American companies see potential in Cuba, but will need patience

American companies see potential in Cuba, but will need patience
Relations are warming but the U.S. trade embargo is still in place, so
investing in the country will be difficult.
BY KATE LINTHICUM LOS ANGELES TIMES

HAVANA — Chris Rosander was touring a mango grove in Cuba last year with
a group of U.S. agriculture leaders when he had a revelation: "Why don't
we import mangoes from Cuba?"

Sun-Maid Growers, the California dried-fruit company where he heads
international market development, now gets its mangoes from Thailand.
Cuba, he said, is "90 miles from the U.S. instead of halfway around the
world."

Rosander is among the American business leaders who see dollar signs in
warming U.S.-Cuba relations.

As the U.S. eases its commerce and travel restrictions in Cuba – with
President Obama calling for an end to the embargo now in its sixth
decade – hundreds of airlines, hotel chains, telecommunication firms and
other companies are jostling for business.

Thirteen U.S. airlines have applied for permission from the
Transportation Department to provide direct flights to Havana, and
Connecticut-based Starwood Hotels and Resorts recently announced a
contract to manage several hotels owned by the Cuban government.
Carnival is already selling tickets for cruises that will dock in Cuban
ports later this year, and Google is expected to announce plans to
expand Internet access in Cuba.

Making the rounds in Havana last week were the chief executives of
PayPal, which hopes to launch an online remittance service in Cuba, and
Airbnb, which already offers 4,000 rental properties on the island.

Singer and businessman Jimmy Buffett rubbed elbows at a cocktail
reception with top White House advisers. He is said to be exploring the
possibility of bringing his Margaritaville restaurant chain here.

"Cuba is a very romantic and sexy market right now," said Alana Tummino,
director of policy at Council of the Americas, a U.S. business
organization that promotes open markets in Latin America.

But for all the excitement about American investment in Cuba and the
flood of new Cuban businesses that have opened after the government here
relaxed its rules, significant hurdles remain. The biggest is the U.S.
trade embargo.

While the U.S. Treasury and the Commerce Department have made regulatory
changes – eliminating certain restrictions on remittances, facilitating
trade in the telecom and agriculture sectors and allowing some U.S.
companies to establish a physical presence on the island – most U.S.
companies are still not allowed to invest in Cuba.

"The vast majority of executives who have come here have returned home
empty-handed," said Richard Feinberg, professor of Global Policy and
Strategy at the University of California, San Diego, and the author of
"Open for Business: Building the New Cuban Economy." "Very few have
actually signed deals."

The American companies already here, such as Airbnb, operate in a rare
niche between regulations, Feinberg said. Management contracts such as
the one signed by Starwood or contracts for airline service aren't the
same as an investment deal.

If the embargo is lifted, U.S. companies will have to play catch-up with
investors from Europe and Latin America, who have been operating in Cuba
for decades and supply food, electronics, appliances and other basic
goods sold in government stores.

Most Cubans live off government salaries of around $25 a month and are
accustomed to limits on what they can buy, whether it's fish or potatoes.

Rosander, who says his mango export dreams are not feasible under
current U.S. regulations, is part of a U.S. agricultural group that is
pushing Congress to end the trade embargo. "Real trade is only going to
happen when Congress drops the embargo," he said.

In the meantime, he is trying to lay the groundwork. He plans to meet
with Cuban mango farmers this year to figure out whether they would have
to change their growing process in order to meet U.S. sanitation standards.

That long-view approach is what many consultants recommend to their clients.

"You have to be ready to be in this for 10 years," said Michael Laverty,
who runs a consulting company with his brother, Colin, that has more
than a dozen clients exploring business opportunities in Cuba.

Their company advises companies to focus on building brand awareness and
donating to local causes to build goodwill. If it's a sporting goods
company, why not support a local baseball team?

"It might not be legal for you to do business here for a couple of
years, but you'll need a head start," Laverty said.

The Cuban government appears to be moving cautiously toward increased
trade and private enterprise.

In recent years, the socialist government has been allowing more
investment from non-U.S. companies. Cubans have opened hundreds of
thousands of small businesses in their homes, like restaurants and hair
salons, since the government loosened restrictions on private enterprise.

While there is a class of Cubans excited about increased foreign
investment, many express skepticism about whether an infusion of outside
capital will improve the lives of Cubans. That is especially true
outside Havana, in places where fewer tourist dollars flow.

On the highway to the port city of Mariel, about an hour outside Havana,
a government sign promotes the town as "socialist, prosperous and
efficient." It's a message slightly at odds with a newly created
free-trade zone at the port, where international businesses operate with
generous tax breaks.

Cranes lift huge containers onto large ships heading for Brazil and
other countries, and an American-owned tractor factory is expected to
open soon.

All the activity can be seen from the town of Boca, across the bay. On a
recent evening, Leonardo Valdez Diaz, 30, was preparing to head out on a
small boat for a night of tuna fishing.

He said the Cuban government needs to make more changes so everyone can
benefit from the new economy. For example, he would like to be able to
cook and sell the fish he catches at whatever the market will bear,
instead of being forced to sell it to the state at a price set by the
government.

"For the capitalist foreigner, it's a good thing," said another man,
Ricardo Gonzales Sani Esteban, 73. "But most people don't see a thing."

Source: American companies see potential in Cuba, but will need patience
- The Portland Press Herald / Maine Sunday Telegram -
http://www.pressherald.com/2016/03/28/american-companies-see-potential-in-cuba-but-will-need-patience/