Cuba is open for business — almost
by Michael Bradley
Special to Delaware Business Times
Joe Miro could see it more than three years ago, when he visited the island he left in 1962 as a boy of 13.
Cuba is ready.
The people are clamoring for more foreign goods. Other countries are already doing business in the country, which has been shut off for decades from the U.S. commerce by government embargo. But as President Obama pushes fornormalization of relations between the two countries, and cruise ships head to the nation just 90 miles from the southern tip of Florida, excitement is growing that American companies will soon have greatly expanded trade prospects.
“As far as trade is concerned, the opportunities are immense,” said Miro, a member of the Delaware House who represents that 22nd District. “What is not clear at this point is the mechanism by which businesses will be able to comply with those opportunities.”
Miro’s experience with Cuba and its complexities is vital at this point in the history between it and the U.S. On May 17, he attended the World Trade Center Delaware breakfast meeting on trade with Cuba that featured guest speaker John S. Kavulich II, the president of the U.S.-Cuba Trade and Economic Council. The program looked at what is next for the countries’ relationship, as well as the ramifications of Obama’s historic March visit.
Although the idea that there will be unfettered access to American goods on the island in the next several months is preposterous, there is no doubt companies will have the chance to tap into the Cuban market in the future. As Miro said, it’s important protocols be established and the groundwork be developed that will allow for commercial give-and-take.
“People in the streets are eager to see change, but I think change is going to be slow, because of the number of years people have lived under a particular system,” Miro said. “They are accustomed to having their needs met by the government.”
While he was in Cuba during his last visit in late 2012, Miro saw foreign-owned hotels and noticed that citizens had more American goods than before, some of which they were selling from their houses without the previous fear of government crackdown. “The idea of private business is growing, as well as many restaurants,” Miro said. “Much of that was not available when I visited in 2007.”
Delaware already has a trade history with Cuba. In 2007, Mountaire Farms signed an agreement to export poultry to the island. Because the nation has no broiler-chicken production and limited egg harvests, it is in need of product from many other places, including the U.S. and Delaware. Five years ago, the then-export trade director for Global Delaware, which is part of the Secretary of State’s office, organized a mission to Cuba involving poultry companies from the state to look at opportunities. Since then, other states have arranged similar missions to Cuba in the past few months, hoping to tap into the fertile market.
David Mathe, the current export trade director, is interested in helping the state’s farmers, as well as any other businesses, navigate the intricacies of the Cuban market. Although Global Delaware’s current focus is on Canada, Mexico, Germany and South Korea, it is interested in taking advantage of the opportunities that Obama’s new approach to Cuba will offer. He sees the trade center’s Delaware event as a chance for local businesses to learn how to begin the process of trade with Cuba. “We are learning what the opportunities and what are the challenges,” Mathe said. “We want to be prepared when the embargo is lifted.”
Since, as Mathe said, there aren’t many “assets on the ground” in Cuba, businesses and the organizations that support them rely on the U.S. Department of Commerce for information and guidance. One would imagine that the programs offered will expand as the country opens more and the U.S. permits a wider array of contact with Cuban markets.
Obviously, one thing that could slow down trade progress is the human-rights issue. When Obama visited in the winter, he was clear that there must be progress in that area before the U.S. can launch any total spectrum of relations with Cuba. But there is an undeniable allure to working with a partner that is only 90 miles away.
“It’s a close market,” Mathe said. “We work with companies in Delaware who are trying to do business with Asia, which is halfway around the world and a 13-hour time difference away. Cuba is easily accessible, and because it has been closed to us for so long, there is a romance associated with it. But there is a desire there for our products.”
The “romance” of which Mathe speaks is real. But while some American companies may envision a citizenry thirsting for U.S. goods and eager to fill the coffers of our businesses, there are few things to remember. Cuba is nearby and is an untapped market, but it has also spent the past several decades building relationships with other nations for many items. And it’s not just old Soviet-bloc countries. Its biggest partners are Venezuela, Canada, China and the Netherlands. Plus, because the nation’s population is a modest 11.3 million people, it’s not exactly as if firms would be tapping into the Indian or Chinese markets. Finally, since the Castro regime has been so repressive, and the planned-economy system has kept incomes down, there is not abundant disposable income available. Still, a new market is always exciting, and as Mathe said, there is a romance to Cuba. People have to remember, though, that it will require some patience.
“Doors are getting opened, but it’s a slow process,” Miro said. “Nothing is going to take place overnight. [The Cubans] are cautious about who is going to what, when and how.”
John S. Kavulich, President of the U.S.-Cuba Trade and Economic Council, focused on the basic tension between the strategically slow Cuban government and the excitement of American business as trade barriers begin to fall in remarks he delivered to members of World Trade Center Delaware last month.
He delivered a message of “sobering encouragement” to Delaware businesses – balancing the allure of new markets with sizeable challenges that remain.
“There are export opportunities for United States companies, but they are hostage to politics, logistics, and ability to pay,” Kavulich said.
Kavulich noted that trade with Cuba already exists in Delaware, a result of the Trade Sanctions Reform and Export Enhancement Act, signed into law by President Bill Clinton in October 2000. It reauthorized the direct export of food products and agricultural commodities from the United States to Cuba.
And while Kavlulich understands the desire to travel to Cuba on business – to drink “the Mojito at El Floridita where the writer Ernest Hemingway would sit on a stool” – he also advises business leaders to go with a specific plan and to research in advance what is, and is not, allowed in a quickly changing marketplace.
“You don’t need a consultant,” he said. “You probably don’t initially require legal services. But you should try to make certain that you know what the United States government authorizes you to do and what the government of Cuba authorizes you to do. There is often a tremendous distance between the two opportunities.”