U.S. businesses slow to expand to Cuba

U.S. businesses slow to expand to Cuba
Paul Guzzo | Tribune Staff Published: February 28, 2016

TAMPA — Through a series of executive orders by President Barack Obama
during the past year, U.S. citizens are finding it easier to do business
in Cuba than at any time in five decades.

Americans can now sell and export items such as materials, equipment and
tools for construction or agriculture, on credit if they choose, to the
Cuban private sector. They also can establish a presence on the island
nation and hire its citizens.

Still, no deals have been struck yet — raising concerns that without
brick-and-mortar progress on the ground, the U.S. president who will be
sworn in Jan. 20 could wipe away Obama's orders with a stroke of a pen.

The same clock is ticking on a measure by U.S. Rep. Kathy Castor, the
Tampa Democrat, calling for Congress to lift the embargo on travel and
trade that Obama's orders have whittled away. There is pressure, Castor
has said, to pass her Cuba Trade Act during the term of a president she
knows would sign it into law.

An established U.S. business presence in Cuba, though, with millions
already invested, would prove a major obstacle if the next president
seeks to walk back the steps toward normalization that Obama has taken.

"I think the more skin the U.S. has in the game — diplomatically,
commercially, and at the individual level — the more difficult it will
be to undo things," said Sarah Stephens, executive director of the
Washington, D.C.-based Center for Democracy in the Americas. "As we
know, business is a powerful interest and can affect policy."

Still, can enough of an investment be made in the next 11 months?

❖ ❖ ❖

Two U.S. businesses seem close to finalizing a deal with Cuba —
Alabama-based Cleber LLC, which would sell tractors to farmers, and
Tampa's Florida Produce, which would operate a distribution warehouse
for all American goods that can legally be sold on the island nation.

Both ventures have been approved by the U.S. government.

Saul Berenthal, co-founder of Cleber, said the Cuban government verbally
OK'd his company's proposal to open a manufacturing and distribution
center in the Mariel special economic development zone, an area covering
180 square miles west of Havana.

Berenthal will formally file the necessary documents with the Cuban
government to receive official approval when he returns there March 11
for the International Agricultural Fair.

He expects the approval process to take 60-90 days. His company would
then begin building a $5 million to $10 million tractor manufacturing
center by end of the year with a goal of starting production in the
first half of 2017.

"We are not afraid," Berenthal said, considering the prospect of a new
U.S. president. "We believe this is an important step in improving the
relations with the two countries and is something that can help the
Cuban people. So it is worth the risk."

Florida Produce and its owners, Manuel Fernandez and Mike Mauricio, will
give their formal presentation to the Cuban government March 29, said
Tim Hunt, their attorney, with Tampa law firm Hill Ward Henderson.

Conversations he already had with Cuban government officials left Hunt
confident that Florida Produce will win approval of its proposal once
all the paperwork is filed and bureaucratic channels navigated.

Florida Produce would then lease a warehouse from the Cuban government
in Havana.

Hunt said he could not estimate yet how much his clients will invest,
but it would include installation of proper refrigeration and other
components of a warehouse. Nor did Hunt have a timeline for beginning
operations, except to say they prefer to open before Obama leaves office.

"I think the more we can implement, the harder it will be for the next
president to unwind the executive orders," Hunt said.

❖ ❖ ❖

Nothing would stand in the way of a president who wishes to rescind
Obama's orders in the view of another Cuba observer, Mauricio
Claver-Carone, director of the Washington, D.C.-based U.S.-Cuba
Democracy PAC.

The president's job, Claver-Carone said, is to uphold the law and he
believes Obama's policies violate the law by circumventing the embargo.
Only Congress can change the embargo and allow even limited trade with
Cuba, he said.

The only trade Congress allows now is for U.S. companies to sell Cuba
agriculture and medical devices, and on a cash-only basis, Claver-Carone
said.

Congress also allows U.S. companies to establish telecommunication
services with Cuba's state-run ETECSA, but sale of devices these
services require is prohibited, as are investments in the island
nation's domestic infrastructure.

Obama's executive orders permit commercial exports of limited
telecommunications to Cubans, those necessary for communicating with
people in the U.S. and the rest of the world.

In addition, telecommunications providers are allowed to establish in
Cuba the necessary mechanisms, including infrastructure, to provide
commercial telecommunications and Internet services.

"Some of the transactions that Obama is giving a wink-and-nod to today
can easily be considered sanctions violations tomorrow," Claver-Carone
said. "Many of the regulations altered already stretch the bounds of the
law."

❖ ❖ ❖

The companies closing in on a deal with Cuba, Claver-Carone noted, would
establish small operations that a new president would feel little
compunction to honor. He doesn't envision any major corporations
investing in Cuba under current conditions.

Even American Airlines, with plans to take advantage of a non-binding
arrangement allowing as many as 110 commercial U.S. flights to Cuba each
day, has no plans yet for one of its signature Admiral's Clubs in
Havana's José Martí International Airport.

American Airlines is focused on applying for scheduled services through
the U.S. Department of Transportation, spokesman Matt Miller said.

That process ends March 21. Commercial service to Cuba is expected to
begin a few months later.

"We'll evaluate this after we've started scheduled flights," Miller said
in an email, speaking of an Admirals' Club.

Claver-Carone said he believes that once an evaluation is complete, the
decision will be, "No."

The location of the Jose Marti airport is property that was nationalized
by the government in the years following the revolution of Fidel Castro.
The last owners of airport property fled the island nation.

José Ramón López, heir to the land, now lives in the U.S.

Though his relatives were not American citizens when the land was
seized, the Helms-Burton Act that codifies the U.S. embargo says the
president can allow Cubans now living in the U.S. to seek legal recourse
if a U.S. business profits from the seized property.

This adds more potential consequence for Cuba to the question of who is
elected U.S. president.

And that makes operating a business anywhere on the island nation is
risky, Claver-Carone said, especially considering all the land
nationalized by Castro's government.

"If I am a compliance officer for a major company I am not signing off
any deal that could involve stolen properties," Claver-Carone said.

❖ ❖ ❖

Then there is the issue of civil judgments levied against the Cuban
government by American courts — $4 billion plus interest, primarily in
favor of Floridians whose families suffered from Cuba's actions while it
remained on the U.S. State Sponsors of Terrorism list from 1982-2015.

The plaintiffs may be able to freeze money transferred between a U.S.
company and Cuba if that cash makes its way through the American banking
system.

Asked if he would attempt to do so, Andrew Hall, a Miami lawyer
representing a South Florida man who is owed the lion's share of the
judgments — $3.2 billion — sent a simple reply via email: "Yes."

"It is a real concern and something we have been following," said
Florida Produce attorney Hunt. "My impression is that it has been a
topic of much discussion between the U.S. and Cuban governments."

U.S. State Department and Cuban officials began negotiating in December
on settling the civil judgments as well as property claims made by
American citizens against the island nation.

There is also a logistics issue. Obama's executive orders say these new
deals can only be made with private Cuban entrepreneurs. But under Cuban
law, all imports must be sold to the state-run Alimport then re-sold to
private citizens and businesses.

Florida Produce is not concerned with this hurdle, confident that the
U.S. government will bend its policy.

"If we can come to an understanding that the Cuban government is not the
ultimate consumer and is the consignee transferring to the individual
entrepreneur, I don't see this as an issue we need to overcome,"
attorney Hill said.

Again, Claver-Carone said he sees this as a risk only a small company
would take.

"When something is based on what you think, it is not based on sound
business rationale," he said. "The only time I see big companies willing
to do business in Cuba is if Congress changes the law."

If he is correct, the question may be whether enough small U.S.
companies can strike deals before inauguration day in 11 months to apply
pressure to a new president pledged to rescind them.

❖ ❖ ❖

Deal or no deal, interest is high in doing business with Cuba.

From the Tampa area alone, the Greater Tampa Chamber of Commerce sent a
delegation to the island in May and leaders from both sides of the bay
are lobbying for a Cuban consulate.

Still, the Cuban government has been slow to react to the interest.

"You finish a meeting and it feels great and you think you have inked
the deal and then you hear nothing and are left wondering, 'Is it
something we said?" said Stephens, who as executive director of the
Center for Democracy in the Americas has organized trips for business
delegations.

There are a number of theories to explain the lack of progress — the
Cuba government does not yet trust U.S. intentions, does not have the
capital to purchase American goods, prefers to remain loyal to
international companies that have done business with them for years, has
such a long bureaucratic chain of command that such decisions take time,
or will only reciprocate this renewed interest once the embargo is lifted.

Stephens believes it is a combination of all these factors.

Some business leaders have expressed hope that Obama's planned visit to
Cuba March 21-22 could inspire the Cuban government to act faster.

"Cuba understands there is a window of opportunity and they probably do
want to accomplish what they can while there is still time in Obama's
term," Stephens said.

Still, she added, Americans see Jan. 20 as more important than Cubans do.

"For us, the window of the end of the Obama administration is front and
center. And while the U.S. of course looms large in Cuba's future, we
are mistaken if we think we are all of it. They have other partners
who've been loyal to them for decades before President Obama's decision
to restore relations."

pguzzo@tampatrib.com

(813) 259-7606

@PGuzzoTBO

Source: U.S. businesses slow to expand to Cuba | TBO.com and The Tampa
Tribune -
http://www.tbo.com/news/politics/us-businesses-slow-to-expand-to-cuba-20160228/