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 Business News | August 2006 
Cuba: Open for Business?
 Charles Herman - ABC News
| | Cuban President Fidel Castro listens to a speaker during the May Day parade on Havana's Revolution Square, May 1, 2005. Castro stepped down temporarily for the first time, leaving many Cubans nervously contemplating a future without the communist U.S. foe who has dominated political life for nearly 50 years. (Claudia Daut/Reuters) |
Cuban-Americans celebrated in the streets of Miami Monday night after learning that Fidel Castro had undergone abdominal surgery and turned over the presidency of Cuba to his brother Raul. And eager businesses eyeing the Cuban market cheered right alongside them.
While Cuban exiles greeted the news from Havana as a sign that Castro's nearly five-decade rule could finally be coming to an end, others turned an eye toward the possibility of billions of dollars in new business and trade in a post-Castro Cuba. But are they jumping the gun?
"Basically, we are trying to alert our clients, and those who have expressed interest in doing business in the future, to take their three-ring binders with their strategic plans for doing something in Cuba in the future and take it out of their bookshelves and put it on the table and remove some of the dust," said Teo Babun. His consulting practice in South Florida provides strategic services for businesses that want to work in Cuba at some point in the future.
Minimal Trade Between U.S - Cuba
The island nation, only 90 miles from Key West, Fla., has been off-limits to most U.S. businesses for 45 years. Despite the U.S. embargo, though, some trade does exist between the two nations.
Health care products from the United States can be exported to Cuba, along with food and agricultural products such as chicken, corn and rice. Last year agricultural exports totaled more than $350 million, according to the U.S.-Cuba Trade and Economic Council.
Despite a travel ban that prohibits Americans from visiting Cuba as tourists, thousands make the trek through third countries each year, pouring U.S. money into the Cuban economy. That exchange would likely increase should the trade and travel sanctions be eased or eliminated. And Cubans would likely return the favor, sending fruits, vegetables and even the most American of commodities - baseball players - to the United States.
Baseball scouts took notice after Cuba's second-place finish in the World Baseball Classic this past spring. There have been some reports that as many as 200 current Cuban players could join professional baseball teams in the United States and train alongside fellow countrymen like the New York Mets' Eli Marrero and Orlando Hernandez.
Venezuela, China to the Rescue
Since trade with its neighbor to the north has been limited by Congress, Cuba has developed commercial ties with businesses in other countries. Cuba exports large quantities of nickel for manufacturing in addition to sugar, tobacco, seafood and fresh fruit. It imports oil, machinery, chemicals and food. According to the CIA World Fact Book, Cuba imports $6.9 billion in goods and services annually.
Those imports come primarily from Venezuela, China and Spain. In recent years, the government of Hugo Chavez, president of Venezuela, has developed close economic and political ties with the Castro's Cuba. According to the U.S.-Cuba Trade and Economic Council, that relationship has led to a decline in agricultural imports from U.S. farms.
Venezuela is the third-largest supplier of oil to the United States. Chavez has used the wealth generated from his country's oil fields to provide services to the poor and needy in Venezuela. Working with Castro, he has done the same for Cubans. In return for subsidized oil and other needed products, Cuba sends teachers and doctors to Venezuela.
Here Come the Americans!
Before the revolution that ended on Jan. 1, 1959, when Castro assumed power, Cuba and the United States were close trading partners.
"It was a very important market," said Terry McCoy, director of the Latin American Business Environment program at the University of Florida. "It was probably one of our top five trading partners in the world."
If Cuba and the United States were to normalize relations in 2006, "Cuba will need everything," said McCoy. "It would be a good market if they can find the means to pay for stuff."
Cuba's agriculture industry could see investments in the form of equipment and fertilizer. Cuba's infrastructure - its highways, buildings and homes - would all need to be rebuilt.
Researchers at Florida State University in 2004 forecast that 10 years after lifting the embargo, Cuba could export up to $4 billion annually to its neighbor due north, while the United States could send just over $9 billion worth of goods and services each year.
I See Americans
Perhaps the biggest U.S. export would be people. Curious American tourists would take the short flight to explore the island's historic cities and pristine beaches. That translates into more airline flights, more hotel rooms, more restaurants, more trinket shops selling more postcards and tubes of suntan lotion.
A 2002 study conducted by the Brattle Group, an economic consulting firm, found that lifting the sanctions against Cuba could lead to 3.2 million Americans visiting the island country annually.
All that tourism would create thousands of jobs here as well as in Cuba. The airline and cruise ship industry could see upward of 20,000 jobs created, according to the study, and U.S. economic output to Cuba could expand between $1.2 billion and $1.6 billion annually.
Two-Way Street
Trade with Cuba, however, would go both ways.
"When the Cuban economy gets on its feet, it will become a competitor with certain states like Florida," said McCoy.
Cuban exports would include fruits and vegetables, many that are currently grown in Florida. It could also become a major provider of seafood. And the surge of tourists to Cuba would most likely mean a decline in Americans spending money in other Caribbean islands, and in places like Miami.
And, of course, Cuba would be allowed to export freely those items so closely identified with that country in the minds of Americans: cigars, rum and yes, even baseball players.
Waiting Game
The question that looms over all thoughts about trade between the two countries is when it might happen. According to most experts, it won't be anytime soon.
John Kavulich, a senior policy analyst with the U.S.-Cuba Trade and Economic Council, put it bluntly to those hoping to catch the next flight to Cuba.
"Stop popping Viagra and start popping Valium," he said.
The laws in the United States against trade with Cuba cannot be overridden unless several conditions are met by that government, explained the University of Florida's McCoy. Prisoners must be released, multiparty elections must occur, and there must be no Castro - Fidel or Raul - in any part of the country's government.
"To get there, it seems to me that the regime needs to collapse in some way," McCoy said, adding that the Cuban government has "gone to great lengths to preserve socialism and communist rule."
Kavulich pointed out that a successor government to Fidel Castro has no incentive to work with the U.S. government because that would only weaken its authority.
The Cuban government, he said, will not be embracing political or economic changes that the United States desires because it has the financial support of countries like Venezuela and China.
"Cuba has turned itself into not-for-profit corporation that survives on donations of others," said Kavulich. "Even without Fidel Castro, there is still a relationship that will exist because a successor government will want to show it is still in charge."
So even if some in South Florida have allowed themselves to dream of a Cuba without Fidel, it could be sometime before anyone in the United States sees that firsthand.
"People are way ahead of themselves," said Kavulich. |
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