Monday, February 26, 2007

After Fidel

After Fidel
Will Cuba's doors open to entrepreneurs?

Following Fidel Castro's coup in 1959, Olga Ramudo fled from Cuba to
Miami with her family. Ramudo, now 56, hopes one day to return to Havana
to open another branch of Express Travel, her 32-employee, $20 million
Miami-based travel agency. That time may soon arrive. The Cuban dictator
has been largely absent from the political stage since summer, 2006,
following an illness described by Cuba's government as intestinal
bleeding, but which some sources have reported is cancer or
diverticulitis. Cuba watchers say the 80-year-old Castro's death is
imminent, likely leading to the rise of Castro's brother, Raul, the
75-year-old defense minister. That could bring big opportunities for
U.S.-based entrepreneurs.

Ramudo, like thousands of other Cuban American entrepreneurs, is hoping
for a new economic openness following Castro's death. Although Raúl
Castro has so far shown himself to be a doctrinaire Communist, experts
such as Daniel Greenberg, director of the Latin American Studies program
at New York's Pace University, suspect he would show a more pragmatic
side as President. In that case, says Greenberg, Cuba may wind up with a
transitional economy similar to China's: Communism with open markets.

Ramudo says: "I expect traffic will be there for vacations, for family
reunification, and certainly for business." She's polling airlines,
hotels, and cruise companies about their plans to eventually offer
services in Cuba, all to help her clients travel to Cuba should U.S.
economic sanctions be lifted.

Those sanctions take two forms. The Foreign Assistance Act of 1961
imposes an economic embargo on Cuba, prohibiting trade and most travel
there. Additionally, the Helms-Burton Act of 1996 prevents recognition
of a Cuban government led by either Castro, and extends the 1961 embargo
to prevent foreign companies from doing business with any Cuban
enterprise whose assets were owned by a U.S. business prior to 1959.

Most experts expect the embargoes to be lifted in phases after Fidel
dies. Within a year of his death, Cubans and Cuban Americans will likely
be allowed to travel between the U.S. and the island freely, predicts
Jorge Pinon, senior research fellow at the Institute for Cuban and Cuban
American Studies at the University of Miami. That could be enough to
spark demand for more open markets within Cuba, he adds. "The biggest
catalyst for change in the economic transition is going to be the small
and medium-sized businesses," he says, adding that those likely to move
in first are small businesses such as Miami-based contractors who can
get to Cuba easily, invest small sums of money, and hire relatives.
Large businesses, he says, aren't likely to make significant investments
until the infrastructure, which has decayed badly since the Soviet Union
collapsed, is partially rebuilt.

Still, many estimates say the Cuban economy has grown at a good clip:
The CIA's World Factbook puts annual growth at 8%, thanks partly to two
million foreign visitors annually. What's more, the island, which has
the third-largest supply of nickel in the world, has gotten a big boost
from soaring global demand for the metal. Plus, China and Venezuela have
strengthened ties with Cuba, the former providing cheap credit and the
latter oil, says Philip Peters, vice-president of the Lexington
Institute, an Arlington (Va.) think tank.

A 2004 poll by the Institute for Opinion Research and Florida
International University found that nearly 20% of Cuban Americans own
their own businesses, but many, particularly older entrepreneurs,
virulently oppose trade with a Communist Cuba. "There will not be any
possibility to work with Raul, and we will not go back to Cuba until
there is another government," says Eduardo Carranza, executive
vice-president of Sunshine Cordage, a $2 million, 34-employee rope
manufacturer in Miami. He says Castro's regime confiscated his family's
previous rope factory and its sisal plantations before the family
emigrated to Miami in 1960.

Younger Cuban Americans see things differently. About 55% of those who
arrived in the U.S. after 1980 favor lifting the embargo, compared with
30% of those who arrived earlier, according to a 2006 survey conducted
by Miami-based researchers Bendixen & Associates. "Our entrepreneurs are
positioning themselves and identifying the opportunities and looking
around," says Frank Nero, president and CEO of Miami-Dade's Beacon
Council, a local economic development organization that works with many
Cuban American entrepreneurs. Ramudo has faith: "Cuba needs everything,
so eve

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