By: Sam Fleming and Demetri Sevastopulo
Chinese and British developers are building luxury golf resorts. Mexico and other countries are investing in a development zone. And Vietnam has inked a deal to build a hotel, following the path of Canadian and Spanish hoteliers.
Welcome to Cuba. European, Asian and Latin American investors are eyeing the Caribbean island and trying to get deals ahead of their US rivals, as ties between Havana and Washington thaw following decades of hostility.
When John Kerry, US secretary of state, opened a US embassy in Havana in July, it was a milestone on a path to bringing US investment into the Communist country. US executives have been pouring into Havana since last December when President Barack Obama signalled the historic rapprochement.
From Arkansas governor Asa Hutchinson and New York governor Andrew Cuomo to Penny Pritzker, US commerce secretary, officials are visiting Cuba to boost trade in industries such as agriculture, education and telecoms.
“I am telling my Cuban friends ‘Prepare yourselves, this is not going to stop’,” says Paul Johnson, executive director of the Illinois Cuba Working Group.
But while many businesses are intrigued by the prospect of tapping a virgin market on their doorstep, US companies face obstacles that do not impede many of their international rivals.
Tom Daschle, the former US Senate majority leader and co-chair of The Cuba Consortium, a group helping businesses navigate the opening, says: “There is a great deal of interest in doing business in Cuba, but there are significant impediments. The Helms-Burton law most particularly is something we’re going to have to address.”
Carlos Gutierrez, chair of the consultancy Albright Stonebridge Group who wants his fellow Republicans to back the rapprochement, agrees that Helms-Burton, the US Congress-imposed trade embargo, is a big impediment. “The president has done pretty much what he can by executive order,” he says.
Few experts expect Congress to lift the embargo soon, especially as the US enters a presidential election season with several Republican candidates, including Jeb Bush and Marco Rubio, voicing opposition to promoting business that could help the Castro regime.
So, for now, US businesses are targeting areas that are not covered by the embargo. Farming states have been pushing hard for an easing of barriers given that the US already has substantial agricultural exports to Cuba. “We can ship there easily,” says Doug Keesling, who grows wheat and other commodities on his 3,000 acre Kansas farm.
But one key barrier the agriculture industry complains of is a prohibition on the provision of credit and financing for US exports. The US sold $286m of food products to Cuba last year. Estimates from Texas A&M University suggest that US agricultural exports to the country could reach $1.2bn a year if regulations were eased and barriers were lifted.
Interest is by no means confined to the farming lobby. Deere & Co, the agricultural equipment manufacturer, has said that it views Cuba as a potential market, while Airbnb opened up operations in April. Existing loopholes have afforded both medical and telecommunications companies opportunities.
In September, Mr Obama further eased restrictions to allow Americans to open bank accounts and companies in some industries, including telecoms, to open offices and establish businesses in Cuba for the first time. “It just shows how much work that has to be done when that is seen as progress,” says Mr Gutierrez.
One US telecoms company with such ambitions in Cuba is IDT Corp. It struck a deal in February with Cuba’s national operator to exchange long-distance voice traffic directly. “It is in our sweet spot, in that we are focused on serving the needs of immigrant communities,” says Bill Ulrey, a spokesman. On Monday, Kansas-based Sprint became the first US wireless carrier to sign a direct roaming agreement in the country, with Telecommunications Company of Cuba.
Among the US multinationals watching developments is Coca-Cola. It made Cuba one of the first nations outside the US to have a bottling plant but left in 1960 after the Castro government started seizing assets. Earlier this year, a senior executive was quoted as saying that the thaw meant that in the “hopefully not too distant” future, the company would be able to re-establish its presence.
James Williams of the Engage Cuba Coalition, which advocates lowering barriers between the nations, says many executives are attracted by the “forbidden mystique” of Cuba. “These are the type of folks that have a giant map, look at where they are, and Cuba is one of the few places in the world they have to get to before their competitors do.”
But it is easy to exaggerate the scale of the opportunities. In 2014, the Cuban economy was only $77bn, smaller than the combined economies of New Hampshire and Vermont.
Rachel DeLevie-Orey, a US-Cuba specialist at the Atlantic Council, says tourism would be a particularly lucrative area given that operators would be selling to well-off Americans visiting Cuba. Other industries, however, would be “really hard-pressed to find that kind of wealth”.
But she adds that despite the challenges, opponents of the thaw, such as Mr Rubio, would find it “incredibly difficult if not entirely impossible” to roll back the initiatives, with polling suggesting a majority of Americans support an end to the trade embargo with Cuba. “It is not something most Americans favour and it is not something most Cuban Americans favour,” she says.