An Island of Opportunity: What the evolving U.S-Cuba relationship means for U.S. Businesses

October 6, 2015

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The evolving bilateral relationship between the Cuba and the United States is setting the stage for Cuba’s economic development, as the Obama administration is incrementally allowing U.S. businesses access to the Cuban market. Therefore, companies looking to approach and engage with Cuba in the immediate and long term should understand how both the forces shape the political, economic and cultural institutions that shape the nuanced and challenging business environment.

To help businesses understand the opportunities and engagement strategies around Cuba, FleishmanHillard hosted a webinar of prominent thought leaders and industry professionals on Tuesday, September 29, to shed light on what the tangible efforts of U.S.-Cuba relationship are today, and what they are projected to be in the near- and long-term.

Award-winning journalist, Juan Carlos Lopez of CNN en Español, moderated a dynamic 60minute discussion among speakers including Pedro Freyre, chair of the international practice at Akerman LLP and professor at Columbia University; Michael Shifter, president of the Inter-American Dialogue; Mark Wells, coordinator for Cuban Affairs at the U.S. Department of State; and James Williams, president of Engage Cuba.

The headlining questions and key takeaways from the conversation included:

Why is it important that Cuba is a bilateral business partner for the United States?

 In a few parameters, Pedro Freyre reinforced the tremendous consumer and workforce potential: “It’s the largest island in the Caribbean, a population of 11 million, 99 percent literacy rate, and it’s 90 miles away from United States. It punches above its weight in biotechnology; it’s vastly underutilized on the agriculture side. It’s stunningly beautiful. It’s been a ‘forbidden fruit’ for 54 years.”

He continued that “Cuba is not China in terms of opportunity. It’s not even Vietnam. But, it is significant for the market and geographical location that it represents. American businesses that focus on biotechnology, agriculture, travel and tourism have already-made fabulous opportunity for development.”

So, where does the U.S. stand with Cuba now?

Over the past year, political relations have warmed at a pace that Pedro Freyre described as “nothing short of breath taking”: Although there is a Congressional ban on trade and tourism, the Administration under President Obama accelerated the bilateral relationship since December 2014 by easing trade and travel restrictions and re-opening the Cuban Embassy. Michael Shifter asserted, “A new president in January 2017 would have the authority to reverse what has been done, but this won’t happen. Opinion polls show support for the bilateral relationship, and it’s overall a political winner.”

Acceleration of pressure on Congress to drop the embargo: Hardliners on the issue have sustained political support for the Congressional restrictions on trade and tourism over the decades and what will likely be another two legislative sessions. However, James Williams noted that President Obama’s progress on Cuba in the past year has allowed the industry to be more open and comfortable contributing to the dialogue and the growing advocacy efforts to drop the embargo.

What does this mean for the U.S. private sector?

Companies eager to jump in…: As Pedro Freyre has seen firsthand on the ground in Cuba, “Americans are everywhere. Companies in key industries like agriculture, pharmaceuticals, and telecommunications are already active here, and if not – they’re late in the game.” Companies who Mr. Freyre considers “late term” business interests with stakes in the market down the road, in industries such as hospitality, real estate development and biomedical engineering should also be here – or come up with their strategy, now.

 …but they need to be realistic: From James Williams’ experience working directly with U.S. companies, although there “was a naïve euphoria” among the private sector following President Obama’s initial December 17 announcement, they were quickly disillusioned by the reality of remaining legal restrictions on trade with Cuba. However, companies are taking a second look, and reemerging with practical approaches their long-term business plans on the island.

From Mark Wells’ perspective from working within political institutions through the State Department, business transactions also burden a gap in the two cultures:  “U.S. and Cuban political and economic systems are vastly different in definition. There is so much potential for misunderstanding.” Furthermore, although the U.S. State Department is auditing Cuban ports and the civil aviation network as a result of its expanded diplomatic duties, the land, sea and air infrastructure on the island remains a significant obstacle to large-scale influx and economic development.

 The Cuban government is not conducive to FDI, but can change as a result of the U.S. being the “force for disruptive and positive change”: All panelists agreed that in order to foster foreign direct investment, the Cuban government must open their political and economic systems and improve their human rights record.  Some also urged that for the Cuban government to fundamentally change, there needs to be external pressure – including the U.S. lifting its Congressional ban on trade and tourism.

Michael Shifter added that America needs to take leadership in pressuring the Cuban government, as the implications are beyond the U.S. and are global-reaching: “Many are hoping that the U.S. opening will reduce restrictions that other countries have had in carrying out business in Cuba. The role of the U.S. is extremely important for [pressuring the] Cuban government to reduce restrictions and make it more attractive to other Latin American and global businesses as well.”

 Business is made over an Embassy-appointed cafecito break:   The primary way Cubans conduct business is through personal relationships, and these relationships require a strong sentiment of trust. For Americans, access to these relationships is limited to the State Department, as establishing business in the country requires Embassy meetings.

Provided the current political, economic, and cultural landscape: What should the private sector do to engage with Cuba now?

Visit Cuba: In order to understand the dynamics of the situation, bridge the cultural gap, and above all, build trust and relationships is to, in Pedro Freyre’s words, “have flip flops [boots] on the ground.”

For a full recording of the 60-minute conversation, click here.

Katie Fraas and Rashidah McCoy contributed to this article.