When the Berlin Wall came down in 1989 it was quite unclear to Western investors just how many opportunities the revolutions in the former Warsaw Pact countries would provide. Cuba is now in a similar position.
Eastern European countries were still gray, drab places emerging from under the thumb of the Soviet Union with decaying infrastructure and no business to speak of.
Still, the Westerners who bet on Central and Eastern Europe reaped massive rewards in the long run as it was cheap to get in and those countries would eventually join the European Union. Today they are as advanced as Western countries.
Now it is Cuba’s turn. At least many think and hope so, including some government officials, prominent law firms and major U.S. companies. While short-term skepticism and large political hurdles remain, most Cuba watchers see a full transition and opening as simply a matter of time.
Since December 2014 when U.S. President Barack Obama began normalizing relations with Cuba many industries, including travel, banking and trade, and other industries like telecom construction and law firms have been closely monitoring the progress is the last Soviet satellite country.
One American who has high expectations is Wolanyo Agudu, founder and owner of Philadelphia-based Eneri Visions, a company that supports telecoms and telecommunications initiatives.
“Cuba is on the verge of delivering huge profits for bold and well-timed American investors,” he said. “However, Cuba’s Internet and telecommunications infrastructure – the engine and lifeblood that will power its new economy, needs a major upgrade to support new unprecedented growth.” Cuba has just a 5 percent Internet penetration rate, one of the lowest in the world.
Although the trade embargo the United States placed on Cuba in 1962 is still in effect, many are optimistic it could be removed in the coming years.
There is a lot of buzz even if there is ways to go, particularly since the election of U.S. President Donald Trump who has joined Florida Republican Senator Marco Rubio in opposing an open Cuba policy. Still, many think it is not likely that the Trump administration will attempt to scrap what has been put into place.
According to the blog Cubatrade.org, “A point of contention is whether to make changes to policy and regulations retroactive or henceforward. There are potential legal challenges to removing what United States companies and citizens have already been relied upon. The decision is not about can or can’t, it’s about should or shouldn’t.”
“I am quite positive about [the lifting of the embargo],” said Lawrence Diamond, a partner at the global law firm of Duane Morris. “I think the embargo will be lifted in two to three years.”
Cuba and the longest 90 miles
It is only 90 miles between Havana and Miami, yet the two cities – and the two countries — have been worlds away for more than half a century.
So what does Cuba need and how are U.S. companies going to benefit?
According to U.S. lawyers and potential investors, the country needs capital investment, which is likely unsolvable without greater capital inflows to Cuba from the United States, meaning the embargo needs to end.
Once that happens the U.S. industries that have the most to benefit include infrastructure related businesses. That means construction, building restoration and real estate. Other sectors include tourism, telecommunications and technology, energy, education, agric and pharma.
Cuba has a highly educated population, but with a limited financial system, Cuba lacks the domestic savings to raise fixed capital investment above the current level of 10 percent of GDP.
Cuba’s state-led economy has also ground to a halt. With many state-run enterprises dependent on public subsidies, Cuba has attempted to shift workers to the much agile private sector, but progress continues to be slow.
On the flip-side, however, it is precisely these circumstances that could speed up investment in the Island nation, according to those eyeing opportunities.
Another development will be the retirement of President Raul Castro next year. His expected successor, current First Vice President H.E. Miguel Diaz-Canel Bermudez, is much more willing to open Cuba to the United States.
Agudu said Obama’s efforts have already “increased telecommunications connections between USA and Cuba”.
“The new regulations include a general license that authorizes companies to “establish mechanisms to provide commercial telecommunications services in Cuba or linking third countries and Cuba,” he said.
Agudu has also started business tours to Cuba with the idea of introducing American executives to the proper officials on the ground. He said these all-inclusive people-to-people business trips are aimed at giving American companies a first-hand look at what is really going on.
He said the goal of his company is to assemble a delegation of 20 people each month, craft a customized itinerary and take them to Cuba to explore business opportunities.
That includes arranging one-on-one meetings with key business figures and government officials, connecting clients with the right companies to broker deals and patching clients with U.S. firms and industry experts specializing in Cuba advisory and business services. It also includes tours of free trade zones.
“We want to also assist in navigating the complex OFAC regulations, licensing requirements and landmines,” he said.
According to Agudu, businesses and trade group must get into Cuba now to explore incredible trade opportunities and establish a first-mover position in an extremely lucrative, but soon to be a competitive market.
“U.S.-based businesses need the right expertise to assist them in navigating the complex Cuba market,” he said. “Part of our Cuba engagement strategy is to expose as many people as we possibly can to legal people-to-people business meetings in Cuba.”
As Cuba Journal recently pointed out, Cuba is poised to shift into a vibrant, Internet-enabled economic engine.
“Web technology and innovation is already starting to impact Cuba’s most vital industry – travel and tourism – and will no doubt impact nearly every other sector of the economy in the future,” the news source wrote.
Still choppy seas ahead
Despite the restoration of diplomatic ties between the two nations, U.S. citizens are still not technically allowed to travel to Cuba as tourists and must still certify that travel falls into one of 12 permitted categories, including visiting family; educational, religious, or humanitarian activities; and participating in various cultural programs.
For all intents and purposes, however, Americans can travel freely to Cuba. Flights and ferries leave from the United States daily and the Treasury Department, which oversees travel restrictions, has indicated any restrictions will not be enforced.
Perhaps the biggest wild card in U.S.-Cuba relations is newly-minted President Donald Trump. Trump has made clear that he wants to reverse many of the initiatives put forward by Obama and recently said he shared the same view as Florida Republican Senator Marco Rubio, a staunch opponent of closer Cuba ties.
What that will mean is unclear, but if history tells us anything it is that if American business supports Cuba intervention it is likely to happen.
“It could be slow or very rapid,” Agudu said. “The key is to transcend the Cuba/USA political noise and proceed to begin legal business engagement, which will give U.S. firms competitive advantage during the embargo and position them for aggressive business growth and domination once the inevitable embargo is lifted.”
For more information contact Wolanyo “Woody” Agudu at firstname.lastname@example.org