U.S-Cuba Rail, Aviation, Port Deals in Jeopardy Under Trump

Bloomberg BNA

By: Stephanie Beasley 

A top Cuban official said he is optimistic that talks with U.S. companies seeking to partner on infrastructure projects will continue to advance despite President-elect Donald Trump’s threats to reinstate sanctions eased by the Obama administration.

It wouldn’t make sense for the Trump administration to halt flights or roll back other policy measures that could help U.S-Cuba rail, aviation and maritime deals move forward, Ivan Chacon, the head of international relations at Cuba’s Ministry of Transportation, told Bloomberg BNA in an exclusive interview.

Trump has lambasted President Barack Obama for entering into a “one-sided deal” to normalize trade relations with the former Cold War adversary and said he would roll back a series of Obama’s executive orders unless Cuba makes concessions.

“If Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate deal,” Trump tweeted on Nov. 28.

Obama has issued six U.S.-Cuba trade policy packages since 2014. Changes include lifting restrictions that banned cargo ships from visiting U.S. ports immediately after departing Cuba. U.S. airlines also were permitted to resume flights to Havana and other Cuban cities for the first time in more than 50 years.

Although American Airlines, one of the 10 airlines to win the slots, recently announced plans to cut more than a quarter of its flights next year due to low demand.

Uncertainty Under Trump

Cuba is currently working to expand and modernize Jose Martí International Airport in Havana so that it can receive up to 50 percent more flights.

Chacon said he found the idea that Trump could stop flights or block other efforts to improve Cuba’s infrastructure and tourism industries worrisome.

“If the new administration decides to withdraw these six measures packages, to revoke licenses that the [Office of Foreign Assets Control] has approved, that would just close the door to the progress made so far between the two countries,” Chacon said. “It would be a regression.”

For now, it appears that U.S. companies are continuing to move forward with infrastructure-related projects in Cuba. For example, Google Inc. signed a deal with the government on Dec. 12 to expand its services to Cubans.

And a slew of lawmakers and lobby groups said they will continue trying to advance bills that would lift travel and trade restrictions against Cuba in the next Congress.

“We do not want to go backwards,” Sen. Amy Klobuchar (D-Minn.) said at a recent briefing hosted by the lobbying group Engage Cuba. “Fifty-some years of a failed policy is enough.”

Klobuchar was among a bipartisan group of senators that introduced a bill last year to lift the U.S.-Cuba trade embargo. Other sponsors included Sens. Jeff Flake (R-Ariz.), Patrick Leahy (D-Vt.) and Mike Enzi (R-Wyo.).

Leahy, also spoke at the Engage Cuba briefing, and said he would like to work with the Trump administration and his congressional colleagues to lift the trade and travel restrictions against Cuba.

Cuba Could Be Lost Cause

But lawmakers and lobby groups supporting the Senate bill and similar legislation in the House are most likely playing a losing game, Thad McBride, who specializes in foreign investment at Bass Berry Sims, said.

The reality is that relations with Cuba will probably be a low priority for Trump for at least the first few years of his administration, McBride said. He said he expects the Trump administration to turn its attention to trade issues in other countries, like Iran. And the incoming Republican-controlled Congress won’t be particularly interested in lifting the trade embargo, he added.

“I certainly wouldn’t expect there to be a lot of movement on Cuba for the first year to year and a half of [Trump’s] administration,” McBride told Bloomberg BNA. “I just think he’ll have other higher priority items, especially in light of the fact that I don’t think he necessarily feels the need to open up trade with Cuba and with most countries. He wants to turn more inward.”

Further, cash-strapped Cuba is not an ideal trading partner, McBride said. Until tourism is opened to Americans, Cuba’s is not likely to see the influx of cash it would need to boost its economy and forge strong business partnerships with U.S. companies, he noted.

He said he would not recommend companies spend a lot of time actively pursuing investments in Cuba for the next few years.

Port Plans at Risk

If the national spotlight shifts away from Cuba, negotiations on once promising trade deals could stagnate.

For example, the Port of South Louisiana recently signed a memorandum of understanding to trade with Cuba’s port administration. Unless the embargo is lifted, the memorandum is just a symbolic gesture, Paul Aucoin, executive director of the Port of South Louisiana, said. The Port of South Louisiana ships more than 50 percent of the U.S. grain sold internationally. And grain is just one of the many goods the port could provide Cubans, Aucoin said.

“The Port of South Louisiana and the state of Louisiana are looking forward to the embargo being lifted. And we have many things that we can offer them, including but not limited to, rice, oil, fertilizer, phosphate rocks, just to name a few,” he told Bloomberg BNA.

Aucoin said the Port of South Louisiana also is exploring the possibility of shipping cargo containers through the Panama Canal and is eyeing either Jamaica or Cuba as a potential partner.

Aucoin said the containers could be directed to Cuba’s newly constructed Port of Mariel, which has replaced the Port of Havana as the island main hub for international trade. The port is reported to have 700 meters of docks for its container terminal along with a freight center and storage yards.

Bloomberg BNA was not granted access to the Port of Mariel during a recent visit to Havana.

If trade sanctions against Cuba remain in place, the port would have no choice but to choose Jamaica as the go between for its containers, Aucoin said.

Rail Work Could Halt

Meanwhile, General Electric Co. is planning to work with Cuba to complete a five-year plan to expand its rail system, Miguel Acuna Fernandez, the head of Cuba’s railroad department, told Bloomberg BNA.

The U.S. International Trade Commission released a report in March that said while the main lines of Cuba’s railway system had been updated, improvements were needed to the rail signaling system and the outdated locomotive fleet, which includes U.S.-built engines from the 1950’s as well as others from Russia, Czechoslovakia, Hungary, Canada and China.

GE is supplying the island with passenger train engines and is the only American company working with Cuba on the rail development project, Acuna Fernandez said. Cuba also has partnered with rail companies from Europe and Asia.

GE did not offer a direct comment on the rail expansion project but confirmed that it was seeking investment opportunities.

“We are currently exploring opportunities to work in Cuba and are in ongoing discussions about various potential projects,” a company spokesman told Bloomberg BNA when asked about the status of negotiations for the rail expansion project.

Cuba Ready to Fight

McBride predicted that U.S. investors’ excitement about investing in Cuba would eventually stagnate if the Trump administration made no additional policy changes to spur them along.

“Cuba has been the forbidden fruit for a long time,” McBride said. “It’s 90 miles offshore. There’s a certain exotic component to it. I think American companies got really excited and remained interested in Cuba when the easing of sanctions was announced. And there’s been sort of this parade of additional measures to improve relations. But at the end of the day, I’m not sure there are great business opportunities there.”

Chacón said that if the U.S. reversed newly implemented trade policy changes or held off on taking further steps to normalize relations it would not be any worse than before normalization began. Still, he said he would push for more progress.

“We are ready to keep fighting,” he said.