Last week, The Cipher Brief sat down with Kirby Jones, the President of Alamar Associates, a company that has consulted on trade and business with Cuba since 1974, to discuss how U.S. businesses can take advantage of the recent changes to U.S.-Cuba relations. He believes that the U.S. attempts to change the Cuban government are futile and that the embargo is causing U.S. companies to miss out in business opportunities in Cuba.
TCB: You’ve been a long time advisor to companies seeking to do business in Cuba. What is the business climate in Cuba like and how have you seen it change?
KJ: That question has two answers. The business climate really is no different than any place else. In other words, you can’t assume that because the U.S. isn’t there that everybody else isn’t there. In fact, everybody else is there and so Cuba has now several decades of experience of big times companies, Unilever, Nestle, Sherritt, and Odebrecht of Brazil so U.S. companies and business people are going into a fairly sophisticated market. On the other hand, because of Cuba’s domestic changes and reforms over the last couple years, there is developing a brand new middle class and a consumer class, which never existed before, and so the opportunity is ripe for U.S. companies.
TCB: Although the U.S. has normalized relations, the trade embargo remains in place. What advice would you give U.S. companies who are looking to do business in Cuba now?
KJ: Relations are far from normalized. In fact they are very abnormal because we don’t have such a total embargo that has existed for so long against any other country except for Cuba. Yes we have diplomatic relations, but usually that is the last thing to happen. Look at Vietnam. We lifted the embargo there and then we had official diplomatic relations. Here is the reverse. The climate between the two countries has changed, but the practicalities of doing business have not changed. American companies still have to get licenses, they still are prohibited from investing, there still is no direct banking, you cannot use your credit card, Master Card and American Express are not there, American airline carriers are not there. A lot of companies have announced what they’re going to do in Cuba, but nothing has happened because you’ve got over 50 years of embargo regulations that have to be dealt with.
TCB: So the change in diplomatic status is really just a change in name only. Do you think the opening, as narrow as it may be, is it going to have some impact on either the Cuban economy, on the Cuban people, or the Castro government?
KJ: Those are at least two different areas. On the Cuban people, when trade begins and when the U.S. allows American companies to invest and sell, yes that will help the Cuban people. More Americans are traveling and that opening is really a gift to you and me, to the American people, rather than to the Cubans. But hotels are filled and streets are crowded. As far as the Castro government is concerned, our business is not to change the Castro government. Our business is not to change the Vietnamese government, we are not changing the Saudi Arabian government, and we are not telling King Hussien in Jordan to leave office. This trade and this business is going to help American companies, it’s going to help the Cuban people. As for the Castro government, Raul Castro is leaving in 2018. He has already announced that so the Cuban government will evolve on its own.
TCB: If the embargo were to be lifted, in what sectors do you see the greatest long-term opportunity for American business?
KJ: I think there are 4 or 5. One is mining. Cuba has the 3rd or 4th largest deposit of nickel in the world. It is one of the very few things that the U.S. has none of. We import nickel from Canada, Australia, and Russia, I think, and there are huge deposits in Cuba. I think there will be potential there for not only the nickel, but also mining machinery and mining technology. Biotechnology. Cuba has a very sophisticated biotechnology industry. They make medicines that are sold around the world, but not sold in the U.S. They have vaccines against a strand of meningitis that kills several hundred children here in the U.S. Because of the embargo, American companies are not allowed to import it. So I think that is an area. Agrobusiness has huge potential. Cuba has lots of land. It can grow anything so American companies are using Mexico and other places to grow food when they can grow the same thing from Cuba. I think there will be infrastructure needs. Roads repaired, sewer systems repaired, water systems repaired. That’s further down the line, but I think there’s potential. Energy, oil exploration. Both the exploration of oil in the Gulf and the refining of oil and oil machinery is a potential. And finally, there is rum and cigars, which everybody talks about. It is a small amount of money, but it’s certainly more visible than agrobusiness.
TCB: If the embargo were to be lifted, should American companies be worried about the Cuban government implementing protectionist measures to shield Cuban companies form competition? Do you think if the embargo were to be lifted that there would be additional red tape to shield domestic competitors?
KJ: Yes and no. Detractors in America who talk about Cuba as not a good investment opportunity or not a good business partner often use that argument. But I would say this, what do these people know about Cuba that the hundreds of people from around the world from other countries and other companies don’t know? Is Nestle, is Unilever, are any other companies that are there less careful than American companies? The answer is no. Are they just as concerned about profit as anybody else? The answer is yes. I cannot predict regulations that Cuba might have, but it is something to consider. Will they do anything special about the U.S.? No, because whatever they have will apply to the whole world. There are rules and regulations to learn and American companies need to do that. They talk about needing to change the law. That’s fine, we can debate changing the law and changing the investment code and business practices until we’re blue in the face. Cuba is what it is. Do business or don’t. Make up your own mind, but don’t tell them you have to change before we will. They’re not going to do that.
