U.S. business relations with Cuba seem to have one speed: Slow
There's been a flurry of interest in Cuba by U.S. companies since
Cuban government seems most interested in hospitality-related projects
BY MIMI WHITEFIELD
A Tampa company that's in negotiations to open a warehouse outside
Havana that would stock food, wine and other products needed in Cuba's
growing tourism industry is hopeful it will eventually get the green
light, but Cuban officials have made it clear that the government will
be its partner and it could take some time.
In the 16 months since Cuba and the United States announced they had
begun the process of normalizing relations, there's been a flurry of
interest from American companies eager to sample the formerly forbidden
fruit of the Cuban market, but as many are finding, navigating Cuban
law, policy, priorities and the multiple agencies necessary to win
approvals can be tricky.
Getting U.S. approval for a project that's an exception to the embargo
or that falls within a series of new rules on trade with Cuba that the
Obama administration has been issuing since the rapprochement began is
just the beginning of what can be a long, winding road.
Tim Hunt, the lawyer for Tampa-based Florida Produce, said he's
optimistic the firm might get a draft term sheet back from the Cubans by
the end of the month after what he describes as a "very good meeting"
recently with Cuban officials. They told him they would get back to him
on a potential Cuban partner for Florida Produce, a veteran of exporting
food to the island.
"It seems it's going to be a very, very slow-moving process," Hunt said.
Florida Produce first presented its plan for a wholesale distribution
center, stocked with legal U.S. exports, to Cuban authorities in October.
"Our idea gives Cuban companies, restaurants and hotels an opportunity
to buy products as needed. We think we have a compelling argument," Hunt
John Kavulich, president of the U.S.-Cuba Trade and Economic Council,
says it also has been slow going for the seven New York companies that
accompanied Gov. Andrew Cuomo on a trip to Cuba in April 2015. Four of
the companies — Cayuga Milk Ingredients, Chobani Greek Yogurt, Pfizer
and Regeneron — have reported no exports to Cuba in the intervening
year, according to Kavulich.
The U.S. Office of Foreign Assets Control authorized the use of
U.S.-issued credit cards by Americans in Cuba a year ago, but
MasterCard, which was also on the Cuomo trip, said it is up to each bank
to decide whether cardholders will be allowed to use their cards on the
island. Another company that went on the trip, Infor, didn't provide
follow-up information, and JetBlue is awaiting a decision from the U.S.
Department of Transportation on its bid to offer commercial air service
Most of the companies that have found a degree of success so far are in
the tourism and telecom businesses — both priorities for the Cuban
government. Emphasizing how important tourism has become, Cuban leader
Raúl Castro said last week: "Each hotel inaugurated is another factory
that generates within our border much-needed export income for our country."
On the eve of President Barack Obama's visit to Cuba in March, Starwood
Hotels & Resorts announced that it had signed deals to operate Havana's
iconic Hotel Inglaterra and the Hotel Quinta Avenida, located on
Havana's prime Fifth Avenue, with Cuban government partners. It also has
signed a letter of intent to convert Havana's Hotel Santa Isabel into a
member of its "The Luxury Collection."
After renovations, the hotels will reopen and the names of American
hospitality brands will appear in Cuba for the first time in more than
five decades. Starwood already has listed the Four Points by Sheraton
Quinta Avenida, with a May 30 opening, and the Inglaterra, with a July 1
opening, on its website, but neither hotel is bookable yet.
Marriott International, which is also trying to swing its own hotel deal
in Cuba, is currently in the process of merging with Starwood in a deal
that would make Marriott the world's largest hotel company.
Airbnb, the San Francisco in-home-stays booking company, also has found
success in Cuba. It launched there in April 2015 with 1,000 listings.
That has grown to 4,000 listings, and guests from all 50 states have
stayed in accommodations in Airbnb's Cuba network, said Brian Chesky,
chief executive and an Airbnb co-founder.
"Cuba is the fastest-growing market ever for Airbnb," said Chesky, who
took part in an Entrepreneurship Summit during Obama's visit. It's also
a profitable market for the company.
There also have been a few telecom deals signed for roaming and direct
connect, but so far Google, which has offered to bring high-speed
Internet to Cuba, has had to content itself with a small-scale
demonstration in Havana.
Google products such as Cardboard and Chromebooks are on display and
visitors can try out high-speed access. Such efforts, Google said,
"demonstrate what might be possible in the future."
Richard Feinberg, a professor of international political economy at the
University of California, San Diego, and a senior Latin American fellow
at the Brookings Institution, also sees the Cuban government as a
reluctant partner for U.S. companies. "In my view, the Cuban government
is self-embargoed. The United States cut a significant hole in the
embargo [with its new regulations that allow more trade and commerce
with Cuba], but the Cubans are largely saying, 'No, not until the whole
embargo is lifted.'
"There has been some progress in the business relationship," he added,
"but we're still in the early innings before there is a fully normal
Feinberg said the Cubans also "need to rethink their preference for only
wanting to do business with big, big, big groups. That is wrong-headed."
But even being a big company doesn't necessarily guarantee success.
On March 22, the same day Obama gave an historic speech to the Cuban
people, Carnival Corp. signed an agreement with the Cuban government for
its Fathom line to begin cruise service from Miami to Cuba on May 1. It
was considered a coup — the first time a cruise line would offer service
from the United States to the island in more than 50 years.
But an outcry about a long-standing Cuban policy that bars anyone born
in Cuba from entering or leaving the island by vessel and two lawsuits
by potential passengers who had tried to book the cruise and were
excluded prompted Carnival to reconsider.
It said it would delay the Fathom cruise until a change in Cuban policy.
That came Friday and the Fathom cruise will leave as originally scheduled.
"U.S. companies are eager to take advantage of new opportunities in Cuba
without fully understanding Cuban laws and how they are interpreted,"
said Andy Gomez, a Cuba scholar. "Carnival serves as a good example of
how vague Cuban laws can be. Sometimes they're not even laws, but
guidelines left to the interpretation of the Cubans."
Castro said as much during last week's Seventh Congress of Cuba's
Communist Party when he was talking about hundreds of economic
guidelines approved during the previous party congress.
Some of these guidelines have been difficult to implement, he said,
because some Cuban officials thought that all that was needed was to
create a document "sending it from one end of the country to the other."
During follow-up, he said, "We saw that everyone had applied the policy
in their own way." He advocated more training and more frequent updates.
Kavulich isn't particularly optimistic about the prognosis for new
business deals, especially those involving Cuba's nascent private
sector, after analyzing the discussions at the party congress. "Those in
the newly reconstituted middle class, and their relatives abroad, should
be prepared for a walk instead of a jog or run to implement changes to
the commercial, economic and political structures in Cuba," he said.
"For United States companies, there will continue to be limited
opportunities to provide products and services which earn revenues for
the government of the Republic of Cuba, specifically relating to
tourism," he said. "However, the importation of products and services
that will require expenditures — and assist with further developing a
middle class — will be marginal."
Cuba isn't opposed to private enterprise, but it must be a complement to
socialism and state-run businesses, Castro said during the party
congress. And it's clear the Communist Party doesn't want private
businesses to get very large either.
A guideline that states "concentration of property will not be allowed"
in the non-state sector will be amended to include the phrase "nor of
wealth," Castro said. "The private company will operate within well
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