Virginia businesses begin wary courtship with Cuba

Washington Post

By: Laura Vozzella

It was a blind date of sorts, this first meeting between the Cubans and the Virginians who had come wooing with high-tech fish farms and fancy wood flooring, organic chicken and bony, downscale fish.

The icebreaker, proffered by Cuba’s Ministry of Foreign Trade and Investment, was a slide show meant to stress the safety of pouring big bucks into the communist island nation.

Foreign investments “enjoy all-out protection and legal security and could not be expropriated, unless such action is executed for reasons of public or social interest,” one slide read.

Members of Virginia’s business delegation, most of them visiting Cuba for the first time, barely stifled a collective “Yikes!”

“I gotta know I’m not going to invest half a million in a mill down here and lose it,” Bill Stone, owner of Mountain Lumber Co., said later.

After a half-century of hostilities and 13 months of detente, U.S.-Cuban business relations are at a moment of tantalizing promise and stomach-churning doubt. Stone, like others on the three-day trade mission that Gov. Terry McAuliffe (D) led last week, came away from the encounter keenly interested though not entirely smitten. With the winds of history seemingly at their backs — and a well-connected governor in their corner — they returned to Virginia intent on pushing ahead, however warily, with their Cuban courtship.

They face legal and political obstacles on both sides of the Florida Straits, with especially byzantine do’s and don’ts in evolving — but still centrally controlled — Cuba. In many cases, there was no simple answer to even the most basic question: Can I legally sell my product or service to Cuba?

Yet at least so far, those who made the trip returned undaunted, willing to wade into bureaucracies foreign and domestic, to face unknowns and red tape. They felt certain that doors would be opened for them by McAuliffe, who met with the White House and congressional leaders the day after his return, then headed to Iowa to stump for a longtime friend, presidential contender Hillary Clinton. They were also convinced that Cuba will eventually shake off its economic shackles — and pay off for those who get in early.

“It’s obviously going to take off. and the question is whether we are going to have a part of that,” said Stone, who sells wood reclaimed from old barns to Starbucks and others seeking a warm, weathered vibe in their business interiors — something desirable, he thinks, for future Cuban resorts. “There’s a win-win if we can get the politics straight.”

The rules for commercial engagement between Cuba and the United States are complex and quickly changing. What Washington allows does not always line up with what Havana permits, and vice versa. The Obama administration gave the green light to agricultural equipment exports, for example, but only if the buyers are private-sector farms, a caveat meant to nudge the island closer to capitalism. Yet the Cuban government does not permit private citizens or businesses to import goods. Only Alimport, the state’s purchasing arm, can buy from abroad.

“There’s the ‘Yes, but’ answer for everything,” said James Williams, president of Engage Cuba, a Washington-based nonprofit group that advocates for normalization.

There could be ways around those Catch-22s. The Virginians will be pressing — through McAuliffe and others — for Congress, federal regulators and President Obama to smooth their path. At the same time, they plan to work with contacts made in Havana and at the Cuban Embassy in Washington to win approvals on that end.

And things seemed to be moving along. Within days of their return, the Cubans had sent letters to two of the companies, formally expressing interest in doing business with them. The governor’s staff was in the process of notifying U.S. authorities that those letters, needed before a business can seek Washington’s permission to trade with Cuba, were in hand.

Mitchell Sanner, chief executive of Onduline North America, went to Cuba to peddle plastic paneling used to line metal livestock shelters, which makes them easier to clean. He returned home intending to operate on two tracks. He will seek permission from the United States, maybe through Congress or regulators, to sell the panels to Cuba. At the same time, he will submit samples of the plastic to Cuban officials for required testing. “We don’t know if it’s months or years,” he said of the testing process.

There was no doubt that the Cubans were interested in their visitors — though seemingly more as potential investors than as suppliers of finished goods. In meeting after meeting, the Virginians said, the Cubans discussed having them set up shop on the island.

“They clearly prefer the idea of making the products here,” Sanner said.

Stone, the lumber company owner, left with the impression that selling to Cuba could be contingent on investing there.

“They want to on-shore some of the manufacturing,” he said. “The vibe I got from them was, ‘The only way we’re going to sell down here is if you allow us to do some of the value-added stuff.’ They need to build industry.”

No American governor leads a foreign trade mission with the goal of shipping home-state companies abroad. Administration ­officials and independent Cuba experts said the complexities of doing business there make off-shoring unlikely, even to a place with a reported literacy rate of 100 percent and a prevailing wage of about $30 a month.

Business leaders on the trip said that if they were to establish manufacturing in Cuba, the facilities would supplement their Virginia operations, not replace them. And for the most part, the Virginians saw investing in Cuba as a far riskier proposition than selling there.

Even before the opening-day slide show raised the specter of expropriation, they had the example of Virginia-based Hilton. The hotel chain opened a grand seaside tower in 1958, less than a year before Fidel Castro swept into power and turned its 22nd-floor presidential suite into his headquarters.

Jason Heckathorn of Forever Oceans was the rare delegation member who came in with the goal of building a Cuban outpost. His company, an unlikely spinoff from Lockheed Martin, applies command-and-control technology developed for defense to deep-sea farms for sushi-grade fish.

Rather than sell a $30 million system and leave, the company wants to find a local partner but stay involved to maintain the technology and ensure it is run in an environmentally sensitive way.

“It’s not as simple as just selling seeds,” Heckathorn said. “It would be an ongoing relationship.”

He is not even sure whether his venture would fall under rules for agricultural equipment or technology. But he went home bent on figuring it all out.

“The important thing for this trip was to establish a vision,” he said. “What’s left is to determine what’s feasible.”

Although no contracts were signed, the Cubans seemed interested in making deals — even on high-end products that might seem like a stretch for a poor country.

“They’re interested in the organic chickens,” said Charles Flowers, owner of Virginia Natural Beef, near Roanoke.

Those whole, organic birds are Flowers’s priciest product, fetching about $1 a pound when bought by the 60,000-pound container load. The Cubans wanted the chicken for use in tourist restaurants and hotels, as well more modestly priced items such as croaker, a small fish served whole, bones and all.

The path for Flowers seems easier than for some of the others, since food exports have been allowed for humanitarian reasons for more than a decade. Even so, the veteran exporter left Cuba with a long to-do list — but also high hopes.

“I’m encouraged,” he said. “I hope to be back to thank someone for doing business with me.”