Cuba Investment Anyone? Not So Fast

Cuba Investment Anyone? Not So Fast
By Amy DiPierro | 07/01/15 - 12:53 PM EDT

NEW YORK (TheStreet) -- President Obama handed some good news to U.S.
tech companies looking to build a business in Cuba: The U.S. is
re-opening its embassy in Havana after 54 years.

"This is not merely symbolic," Obama said Wednesday. "With this change,
we will be able to substantially increase our contacts with the Cuban
people. We will have more personnel at our embassy and our diplomats
will have the ability to engage more broadly across the island."

Since the White House announced moves to re-open diplomatic
relations with Cuba on Dec. 17, a number of U.S. tech companies have
made their own overtures, among them Google (GOOG - Get Report) and
Netflix (NFLX - Get Report).


Still, while businesses looking to open up shop on the shores opposite
Key West, Fla., will likely get a boost from reinstated embassies, U.S.
companies continue to face formidable barriers to actually doing
business there.

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"The reestablishment of the embassies has permanence that everything
else doesn't," said John Kavulich, president of the New York-based
U.S.-Cuba Trade and Economic Council. "The hope is that in
re-establishment of diplomatic relations, there will be more
transparency, more accountability and more creativity by both governments."

More substantially, that means neither government can lean on a timeworn
excuse for refusing to facilitate buying and selling between the two
countries, said Kavulich: "We can't do that. We don't have diplomatic
relations."

The plan to mutually re-open embassies is the latest loosening of
restrictions between the longtime enemies. The Obama Administration has
removed Cuba from its list of state sponsors of terrorism and raised the
cap on money that U.S. citizens can send to Cuba as well as how much
money U.S. tourists can bring if they travel there.

Lifted U.S. restrictions have additionally sought to aid Americans
looking to import goods destined for Cuban entrepreneurs. Licensed trips
to the island must still fit within 12 pre-existing categories.

Congress must approve any measure to lift the embargo on trade with
Cuba. The Republic of Cuba has its own set of restrictions on which
transactions with the U.S. are and are not permitted.

But so far there have been few concrete changes requiring the
cooperation of the Cuban government in the tech industry. In March,
Newark, New Jersey-based telecommunications company IDT Corporation
became the first U.S. firm in decades to reach an accord for direct
international long distance calling with Cuba's state telephone
provider. Announcements from Netflix and AirBnB that their services
would be available in Cuba have yet to get a go-ahead from the Cuban
government.

A year ago, even before the White House trotted out its plans for Cuba
in December, Google Chairman Eric Schmidt and other executives at the
search giant had already made a visit, advocating open Internet access
as a route towards "better education, better business, and a more open,
accountable government to Cuba." Company representatives have returned
multiple times since, with their most recent trip earlier this month.

Cuba, meanwhile, has made its own halting steps to get more Cubans
online. Recently it has cut the price in state-run Internet cafes and
pledged to expand WiFi hotspots throughout the country.

But with lots of economic uncertainties regarding everything from Cuba's
sovereign and commercial debts to its intellectual property rights --
not to mention the government's willingness to let U.S. companies do
business with Cubans -- the investment opportunities in Cuba today still
face many stumbling blocks, said Kavulich.

"Cuba shouldn't be oversold and it shouldn't be undersold. It should be
sold for what it is," he said.

The next big steps? A presidential visit to Havana before Obama leaves
office in January 2017 and the expected end of Cuban President Raul
Castro's term in 2018.

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