10 Reasons US Business Should Consider Cuba Now

The actions taken by President Trump to “completely roll back” the US/Cuba normalization process launched by President Obama have not been helpful, but in reality have been far less harmful than commonly believed.  Their main objective was to win headlines and the 2020 vote of a peculiar Miami sector that has built a very profitable corner on the Cuban market, based on keeping everyone else out.  But it would be a mistake for US businesses to simply forget about Cuba for the next two or six years, and here are ten reasons why:

1. Trump’s regulatory changes are more bark than bite.

The famous “complete rollback” is not even close to complete.  It began with slight changes to the rules for Americans traveling to Cuba, was augmented with a blacklist of certain Cuban companies off limits to Americans and finally, a partial suspension of Helms Burton Title III. 

Yet, travel is still legal, even for individuals.  There are many Cuban companies that do not appear on the blacklist.  

And while in theory, Title III allows US citizens to seek compensation judgments in US courts for properties nationalized or expropriated in Cuba after 1959, this is a smokescreen.  The real targets of the aberrant Title III were US allies doing business on the island, but given the double-edged nature of this particular sword, Trump opted for a partial suspension, allowing only lawsuits against the Cuban government but not the allies. 

Everyone knows that Cuba is never going to respond to a judgment from a US court – this is already proven – and furthermore, frozen Cuban assets in US banks were drained long ago by these kinds of awards to other claimants.  Thus, a lawsuit with no foreseeable payout is pointless and this explains why none have been filed.  The real objective as always, was negative publicity to instill fear and doubt, but any business executive who confuses perception for reality probably shouldn’t be in business at all.

2. The gold rush has subsided.

After the beginning of the normalization process in 2015, travel agents looking for quick, easy commissions flooded Cuban ministries with a parade of tire-kicking business tourists.  The reactions from Cuban managers, initially hopeful and positive, eventually gave way to weary impatience and eventually, irritation, as they found themselves having to educate their guests about the fact that Cuba was not the roadblock.  Executives who come to Cuba now are no longer competing for appointments with the tire kickers and are practically guaranteed a warmer reception, as long as they’ve at least done their homework. 

3. Doing business in Cuba is a process that doesn’t happen overnight.

Doing business in Cuba is a lot like getting to know someone you think you might want to marry.  There’s no substitute for getting to know the person and love-at-first-sight is a dangerous myth.  The embargo is a big obstacle now, the harsh rhetoric unhelpful, but neither of these are eternal.  When this page is turned (not if but when) and the normalization process begins again, where do you want to be? Competing with hundreds of other companies suddenly vying for that attention or reaping the fruits of a relationship already established over several years?

4. Now is the most cost-effective time to do it.

Competing with many other companies is not the same as competing with just a few, or none.  The later you enter, the more you must spend to place your product or service ahead of the competition.  This is not to say that Cuba is a virgin market – foreign companies have been doing business in Cuba for more than 20 years.  But it is mostly a virgin market for one US competitor against another.  In the future, that competition will be ferocious.  If you’re not first, you have to be best, and being best is quite simply, harder than being first.

5. US license applications are not prohibited.

Any impression that commercial licenses are not being processed at the U.S. Department of Commerce or are being automatically declined is incorrect.  Like the saying goes, you can’t win if you don’t play.  For this you’ll need a good attorney, not only one who’s adept at maneuvering a tricky regulatory environment but also one with a positive attitude.

6. Despite all the negative press, business between US companies and Cuba is still being done.

Whether the business is moving forward quietly, or not so quietly (see last week’s Memorandum of Understanding between Google and Cuba for peering, pending a future US/Cuba cable) licenses are being approved and relationships are being established.

7. Current opportunities exist.

Not all US business opportunities in Cuba are dependent on future events (a lifting of the embargo, normal agriculture credit financing, an undersea cable).  There are plenty of opportunities within existing regulations to work with Cuba’s private sector.  This includes not only B&Bs, restaurants and small retailers but also cooperatives, some of which are truly substantial and frequently overlooked.  Because examples depend very much on the sector of interest, it’s not particularly helpful to name only one, but we’ll mention one anyway.  Software production and exportation is one legal and very interesting option that inexplicably, has not been seriously exploited.

8. Small opportunities can be leveraged into bigger ones.

The foreign companies that were willing to deal with Cuba during its most difficult times have earned a loyalty premium – this is part of the equation any competitor will have to consider. The same will be true for those US companies who were able to think creatively about legal avenues to introduce their products, even on a very small scale, where branding now will pay big dividends later on.

9. The space for US companies is not unlimited – first come, first served.

Cuba experienced two terrible economic shocks.  The first came in the 1960s after the break with the United States and was arguably worse than the second, in the 1990s after the Soviet Union’s disappearance.  Both followed complete dependence on a single market that vanished unexpectedly.  Cuba has spent the past 20 years making sure this will not happen again.  It has been cultivating a wide array of foreign investors in order to avoid these kinds of shocks, and this is why the disappearance of any one of them, though hurtful, would not be as devastating as some imagine.  So even though Cuba is open to US investment, as a percentage of the entire economy it will be limited.  Get in or get lost.

10. The environment is forgiving, now.  Later, not so much.

The Cuban business process has a steep learning curve, one that is constantly changing.  Some of the biggest US corporations who approached Cuba during the 2015-2016 thaw wrongly assumed that putting a huge gift basket of business offers on the table would guarantee a bigger slice of the pie. The Cubans were not flattered however, they were startled, and it became evident that a slower, more conservative approach was a better strategy.  The point here is simply that as early movers, they had the necessary space to learn from experience and adjust their offers.  The standard still holds, but the clock is ticking.

The strange U.S. perception that Havana is located in Florida

David Urra

The long path to re-establishing Cuban/U.S. relations is permeated with obstacles and misunderstandings, some of which make it even harder to reach that objective. One of the most visible misperceptions has to do with the general impression among U.S. leaders that Cuba is the ripe fruit just waiting to fall into U.S. hands, and that what happened in January 1959 in Cuba was something akin to a temper tantrum that would eventually be resolved by the Cubans who fled to and set up shop in Miami. Continue reading “The strange U.S. perception that Havana is located in Florida”

Investment in Cuba: the US Investor’s Forbidden Fruit

 

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David Urra

When Adam shared the apple with Eve, he must have thought it a good investment, though both were expelled from paradise as a result. In the end, it’s clear that they came out the better for it, since afterwards they had access to earthly pleasures as well as difficulties. As a matter of fact, paradise was not perfect – it had plenty of restrictions.

Right now, for U.S. companies wanting to do business in Cuba, something similar is happening. Cuba exists, just not for them. Thanks to a supreme power, they are unable to invest in Cuba because this might “damage” the Made-in-USA franchise. Continue reading “Investment in Cuba: the US Investor’s Forbidden Fruit”

The Irrationality in U.S./Cuban Relations

 

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David Urra

Fifty-five years of confrontation, misunderstandings, entrenched positions and distrust have turned relations between Cuba and the United States into an irrational nightmare that leaves all logic in human relations behind.

It’s very difficult these days to take a balanced approach when it comes to relations between Cubans and Americans. This is even more evident at the highest official levels on both sides.

For some time, I’ve found myself at the center of this problem. In my work as a business consultant, I’ve always believed that the most rational approach is to refrain from identifying with either side, the better to assist both. It’s impossible to produce any kind of useful analysis if it is only performed from a one-sided perspective. It’s not that an analyst won’t have perceptions that might tend to favor or disadvantage one of the parties, but it’s a matter of being intellectually honest and understanding that both sides need support. Continue reading “The Irrationality in U.S./Cuban Relations”

Successes & Failures by Foreign Investors in Cuba: A Primer

 

arrumbadoressxx1_0Prior to the 1990’s, the Cuban economy was completely integrated in the world’s socialist bloc with nearly ninety percent of its trade and investment coming from the member countries in that bloc, via the Council for Mutual Economic Assistance (CMEA). The Soviet Union was the largest participant in the group and relations were based on complementary economics.

Within this context, the benchmark currency was the convertible ruble and the hallmark of the system was its extensive Economic Plan that was initially designed for a strategic 5 year period, with yearly updates thereafter.

Notwithstanding its CMEA agreements, Cuba also engaged in a small amount of trade with capitalist countries where it operated under the rules of international commerce at the time.

With the disintegration of the Soviet Union and the socialist camp, Cuba was left practically without access to the majority of the markets with which it had previously traded and found itself obliged to insert itself completely in the complicated world of commercial capitalist relations, with the aggravating factor that this sector was heavily restricted by the U.S. embargo against the island, and international trade was subordinate to the United States as a consequence of its status as world leader. Continue reading “Successes & Failures by Foreign Investors in Cuba: A Primer”

American Airlines’ In-House Saboteurs

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Sue Ashdown

Just when you thought you’d seen it all. Now the Miami Herald is complaining (again) about discrimination against Cuban Americans.  This time their target is not Carnival Cruise Line but American Airlines.  The reason?  A Cuban-born pilot flying for American arrived in Cuba without a Cuban passport and Cuba refused him entry.  The Herald is urging the airline to join its anti-Cuban offensive and “negotiate harder” with Cuba.

First of all, discrimination is a rich word coming from the Cuban Americans who’ve been its unique beneficiaries for so many years. When they were the only US citizens/residents granted legal cover to visit Cuba, the discrimination against their fellow (non-Cuban) Americans who were intimidated, harassed, prosecuted, and fined for doing the same was utterly uninteresting to them. Cuban Americans are still the only immigrants given a red carpet treatment and path to citizenship when they arrive in the US illegally. Where is the outrage? Continue reading “American Airlines’ In-House Saboteurs”

Doing Business in Cuba – Myth vs. Reality

Over the past year and a half, as American business executives, journalists, and government officials have set off for Cuba in search of future business deals, we’ve had the opportunity to meet with a good many of them in Havana, while observing the comments of others from a distance. A common denominator appears to be their mental frame of reference. Like hermit crabs shuttling their habitats on their shoulders, it’s evident that more than half a century of missing information or misinformation has taken its toll, and the American view of Cuba has come to be largely governed by social myths.

The problem for any company considering future opportunities in this market just 90 miles south of Florida, is that social myths make the worst kind of compass. Business executives wandering distractedly in the fog of social myth become easy prey for grifters looking to take advantage of their confusion. Their international competitors can rest a little easier, knowing that Americans are so far behind the curve that even a lifted embargo will not be an immediate game changer.

Here are some of the misperceptions we hear expressed most often:

Myth #1: Recent changes in U.S. regulations have freed American companies to do business in Cuba. Continue reading “Doing Business in Cuba – Myth vs. Reality”

Hilton: Nothing to Claim

Ciro Bianchi Ross – Juventud Rebelde

Translation: IcarusCuba LLC – credit requested for redistribution

The media frenzy over Paris Hilton’s recent visit to Cuba for the Cigar Festival was pretty predictable. The heiress to one of the world’s largest hotel chains didn’t limit herself to visiting Havana, but traveled to Soroa and Cayo Largo as well, and everywhere she went, people who came in contact with her were impressed by her down-to-earth, easygoing nature. When she visited Varadero, she stole the show at the International Hotel’s cabaret, where she went on stage, grabbed a congo, and accompanied the orchestra before dancing along with the entertainers. Continue reading “Hilton: Nothing to Claim”