News Column

Waiting Game

July/August 2005, HISPANIC BUSINESS Magazine

Keith Rosenblum

cuba trade

The United States bans trade with Cuba, but agricultural producers ship about $400 million worth of goods there every year, thanks to a humanitarian exception to the embargo. Besides this legal trade, companies employ "gray" methods by shipping goods through foreign partners in Canada, Spain, or Mexico.

The big question is how companies can prepare for full and open trade with a nearby market of 11 million. Officially, few U.S. corporations acknowledge having marketing plans for Cuba on the day that President Fidel Castro's heart stops. Unofficially, it is an open secret that many companies have plans for the Cuban market once the 45-year-old embargo ends.

Spain and Canada have already staked their claims in the hospitality industry. Cuba hosted more than 2 million visitors last year, and the principal beneficiary was the Spanish company Sol Melia, which controls some 20 percent of the island's 45,000 hotel rooms.

"There is a lot of prime beach real estate dedicated to tourism that has been overtaken," says Isaac Cohen, former director of the Washington bureau of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) and now a business consultant on Latin America. "In many ways, the embargo has given a head start to companies from other nations. There is a finite amount of property."

Mr. Cohen adds that U.S. companies in agriculture, mining, oil exploration, and tobacco, among others, should make contingency plans for an open Cuban market. As time passes, U.S. companies lose ground, he points out, "and no one likes being second in line."

The U.S. Chamber of Commerce and other trade groups oppose the embargo, arguing it puts U.S. companies at a competitive disadvantage and does nothing to hasten Mr. Castro's departure. Legislation to normalize relations with Cuba introduced by Congressman Jeff Flake, a Republican from Arizona, has yet to garner enough support to overcome resistance in the House of Representatives, much less the threat of a presidential veto.

Meanwhile, the Castro government has tried to circumvent the embargo by a de facto lobbying of individual states, according to Hans de Salas, a research associate at the University of Miami. "Initially, [Mr.] Castro refused to buy anything unless the embargo was lifted," Mr. de Salas says, "but he quickly realized that this opening could be used to his strategic advantage. Cuba has masterfully spread its purchases among states run by Democrats, who are traditionally conciliatory, but also in Republican states where there has not been that sympathy."

John Kavulich, former head of the U.S.-Cuba Trade and Economic Council, recalls a time in the mid-1990s when U.S. corporations "were ready to enter the Cuban market and had boxes in Spanish waiting to go in South Florida warehouses." But as hopes faded for normalization, so Cuba became a lower priority in a global economy teeming with other opportunities, setting the stage for the current game of waiting for Cuba's opening.


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