U.S. businesses eye new opportunities in Cuba

Jay Brickman envisions a day when the company he works for freely trades with Cuban entrepreneurs and the Cuban government without restrictions or crippling regulations.

But that day is still a speck on the horizon despite President Obama’s announcement last month on plans to normalize U.S. relations with the island nation.

“It’s an extraordinarily important first step, but it really is just a first step,” said Brickman, vice president of government services for Crowley Maritime Corp., a Jacksonville, Fla.-based container and shipping company that already does some business in Cuba. “The embargo is still there. That continues to restrict a lot of things that can be done.”

Crowley joins myriad U.S. businesses — from telecommunications giants to building suppliers to poultry and rice farmers — keen on doing business in Cuba. Yet they say the main obstacle is the half-century-old economic embargo on Cuba, which only Congress can lift.

Some groups — mostly in the agricultural sector — plan to push the new Republican-led Congress to dismantle the embargo. Others are waiting for Cuba to loosen control of its own economy and the U.S. to issue new rules of commerce.

Tennessee Sen. Bob Corker, the new Republican chairman of the Senate Foreign Relations Committee, recently said the embargo hadn’t yielded the intended results — regime change in Cuba, increased civil liberties — and warned the issue will spark heated debate on Capitol Hill.

“Cuba has been off the front burner for a long, long time,” he said. “You’re going to see that change in the next several weeks.”

Fellow Republican Sen. Marco Rubio of Florida, one of the embargo’s most strident supporters, has blasted Obama’s decision to improve relations with Havana but said he would listen to the administration’s plans. “I think their arguments are going to fail, but we’re going to take the process seriously,” Rubio said. “We’re going to give them the hearing that they want.”

In his Dec. 17 announcement, Obama promised to facilitate travel to Cuba for family visits, humanitarian projects and other reasons and expand sales and exports of certain goods and services from the U.S. to Cuba. The goal, he said, is to empower the nascent Cuban private sector and help its citizens gain economic independence, as well as allow telecommunications providers to furnish Cuba with a more robust infrastructure and internet services.

Direct trade, however, is still severely hamstrung by the embargo, which only allows some exports, such as food and medicine, to go to Cuba, and requires Cuba to pay cash up front.

As Cuba has found more accessible trade partners elsewhere, U.S. exports to Cuba have dipped to one of the lowest points in more than a decade, from a peak of $710 million in 2008 to $349 million in 2013 and $266 million last year through November, according to the U.S.-Cuba Trade and Economic Council.

There’s much room for growth. Merchandise exports to Cuba could reach $4.3 billion annually, while Cuban merchandise exports to the U.S. could reach $5.8 billion annually, up from zero today, if the embargo were lifted, according to a study by the Peterson Institute for International Economics.

Little wonder many businesses would like to see an end to the embargo, said Jodi Bond, vice president of the Americas for the International Division at the U.S. Chamber of Commerce. “The business community has been against the embargo for quite some time,” she said. “You’ll be hearing more and more from companies soon.”

Opening trade with Cuba not only provides U.S. businesses a new market where telecom, construction, agriculture and tourism firms could flourish, but it also will improve U.S. trade with the rest of Latin America, which would view the move favorably, said Paul Johnson, vice chair of the recently-formed U.S. Agriculture Coalition for Cuba. The group, consisting of more than 30 firms, plans to lobby Congress to end the embargo. “We have the momentum,” Johnson said. “We’re carrying it forward.”

Even if the embargo were to end tomorrow, huge doubts linger on doing business with Cuba, said John Kavulich, senior policy adviser to the U.S.-Cuba Trade and Economic Council. For starters, all trade transactions still go through the Cuban government, not individual Cubans or companies, making business cumbersome. Also, Cuban officials will only allow as much telecom infrastructure and free market leeway they feel they can control, he said. “They’re not going to embrace something that’s going to put them out of businesses,” he said.

The island of 11 million — roughly the size of Ohio — has little-to-no dispensable consumer income and the government also defaults on contracts, making it a less-than-attractive choice for U.S. firms now, Kavulich said.

“This is not Dubai 93 miles south of Key West,” he said. “There needs to be meaningful commercial and economical change in Cuba before anything that the president announced is going to be beneficial to U.S. exporters.”

Brickman, of Crowley Maritime Corp., agrees that more meaningful Cuban economic changes would help boost trade with the U.S. But Obama’s announcement was a necessary — and historic — first step.

Brickman had just landed at José Martí International Airport in Havana for a business trip last month when the announcement was made. A Cuban customs officer ran over to him and gave him a hug, professing her enthusiastic approval of the renewed ties.

“My feeling is that this is a lot more important than trade,” he said. “It’s the beginning of a new journey.”

Rick Jervis, USA Today

January 12, 2015

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