Trump – New bans on Cuban rum and cigars

Oct 4, 2020

pic: Federica Ariemma @federicaariemma

As part of a package of measures to tighten the trade and financial embargo against Cuba, US President Donald Trump has banned his citizens from buying and importing Cuban cigars or rum on their return to US territory.

This measure was announced last Wednesday 23rd Sept at the celebration of one more anniversary of the failed invasion of Playa Giron. Sadly, in the middle of the 75th session of the UN General Assembly, where there have been calls to avoid coercive policies in the midst of the COVID-19 pandemic.

What economic impact can these measures bring?

None. For more than six months Cuban borders have been closed to tourism and charter flights to Cuba have been paralyzed.

The current administration has also been systematically disarming all the advances in rapprochement between these two countries achieved by the administration of President Barack Obama. One after another restrictions are imposed on US citizens, limiting the rapprochement between the two peoples. One of these measures in 2016 was the removal of the $100 limit on the purchase of Cuban rum and tobacco.

New measures were also announced restricting the organisation or participation in professional meetings in Cuba, as well as sporting competitions or cultural exchanges. In addition, Trump has banned US citizens travelling to Cuba from staying in hotels where the Cuban government is involved.

Another measure that will be implemented is to prohibit passenger and recreational boats from docking in Cuban ports, as well as to prevent private or corporate aircraft from traveling to Cuba.

The reasons for these new restrictions are not economic. They are political: surpassed in voting intent by candidate Joe Biden, Trump is fighting for the Cuban and Latino vote in general and that of Florida in particular.

And he’s having a tough time of it: according to The Washington Post-ABC, Biden is ahead with 51% of the vote vs. 47% for Trump. Considering the Latino vote, the votes would be 52% for Biden and 39% for the current president.

As a matter of fact, in 2008, Donald Trump registered his trademark in Cuba to invest in hotels, real estate and other activities.

International S.A. and Habanos S.A. are probably not very worried

Who is affected by these measures? The Americans themselves.

Both the Cuban rums, marketed by Havana Club and Pernod Ricard and the cigars exported by Habanos are completely independent of the American market, which in turn generates 40% of world demand for alcohol.

I have no doubt that a trade agreement with the US would be extremely beneficial, but both firms have solid contracts with European partners for the distribution of their products. In terms of sales volume, Havana Club sold 4.6 million 9-litre cases in 2018, reaching 120 countries.

Habanos S.A. revenue in 2019 almost reached 532 million dollars, operating as the leader of the Premium tobacco market in Spain, China, France, Germany and Cuba. Europe continues to be its main customer, with 53% of sales volume.

With the relaxation of travel restrictions advocated by Obama following the re-establishment of diplomatic relations in 2015, US tourism in 2019 exceeded half a million visitors out of a total of 4.7 million tourists (10.6%). But in the midst of the current pandemic, it is not worth talking about these figures.

The low sales volume that non-existent US tourism represents right now for rum and tobacco, means that the measure does not make much sense right now.

If Trump wins the elections next month and is re-elected and if the pandemic is halted and tourism restored, perhaps there could be a real impact on what the President is proposing.

But that would already be too much to assume, wouldn’t it?

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