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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
By Michael A. Fletcher April 1 at 6:35 PM

NEW YORK — 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.

There is also the question of what kind of protections Cuba is willing
to offer investors.

“They have to decide how much reform they are willing to make,” said
Assistant Secretary of State Roberta S. Jacobson. “It is no longer going
to be the U.S. government that is holding things back.”

Ultimately, there is also the question of what kind of business
relationships interest Cuba. The revolution that put the communist
regime in power decades ago grew largely from resentment over the amount
of control foreign companies — mainly American firms — exerted over the
island. So Cubans are not eager to see unfettered foreign investment in
their country.

“Nobody wants 1,000 Burger Kings and 500 Starbucks there,” said Hugo
Cancio, a Cuban-born entertainment and publishing entrepreneur who
operates between Miami and Havana. “The question is whether that would
deter foreign investors.”

Michael A. Fletcher is a national economics correspondent, writing about
unemployment, state and municipal debt, the evolving job market and the
auto industry.

Source: U.S. companies cautioned to curb their enthusiasm for trade with
Cuba – The Washington Post –
http://www.washingtonpost.com/business/economy/us-companies-cautioned-to-curb-their-enthusiasm-for-trade-with-cuba/2015/04/01/7af87be2-d8a6-11e4-b3f2-607bd612aeac_story.html

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