Nevshehir: Cuba is a new frontier for U.S. companies

Noel Nevshehir

In light of the recent normalization of relations and restoration of diplomatic ties between the U.S. and Cuba, many local companies have expressed interest in exploring business opportunities in Cuba. And while there certainly are opportunities, companies must consider the challenges they will face in what is still a very Communist nation. Much work remains to be done before we return to the status quo ante when the embargo was imposed in 1960, and U.S. companies must manage their expectations accordingly.

For starters, Americans are still banned from traveling to Cuba as tourists, although there are 12 categories of people who can legally travel there today (including relatives, academics, journalists, religious and humanitarian organizations).

Secondly, they are no direct commercial flights between our two nations. Instead, specially licensed charter planes shuttle people across the Florida Straits.

Third, most trade remains illegal, with the exception of agricultural products, medical supplies, telecommunications, and building and construction materials.

Congressional action is needed to begin chipping away at the bans on both travel and trade — a sensitive task given the upcoming presidential election and the importance of Florida in determining the outcome. And once all these challenges have been addressed, the next question is how U.S. companies can overcome Cuba’s internal embargo, namely the centrally planned nature of its economy, exemplified by its state-owned monopolies.

Geopolitical experts have drawn interesting parallels between Cuba’s economic, political and social institutions today and those of Eastern Europe when the Berlin Wall fell in 1989, and the subsequent collapse of the Soviet Union in 1991.

Raul Castro has begun to slowly liberalize his nation’s $80 billion economy. It may soon take on a greater sense of urgency because the plunge in oil prices has forced Venezuela to throttle back its $1.5 billion annual aid package to Havana.

Cuba is like a storage chest that hasn’t been opened in 55 years, and a bit of a time warp. Showroom-new Chevys and Buicks of the 1950s prowl Havana’s streets with jerry-rigged engine components poached from Russian-made Ladas and Volgas. However quaint this may appear to tourists, it goes a long way in underscoring the ingenuity of the Cuban people. A Discovery Channel documentary entitled “Cuban Chrome” highlights the nation’s entrepreneurial spirit and makes viewers wonder what would happen if you could equip Cuba’s highly educated population, with their innate ability to innovate, with modern day technologies.

As with any new emerging market, the initial rush to get into to Cuba will eventually give way to a more measured approach when all of the sanctions have been lifted. In the meantime, companies can learn from European, Canadian and U.S. companies with experience doing business with Cuba. Notwithstanding the embargo, there have been exceptions made that allow U.S. companies to export certain products to Cuba, including those mentioned above. Furthermore, many U.S. banks have now established correspondent accounts in Havana to process trade and financial transactions.

While there are many challenges to doing business in Cuba, they are heavily outweighed by the opportunities. The recent thaw in relations with the U.S. will advance Cuba’s integration into the global economy.

In addition, the country has the highest literacy rate in the Western hemisphere and one of the best educational systems in the world, graduating a high number of Ph.Ds in the math, medical, scientific and technical disciplines.

The Mariel Port west of Havana, a capitalistic enclave which serves as Cuba’s major free-trade zone, is undergoing infrastructure improvements that will facilitate mutually beneficial trade and investment between our two nations.

For these reasons, Automation Alley is organizing a trade mission to Cuba in November 2016 to attend the annual Havana International Fair. The mission will provide local companies with a chance to assess the market firsthand while exploring trade and investment opportunities in industries with a strong demand for U.S.-made products, services and technologies.

Despite the historical enmity between our two nations, the restoration of trade will hopefully eliminate the last vestige of the Cold War era and make way for a brighter future, unclouded by past differences.

Noel Nevshehir is director of international business services at Automation Alley.