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U.S. companies cautioned to curb their enthusiasm for trade with Cuba

U.S. companies cautioned to curb their enthusiasm for trade with Cuba

Posted by Juan Gavasa on April 02, 2015

President Obama’s efforts to normalize relations with Cuba are producing a wave of enthusiasm from U.S. firms eager to do business there, but that passion is bumping up against stubborn realities of Cuba’s limited economic capacity and uncertainty about what is permitted under both U.S. and Cuban law.

More than 200 business people and policy makers who gathered at the Nasdaq MarketSite on Wednesday for a day-long conference on business opportunities in Cuba heard encouraging forecasts about the island’s long-term ­potential, tempered by sober warnings not to expect too much too soon.

“We are embarking on a process that is complicated,” said Stefan M. Selig, the Commerce Department’s undersecretary for international trade. “We should remember Cuba is a small country, and a poor country. I don’t think we should be overly excited about the near-term economic prospects.”

Still, there has been a flurry of business activity since mid-

December, when Obama announced the most dramatic shift in U.S. policy toward Cuba in the 55 years since the United States imposed an economic embargo against the communist nation.

In March, IDT Corp. signed an agreement with Cuba’s ­government-owned phone company to provide direct long-

distance service from the United States to Cuba. Business groups have embarked on trade missions to the island. Meanwhile, other companies, including cruise lines, ferry companies and shipping firms, have shown intense interest in doing business in Cuba. Just a tiny percentage of Cubans have Internet access, and American firms are keen to help build out the country’s telecommunications network.

In addition, the estimated 500,000 fledgling small businesses operating in Cuba — barber shops, beauty parlors, home-based restaurants, bed-and-breakfasts, car repair shops — represent a potential market for U.S. businesses.

The Obama administration is in the final stages of a review that is likely to result in Cuba being removed from a list of countries considered to be state sponsors of terrorism, which would offer more freedom for banks to operate there. “That will happen in the near term,” Selig predicted.

Moreover, attitudes toward Cuba are changing. A growing share of the nation’s 2 million ­Cuban Americans, a majority of whom once supported the U.S. embargo, endorse a more open relationship with the nation. A poll concluded in late March and released at the conference found that more than half of Cuban Americans — 51 percent — agree with Obama’s move to normalize relations with Cuba. That is up from the 44 percent of Cuban Americans who agreed with the policy in the days after it was announced, according to the poll by Bendixen and Armandi International.

Still, significant hurdles ­remain. Cubans earn an average of $20 a month, severely limiting their potential as consumers. Exporters, who sell agricultural and other permitted items to Cuba, sometimes struggle to get paid because of the absence of credit and direct banking between the two countries. The vast majority of the nation’s economy is ­government-controlled. And with the exception of a few sectors, such as agriculture and telecommunications, U.S. firms are prohibited from selling to the Cuban government.

Obama has greatly broadened the circumstances under which Americans can legally travel to the island, but tourism remains verboten because the embargo remains law.

Consequently, many large businesses say they will remain wary about doing business in Cuba until the law is changed. Norwegian Cruise Line chief executive Frank Del Rio, who left Cuba as a 7-year-old, said for personal and professional reasons he is eager to see his company’s ships bringing visitors there. Given Cuba’s vibrant culture, beautiful beaches and dramatic rain forests and mountains, he thinks the business potential is enormous. “Cuba is hand-made for the cruise business,” he said.

Yet, he does not foresee his company offering cruise trips there anytime soon.

“Right now, all we really have is a willingness on both sides to improve relations,” Del Rio said. “These are baby steps. But they are baby steps leading up to the ultimate prize, and the ultimate prize is lifting the embargo.”
 

The latest thaw is not the first time that relations have warmed between the two countries. In the past, some restrictions on doing business with Cuba had been relaxed, and the effects were limited and temporary. For example, a fiber-optic cable that would have connected Cuba with the United States in 2009 was scrapped in favor of a similar project linking Cuba and Venezuela.

Those types of experiences have left business people cautious about Cuba’s short-term potential. “The business community needs to recognize this is going to be a very slow process,” said Jodi Bond, vice president of the Americas for the U.S. Chamber of Commerce.

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