U.S. companies line up to do business in Cuba

In a free-trade zone in the city of Mariel, models are photographed at a market that features commercial advertising, a rarity in Cuba.

March 25, 2016 12:47 PM PT

Reporting from Havana — Chris Rosander was touring a mango grove in Cuba last year with a group of U.S. agriculture leaders when he had a revelation: “Why don’t we import mangoes from Cuba?”

Sun-Maid Growers, the California dried fruit company where he heads international market development, currently gets its mangoes from Thailand. Cuba, he said, is “90 miles from the U.S. instead of halfway around the world.”

Rosander is a part of a rush of American business leaders who see dollar signs in warming U.S.-Cuba relations, on display this week during President Obama’s historic visit to Havana.

As the U.S. eases its commerce and travel restrictions in Cuba — with President Obama calling for an end to the embargo now in its sixth decade — hundreds of airlines, hotel chains, telecommunication firms and other companies are jostling for a piece of the pie.

Thirteen U.S. airlines have applied for permission from the Department of Transportation to provide direct flights to Havana, and Connecticut-based Starwood Hotels and Resorts recently announced a contract to manage several hotels owned by the Cuban government. Carnival is already selling tickets for cruises that will dock in Cuban ports later this year, and Google is expected to announce plans to expand Internet access in Cuba.

Making the rounds in Havana this week were the chief executives of PayPal, which hopes to launch an online remittance service in Cuba, and Airbnb, which already offers 4,000 rental properties on the island.

And then there was singer and businessman Jimmy Buffett rubbing elbows at a cocktail reception with top White House advisors. He is said to be exploring the possibility of bringing his Margaritaville restaurant chain here.

“Cuba is a very romantic and sexy market right now,” said Alana Tummino, director of policy at Council of the Americas, a U.S. business organization that promotes open markets in Latin America and on a recent night cohosted a party for executives interested in doing business here.

In the courtyard of a restored Havana mansion, business leaders mingled with young Cuban entrepreneurs over mojitos and live music. On one wall hung several dozen painted dinner plates, each bearing an image of Fidel Castro in a different act of copulation — a none-too-subtle condemnation of the communist leader’s policies by Cuban artist Esterio Segura.

The heady scene recalled the free-market heyday of downtown Manhattan in the 1980s or Eastern Europe after the fall of the Soviet Union.

But for all the excitement about American investment in Cuba and the flood of new Cuban businesses that have opened after the government here relaxed its rules, significant hurdles remain.

The biggest is the U.S. trade embargo.

While the U.S. Treasury and the Commerce Department have made a series of regulatory changes — eliminating certain restrictions on remittances, facilitating trade in the telecommunication and agriculture sectors and allowing some U.S. companies to establish a physical presence on the island — most U.S. firms are still not allowed to invest in Cuba.

“The vast majority of executives who have come here have returned home empty-handed,” said Richard Feinberg, professor of Global Policy and Strategy at UC San Diego and the author of a new book called “Open for Business: Building the New Cuban Economy.” “Very few have actually signed deals.”

The American companies already here, such as Airbnb, operate in a rare niche between regulations, Feinberg said. Management contracts such as the one signed by Starwood or contracts for airline service aren’t the same as an investment deal.

If the embargo is lifted, U.S. companies will have to play catch-up with investors from Europe and Latin America, who have been operating in Cuba for decades and supply food, electronics, appliances and other basic goods sold in government stores.

Most Cubans live off government salaries of around $25 a month and are accustomed to limits on what they can buy, whether it’s fish or potatoes.

Rosander, who says his mango export dreams are not feasible under current U.S. regulations, is now part of a U.S. agricultural group that is pushing Congress to end the trade embargo. “Real trade is only going to happen when Congress drops the embargo,” he said.

In the meantime, he is trying to lay the groundwork. He plans to meet with Cuban mango farmers this year to figure out whether they would have to change their growing process in order to meet U.S. sanitation standards.

That long-view approach is what many consultants are recommending to their clients.

“You have to be ready to be in this for 10 years,” said Michael Laverty, who runs a consulting company with his brother, Colin, that has more than a dozen clients exploring business opportunities in Cuba.

Their company advises companies to focus on building brand awareness and donating to local causes to build goodwill. If it’s a sporting goods company, why not support a local baseball team?

“It might not be legal for you to do business here for a couple of years, but you’ll need a head start,” said Laverty.

For its part, the Cuban government appears to be moving cautiously toward increased trade and private enterprise.

In recent years, the socialist government has been allowing more investment from non-U.S. companies. Cubans have opened hundreds of thousands of small businesses in their homes — from restaurants to hair salons — since the government loosened restrictions on private enterprise.

During his visit, Obama embraced Cuba’s small but burgeoning private economy, dining with his family at one of Havana’s new private restaurants and sitting down with local entrepreneurs and Brian Chesky, Airbnb’s CEO.

And while there is a class of Cubans excited about increased foreign investment, many express skepticism about whether an infusion of outside capital will improve the lives of everyday Cubans. That is especially true outside Havana, in places where fewer tourist dollars flow.

On the highway to the port city of Mariel, about an hour outside of Havana, a government sign promotes the town as “socialist, prosperous and efficient.” It’s a message slightly at odds with a newly created free-trade zone at the port, where international businesses operate with generous tax breaks.

Cranes lift massive containers onto large ships heading for Brazil and other countries, and an American-owned tractor factory is expected to open soon.

All the activity can be seen from a sleepy town called Boca across the bay. On a recent evening, Leonardo Valdez Diaz, 30, was smoking a cigarette on the waterfront there with friends, preparing to head out on a small boat for a night of tuna fishing.

He said the Cuban government needs to make more changes so everyone can benefit from the new economy. For instance, he would like to be able to cook and sell the fish he catches at whatever the market will bear, instead of being forced to sell it to the state at a price set by the government.

“For the capitalist foreigner, it’s a good thing,” said another man, Ricardo Gonzales Sani Esteban, 73. “But most people don’t see a thing.”

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