Star

20 Monday, March 21, 2016 The San Juan Daily Star
Culture Gap Impedes US Business
Efforts for Trade With Cuba
By VICTORIA BURNETT
They have gone to Cuba with plans to
build houses. To assemble tractors. To
buy apps from young programmers.
Even to import charcoal made from the sicklebush
that grows in vast stretches across the
island.
But 15 months after American prospectors
began swarming Havana, filling hotels
and hiring consultants, only a handful have
inked deals to do business with the once-forbidden
island.
As President Obama visits Cuba this
week, the lack of trade with the former foe
threatens to sap momentum from the process
of building relations. It is also a reminder that
beyond tourism — which satisfies Cuba’s need
for foreign currency and the desire of Americans
to visit the island — the countries have
very different visions of economic engagement.
“The litmus test of normalization is trade
and investment,” said Robert Muse, a Washington
lawyer who specializes in Cuba-related
law. “That’s how the Obama legacy will be
judged.”
Eager to show results, the Obama administration
in late January made the biggest
breach yet in the embargo by permitting
Americans to trade with state-owned companies,
which control much of Cuba’s commerce
and are run, mostly, by the military.
The new regulations mean that exporters
can apply for a license to sell goods to state
entities in sectors that include education,
food processing and infrastructure, making
them “the most significant” change since Mr.
Obama announced a thaw with Cuba in December
2014, said Stephen Propst, a partner at
the Hogan Lovells law firm in Washington.
The move was a concession to reality: Efforts
at opening commerce had, until then, targeted
everyday Cubans. But with the island’s
trade apparatus controlled by the state, trying
to sell American cement to Cuban homeowners
or stoves to privately owned restaurants is
impractical and of little interest to the Cuban
government.
The Obama administration has “accepted
the fact that they have to do business
with Cuban state enterprise,” Mr. Propst saed.
The administration loosened restrictions on
trade and travel even further and announced
new commercial deals with Cuba before Mr.
Obama’s arrival on Sunday.
The European Union, meanwhile, signed
an agreement with Cuba on March 11 to establish
normal relations. If ratified by its member
states, it will open the way for full cooperation
and commercial ties between Cuba and
Europe.
Cuba has made it clear that it will not
alter the way it does business to suit American
needs. A stinging editorial published last
Wednesday in Granma, the official Communist
Party organ, said that Mr. Obama could
do even more to ease trade and that, for Cuba,
“getting along does not mean having to give
up our beliefs.”
Cuban officials are “overwhelmed” by the
number of American delegations, said Philip
Peters, a partner at D17 Strategies, a consultancy
in Washington, who travels frequently
to Cuba. And, he said, they are “not going to
rewrite the rule book” for American entrepreneurs.
That rule book is restrictive. Foreigners are
barred from buying most property in Cuba, so
Americans can only covet the beautiful, crumbling
mansions of downtown Havana.
The Cuban government usually insists on
holding a majority stake in any joint venture
outside the new development zone at the port
of Mariel, near Havana, where foreign companies
can wholly own ventures and receive a
10-year tax holiday. State-owned companies
often ask for up to a year to pay for goods, not
the customary 90 days.
Still, some American businesses have
prospered. Airbnb began operating in Cuba
in April; Sprint now has a roaming agreement
with the Cuban state telecommunications
company, Etecsa.
Cleber, an Alabama company, received a
license in February from the Treasury Department
— and has an agreement with the Cuban
government — to assemble simple tractors in
Cuba to sell to private farmers and cooperatives.
Florida Produce, a grocer in Tampa, Fla.,
has a license from the Treasury to open a distribution
warehouse in Cuba and is in talks
with the Cuban authorities.
But threading the needle between Cuba’s
rigid rules and the restrictions that the United
States continues to impose is tricky.
John S. Kavulich, the president of the
U.S.-Cuba Trade and Economic Council, said
he had counted about 500 visits to Cuba by
American businesspeople since December
2014 and more than 140 visits by United States
representatives and officials. But, he said, he
could count the number of business deals they
had reached on his fingers.
Each government has urged the other to
do more. Rodrigo Malmierca, Cuba’s minister
of foreign trade and investment, told a trade
conferencein Washington on Feb. 16 that the
countries “need to show that things are happening,”
and referred repeatedly to the embargo.
Penny Pritzker, the commerce secretary,
said the next day that her department had
granted American companies billions of dollars’
worth of authorizations to do business in
Cuba.
In interviews, American entrepreneurs,
business lawyers and consultants described
a culture gap that often seems the size of the
Florida Straits, with Americans expecting
swift decisions and baffled by the time and
meetings required to get answers from Cuban
officials.
Kevin Ellis, the chief executive of Cayuga
Milk Ingredients, a dairy company in Auburn,
N.Y., met with officials at Alimport, a state import
company, in Havana in April about selling
milk powder. The officials were polite,
said Mr. Ellis, who was part of a whirlwind
delegation led by Gov. Andrew M. Cuomo of
New York. But they seemed more interested
in talking about the embargo than about milk,
he said.
On his return, Mr. Ellis twice emailed
Alimport, in Spanish, about sending samples,
but did not get a response.
“I took that as a ‘No,’ ” he said.
Some worry about the lack of freedoms
in Cuba. Carlos Medina, the chairman of the
Statewide Hispanic Chamber of Commerce of
New Jersey, who visited Cuba as part of a business
delegation in April, said he was dismayed
by the “slow movement toward change” and
would not recommend investing there.
Internet access, for example, has improved
only marginally over the past year, and political
oppression continues, said Mr. Medina, an
engineer who does aerial mapping. Business
cannot thrive in “this controlled environment,”
he said.
Some Americans have only a vague grasp
of the United States regulations or of the kind
of business they are pursuing, lawyers and
consultants said. Even when advised that their
proposal will not be successful, some still insist
on visiting Havana.
Mr. Peters said those who do succeed in
making deals “are prepared to have extended
dialogue in Cuba and go and return.”
“It’s not done by a quick visit and followup
by email,” he said.
The seafront outside the American Embassy
in Havana. Cuba has made it clear
that it will not alter the way it does business
to suit American needs.
Saul Berenthal, a co-founder of Cleber,
the tractor company, who was born in Cuba
and spent part of his childhood there, said he
had studied Cuban and American regulations
in detail and then identified a gap in the Cuban
market: small tractors that do not require
sophisticated parts.
“I spend a lot of time understanding the
social context in Cuba,” Mr. Berenthal said.
Meanwhile, applications for licenses from
United States officials take months to process,
as officials grapple with business proposals
for which there is no precedent.
Ambar Diaz, a Miami lawyer who handled
Cleber’s application, said it had taken
seven months to get the license for the tractor
project. She has been waiting four months
for a license for a Hollywood filmmaker who
wants to film in Cuba, and has another license
pending to import charcoal from a group of
Cuban entrepreneurs.
“My job is to test the limits of the regulations,”
she said.
The most important change that United
States regulators could make — and that many
expected would be made before Mr. Obama’s
trip — is to lift a ban on using dollars in transactions
with Cuba, lawyers and consultants
said. The ban means that legitimate trade with
Cuba has to be financed through complicated,
three-way operations or simply does not happen
because no bank wants to handle it.
Lifting that restriction would “take many
of the excuses away from Cuba” for holding
up business deals, Mr. Kavulich said.
Mr. Muse predicted that the Obama administration
would continue to relax restrictions
during its remaining months, regardless
of how Cuba responds.
The notion of the process as quid quo pro
is false, he said, adding, “You cannot deal in
conditionalities with the Cubans.”