Despite President Barack Obama’s recent visit to Cuba, and the prospect of the lifting of the trade embargo tomorrow that has been in place since the early 1960s, it may still take some time for Americans to legally sample Cuba’s famed cigars. It is likely that Cuba, which remains under a Communist dictatorship, will be prepared to satisfy the demand in the U.S. for its famed tobacco products.
Between 2009 and 2014, the amount of tobacco produced in Cuba dropped by 65% to 8,795 hectares. Annual production dropped by 21% to 20,000 metric tons, according to Cuba’s National Office for Statistics and Information. Cuba exported 91 million cigars in 2014, which represents only 58% of the exports for 2006.
In a report by the Wall Street Journal, Frank Robaina – who belongs to one of the major tobacco families in Cuba – noted that 20 hectares of once-productive tobacco land near his farm is now abandoned to huge, thorny bushes called marabú that reach up to eight feet in height and crowd out other plants in the fertile soil. The abandonment of prime tobacco plantations came about, said Robaina, because of a lack of sufficient resources such as fertilizers, fuel, and other needs. Also, the Communist government pays less for tobacco than it does for other crops. As a result, many growers have decided to abandon the tobacco business.
The government tobacco monopoly, Tabacuba, is getting ready for the end of the embargo, anyway. It is implementing measures to increase production, including more generous payment for dried tobacco leaves, as well as better training for tobacco workers. Its goal is to increase production by 20% over the next five years. According to Inocente Núñez Blanco, who co-chairs Corporación Habanos S.A., a joint venture of the Cuban government and British tobacco giant Imperial Brands PLC, the company is ready to respond to increased demand. The joint venture has a monopoly on marketing Cuban cigars worldwide.
Because many of the “vegas”: tobacco plots are cultivated by growers who use oxen or 70-year-old tractors to till the soil, it is difficult to know how quickly Cuba can increase production. Fertilizers are imported from Venezuela, as are the boxes cigars are shipped in. When either of these are delayed, growing tobacco or shipping out the finished product drops.
The Cuban government has a monopoly on all tobacco cultivated on the island. It is shipped to 40 cigar factories in Cuba where the leaves are rolled into cigars. In 2000, Imperial Brands signed a 100-year agreement to serve as the exclusive partner of Cuba in cigar exports. The pact could serve to limit Cuba in seeking additional foreign assistance to increase production.
Another issue Cuba must face is the current hostility shown by the U.S. to all forms of tobacco. The Food and Drug Administration recently announced regulations that could seriously limit the entry of Cuban cigars to the U.S. for at least two years. As a result, cigar aficionados will not have access to all of the types of cigars Cuba offers, according to the Tampa Bay Times.
According to the FDA, electronic cigarettes, vaporizers, and cigars that enter the U.S. market as of February 15, 2007, must present detailed reports on their ingredients and manufacturing processes. This is similar to the rules for cigarettes. The application process can take about 1,700 hours, according to the FDA, though tobacco industry sources put the figure at 5,000 hours. In other words, the process will take two years.
If the embargo on Cuban cigars were to be lifted in 2017, they would not legally the country until at least 2019. Therefore, Habanos S.A. – a cigar manufacturer – will begin the applications process as soon as the embargo is lifted. Cigars that are already on the U.S. market may continue to be sold during the process, but new brands may not be sold until receiving their FDA approval. Cigar brands that were extant at the time of the Cuban Revolution and the subsequent U.S. embargo (such as Romeo y Julieta) will have to go through the process, too.
Imperial Brands is projecting that Cuban cigars will represent 30% of cigars sold in the U.S. once the embargo is lifted, jumping from the current level of 3%. Cigar sales in the U.S. could eventually represent income for Cuba in the amount of $200 million per year.
Americans visiting Cuba, for example on Carnival Cruise line ships, can bring home $100 worth of Cuban cigars. Once the embargo is lifted, tourists to the Communist island of the Caribbean can bring home between $200 to $500.