Sunday, August 30, 2009

Cuba might stay cloistered even if embargo vanished

Posted on Sunday, 08.30.09
Cuba might stay cloistered even if embargo vanished

Golden arches across the malecón glistening under a hot Havana sun. Long
lines at Home Depot as a crush of Cuban Americans with deep pockets and
dollar signs in their eyes sip cafecitos at a Starbucks in Old Havana.

They are among the images evoked of a post-embargo Cuba, where
speculators would rush for a free-for-all on a newly opened market of
11.2 million people largely deprived of consumer goods for decades.

``One of the greatest myths is that the day the embargo is lifted, it's
Burger King time in Havana,'' said Washington, D.C., attorney Robert
Muse, who represents European companies that do business in Cuba.
``That's just silly. You will not see much that is highly public or
highly visible.''

Few times since John F. Kennedy was in the White House has there been as
much buzz about the embargo. Even though Barack Obama, since announcing
for president, has publicly supported the trade sanctions and has done
little toward chipping away at the embargo since his election, for a
time this year anti-embargo activists felt the momentum was never better
to have it repealed.

But if trade sanctions first implemented by President Dwight Eisenhower
49 years ago were lifted today, experts say the results would be barely
visible for the cash-strapped nation. If Cuba wanted franchise
restaurants and chain stores, they would have them already from European

So while companies and entrepreneurs across America hatch post-embargo
business plans in the hyped expectation that change could come soon, a
reality check is in order. If the embargo were lifted with Rául Castro
still in power, the Cubans would tightly control all transactions, and
it would take years before necessary legal and trade systems were in
place to make business there feasible.

Even if swarms of American tourists dash for Cuba's shores, the
government would be hard at work tightening a short leash on what could
lead to an explosion of social and political instability, while it
sought the big-ticket infrastructure items it sorely needs and can
hardly afford. Cuba, embargo specialists say, is more interested in Otis
elevators than Nike sneakers.

Cuban stores are already filled with flat-screen TVs and Ray Ban
sunglasses. What Cuba doesn't have -- and people hope a lifting of the
embargo would bring -- is the infusion of cash to kick-start the economy.

Like many others in Havana, Yenny, a 36-year-old janitor from Holguín,
cannot think of anything that the embargo has deprived her of having.
What she wants from a post-embargo Cuba is money to afford such items.

``You see very rich people around here -- people with cars, cell phones
and gold necklaces. But I can't afford that,'' she said. ``Do you know
how much gold costs? That's a lot of money.''

The embargo began in 1960 after a series of tit-for-tats between
Washington and Havana. U.S. oil companies refused to refine Soviet oil,
so Cuba expropriated Texaco, Esso and Shell refineries. Eisenhower first
halted imports of Cuban sugar, and eventually stopped all exports to the

The embargo was made law in 1961, and was broadened by Kennedy several
times in the following years. In 1963, Kennedy outlawed travel to Cuba,
too. Lifting it would require several key moves by Cuba such as
elections and the release of political prisoners.

For the first time, entities such as the Greater Miami Chamber of
Commerce have produced reports acknowledging that the embargo could
conceivably be lifted -- with the Castro regime still in power.

The post-embargo scenarios in Cuba vary wildly depending on who is
running the island. If it happens under a communist state, tightly
controlled trade would begin, with Cuba calling the shots. Should it be
lifted under a capitalistic democratic government, experts fear a
wild-West economic free-for-all and corruption.

But experts agree that despite Cuba's constant rhetoric on the topic,
its leaders are fine with the status quo.

``If President Obama tomorrow were to say `I am going to lift the
embargo,' Fidel would sink an American ship or shoot down a plane, or do
whatever he could to stop it,'' said Pedro Freyre, an attorney who
represents companies with licenses to do business in Cuba. ``His
linchpin is to have American confrontation.''

Any goods Cuba really needs, it can purchase elsewhere.

So if Congress repealed the embargo or Obama issued so many sales
licenses to make it meaningless -- which he has the authority to do --
what would happen?

• Tourism. Experts say the first and strongest change for Cuba would
come in the form of American travelers. Americans who have been shut out
of Cuba would rush to the island, dollars in hand. But Cuba's limited
hotel space would be unable to accommodate them, so prices would spike
as Canadians and other tourists were squeezed out.

``That would be so good for our economy,'' said Juan L., a taxi driver
who shuttles tourists from Havana's international airport.

Unlike some Europeans, who he says try to short-change him, visitors
from the United States tip. He has heard that an end to the embargo
could lure up to two million visitors a year.

``If the Americans started showing up at the airport,'' he said, ``I
tell you the Spaniards and Italians would never be able to catch a cab.''

• Credit. Cuba is starved for cash and experiencing its worst recession
since the collapse of the Soviet Union. If the embargo were lifted,
there would be nothing to stop U.S. companies from making sales to Cuba
on credit.

``They'd buy more food, they'd get a few consumer goods, infrastructure,
cars, buses and other things, but it would be a shell game,'' said Miami
businessman Carlos Saladrigas, who chairs the Cuba Study Group. ``They
buy from country X. When country X doesn't get paid, it doesn't sell
more. Then Cuba goes to country Y and builds up more debt. The Cuban
regime has been playing this game for years, and we don't want to fall
into that.''

• Infrastructure. Cuba's buildings and roads are dilapidated, and were
dealt a $10 billion blow by three hurricanes last summer.

``If Cuba were able to get Haliburton to go in and build an airport and
roads and do it on credit, they'd like that,'' Freyre said.

• Food exports. Cuba would be eager to export winter vegetables, while
lawsuits would stall the exportation of highly sought products such as
rum and cigars.

``They can be harvesting tomatoes and have them at the farmers market in
Pompano Beach less than 24 hours later,'' said William Messina, an
expert in Cuban agriculture at the University of Florida. ``That's a
pretty huge incentive.''

Jorge Piñon, a business consultant and energy fellow at the University
of Miami's Center for Hemispheric Policy, said changes in a post-embargo
Cuba would arrive in stages.

Some companies and entrepreneurs would move in fast, selling inventory
to distributors -- investing no capital and taking no risks. Investments
by, say, major soft drink or hardware brands to set up shop in Cuba
would take longer, and experts warn that they'd have to cut deals with
the government, which could want to stifle U.S. brand presence.

Progress could be stalled in Cuba for lack of what Piñon calls ``yellow
pages'' -- mid-sized businesses that do the lion's share of a company's

``Where's the guy with the port-a-potties? The pickup truck? The back
hoe and wheelbarrow?'' Piñon said. ``Small and medium investment will
happen overnight. Where will the techs be coming from? They'll be coming
from Miami.''

If there was a boom in Home Depot, experts say, it would probably be in
Hialeah, as more recent immigrants bought supplies to take back to Cuba
to sell or help relatives.

But current Cuban law does not allow individual investors to go to Cuba
and do business. Even if those laws are repealed, Cuba's legal system
would have a long way to go before investors felt safe.

``Common people believe there will be a free-for-all to go down there
and make money,'' said Charles A. Serrano, a Chicago-based consultant
for companies that seek business in Cuba. ``There are no laws in Cuba to
facilitate that process.''

Muse, the Washington attorney, says South Floridians with dreams of
striking it rich in Cuba should take Cuban leader Raúl Castro at his
word. During a recent speech, Castro made it clear that he ``wasn't
elected president to make Cuba capitalist.''

``Companies all over the world would be investing in Cuba if the
environment was worth investing in,'' said Gary Maybarduk, a former
State Department official who was an economic counselor at the U.S.
Interests Section in Havana in the 1990s ``Lifting the embargo would
generate lots of excitement, but in the end, without fundamental changes
in the way the Cuban economy is organized, the impact will be limited.''

But he can still dream.

``I'd like to have the first barge with 4-year-old Ford Tauruses and
pickups,'' Maybarduk said. ``I think the first person in will probably
make a lot of money doing that. I would like to open a Home Depot in
Havana, or just a hardware store.

``Give me the right to put up a True Value.''

A Miami Herald staff writer contributed to this report from Havana. The
name of the reporter and the last names of the people interviewed in
Cuba were withheld, because the journalist lacked the visa required by
the Cuban government to report from the island.

Cuba might stay cloistered even if embargo vanished - Issues & Ideas - (29 August 2009)

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