American Businesses Hoping to Cash In On Cuba
American industries of all kinds—from travel and telecom to construction and energy—would be poised to profit if the 52-year trade embargo with Cuba were lifted. Among the first businesses to cash in would be those involved with tourism, most experts agree.
“I believe U.S. travel and tourism companies will be the first to benefit,” said Larry Register, president of the Cuba Business Bureau consulting firm.
“The travel sector already is getting prepared for what might happen,” said Kirby Jones, president of the U.S.-Cuba Trade Association.
In fact, the U.S. travel industry already has seen a significant growth in Cuban tourism, even with the embargo still in place.
President Obama, who has called for “a new era” in relations with the island country, lifted nearly all restrictions on Cuban Americans' travel there in April, 2009. This year, more than 20,000 Cuban-Americans travel to their homeland each month, compared to 9,000 before the restrictions were lifted. The Bush Administration had allowed only one visit per person every three years.
Last week, the U.S. agency that enforces Cuba sanctions approved 42 new travel and other service providers, allowing them to do business with Cuba. There were no such approvals last year.
If travel restrictions to Cuba were lifted for all Americans, first-year projections suggest that 800,000 to 1 million Americans would visit, said Jones, whose Alamar Associates consulting firm staged a U.S.-Cuba tourism summit in Cancun earlier this year.
“There were 120 people there,” Jones said. “All major travel-sector tour operators came to meet with Cuban officials to discuss the potential of doing business and how it might be done.”
Cuba began developing its tourism industry after the 1989 collapse of the Soviet Union, which had granted Cuba billions of dollars in annual subsidies. Last year, more than 2.5 million tourists visited Cuba, mostly from Europe and Canada. Tourism is now Cuba’s biggest source of foreign income.
Jones, who has advised U.S. companies on Cuba since 1974, is not optimistic about an outright end to the Cuban trade embargo. But he thinks a piece of legislation moving through Congress may serve much the same purpose.
House Agriculture Committee Chairman Collin Peterson, D-Minn., is sponsor of a bill that would eliminate some of the cumbersome restrictions faced by farmers who have been selling food to Cuba since 2001.
The Trade Sanctions Reform and Export Enhancement Act of 2000 lifted part of the trade embargo, allowing the sale of food and medical supplies to Cuba’s 11 million people. Since then, a steady flow of U.S. corn, cattle, wheat, rice, apples, cereal and soybeans has made its way to Cuba, which must import 70 percent of its food.
But the reform bill mandated that Cuba had to pay cash upfront for all transactions—allowing no credit. It further stipulated that both parties to any transaction had to use a bank in a third country, disallowing any direct dealings between U.S. and Cuban financial institutions.
Even with those restrictions, U.S. exports to Cuba reached $710 million in 2008, before the global recession forced the cash-poor island to cut back 26 percent last year to $528 million.
Peterson’s bill would do two things. First, it would allow direct transactions between U.S. and Cuban banks. Farmers have long been complaining that the forced use of another foreign bank adds needless cost and prevents expansion of their business.
The second part of the bill is more controversial. It would lift the travel ban for all U.S. citizens, so the resulting increase in tourism would help Cubans generate the cash they need to buy more U.S. goods.
“They’re within 10 votes of getting this passed in the House,” Jones said. “I’ve been following this issue for 35 years and I’ve never seen anything like this. They’re not quite there yet, but it’s closer than it’s ever been.”
A lifting of travel restrictions would sound the death knell for the embargo, Jones believes.
“Right now, most U.S. companies cannot buy or sell goods with Cuba,” he said. “But the validity of having a trade embargo when a million Americans are going there every year loses all sense of logic. I can imagine the head of John Deere thinking to himself,. ‘I can’t sell tractors down there, but my son can go for spring break?’ The embargo would begin to be dismantled.”
Jones envisions an American tourism influx that would lead to ATMs, U.S. cellphone coverage, and airplane maintenance facilities.
“There are any number of areas that will be opened up if there is free and open travel to Cuba,” he said.