American Businesses Hoping to Cash In On Cuba
Future Opportunities in Mining, Energy and Telecom?
Travel and tourism may top the list of business sectors that would benefit from a lifting of the Cuban trade embargo, but they’re followed closely by mining, oil, telecommunications, construction supplies—and virtually everything else.
“Who wouldn’t want to do business in Cuba? They need everything.” said George Harper, an attorney whose Miami firm often deals with Cuban trade ssues.
“You name it—construction, road building, services of all kinds, banking insurance,” added Harper, who was born and raised in Cuba. “It’s an absolute gold mine for any company that wants to expand.”
Beyond travel, the two biggest sectors with potenital for doing business in Cuba are mining and energy, experts say.
Cuba’s nickel deposits are the third-largest in the world and represent its second most valuable export behind sugar. There are no nickel deposits in the United States, which imports imports all of its nickel, mostly from Canada and Australia. It’s is used widely as an alloy, much of it in the production of stainless steel products.
Copper, chromium, and cobalt also are mined in Cuba, with lesser quantities of salt, lead, zinc, gold, silver. Immense iron reserves have not yet translated into much production.
In 2004, the U.S. Geological Survey estimated that drilling off the coast of Cuba could yield 5 billion barrels of oil or more. The Brookings Institutehas said that Cuban oil reserves are "equal to major fields in Alaska people want to drill."
Senators Lisa Murkowski, (R)-Alaska, and Mary Landrieu, (D)-La., drafted legislation last year that would lift the trade embargo enough for U.S. oil executives to do business in Cuba, but the bill has languished. In the meantime, a multitude of other countries have moved in.
“Cuba has entered into quite a few partnerships to aggressively explore their coast,” said Jones, of the U.S.-Cuba Trade Association. “Canada, the UK, Spain, Norway, Brazil, Russia, Malaysia, Vietnam, Venezuela – all are partnering with Cuba to get at its oil.”
The United States still has a huge advantage over other countries because of its proximity to Cuba, even if it’s late to the game. Transportation costs over 90 miles of water would be miniscule when compared to Asia or Russia.
"We feel that a greater reliance on American technology to develop their resources could have a positive influence on the Cuban culture," said Robert Dillon, spokesman for Murkowski. "American companies are the best equipped and experienced to deal with offshore drilling like this, and we feel that American oil workers are missing out."
U.S. infrastructure companies stand to gain if the trade embargo is ended or loosened, said Register of the Cuba Business Bureau. “There is need for building supplies, highway development and building renovations.”
Another area worth exploring “right now” involves U.S. telecommunication firms,” Register added.
When it eased travel restrictions, The White House also announced it would exempt U.S. telecommunications companies from the trade embargo. Companies like Verizon , Sprint and AT&T could bring better phone and internet service to the island to “promote the freer flow of information,” a White House statement said.
But the Cuban government rejected such an arrangement. An executive of the government-owned telecommunications company, ETECSA, said two obstacles would first need to be removed. The U.S. froze $160 million in ETECSA funds in 1996, and they want it back. And the agreement that forces Cuba to pay U.S. companies through third countries—the same obstacle the Peterson bill would address—would need to be rescinded.
“It may seem like the Obama administration has expanded communication possibilities,” said ETECSA exec Vivian Iglesias. “But we know that unless restrictions like the (Cuban Democracy Act) and others that have been tightened since 1992 don’t change, there can’t be any normal communication.”
“The causes that led to the theft of our funds are still in place,” she said. “If those restrictions don’t change, that prevents direct communication between the United States and Cuba.”
In October 2009, a small Miami company, TeleCuba Communications Inc., announced it had obtained U.S. permission to lay fiber-optic cable to the island, but the Miami company admitted it has not yet received permission from Cuba.
While U.S. efforts are stalled, an Italian joint venture that began 12 years ago has developed a widespread cellphone system. Italy now owns 27 percent of ETECSA. Venezuela is spending $63 million to build an undersea fiber-optic cable across the Caribbean that is expected to be completed next year.
Business opportunities may abound in Cuba, but many impediments remain before U.S. firms can take advantage.
“I don’t think the embargo will be lifted in my lifetime,” said Cuban-born Harper, the Miami attorney. “But I’m 67. Maybe in my children’s lifetimes.
“I think the Castro boys will find a way to keep it in place,” he continued. “The embargo has been a good friend of theirs. There are few other things they can rally the Cuban people behind. It would be very difficult to keep control over people if there’s a free flow of information.”