Culture Gap Impedes US Business Efforts for Trade With Cuba

MEXICO CITY — 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 prepares to visit Cuba this month, 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.”

Continue reading the main story  

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 said. The administration is expected to loosen restrictions on trade and travel even further and announce new commercial deals with Cuba before Mr. Obama’s arrival on March 21.

The European Union, meanwhile, signed an agreement with Cuba on Friday 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 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 conference in 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 follow-up by email,” he said.

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 expect will 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.”

Back To Listing