U.S. business slow to invest in Cuba; rules still evolving

A worker unloads Heineken beer at a store in Havana in this file photo. The ongoing trade embargo and new rules are slowing the movements of U.S. businesses that hope to expand in Cuba.
A worker unloads Heineken beer at a store in Havana in this file photo. The ongoing trade embargo and new rules are slowing the movements of U.S. businesses that hope to expand in Cuba.

MIAMI -- Many barriers remain for U.S. businesses wishing to take advantage of thawing relations between the United States and Cuba.

With a trade embargo still in effect, businesses are proceeding slowly when it comes to the limited commercial opening toward Cuba outlined by President Barack Obama as part of the U.S. rapprochement with Cuba.

Cuba is a new frontier for American business.

Because there hasn't been a semblance of a normal business relationship in more than half a century, the United States was dealing more with the theoretical than real-world experience when it wrote its new rules of business engagement with Cuba earlier this year. Also, the rules were written hurriedly.

Roberta Jacobson, assistant secretary of state for Western Hemisphere affairs, calls the new rules "a work in progress."

"Cubans are getting used to it; our business people are getting used to it," she said. "We are going to tweak. We may not have written them right."

Among the most visible deals to date are Stonegate Bank's announcement last week that it had signed a correspondent banking agreement with Cuba's Banco Internacional de Comercio -- a move that should make it easier to pay for transactions -- and Airbnb's move into Cuba. It now offers more than 2,000 listings in private homes that rent rooms to travelers.

Yet to materialize are any major deals in agriculture or telecommunications. U.S. rules announced in January allow American companies to sell telecommunications and computer equipment and even work with the Cuban government in ventures to improve access to the Internet and telecommunications.

Even though Cuba has shortages of many building supplies and the new U.S. rules allow shipments of construction materials and equipment to Cuba's budding private sector, there have been no announcements by major companies that they're shipping cement mix or sending enough supplies to repaint Havana.

During a White House briefing last week with business people, academics and others who have been supportive of the normalization process, briefers said a revision and clarification of some banking and travel rules would come out shortly. They also asked business executives to keep offering feedback on the evolving rules.

Florida-based Stonegate is the first U.S. bank to engage with Cuba under the regulations that came out in January.

But banks in general are very nervous about Cuba, said Ted Piccone, a senior fellow at the Brookings Institution. "Part of it is the banking culture is very conservative, but the banks also have seen that they can be heavily penalized if they don't abide by the letter of the law."

Meanwhile, as U.S. business pioneers try to strike deals, they must also contend with a Cuban system that doesn't necessarily mesh with U.S. business practices, limited Internet service, and a Cuban bureaucracy that often seems more interested in going slow than expediting business.

Beyond the sluggish bureaucracy, the government is testing the shifting currents with caution.

Carlos Alzugaray, a retired Cuban diplomat, points out there are reasons the government wants to go slow and not risk losing political control by allowing too swift an economic transformation.

Cuban leader Raul Castro, he said, has undertaken three processes of change at once: economic measures, a new relationship with the United States, and a generational shift in political power as he retires in 2018.

All carry a degree of risk that could derail the government's goal of "prosperous and sustainable socialism."

"They want to do things slowly, to keep things under control," said Piccone. "There's also an ongoing battle between Raulistas [who are more supportive of economic change] and Fidelistas for control, and that's another reason that things are so slow."

To help companies try to overcome some of the obstacles in entering the Cuban market, Burson-Marsteller, a public relations and communications firm, recently introduced a Cuba consultancy team that will advise clients on matters such as positioning themselves in the Cuban market, how they should enter it, how to present their corporate presence in Cuba and how to effectively communicate to various stakeholders about their Cuba business.

For companies and industries that consider Cuba a longer-term investment when the embargo is lifted, Burson-Marsteller will advise them on an advocacy role to help bring about policy changes, said Ramiro Prudencio, the company's Latin America president and chief executive.

"I think that for most companies, Cuba needs to be a long-term play -- unless they're in very specific industries," he said. But travel and tourism will present "almost immediate opportunities."

Companies that want to do business in Cuba, he said, must be cognizant of whether their venture is in sync with government development plans and offers social and economic benefits to the Cuban people.

"We want to make sure companies are successful in Cuba," he said. "It's about having the message right and the right policy. Cuba is not just any market and it is not just any country."

Business on 07/30/2015

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