The Cuban Rapprochement - What Businesses Can Do Now

The Cuban Rapprochement: What Businesses Can Do Now

On May 29, Corban University, an evangelical college in Salem, Oregon,
will send its baseball team to Cuba on a religious mission and to play a
little ball. "I think it's awesome how…we can use a sport that both
countries love to go and tell people about Jesus," said a Corban player.
"Even though we won't be able to do that publicly because of the laws
there, we will be able to speak in the underground churches…which is
really cool."

Nothing like announcing a covert operation in the newspapers one month
in advance! Yet reportedly, it was Cuban officials who suggested the
team could come on a religious visa, implying at least some overt
complicity on their end. And that's important for reasons that have much
less to do with baseball or religion.

No, this particular brand of Ping-Pong diplomacy doesn't presage a Major
League franchise in Havana any time soon. But, for U.S. businesses with
eager eyes on the Cuban market, it does underscore the real dynamics at
play after President Obama's historic announcement. The situation is
very different than in Iran, which I wrote about here in my last column,
where complex sanction schedules and profound mutual distrust will
continue to becloud Western business prospects in the aftermath of a
nuclear treaty.

Cuba, by contrast, is now off the list of state terrorism sponsors and
there is every reason to believe that, whatever public maneuverings
complicate the ongoing rapprochement with Cuba, the intentions of
officials there are encouragingly clear. Bottom line: for U.S.
companies, the key thing is to know those right people and to cultivate
the right kind of relationships.

So the most important step now for American investors is to patiently
lay that groundwork. To be sure, full business relations with Cuba
remain hypothetical as long as the embargo is in place. "The bad news is
that, as long as the embargo exists, foreign competitors enjoy a
potentially decisive head start," says Scott Gilbert,who heads Reneo
LLC, a Washington-based legal-strategic consulting firm. He's the lawyer
who secured the release of Alan Gross, the American subcontractor for
the U.S. Agency for International Development after Gross spent five
years unfairly imprisoned in Cuba.


"The good news is that the embargo will be lifted. It's just a question
of when," says Gilbert, who's advising companies and others in a variety
of sectors.

Those moves are all the more worthwhile in light of current developments
that have already sweetened this kitty for eventual investment. The
embargo notwithstanding, permitted remittances from the U.S. will be
raised fourfold from $2,000 to $8,000 per year. That should set off a
significant uptick in Cuban spending power, which is projected to grow
at a compound annual rate of 4.6% through to 2020. It seems an
especially desirable trend for American consumer companies selling items
that even poorer Cubans will be able to afford. Soda pop companies, take
note.

Meanwhile, personal spending will also increase as Cuba unifies its twin
currencies, the convertible peso (CUC) and the lower-value Cuban peso.
With a devalued CUC, Cuban exports, including ores and metals,
pharmaceuticals, sugar and tobacco, are expected to become more competitive.

Nor are the assets limited to strictly monetary returns on investment.
It's been observed, but not emphatically enough, that a healthcare boon
lies ahead for the U.S. as a salient benefit of normalized relations.
For one, we have much to learn from how the Cubans provide primary care,
especially for their emphasis on continuous real-time health surveillance.

Cuba also has a strong biotech sector producing treatments not yet
available stateside, and which could be more affordably distributed to
America's under-served populations. Medical professionals who joined New
York Governor Andrew Cuomo's highly publicized trade delegation to Cuba
in April believe that the discussions they're having with the Cubans
will only help facilitate FDA approval of now-prohibited vaccines.

To be sure, there are compelling reasons for diverse entities – global
corporations, smaller businesses, and non-profits – to talk to the
Cubans, and to an extent we haven't since the revolution. As Scott
Gilbert advises, there's every reason for you to talk to experts in both
countries about what's currently permissible under current regulations.
Also articulate the business pitch in advance with realistic
explanations of why your investment plans can serve both countries
better than foreign-based ventures.


Reassure your own stakeholders by identifying reliable safeguards for
capital once it's invested, including practical economic and legal
provisions such as arbitration in neutral venues. (The confiscation of
corporate holdings by the leaders of the revolution may be distant
history but those leaders are still in power. Trust, but verify!)

Some first-mover advantage is still possible, despite the embargo.
Airbnb and Netflix NFLX +1.65% famously prove that. Both companies have
sent decisive messages to Cuban officials about how far they're willing
to go to gain a foothold, providing technology-based services in a
country that is technologically still antediluvian.

Airbnb uses intermediaries to get around those obstacles, beating the
major U.S. hotels to the punch by years, while Netflix doesn't even know
at this point if or when Cuban buyers will be able to pay for what the
company sells. But Netflix is all in regardless, an act of faith that
the Cubans won't soon forget.

Those Cubans, I'm told, have long memories.

Richard Levick, Esq., is Chairman and CEO of LEVICK, a global
communications and public affairs firm.

Source: The Cuban Rapprochement: What Businesses Can Do Now -
http://www.forbes.com/sites/richardlevick/2015/05/08/the-cuban-rapprochement-what-businesses-can-do-now/