Trading With the Enemy Update

While legislation about improving trade ties to Cuba grabs headlines, a lot is going on under the embargo's radar, say tipsters at a Miami trade expo.
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Nixon went to China, McCain and Kerry went to Hanoi, and Jonathan Bedard went down to the street corner by the Hotel InterContinental in downtown Miami to see a group of about 20 protesters wielding handwritten cardboard signs.

As organizer of the Cuba Trade Expo, Bedard was spending most of that Friday this past March in a conference room inside the hotel. While the expo’s purpose was to inform enterprising Americans about doing business in Cuba, trading with the socialist island is currently illegal under U.S. law, unless one is peddling agricultural products.

“They make some kind of connection between us and al-Qaeda that I can’t quite understand,” Bedard reported back to an audience of about 100 people seated at several long rows of tables in the conference room. He was referring to the folks out on the corner, members of Vigilia Mambisa, a tiny but vociferous organization of Cuban exiles who hate their former homeland’s socialist dictatorship and denounce any form of political or commercial rapprochement with it. One sign called the expo participants “shameless collaborators."

“They all have opinions, and I think we need to respect their opinions,” Bedard told his conferees.

Bedard and the diplomats, lawyers and executives he lined up for the expo opine that now is a prudent time for American businesspeople to prepare for the day the U.S. Congress lifts the embargo on Cuba. There is a new push on Capitol Hill to do so, albeit gradually, starting by nixing the 46-year-old federal law that, in effect, criminalizes travel to Cuba by prohibiting Americans from spending money on the island.

Members of the U.S. House and Senate recently introduced bipartisan bills to repeal the travel ban. The U.S. Chamber of Commerce has urged passage. In a letter to Congress, the Chamber’s executive vice president for government affairs, Bruce Josten, called the proposed legislation “an important first step” toward ending U.S. trade sanctions on Cuba. “The U.S. International Trade Commission estimated in 2001 that the Cuba embargo costs American exporters up to $1.2 billion annually in lost sales. The embargo does not just hurt American businesses, but also workers and farmers who would benefit from trading with Cuba.”

That 2001 loss estimate is probably very low. Agricultural sales, which U.S. law has permitted since 2000, alone approach a billion. Last year U.S. agribusinesses sold $710 million in products to Cuba, compared to $437 million the prior year. And it’s worth noting that the main sponsors of the Senate bill above — North Dakota Democrat Byron Dorgan and Wyoming Republican Mike Enzi — aren't from the Cuban-American powerhouse of Florida but from wheat, soy, corn and cattle country.

But all of the above — from protests to proposals to open travel and trade — is old news, dutifully reported by mainstream U.S. news media year after year after year. Generally unknown across the United States, however, is that Cuban business leaders on the socialist island are open to meeting with Yanqui capitalists right now to discuss possible new ventures.

Look, for example, at what Gaviota, a wholly owned subsidiary of the Cuban military, is building with the French firm Bouygues Batiment: a 1,500-slip marina at the eastern extreme of Varadero Beach.

“I mean, how many boats are going to go there from Spain or Mexico?” Antonio Zamora, a Miami-based lawyer and Bay of Pigs veteran, quizzed the Cuba Trade Expo audience. Answer: not many. The vast majority would have to come from the United States. “There is a desire to open up the economy,” Zamora assured.

The Cuba Trade Expo panelists had other key pieces of intelligence for the attendees, who were mostly Yanquis but also included many from Mexico, France and Spain. Here are the highlights.

You're Gonna Have to Deal with State-Run Enterprises
Expo consensus: Like it or not, Cuba’s government-managed economic system isn’t going anywhere. “U.S. businesses can expect a fairly philosophically statist economy,” said Mark Entwistle, who served as Canada’s ambassador to Cuba in the 1990s and is now an international business consultant. The Cuban economic model is more a function of “historical tendencies” than “ideological preference,” he posited, alluding to the existence of a heavy government hand in the island’s economy long before the Cuban Revolution.

It's Who You Know
Companies from other countries have spent years building relationships in Cuba, so Americans might want to consider partnering with one of them instead of hitting the Cubans cold. “There will be no slam dunk for U.S. businesses,” Entwistle averred, suggesting Yanqui execs would be wise to consider “strategic alliances” with foreign companies already in Cuba. “Take nothing for granted,” he added. “Cubans are price-driven. They could easily turn away from U.S. agriculture suppliers if they get sloppy.”

Worry About the Brazilians
"The biggest competitor there isn't going to be China or Russia but Brazil," predicted Jorge Piñon, a former Amoco executive who developed joint ventures with government-run oil ministries elsewhere in Latin America. He’s currently an energy specialist at the University of Miami’s Center for Hemispheric Policy. “If I were you guys, I’d be talking to a Brazilian company,” he advised.

You Needn't Wait for Congress
Despite the federal law prohibiting regular tourist and business travel to Cuba, tens of thousands of U.S. citizens have visited the island each year for the past several years. Many of them are confident that the U.S. government doesn’t have the means either to detect or prosecute all of them, and that appears to be the case. Similarly, American investors can also get around the sanctions.

One legal way is by investing in a foreign company that does business in Cuba, as long as a predominance of its business isn’t with Cuba. “There’s a ‘don’t ask, don’t tell’ policy,” said lawyer and former Commerce Department official Timothy Ashby, addressing how his former employer handles such matters. “I’m not giving you a legal opinion. This is just my observation,” he noted.

For example, if a U.S. concern told the Treasury Department’s Office of Foreign Assets Control it wanted to invest in a Canadian company that earns 20 percent of its revenues from China, 30 percent from Brazil, and 40 percent from Cuba, OFAC would “probably” allow it, Ashby said. But then he submitted, “If you don’t ask OFAC for an opinion, they can’t tell you.”

Everything Is on the Table (Almost)
"It's not going to be easy to marry again after a 50-year divorce," warned Philippe Colombani, an economic adviser at the French embassy in Havana. He likened U.S.-Cuban affairs to a “love-hate relationship” (and added that his wife is Cuban). That said, Colombani offered some very encouraging words: Like everyone, Cuba’s captains of industry also have “doubts” about their economic system. “Everything is negotiable but sovereignty,” he concluded.

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