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.

Investment in Cuba: the US Investor’s Forbidden Fruit

 

PTB4a

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”