Readying for the Cuba Rush

Posted on Sun, Apr. 22, 2007

Readying for the Cuba Rush
By Chris Mondics
Inquirer Staff Writer
Lawyer Tim Ashby of Duane Morris is leading the Philadelphia law

And when they are, the Duane Morris L.L.P. law firm in Philadelphia
wants to be there to reap what some think will be a windfall in legal
and consulting fees.

Duane Morris, one of Philadelphia's largest law firms, with 650 lawyers,
is one of a handful of professional-services firms nationwide
positioning themselves to guide clients who want to do business in Cuba
through the thicket of bureaucratic and political obstacles.

The concept is simple, and even a bit seductive: Cuba is a nation stuck
in time, with markets and public infrastructure that are woefully
underdeveloped, much like China 30 years ago. It has more coastline, and
more undeveloped beaches, than all of the other islands in the Caribbean
combined. It also has the potential for offshore energy development.

With so much investment capital sloshing around the globe, and millions
of American baby boomers beginning to think about retiring to warmer
climes, a green light from the United States would surely trigger an
overnight boom.

Or so the thinking goes.

"Once it opens up, it could be 'Katie bar the door,' " said Sheldon
Bonovitz, chairman of Duane Morris.

Yet, because of fierce political opposition in the United States from
Cuban emigres and others, prospects for lifting the embargo and travel
restrictions in the short term are uncertain. Although Congress passed
legislation in 2003 that would have lifted the travel restrictions as
part of a larger legislative package, the provision was removed by
Republican leaders during negotiations between the House and Senate.

Democrats, who now control both houses of Congress, are deemed more
sympathetic to the idea of closer relations with Cuba. But President
Bush, whose administration has aggressively pursued sanctions against
Cuba and companies that violate the trade embargo, likely would veto any
measure that got to his desk.

Political observers say prospects for lifting the restrictions will not
improve measurably until Bush leaves office after the 2008 election.

"This is a policy that has had tremendous staying power," said Dan
Erickson, a senior associate at the Inter American Dialogue, a
Washington think tank. "There have been many times going as far back as
the 1970s when things opened up under President Carter and people said
the embargo was in its final days, and somehow, it manages to continue.
It has proven difficult to change."

What gives hope to firms like Duane Morris is the burgeoning trade that
already exists between the United States and Cuba. Under a series of
exemptions, American firms can export pharmaceuticals and other
health-related products, and agricultural goods. Agricultural trade
alone between the two nations now is $500 million a year.

Other nations do substantially more trade. Total committed foreign
investment was about $6 billion, according to a 2006 report by Ernst &
Young L.L.P. Cuba's largest trading partner was Venezuela, followed by
China, Spain, Canada and Holland.

A study by Florida State University researchers Tim Lynch and Necati
Aydin estimates that the Cuba trade embargo costs the United States $3
billion to $4 billion in lost exports each year.

Helping to lead the Duane Morris initiative on Cuba is lawyer Tim Ashby,
a former U.S. deputy assistant secretary of commerce.

Ashby, who is based in the firm's Miami office, also manages a separate
consulting firm called Cabesterre L.L.C., which advises American and
foreign clients on Cuba. Ashby was recruited by Duane Morris for his
expertise on Cuban and Latin American trade. Bonovitz said he expected
clients of both firms to benefit: Duane Morris will provide legal
services, while Cabesterre will furnish political and commercial expertise.

"I won't have a condo there," Bonovitz said. "But we would like to be
representing condo developers."

Ashby describes the Cubans as eagerly anticipating American investment,
but on their own terms. Cuban officials have told him that the country
would need a minimum of 250,000 new hotel rooms once the trade embargo
was lifted.

"They do believe they have a future with America," he said.

By way of explaining Cubans' dire need for basic commodities and
equipment, he said his Cuban friends often asked him to bring things
like hammers and nails on return visits.

Although federal law lays out substantial penalties for companies that
violate trading restrictions, there is nothing to prevent companies from
meeting with Cuban officials to discuss potential projects or even to
sign letters of intent. In this way, Ashby says, firms are positioning
themselves for an eventual opening up of trade between the two countries.

Ashby said he had been approached by major airlines, building-supply
companies, energy-development firms, and others seeking advice on how to
do business in Cuba once the trade restrictions are ended.

One significant obstacle is Cuba's abysmal human rights record, which
fuels the congressional opposition. Dissent is suppressed, and political
opponents of the Castro government are harassed and jailed. Political
gadflies often find their houses surrounded by mobs of screaming Castro
supporters, who sometimes break windows and prevent occupants from
leaving, or conduct other "acts of repudiation."

The hope among trade proponents such as Ashby is that Fidel Castro's
failing health will help to loosen his iron grip on Cuba and that the
already robust trade with Europe and Canada will foster a more
democratic climate.

But staunch Castro opponents in Congress are skeptical, and they doubt
that trade alone will improve the climate there.

"I think that is naive in the extreme," said Rep. Chris Smith (R.,
N.J.), a harsh critic not only of Castro but also of other authoritarian
governments, such as China. "The Europeans and the Canadians have been
trading robustly with Cuba, and there has been no amelioration of the
democracy and human rights issues. If anything, the situation has gotten
worse."

But Ashby, a former Republican appointee, said it was not trade alone
that would help Cuba change course. The country's proximity to the
United States also will help bring about change, he maintains.

"Cuba is in transition, and that is very obvious," Ashby said. "They are
very aware of the U.S. They are not living in a deep freeze."

Contact staff writer Chris Mondics at 215-854-5957, or
cmondics@phillynews.com.

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