United States Cuba Policy & Business Blog

Saturday, October 10, 2015

United States Cuba Relations: Getting Beyond Tantalization

The definition of tantalize means to “arouse expectations that are repeatedly disappointed”.   The current state of U.S. Cuba relations at this moment can best be summed up that way, “tantalizing.”  It is a precarious situation for both nations as expectations need to be managed instead of aroused.  Right now the U.S. Cuba arousal is high.  Prepare for reality. Many Americans believe Cuba is wide open for business when still it is not.  The business bandwidth and deal flow for Americans are still too narrow.  Americans want to sell to Cuba.  Cuba wants Americans to invest in Cuba.  Therein lies the crux of the challenge.  On the American side, the Embargo still hobbles and blocks this proposition.  On the Cuban side, Cuban economic and investment policies still must be modernized to attract the kind of investment that will eventually come to Cuba and rebuild and restore it.   Selling and investing are functionally co-dependent economic fundamentals. Before we are going to be able to sell anything to Cuba, they have to be able to have the resources to buy the goods and services we want to sell them.  That is why until the obstacles are completely removed, the maximum potential of the relationship is only mesmerizing at the moment.  There are six obstacles remaining to fully normalized and trade relations:

1) The Cuban Trade Embargo

2) Radio TV Marti and Democracy Program Funding

3) Regime Change Foreign Policy

4) Resolution of Claims

5) Guantanamo Naval Base

6) U.S. Travel Restrictions

Beyond the immediate sectors of travel, food/agricultural, health and some telecommunications, the opportunities for business are still limited.   The private sector openings in Cuba are real but also very limited.  They are limited by the Obama Administration who has not expanded the opening even further while they still can.  They are also limited by Cuba’s response of trying to maintain a cautious methodical approach to the new relationship in the face of overwhelming enthusiasm by both the American and Cuban people. While President Obama’s initiatives and regulatory openings are significant, there are still neither substantial nor transcendent.   Transformation requires boldness and risk taking.  With the time remaining in the Obama Administration, there should be more proactive steps taken to expand the opening and facilitate the opening.  For example, while Cuba was removed from the Terror List, the regulatory impediments that make it possible for them to use U.S. Dollars in the international banking system remain in place.  This means the rationale for the infuriating 10 percent surcharge on U.S. dollar exchanges imposed in 2003 remain in place.  Who is paying that?  Americans and anyone who wants to give up the first ten cents of every U.S. dollar they have when it comes to spending in Cuba.  It is disingenuous that we have a real meaningful travel opening when we still put up an onerous cost that easily could be removed by our side.  We have also not divorced ourselves from the notion that we are going to somehow decide or how to conduct Cuba’s political future for the Cubans.  We are not.  That does not mean that Cuba will change.  It will.  On its own timetable however, not ours. That is the root of the distrust between our two countries and the guarantee for our ultimate disappointment.  The best we can accomplish is being a good neighbor and engage in a respectful debate and dialogue.

Similarly Cuba faces its own tantalization by America.  They want our goods, our services, and our people to visit and collaborate with them.  They need us if they are going to meet their economic growth targets.  However, Cuba faces its own existential challenges with 10 percent of its people and their descendants living 90 miles away from the island and another 10 percent living elsewhere abroad.  This alters the notion of Cuban identity.  How will they keep the values they cherish in the face of a reconciliation with their neighbor to the north?  How do they perfect their socialism with capitalism?  The Cuba before normalization will not be the same Cuba after normalization completes.   What is each side afraid of?  Those are the elephants in the room.

The road ahead for businessmen and corporations to do real business will require authentic relationship building with visits in both countries;  establishing  a  meaningful presence;  and negotiating deals that create mutually beneficial business transactions that focus on profit and social benefit.  If you want to do business in Cuba, you need to get in the business of getting rid of the travel restrictions and trade embargo.  That means lobbying at home.  With the plethora of consultants and lawyers with Havana dealing on their minds,  also remember something a Cuban official stated, “There are those who have come here after December 17, 2014 and those who have come here before. We know them.”  Create your Cuba business map and plan beyond tantalization to discover the real opportunities.