People caught with a couple of pounds of coffee are most often arrested and the coffee impounded.

    As far as selling to clients abroad: Cuban law is clear. The government has a monopoly on international trade and Cuban coffee farmers CAN NOT sell to companies abroad. The ONE exception is Cuban artists who are allowed to sell and ship new artwork to galleries and collectors abroad.

    Some reference material:

    “Nobody should think that a small agricultural producer can export directly to the United States. For this to be possible, the participation of Cuban foreign-trade companies is necessary and the financial transactions must be done in dollars, neither of which has been possible until now.”
    Havana Slams as Divisive a U.S. Bid for Coffee from Independent Growers, May 5, 2016
    http://resumen-english.org/2016/05/havana-slams-as-divisive-a-u-s-bid-for-coffee-from-independent-growers/

    “Nespresso purchased the coffee in Europe via Cuban state export companies. It will process and package the beans, grown by small-holder farmers, in Europe.”
    Cuban coffee returning to U.S. but only for Nespresso brewers
    By Reuters, Published: 20:50 GMT, 20 June 2016
    http://www.dailymail.co.uk/wires/reuters/article-3651289/Cuban-coffee-returning-U-S-Nespresso-brewers.html

    On sales to hotel companies see:
    “El Gobierno ampliará los productos que los agricultores pueden vender directamente a centros turísticos
    Agencias | La Habana | 22 de Septiembre de 2013”
    http://www.diariodecuba.com/cuba/1379875207_5194.html

  • once again, through our obstreperous & stupid foreign policy, the United States is on the short end of the stick. Our allies have been there setting up their businesses while we pissed away our money on boycotting the island. Sheer stupidity!

  • Cuban farmers absolutely do trade directly. The deal as it was broken down to me by a few farmers is that they must make a certain quantity available for the state to purchase, then they are free to sell whatever they can produce beyond that.

  • L’Oreal branded products are already widely available in Cuba.

  • Why?

  • It really is difficult to maintain the embargo anymore. The last remaining remnants are just silly.

  • Nestle as the world’s largest food company has had a unique relationship with the Castro regime for many years. Although commercial companies cannot advertise in Cuba, Nestle is permitted to operate its own distribution system using vehicles covered in Nestle logos. Similarly in the various GAESA subsidiary stores, Nestle have their own freezers again displaying their logos.
    As Cuba cannot grow enough coffee to fulfill its own internal market it necessitates imports – particularly from Spanish packers packing Colombian and Brazilian coffee, it is a political decision to allow sales to foreign buyers. A shortage of coffee in Cuban towns and cities is frequent, but there is always sufficient to sell in the tourist frequented spots – Varadero, Trinidad (the shop selling it is kitty corner to the Iberostar Hotel) and the airports. It will be interesting to know whether there will now be a reversal in the decline of coffee production in Cuba or whether with increasing exports, Cubans will no longer be able to waken up in the morning and “smell the coffee.”
    It will also be interesting to see whether the Nestle/Castro regime link results in the sale of L’Oreal of Paris products in Cuba as Nestle has a 25% shareholding in L’Oreal whose subsidiaries include Garnier, Ralph Lauren and others.
    I am not suggesting for a moment that there is any form of special benefit accruing to the Castro family from the peculiar relationship with Nestle.

  • Nestle claims to trade directly with and assist Cuban farmers.
    The Cuban regime and its subservient farmer organization ANAP say Cuban farmers CAN NOT trade directly with foreign firms. That is what the Cuban law says.
    Somebody is lying.

    “Cuban farmers can’t sell coffee to the US, but the Government can”
    http://www.diariodecuba.com/cuba/1467639120_23576.html

    “Nespresso brings back Cuban coffee to the U.S.”
    http://www.incubatoday.com/news/article84793452.html

    More corporate claims:
    “Leni Gas Cuba takes a sip of Cuban coffee company”
    http://www.proactiveinvestors.co.uk/companies/news/127281/leni-gas-cuba-takes-a-sip-of-cuban-coffee-company

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