Wall Street Journal
By: Felicia Schwartz
WASHINGTON—At least three major U.S. corporations are pushing to complete deals to do business in Cuba as President Barack Obama gets ready for a historic presidential trip to the island this month.
With just over a week until Mr. Obama’s March 20 visit, three companies— AT&T Inc., T 0.13 % Starwood Hotels and Resorts Worldwide Inc. HOT 1.54 % and Marriott International MAR 1.37 % —are expected to announce agreements with Cuban government-run entities, according to company and U.S. officials. The three are among a roster of U.S. companies trying to negotiate deals to do business in Cuba.
They will be among the first high-profile deals notched since Mr. Obama said in December 2014 that the U.S. would move to restore ties with Cuba after more than 50 years of Cold War enmity. Since then, the Obama administration has loosened travel and trade restrictions for a variety of industries, betting that closer business ties between the U.S. and Cuba will cement the administration’s policy of normalization.
White House officials expressed hope some of these deals would come together before Mr. Obama arrives in Havana March 20 to showcase the value of closer ties, but the timing is still uncertain and some could be announced after the presidential visit.
Marriott CEO Arne Sorenson, vice chair of the President’s Export Council, will travel to Cuba with Mr. Obama.
While final approvals from Cuba for business ventures often take time, some companies also must obtain clearance from U.S. agencies, since many commercial transactions are restricted or prohibited under the long-standing U.S. embargo.
“We are optimistic that we are going to get a green light soon from the U.S. government to have hotels under the Marriott flag in Cuba,” said Thomas Marder, a Marriott spokesman.
Commerce Secretary Penny Pritzker will also accompany Mr. Obama, as well as the export council’s chair, Ursula Burns, chairman and CEO of Xerox Corp. XRX 3.16 % Agriculture Secretary Tom Vilsack, Small Business Administration head Maria Contreras-Sweet and Secretary of State John Kerry also are among cabinet members going on the trip.
Starwood, which is soon to be acquired by Marriott, is also expected to make an announcement, according to U.S. officials and other people familiar with the matter.
“We see many opportunities for the expansion of our brands into Cuba at this inflection point, and look forward to building long-term relationships and welcoming travelers into our hotels in this dynamic market,” said Carrie Bloom, a Starwood spokeswoman, adding the firm is awaiting Treasury Department approval.
Under Cuban laws, foreign hotel companies have to partner with Cuban entities to do business in the country.
Cuba’s existing hotel stock is poor and insufficient to meet current demand, particularly in Havana. In the past year, travel from the U.S. to Cuba has surged 50%, with many tourists staying in privately run bed-and-breakfasts.
The return of U.S. investors to Cuba is politically fraught. U.S.-based hotel companies, among others, have millions of dollars in claims against Cuba over the expropriation of properties during the revolution. The U.S. and Cuba last year began negotiations last year to resolve billions of dollars of such claims, including a $51 million claim from Starwood.
AT&T is expected soon to complete a roaming agreement with Cuba’s state-run telecommunications company Etesca, U.S. officials said. A person familiar with the negotiations said Etesca and AT&T haven’t yet reached an agreement. AT&T declined to comment.
The White House has also been in touch with Major League Baseball and several cruise lines about completing agreements while Mr. Obama is in Havana. Mr. Obama is scheduled to attend an exhibition game there between the Tampa Bay Rays and the Cuban national team on March 22.
His attendance will come amid discussions among the U.S., Cuba and MLB about allowing Cuban players to leave their country legally to play in the big leagues. The trade embargo against Cuba, which blocks most U.S.-Cuban business, also covers baseball contracts.
In September, the Treasury Department’s Office of Foreign Assets Control granted a general license to cruise lines that want to call in Cuba, but Cuban officials haven’t yet approved proposals from Carnival Corp. CCL 3.48 % , Norwegian Cruise Line NCLH 3.41 % and several other U.S.-based cruise lines, which had been granted specific licenses and submitted proposals before that regulation change. U.S. officials said they are hoping the Cuban government will grant those approvals while Mr. Obama is visiting.
Roger Frizzell, a spokesman for Carnival, said the company plans to sail to Cuba from Miami on its Fathom brand on May 1, the first cruise line to sail from the U.S. to Cuba in over 50 years.
“We are highly optimistic that we will receive approval to sail to Cuba based on the ongoing discussions we are having with Cuban officials,” he said.
The deals will accompany the Obama administration’s likely announcement before the visit of additional steps to loosen the trade and travel embargoes. The details of those are still being worked out, but are likely to include allowing individual licenses for people-to-people travel and loosening restrictions on the use of U.S. dollars in transactions with Cuba, among other changes, according to people familiar with the discussions. If the new people-to-people regulation is enacted, solo American travelers could legally justify a visit to Cuba simply by interacting with Cubans or touring a museum while there.
The White House believes that expanding economic and commercial ties with Cuba will precipitate changes in democracy and governance on the island. Administration officials see business deals as hard to undo once they are in place, so they will go furthest toward making the president’s opening to Cuba a permanent feature of U.S. foreign policy.
Despite enthusiasm among U.S. companies to do business in Cuba, few have announced deals. Airbnb Inc. launched there last year and Sprint Corp. S -0.54 % and Verizon Wireless currently offer roaming service on the island.
Showtime’s “House of Lies” shot an episode there and Universal Pictures’ “Fast and Furious 8” is expected to film there this year. The American DJ and music producer Diplo and his electronic group Major Lazer recently hosted a concert attended by as many as 400,000 people.
U.S. airlines are competing for approval to fly commercial routes between the two countries under a civil aviation agreement signed in Havana earlier this year. Commercial flights are expected to begin this fall.
For any U.S. firm, negotiating a business deal in Cuba is difficult and time- consuming, carrying uncertainties in an environment that amounts to uncharted territory for nearly everyone involved. U.S. law prohibits most business transactions, but even business activities that are allowed can take time to execute in Cuba because of the complexities of the country’s bureaucracy.
“When projects require official action by the Cuban government, whether that means the Ministry of Communications or the Ministry of Transportation, I feel like it’s not an efficient process to obtain those approvals,” said Matthew Aho, a special adviser on Cuba at the Akerman law firm, who has shuttled back and forth to Cuba with clients 25 times over the past 15 months. “It can be difficult to discern at times who’s actually making decisions about whether to approve or not approve a project.”
Mr. Obama’s Cuba normalization push still faces strong opposition from Republicans. In Thursday’s Republican presidential debate in Miami, Donald Trump, Sen. Marco Rubio (R., Fla.) and Sen. Ted Cruz (R., Texas) all vowed to reverse diplomatic relations with Havana, saying the U.S. had gotten a bad deal in December 2014.
“There has not been a single democratic opening; not a single change on the island in human rights. In fact, things are worse than they were before this opening,” Mr. Rubio said.
James Williams, president of pro-normalization advocacy group Engage Cuba, said securing deals before Mr. Obama leaves office advances his thaw and strengthens the case for full normalization.
“Every deal that happens shows we’re only moving forward and makes the whole process irreversible,” Mr. Williams said. “It also argues for why we need a full lifting of the embargo, to get the real major deals that we all want to see.”