Tampa investors long to reconnect with Cuba

Tampa investors long to reconnect with Cuba
By Paul Guzzo | Tribune Staff
Published: April 6, 2014

TAMPA — Few lost more than the Lykes family of Tampa when Fidel Castro
came to power in 1958 and nationalized Cuba's private property.

Their 15,000-acre spread in Oriente province had been identified by
Fortune magazine a few years earlier as one of the most productive
cattle ranches in the Western hemisphere.

"Breathtaking," said John Parke Wright, grandson of patriarch Dr. H.T.
Lykes, of its landscape. "It's a gorgeous part of the island."

Recent signs of improvement in U.S.-Cuba relations have rekindled
Wright's hopes that his family will do business on that land again. He
talks of a cattle ranch on the property, as well as a nature preserve
and a five-star hotel.

Just last week, Cuba took new steps to encourage foreign investment. It
eliminated its labor tax, cut its profit tax in half from 30 percent to
15 percent while exempting most companies from paying it for eight
years, and authorized joint ventures with foreign interests.

But without moves on the U.S. side to soften a travel and trade embargo
now half a century old, Wright and businessmen like him can only watch
as nations such as Brazil capitalize on Cuba's ovations.

"I have tw\o hats here," Wright said during an interview in Tampa last
week, holding a Cuban military cap in one hand and a rancher's hat in
the other. "The question I pose to you is which one do we prefer?"

Carlos Saladrigas of the Cuba Study Group, U.S. business leaders of
Cuban descent, says it another way: "The embargo would force Americans
to lose first-comer advantage and that is a big economic negative."

❖ ❖ ❖

Saladrigas said he doesn't expect the business floodgates will open in
Cuba just yet. There are still roadblocks. Every foreign investment, for
example, needs government approval and businesses must use a
government-run employment agency in hiring.

What's more, he said, the Cuban government has been promising the world
for years that it would allow companies that are 100 percent foreign
owned to set up shop there. Not one has yet.

The first foreign investors will serve as guinea pigs, closely watched
by other potential investors, said Carmelo Mesa-Lago, Cuban-born
economist and University of Pittsburgh economics professor.

"Cuba needs to reverse the bad image it has had for foreign investment,"
Mesa-Lago said.

Wright is resolved that in socialist Cuba, he cannot buy back the ranch
once owned by his family but he does hold out hope of forming a joint
venture and leasing the property. It is used now as a cooperative farm.

It's not the perfect solution, he said, but as a businessman he knows
there is rarely such a thing.

Like his ancestors, Wright has earned his living through the cattle
industry. He also has a flair for drama and storytelling that has helped
him navigate the political side of international trade. Most of his
business is in nations such as China, Saudi Arabia and Cuba.

His cousin, Arthur Savage, president of a Tampa-based shipping company,
is more to the point when he describes what U.S. business needs from its
political leaders to make the most of Cuba.

"You don't go to war," Savage said, "with your top business partners."

And that's just what Cuba could be some day, he said.

❖ ❖ ❖

Still, it may take a while for the Lykes family.

Even if the embargo were lifted today, Wright said, he would need to see
growth first in a high-end tourist trade interested in meals of fine beef.

That would come if U.S. tourists flocked to the island, he said.

Wright and Savage already do limited business in Cuba, taking advantages
of changes through the years in the embargo.

Wright trades cattle semen to Cuban farmers. Savage's company is a
shipping agent whose clients include cargo vessels travelling to Cuba.

It's just a shadow of the bustling business their family did with the
island in the days before Castro.

Savage is part of Tampa's McKay family, which made its fortune in the
Cuban cattle industry. The Lykes family did the same after marrying into
the McKay family.

When the Lykes and McKays arrived Tampa in the 1800s it was wild and
undeveloped. Using the fortune they made in Cuba, they turned it into a
bustling city, said Rodney Kite Powell, curator at the Tampa Bay History
Center.

Powell credits the two families with Tampa's early successes as a port
and banking center, earning them status as the founding families of the
community.

Wright said Tampa could grow again with the money it earns from doing
business with Cuba, either through investment or trade at its port.

Savage is focused on how ports can take advantage of the new foreign
investment laws.

New investor-funded development in Cuba will require supplies, he said.
And any money the Cuban government makes off these investments can go
toward improving an infrastructure that's crumbling from years of isolation.

"When I am in Cuba, I get fixated on the lights being too dim," Savage
said. "That is not just a problem that can always be fixed with new
bulbs. Often it would need new bulbs, wiring and switches. Cuba is a
country the size of Florida and near everything needs to be replaced."

U.S. businesses could supply these necessities to Cuba. And he and
others like him could transport them.

Under current U.S. law, such trade is forbidden. But as with trade in
agriculture, the government could approve it without lifting the embargo.

❖ ❖ ❖

Cuba already uses American construction supplies, but purchases them
from the Dominican Republic, said Cuban native Arturo Lopez-Levy, a
former policy advisor for the Castro regime who now lives in Denver.

"I think they would prefer to purchase them right from the U.S.,"
Lopez-Levy said.

History backs such a claim.

Since 2000, the U.S. has allowed the export of agricultural products to
Cuba as long as payments are made with cash upfront rather than on credit.

According to the U.S.-Cuba Trade and Economic Council, total
agricultural exports to Cuba from 2001 through February 2012 amount to
$3.5 billion. The figure has shrunk toward the end of the period,
though, to just half of what it was annually at its peak in 2008.

Savage blames the decline on the cash requirement. Cuba has grown tired
of it.

The government agreed to it, thinking it was a step toward normalizing
relations with the U.S. When that did not happen, it began taking its
business elsewhere.

In a normal trading atmosphere, Cuba would receive 50 percent of its
exports from the U.S. simply because of proximity, said Al Fox of Tampa,
president of the Alliance for a Responsible Cuba Policy Foundation,
which lobbies for open relations with Cuba. The island lies just 90
miles off Florida's shores.

Savage said Cuba used to purchase the bulk of its rice from Louisiana
but now buys from Vietnam because it provides a line of credit. The trip
from southeast Asia is so far that some of the shipment is ruined by the
time it reaches its destination.

Under the new foreign investment law, Wright said, Brazil is poised to
become a major player in Cuba as a developer and trading partner. Among
Brazil's top exports, said Wright, are cattle, citrus and sugar — all of
them major Florida exports, too.

❖ ❖ ❖

Leaders from Tampa have already begun establishing a relationship with
Cuba. A delegation from the Greater Tampa Chamber of Commerce traveled
to the island nation in 2013 and in January, José Ramón Cabañas
Rodriguez, chief of the Cuban Interests Section in Washington, D.C.,
attended a Tampa chamber event as a guest.

But many still see the risk of doing business with Cuba as too great
because they say its government has proven it cannot be trusted.

A host of examples are cited by Mauricio Claver-Carone, director of
U.S.-Cuba Democracy PAC, a Washington, D.C., lobbying group promoting
democracy in Cuba.

Cuba froze more than a billion dollars in foreign assets in 2009,
imprisoned businessmen from Canada and England without due process, and
has failed to pay a number of trade debts with other countries,
Claver-Carone said.

This, coupled with the difficulty of working with the Cuban government,
is why foreign ventures in Cuba have dropped from 400 in 2000 to 190
today, he said.


Lopez-Levy, the former Castro adviser, disagrees with that assessment.
The businessmen were jailed for corruption and their crimes would have
warranted similar reaction anywhere in the world, he said. Further, he
said, Cuba has bilateral agreements in place with its trading partners
and could have its international assets frozen if it makes unlawful
seizures.

Savage said trust in the Cuban government should not be the issue
keeping U.S. business from investing or trading there. Risk is always a
part of business, especially internationally, he said.

Russia is an example.

❖ ❖ ❖

U.S. businesses that invested in Russia are concerned the nation will
freeze their assets in retaliation against economic sanctions imposed in
response to its invasion of neighboring Crimea, said Bill Reinsch,
president of the National Foreign Trade Council, a Washington-based
business organization advocating a rules-based world economy.

When some of those investments were made, Russia and the U.S. were on
friendlier terms.

But for Claver-Carrone, it's not just about business but about bringing
democracy to an island ruled by what he calls an oppressive government.
He said at some point dollars and cents need to take a back seat to decency.

Cubans, he said, receive an average wage of only about $20 a month.

"That's like slave labor," he said. "And because U.S. companies would
have to hire through the government, they would be employing them at
that wage. How is that OK?"

Cuba, he added, is desperate. Its patron the Soviet Union is long gone.
It risks losing the $3.5 billion a year in oil supplied by Venezuela in
return for the skilled workers it sends to Venezuela. And the economy is
growing at a rate of just 2.7 percent a year when it needs a rate of 7
percent.

The new investment laws adopted last week are an effort to save the
Castro brothers' failing socialist government, Claver-Carone said.

"The problem is they are serial monopolists," he said. "They have a very
hard time letting go. They only relax laws when they need to and then
when things turn around, they tighten control again."

If restrictions are tightened rather than loosened, he added, the
government may topple.

Tampa shipper Savage scoffed at this idea.

"Remember what Einstein said about insanity," he said. "It's doing the
same thing over and over again and expecting different results. We've
tried suffocating Cuba for years and it has not worked. Let's try
something different."

pguzzo@tampatrib.com

Source: Tampa investors long to reconnect with Cuba -
http://tbo.com/news/politics/tampa-investors-long-to-reconnect-with-cuba-20140406/