Cuba Opportunities Will Come Slower Due to Terrorism, Risk

Cuba Opportunities Will Come Slower Due to Terrorism, Risk
ByLuis EscobarFollow | 03/04/15 - 12:01 PM EST

NEW YORK (TheStreet) -- The euphoria created by December's announcement
of a new era of Cuba-U.S. relations, and what it means for trade and
business, has been diminishing gradually as optimism fades in the face
of reality.

The slow pace of diplomacy and politics, relatively high risk and,
believe it or not, terrorism are all hurdles that need to be overcome
before normal trade with the nearby island nation of 11 million can be
restored. And it will take time.

Though President Obama said on Monday in an interview with Reuters that
he hopes that United States will have an embassy in Cuba by the second
week of April, that does not mean that a flood of U.S. companies will
soon be making landfall, ready to do business after more than fifty
years of absence.

"My hope is that we will be able to open an embassy, and that some of
the initial groundwork will have been laid ... but keep in mind that our
expectation has never been that we would achieve full normal relations
immediately," Obama said in the interview. "There's a lot of work that
still has to be done."

One of the biggest obstacles to normal relations is that Cuba is on the
U.S. State Department's list of state sponsors of terrorism. This
greatly limits the ability of companies and individuals to engage in
financial transactions and trade with people and businesses in Cuba.
U.S. banks as well as foreign subsidiaries in the United States have
been hesitant to serve as intermediaries in transactions conducted on
the island.

"Capital does not go where there is risk," says Alex Sanchez, president
and CEO of the Florida Banking Association, a trade group that
represents the banking industry in a state where more than 1.5 million
Cuban ex-pats and their descendants reside. "Money does not go to
Iran and probably won't go to Cuba for the time being because of the risks."

Cuba and Iran are joined on the list only by Syria and Sudan. Being on
the list severely limits the capacity of U.S. companies to do businesses
within the country. Under several different U.S. laws, being on the list
means that U.S. and international foreign assistance, defense sales and
other goods sales are limited and that the country is subject to
"miscellaneous financial and other restrictions," according to the State
Department website.

Heavy hitters in the telecommunications industry, such as AT&T (T),
Sprint (S) and Verizon (VZ), have been waiting patiently to venture into
the market. It will be lucrative to link the 11 million Cubans on the
island with the two million in United States and Puerto Rico. So far,
only IDT (IDT - Get Report), a much smaller company, has taken the first
step, recently announcing long-distance service in the country -- but
the company is proceeding carefully.

"Our primary retail market is focused on the immigrant community", said
William Ulrey, vice president of investors relations of at the Newark,
NJ-based firm. "We are now in the early stages. We hope, down the road,
to advance significantly in other telecommunication services, but that
depends on many factors."

Even in areas where trade to Cuba has been well established, U.S.
restrictions have been an issue for businesses.

In 2000, under President Bill Clinton, the U.S. government issued an
embargo exception to allow food sales, though it denies Cuba credit,
forcing it to pay cash up front. As a result, U.S. agricultural sales to
Cuba fell in 2014 to $291 million after reaching $700 million in 2008.
Other producers like Brazil, Argentina, Canada and some European
countries stepped in and are allowing Cuba to buy food on credit.

A 100-member U.S. agricultural delegation began a three-day visit to
Cuba on Monday. The visit's purpose is to search of potential partners
while also sending a message to the U.S. government to lift the embargo
and explore the $2 billion market just 90 miles away.

"It's an ongoing process," says John Kavulich, senior policy adviser at
the U.S.-Cuba Trade and Economic Council, a private non-profit advocacy
group. "For the time being, they are not talking about investment, as
long as Cuba remains on the list of countries that sponsor terrorism."

One of many hurdles.

"Also, we have to keep and eye on how Cuba manages its economy and how
it restricts the expansion of the private sector," says Kavulich,
adding, "another point, is how it pays its debt."

Source: Cuba Opportunities Will Come Slower Due to Terrorism, Risk -
TheStreet -
http://www.thestreet.com/story/13067405/1/cuba-opportunities-will-come-slower-due-to-terrorism-risk.html?cm_ven=RSSFeed