Japan Trading Houses Knocking on Cuba’s Door Amid U.S. Opening

Japan Trading Houses Knocking on Cuba's Door Amid U.S. Opening
Stephen Stapczynski Ichiro Suzuki
June 7, 2016 — 2:26 AM CEST

Mitsubishi, Marubeni and Mitsui are opening offices in Havana
Traders look to Cuba as business confidence in region drops

Japan's largest trading houses are positioning themselves in Cuba before
any easing of U.S. sanctions, seeking opportunities in infrastructure,
resources and automobiles as the Caribbean nation emerges from
near-isolation.

Mitsubishi Corp., the nation's largest trader, opened an office this
month in Havana and is currently researching potential business deals,
according to a spokesman. Mitsui & Co. will open an office as soon as
September and is considering exporting Cuban nickel, according to a
spokesman. Marubeni Corp. expects the removal of sanctions to unleash
pent-up demand for cars and industrial machines, and the company also
plans to open an office, it said earlier this year.
President Barack Obama is seeking to normalize relations and establish
closer ties with Cuba, signaling an end to five decades of sanctions
that left the country starved of cash and little changed since Fidel
Castro's revolution in 1959. Moody's Investor Services expects Cuba to
grow 3 percent in 2016. That would be a bright spot in Latin America,
which is forecast to contract 1.4 percent this year, according to data
compiled by Bloomberg.

First Movers
"If there are opportunities, they would be the first ones to go in,"
said Polina Diyachkina, an analyst at Macquarie Group Ltd. who covers
the Japanese trading houses. "It's the job of trading companies to find
new markets. Cuba has been closed for so many years and has been a
market that has been very poor. There must be rich opportunities on the
industrial side and infrastructure, as well as consumer products such as
automobiles."
Profits at the companies known as "sogo shosha" hit record lows in the
latest fiscal year on a drop in commodity prices. Mitsubishi and Mitsui
reported their first ever annual losses due primarily to writedowns on
energy and metal assets. Now they are strengthening non-resource
business units including health care and consumer-goods manufacturing.
Mitsubishi is currently exporting coffee beans from island and will hire
two Cuban nationals for the new office, a spokesman said Monday. The
company supplies beans and coffee products, including soluble coffee and
extract, to roasters and instant-coffee makers, according to the
company's website.
Cuba Confidence
Trading houses are eyeing Cuba as Japan's confidence in the rest of
Latin America wanes. Business confidence of Japanese companies in Latin
America fell last year due to the drop in oil prices and a worsening
political environment, according to a government survey. That compares
to 2011, when their confidence in the region exceeded that of India and
China.
Switzerland's Nestle SA entered Cuba in 1996 and Brazil's Odebrecht SA
led the $1 billion expansion of the island's Mariel port. Meanwhile,
many U.S. companies remain wary of investing in an economy hobbled by
the trade embargo, restrictive labor laws and a currency system that
uses a convertible and non-convertible peso. Only the U.S. Congress has
the ability to remove the U.S. trade embargo with Cuba, and the
Republican majority has blocked any attempt to do so.
Cuba is hoping to increase foreign direct investment and has set a
target of $2.5 billion a year, according to Richard E. Feinberg, a
professor at the University of California San Diego, who recently
published a book on the new Cuban economy.
"Trading companies are looking for emerging markets that can deliver
growth significantly higher" than the global average, said Tom
O'Sullivan, founder of Tokyo-based consultant Mathyos. "Cuba must be a
possibility given the rapprochement with the U.S. and possible easing of
sanctions."

Source: Japan Trading Houses Knocking on Cuba's Door Amid U.S. Opening -
Bloomberg -
http://www.bloomberg.com/news/articles/2016-06-07/japan-trading-houses-knocking-on-cuba-s-door-amid-u-s-opening