EYES on CUBA

EYES on CUBA
By Julian Richardson Assistant business coordinator
richardsonj@jamaicaobserver.com
Sunday, July 05, 2009

A few local entrepreneurs have tested Cuba's market, tapping into the
potential of that country's population of over 11 million people. But
even with its huge possibilities, the opportunities in the Cuban market
remain largely unexplored and large-scale trade relations are yet to
develop between Jamaican companies and their socialist neighbour, a mere
90 miles to the north.

The most updated trade data from the Statistical Institute of Jamaica
(STATIN) paints a daunting picture. In 2007, Jamaica imported US$16.7
million in merchandise from Cuba, while it exported just US$5.8 million.
Some of the main exports to Cuba are food items, chemicals, non-metallic
minerals such as aggregates and metallic items, which include scrap metal.

There is no consensus on the primary constraint that has faced would-be
exporters to the Cuban market.

GraceKennedy director and former head of the Caribbean Association of
Industry and Commerce (CAIC), James Moss-Solomon, says Cuban bureaucracy
was an overriding concern for local companies when Grace did business on
the island, back in the 1990's. Grace shipped processed foods such as
vienna sausages and bottled hot sauces to Cuba.

"The economy was a controlled economy; there was no private sector,
really, to trade with because everything was government owned," notes
Moss-Solomon. "It was a bit difficult to deal with the bureaucracy, in
terms of getting paid, so that's the first thing that turned everybody off."

Government's promotional agency, Jamaica Trade & Invest (JTI), said in a
written statement to Sunday Finance, "Our export activity to Cuba, over
the years, has been constrained by a combination of factors including
the language barrier, a lack of adequate trade financing and also the
difficulty in negotiating firm export contracts with our business
counterparts in Cuba."

However, there is also an overriding belief that the half-century US
embargo against Cuba is a major factor behind the anaemic business
interests.

"While one may not be able to link the embargo directly (with Jamaica),
the trade between the two countries is not as active as it would have
been had there been trading without the fear of anyone looking at you as
breaking the rules or putting you in a compromising position," opines
Senator Norman Grant, president of the Jamaica Agricultural Society
(JAS). "We support the rapid lifting of the embargo because we think it
will certainly create tremendous market space for not only Jamaican
products, but regional products."

The John Issa-owned SuperClubs chain of hotels, for example, in 2004,
pulled the plug on managing two Cuban properties, after the then Bush
administration invoked a section of the 1996 Helms-Burton Bill that
penalises those who do business in the communist island.

Against that background, Jamaican fascination with the Cuban market may
have turned into active pursuit since the Barack Obama US administration
said it would ease embargo restrictions on the island. In April, Obama
announced reduced travel restrictions for Cuban-Americans travelling to
their home of heritage and the US Congress will soon vote on wholly
lifting the ban. On the other side of the political fence, Cuban
President Raul Castro and his brother, former Cuban leader Fidel Castro,
have both expressed willingness to hold discussions with the US.

Milton Samuda, President of the Jamaica Chamber of Commerce (JCC), says,
from a business perspective, these are positive developments. Local
companies, he adds, should have an eye out.

"Coming at a time when we don't have a hostile US government (towards
Cuba), it is the best time to make a move," notes Samuda. "If you look
at what it is that they need, we can supply it."

The JCC president, and other experts, have generally identified
telecoms, tourism and agriprocessing as the sectors with the most
potential for Jamaican businesses.

Expansion into Cuba's underdeveloped market would be a major move for
any telecoms firm. Currently, state-owned ETECSA is the only operator
able to serve the domestic Cuban telecoms market, therefore no foreign
companies have a physical presence on the island.

But local players still laud the island's enormous market potential.

"With the biggest population in the Caribbean, and underdeveloped
telecoms markets, Cuba clearly represents a significant opportunity for
operators with an appetite for investment and growth - this includes
LIME," notes LIME's regional vice-president of Corporate Communications
Errol Miller. "There is a large potential demand for services in Cuba,
which could represent several hundred million US dollars in revenue
annually - and that includes landline, Internet and entertainment as
well as mobile, which is the primary focus of many interested players."

Miller says LIME is "watching" the political developments in Cuba
closely but emphasises that that is the most it can do.

"Whilst the recent White House move to relax restrictions for US
carriers is an important first step, it is just that - a first step,"
notes Miller. "The Cuban market is still controlled by Cuban government
regulatory bodies, and will only be opened up to outsiders as, and when,
the government chooses to do so."

It has been reported, however, that both LIME and Digicel were
attempting to secure a phone-service carrier contract between Jamaica
and Cuba.

Miller says that these reports were in regards to a cable system being
installed by a Cuban-Venezuelan joint venture company, which runs from
Venezuela to Cuba and on to Jamaica.

"This represents the first cable system running into Cuba and will have
a major impact on that market," explains Miller. "We are obviously aware
of the project and are looking at it closely."

LIME has a strong working commercial relationship with the Cuban mobile
and fixed-line operator ETECSA. The company was the first operator in
the Caribbean to enter into a commercial carrier agreement with ETECSA
and has well-established mobile roaming agreements. Digicel confirmed
that it has existing business relationships in Cuba, in terms of
terminating some of its traffic, but declined to comment further.

The potential of Cuba's tourism industry is tremendous. Two million
tourists visit Cuba each year and that is expected to double if the US
allows all Americans to travel to the island. Some local commentators
feel that Cuba's potentially robust tourism industry is a threat to
Jamaica's, but the Jamaican government and the Jamaica Hotel and Tourism
Association (JHTA), in response, says that Jamaica would actually
benefit, as it would offer increased airlift and hotel expansion
opportunities. Wayne Cummings, the JHTA president, noted earlier this
year that Jamaica can develop code-sharing arrangements to work with
airlines that go to Cuba but don't come to Jamaica, such as those from
Continental Europe and Eastern Block countries.

Moss-Solomon notes that there has always been an opportunity for local
agroprocessors in the Cuban market, but said his company encountered
beaucratic challenges when it attampted to expand into Cuba.

"When we were in the market, in the early 1990's, we weren't being
allowed to sell in the store where the little Cuban man was buying,"
says Moss-Solomon. "People going in to Cuba when I did were trying to
get into that consumer market of 11 million people, which hadn't
happened and still hasn't happened... most of the products are like
diplomatic stuff."

JAS' Grant acknowledged that agroprocessing is indeed an area of
interest in the Cuban market.

"We are looking at that market to possibly export fresh-produced and
agroprocessing foods, as soon as the embargo is moved," says Grant.

Grant has also been proactive in spearheading the country's efforts to
benefit from Cuba's agricultural expertise via an alliance. A Memorandum
of Understanding was signed on May 26, between the JAS and Cuba's
National Association of Small Farmers.

"One of the commitments that I gave to the farmers, when I presented
myself for leadership in the agricultural sector, was that I would seek
to expand local and international alliances that will help to empower
the farmers and create an enabling environment," says Grant, who led a
delegation to Cuba last year. "The National Association in Cuba is an
impressive organisation... some of the technologies that they use are
basic and simple but they work... during the next 12 months you will see
a very active farmer exchange programme and this will be the beginning
of a relationship of tremendous development for over 200,000 Jamaican
farmers."

The JTI notes that the private sector in recent years has managed to
make some inroads in the Cuban market through the use of interpreters;
the line of credit which exists between the Banco de Nacional in Cuba
and the National Export Import Bank of Jamaica (EXIM); and the export
facilitation efforts supported by the GOJ through Jamaica Trade and
Invest (JTI), the Embassy in Cuba and local private sector stakeholders
such as the Jamaica Manufacturers' Association (JMA). Whether this will
lead to maximisation of the potential of Cuba's much sought-after
market, one will have to wait and see.

EYES on CUBA - JamaicaObserver.com (5 July 2009)
http://www.jamaicaobserver.com/magazines/Business/html/20090704T180000-0500_154765_OBS_EYES_ON_CUBA_.asp