Tag Archives: Foreign Trade

UNITED STATES INTERNATIONAL TRADE COMMISSION, OVERVIEW OF CUBAN IMPORTS OF GOODS AND SERVICES AND EFFECTS OF U.S. RESTRICTIONS

Posted on April 20, 2016 by Arch Ritter

March 2016 Publication Number: 4597 Investigation Number: 332-552

Complete document is here:  US Exports to Cuba after the Embargo is Lifted

 

TABLE OF CONTENTS

Executive Summary

Chapter 1 Introduction

Chapter 2 Cuban Imports of Goods and Services

Chapter 3 Current U.S. Restrictions on Trade with and Travel to Cuba and Their Effects on Cuban Imports of U.S. Goods and Services

Chapter 4 Possible Cuban Barriers to U.S. Exports and Investment in the Absence of U.S. Restrictions .

Chapter 5 Agricultural Products

Chapter 6 Manufactured Products

Chapter 7 Services

Chapter 8 Modeling the Effects of U.S. Restrictions and Cuban Barriers on U.S. Exports to Cuba

 Appendix A Request Letters

Appendix B Federal Register Notices

Appendix C Hearing Calendar

Appendix D Written Submissions

Appendix E List of Authorized Cuentapropistas

Appendix F Regulatory and Legislative Framework of the U.S. Restrictions on Trade with and Travel to Cuba

Appendix G Cuban Intellectual Property Laws

Appendix H HS Codes Contained in Each Sector

Appendix I Description of Empirical Methodology

Appendix J Tables to Support Figures

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CAN CANADA FULLY LEVERAGE ITS UNIQUE TRADE RELATIONSHIP WITH CUBA?

Posted on December 29, 2015 by Arch Ritter

Canadian Sailings: December 3, 2015 @ 8:32 am

Original Source:        http://www.canadiansailings.ca/?p=10739

By Alan M. Field

zzzzzzzzzzStarved for new markets to conquer, American exporters and investors are avidly awaiting the imminent end of the fifty-five year-old U.S. trade embargo of Cuba. Given the current abundance of Cuba-focused business conferences, seminars and traveling delegations to the island-nation, Canadians might well be wondering whether the mania for all things Cuban in the U.S. will also provide a golden opportunity for Canadians to leverage their unique ties with Cuba. Or will it, on the contrary, signal the end to that special relationship at precisely the time when the rest of the world has discovered Cuba?

Trade relations between Canada and Cuba originated during the era when vessels from the Atlantic provinces of Canada traded codfish and beer in Cuba for that country’s rum and sugar. “Canada has been a major trading partner with Cuba dating back to the 1800s,” notes Arch Ritter, an economist at Carleton University, who has written extensively about Cuba’s economic history. “Our ties have been longstanding, and we have never cut trade ties with Cuba.”

Over the past few decades, trade ties between the two countries have grown significantly, but remain modest compared with the volumes that could follow the end of the U.S. trade embargo, and the re-opening of U.S. foreign investment in Cuba. In August 2015, bilateral trade between Canada and Cuba amounted to $100.7 million [Canadian dollars], compared with just $58.4 million in August 2000, and only $33 million in August 1990. From 2000 to 2008, the value of Canadian exports to Canada grew at an annual rate of 11 per cent, while imports from Cuba grew at a rate of 10 per cent. Ontario is the largest provincial exporter to Cuba, followed by Quebec. Manitoba and British Columbia have been the fastest-growing provincial exporters in recent years, according to a report by the Library of Parliament in Ottawa.

Mark Entwistle, a former Canadian ambassador to Cuba (1993-1997) and a founding partner of Acasta Capital, a Toronto-based investment firm, recalls the long decades when Canadian diplomats were the only representatives of any Western democracy at Havana cocktail parties, “Among Western democracies, Canada is the only one that never broke relations with Cuba even once,” Entwistle added.

Canadians imported Cuban sugar, rum and cigars, while exporting a lot of machinery and equipment that “Cuba could no longer get from the United States,” explained Ritter. During the 1990s, when the Soviet Union stopped subsidizing Cuba, the island’s economy “really deteriorated,” added Ritter, “and ties with Canada really intensified. Cuba decided it needed tourism, so it promoted that sector. We became the big tourist country for Cuba, and people said, ‘Cuba’s best friend is the Canadian winter.’” Nowadays, Cuba ranks as the third-most popular overseas destination for Canadians – after only the United States and Mexico – while Canada is Cuba’s largest source of foreign tourists; over one million Canadians visit each year, or more than 40 per cent of all foreign visitors to Cuba.

Burned by Cuba’s ups and downs

During the 1990s, Cuba opened up its economy “a little bit” to foreign enterprises, added Ritter. The mining sector became the focal point of great activity as “a lot of Canadian companies went down there to see if they could prove any commercially viable mineral resources. They all came back empty-handed after a few years, but they were really optimistic because Russia had done the surveying. The Canadian companies thought they just needed to do the work on the ground,” Ritter went on. It turned out that things weren’t so simple.

Other Canadian enterprises went there, but few were successful, noted Ritter. “There were Canadian hotels that pulled out. There was interest in time-share condominiums, and the Cubans changed their mind on that, so that did not go forward. More recently, in the late 2000s, a number of Canadian enterprises made arrangements to invest fairly massive amounts of money in golf courses and related resorts. But those have been put back on the shelf; nothing has happened. I think the Cubans changed their minds [about that],” lamented Ritter. Overall, “The rules have been so fuzzy that every decision is sort of a customized ad hoc decision. The rules of the game come down to case by case decisions by Cubans.”

The only major Canadian firm to enjoy enduring success was Toronto-based Sherritt International, a resource company with interests in nickel and cobalt mining, oil and gas exploration and production, and electricity generation. Ritter said that Sherritt has been “wildly successful for Cuba and for Sherritt.” However, Sherritt’s huge success has not been repeated by other Canadian firms in the Cuban energy sector. In 2009, Pebercan, Inc., a Montreal-based oil producer, was notified by the Cuban government that it would scrap its production-sharing contract with the Canadian firm. That contract, signed by Pebercan and the Cuban government in 1993, had been scheduled to expire in 2018. Neither party to the contract ever announced any reason for the government’s decision to cancel it.

Goodwill is like an isotope that is trickling down

George Petrolekas, a former Marketing Director of a Canadian telecom, who has traveled on business in Cuba, said that former Prime Minister Stephen Harper’s conservative government “has been less receptive to links with Cuba than previous governments, which were Liberal.” During the late 1990s, “The most receptive Canadian governments were probably those of Pierre Elliott Trudeau, and Jean Chretien, to a lesser extent.” Petrolekas said that Harper has been “far harder on Cuba” than other Prime Ministers, such as Brian Mulroney.

Entwistle argues that even under left-leaning Canadian Prime Ministers, Canada has not taken full advantage of existing opportunities to promote Canadian corporate exporters and investors. “Truth be told, no Canadian government of any political stripe has exercised the full weight of instruments available to it for things like trade promotion.” Entwistle believes that Export Development Canada (EDC), which provides Canadian exporters with financing, has “never been overly active in Cuba, in terms of supporting Canadian business. Canadian business has done its own thing in Cuba, regardless of the government.”

Nor have there been a sufficient number of high-level visitors from Ottawa, waving the Canadian flag to drum up new business. Entwistle said, “There have been some political visits; Pierre Trudeau came in 1976; he was the first NATO-member state leader to do so. [Jean] Chretien also went—partly because Trudeau went.” Would it help if the next Canadian Prime Minister paid such a visit? “Hypothetically, if you had a Liberal government, there would be some explosion of activity on the part of the government of Canada in pursuing its relationship; but I think it will probably be business as usual. No government does tremendous damage to the relationship because it does tend to have its own rhythm, and you have this huge number of Canadians who go as tourists; well over a million a year.”

The sluggishness of the relationship defies the rosy expectations of earlier generations of Canadian business leaders. “At least one generation of Canadians in public life always believed that Canada had a special relationship with Cuba,” Entwistle continued. There was an assumption that “this relationship would translate into some sort of privileged access; an ability to leverage the relationship; to acquire things or positions – decisions from the government of Cuba that we want to see. The whole Canadian foreign policy establishment believed that for a long time.”

This presumption of privileged access has turned out to be false, said Entwistle. “While Cubans are very respectful of Canada and they value the relationship very much, we don’t have any special access or privileges in Cuba. We’re in competition with everyone else; you have to earn your keep; earn your way.” Ritter agreed that “Canadians had said for so long that we had built up a lot of goodwill in Cuba – and that it would pay off in the future.” Not true. And yet as early as 2002, when President George W. Bush enabled U.S. exports of pharmaceuticals and foodstuffs to Cuba, Canadians were disappointed with the reaction of their Cuban customers. As soon as lower-priced food became available from the United States, the Cubans switched to it, despite the ongoing U.S. trade embargo in other product sectors. Canada’s business activity in Cuba has been further hampered by the Helms-Burton Act of 1996, which penalizes all foreign companies that do business in Cuba by preventing them from doing business legally in the United States.

Reviving the special relationship

Overall, argued Entwistle, “Canada has an asset that has been created by the 70 years of unbroken ties, but it is being squandered. The goodwill of the relationship on which Canada dined out for a long time is like an isotope with a half-life. It is trickling down and has not been replenished sufficiently. ”

What measures would Entwistle take with respect to Cuba if he were Prime Minister of Canada? First of all, “I would increase the number of political visits at the ministerial level. In a country like Cuba, those kinds of visits, led by [cabinet level] ministers have real value. They signify the importance of the relationship; they provide entrée and access to senior decision makers in the Cuban government. [Canada’s] global competitors have been very active in this. “

In the wake of the normalization of U.S. diplomatic ties with Cuba, senior ministers from several major trading nations have descended on Havana in recent months, accompanied by senior executives from major corporations headquartered in those countries. For example, the President of France brought some 70 French companies; the Spanish prime minister, almost the same number; and likewise from Mexico and elsewhere. Meanwhile, Canadian leadership have undertaken no such large-scale missions in Cuba, of late, perhaps out of a sense that such missions are not necessary, given the decades of mutual goodwill. Despite Canada’s world-famous expertise in telecommunications, Orange S.A., the French telecom company, signed a deal to assist in the development of Cuba’s (government monopoly) telephone network in July 2014. “It’s the kind of deal we could have done, but we just didn’t bother to go there and do it,” Entwistle said.

What role can Canadians play in the Cuba of the future?

The Cuban government has outlined the important role to be played by foreign investment flows in the sustainable development of the country. In 2014, Cuba’s minister for foreign trade and investment said on state TV that the country needs a sufficient volume of foreign capital in order to achieve its economic growth target of 7 per cent a year. Its goal is attract $2 billion to $2.5 billion in foreign direct investments each year, notes Philip Peters, President of the Cuba Research Center. Peters says that target is “pretty ambitious,” given the fact during the entire 1990s, Cuba managed to attract a total of only $4 billion to $5 billion in inward foreign investment.

What will that expansion mean for Canadians? Economist Ritter believes that there are two ways of looking at the ultimate impact of the arrival of so many Americans on Cuban soil. One of those ways is positive; the other is negative. “There will be two kinds of effect. One will be a squeezing out effect in some areas. But there isn’t that much to be squeezed out, so I don’t think we lose so much,” added Ritter, in terms of current Canadian market share in Cuba; given the limited range of Canadian success stories in the world of industry.

When it comes to the tourism sector, there is a divergence of views. Ritter said that “a second squeezing-out effect will take place in the tourism industry, as the tsunami of tourists arrives from the United States. They could squeeze out a lot of Canadians,” given the fact that the typical Canadian tourist in Cuba has a more modest budget than his or her counterpart from the United States. Other analysts, including Entwistle, believe that there will be plenty of room in Cuba – the largest island in the Caribbean – for tourists traveling on all kinds of budgets, from modest cottages suitable for hippies to jet-set plutocrats. The key is to build the infrastructure that supports that expansion for all segments of the market. That’s an area where Canada can fill the gap with additional capital.

A range of enticing new opportunities may open for Canadians to export to Cuba and invest in that country, in partnership with Americans and other newcomers to the island. If the newly pragmatic Cuban government is as transparent as optimists say it will be, Canadians will be making more money in Cuba even if they wind up owning a smaller share of a much larger Cuban pie. Some Canadian companies could play a key role as intermediaries; consultants who advise and partner with U.S. companies that don’t already know Cuba the way a handful of Canadians know it. Apart from their greater familiarity with Cuba, argues Petrolekas, Canadians have this advantage: “There is not a sense that we [Canadians] are there to exploit Cubans. They like us from that standpoint. There are enough companies that operate cross-border between the U.S. and Canada, and we can certainly assist in that.”

How Canadians can improve their chances of success in Cuba

What steps can Canadians take to improve their chances of success? Entwistle notes that “the trick to improving your chances in Cuba is to align [your initiatives] with the Cuban government’s priorities, which have more to do with the real, basic economy than with the bells and whistles of advanced high-technology [economies]. The Cubans are remarkably smart. They have a home-grown leadership that is very serious, very earnest, analytical and methodical.”

Entwistle advises Canadians to study the priorities outlined in the 2014 foreign investment law, which target agricultural development; basic manufacturing, including such substitutes for imports as glass bottles and aluminum cans; and renewable energy, including wind power. In the past, Cuba has benefitted from low-priced, subsidized energy imports from Venezuela, but that country has been suffering economic and political disarray. That makes it riskier than ever for Cuba to depend on Venezuela for low-priced energy imports in the future, industry analysts agree. Another Cuban priority is biotechnology: Close to a dozen biotech institutes have been built in Cuba; meanwhile, Novartis and AstraZeneca – two European pharma companies – have a significant presence in the country.

Tourism remains particularly enticing. Cuba is looking for foreign partners to expand its hotel sector infrastructure quickly, in preparation for the huge flood of American tourists. Canadians may also be able to leverage growing demand for ‘medical tourism,’ which could develop into a huge source of revenue for the island, and for joint-venture partners from capitalist countries. World-famous for its quality, the Cuban medical system is offering medical services for Canadians via Health Services International (Servimed), an agency officially recognized by Cuba’s national medical system. Demand for such services is expected to grow, as well, in the United States, once full trade relations are normalized.

In conclusion, cautions Entwistle, “Cuba is not an economy that is for profiteering in any way; or for get-rich schemes, or getting in and out. This is a long-haul, strategic, patient market that is evolving in front of our eyes; at a very Cuban pace. You need a longer term vision. The companies that have been successful in Cuba have that long term vision, which allows them to ride the fluctuations of the daily ups and downs of doing the actual business. My advice is do less pitching and more listening. And if your business is in areas that are Cuba’s priorities, then you have a real good chance.” If he’s right, Canadians’ cultural aversion to flashy, get-rich-quick salesmanship could work out to their advanta

 

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LET’S MAKE A DEAL: DOING BUSINESS IN CUBA

Posted on December 21, 2015 by Arch Ritter

William M. LeoGrande, Professor at American University in Washington, D.C.

Original article here: Doing Business in Cuba

zzzzBy the first anniversary of President Barack Obama and Cuban President Raúl Castro’s decision to normalize relations last December 17, much had been achieved on the diplomatic front. But progress on the commercial front has been lagging, and unless both sides realize significant economic gains before Obama leaves office, the momentum toward lifting the embargo and fully normalizing relations could be lost.

The initial surge of excitement among U.S. businesses after December 17 was palpable: finally, an opportunity to enter a largely unexploited market, forbidden for half a century. In the past year, a parade of trade delegations has visited Havana. In April 2015, Democratic Governor Andrew Cuomo took a group of 20 New York business leaders. In September, Republican Governor Asa Hutchinson of Arkansas led an agricultural trade mission hoping to expand food sales. In November, Texas Governor Greg Abbott followed suit. Legislators and local officials led other trade delegations from Alabama, California, Kentucky, Illinois, Indiana, Louisiana, Missouri, New Mexico, North Carolina, Ohio, and Tampa, Florida.

In March 2015, the U.S. Agriculture Coalition for Cuba–a broad-based group formed after December 17 to promote agricultural trade–took 95 people to Cuba, including two former secretaries of agriculture. The U.S. Chamber of Commerce launched the U.S.-Cuba Business Council representing over two dozen major corporations, including Caterpillar, Kraft Heinz, Sprint, Boeing, Home Depot, and American Airlines. In October, Commerce Secretary Penny Pritzker went to Cuba, followed in November by Secretary of Agriculture Tom Vilsack.

Cuba needs the trade and investment that U.S. businesses can offer, and Cuban leaders appear eager to expand commercial ties. Yet despite this enthusiasm, few deals have actually been signed. “Up until now it has been going down. looking around, and saying, ‘this is an interesting place, but how do I make money here’?” explained deputy assistant secretary of state Alex Lee at a forum on doing business with Cuba organized by The Economist.

The case of The Home Depot, Inc. illustrates both the opportunities and the obstacles. Some 90 percent of Cubans own their own homes, most of which are in desperate need of repair. Dilapidated structures dot the island, from houses in need of a new coat of paint to apartment buildings literally falling down.

One way Havana has tried to ease the housing problem is by letting people do it themselves. Tens of thousands of families have taken advantage of new government grants and loans to finance home renovations. In 2015, private owners and contractors built more new housing units than the state construction company. That boom translates into a huge demand for tools and building materials–and a huge business opportunity for Home Depot.

The giant home improvement retailer is clearly interested. It is a founding member of the new U.S.-Cuba Business Council, and regional export manager, Heriberto Correa, attended the council’s inaugural meeting held in Cuba during Havana’s International Trade Fair. The Obama administration’s new regulations specifically license the sale of construction materials for private buildings, so Home Depot could legally sell to private Cuban construction cooperatives, contractors, and private home-owners.

It could even rent or build a warehouse in Cuba’s new Special Development Zone at the port of Mariel, where imports are duty-free and new businesses enjoy a ten-year tax holiday. In fact, any U.S. business legally selling goods to Cuba could take advantage of the favorable terms available for establishing facilities in the Mariel zone. And if the Cuban government would allow it, the company could open its own retail outlets and import a fleet of delivery trucks to ship goods from the warehouse to the stores.

Yet when asked if Home Depot planned to enter the Cuban market, the company’s CEO Craig Menear replied cautiously. “Cuba is an area we’re watching carefully,” he said. “We know at some in time when the environment is right, there’s opportunity for The Home Depot to be there. But we believe that before we go in there, it needs to benefit the people of Cuba.”

Caterpillar is another company well-situated to enter the Cuban market. Obama has licensed sales to Cuba’s private farms and cooperative, which are in serious need of better equipment. Moreover, Caterpillar is no late-comer to the island: it first called for an end to the U.S. embargo in 1998, and in 2004 donated generators to Cuban hospitals. “Caterpillar wants to do business in Cuba,” said Bill Lane, senior director of global government and corporate affairs. “Everything Caterpillar makes in the United States is needed in Cuba.” The company hopes to open a dealership on the island, Lane told The Economist‘s Cuba Summit in December, but it has yet to sign any contracts.

So why has progress been so slow?

To be sure, there are difficulties in doing business with Havana. Cuba’s infrastructure– its roads, energy grid, and digital network– lags behind neighboring countries. Foreign companies must still hire labor through the state’s hiring agency. Cuba’s bureaucracy is notoriously slow to make decisions and opaque, making dispute resolution problematic. But, as David Pathe, CEO of Canada’s Sherritt Corp., one of the island’s largest foreign investors, put it, “There is nothing unique about Cuba”– these are the kinds of problems companies face in any new foreign market.

The larger issue making U.S. companies reluctant to enter the Cuban market is uncertainty on the U.S. side. Although the Obama administration wants to see U.S. businesses engage with Cuba to demonstrate the benefits of the president’s new policy, the regulatory changes made thus far still leave too many obstacles in the way. If companies are not absolutely certain that their business plan is legal, they will not take the risk.

Financial regulations are a particular problem. Finance is the life blood of commerce; if funds cannot be easily transferred between Cuba and the United States, business will remain negligible. Although U.S. regulations allow for fund transfers involving licensed activities, companies are terrified of inadvertently violating the rules and being hit with enormous fines.

For example, it took months for the State Department to find a bank willing to handle accounts for Cuba’s diplomatic mission in Washington because the costs of regulatory compliance far outweighed the profit. Stonegate Bank in Florida finally agreed to do it because, as CEO David Seleski put it, they regarded it as a “moral obligation” to help re-establish diplomatic relations. Earlier this month, the Treasury Department had to reassure U.S. banks that they could process fund transfers to Cuba involving authorized travel without themselves having to certify that the travel was, indeed, legal.

The ultimate solution to these problems is to lift the U.S. embargo in its entirety, but that is not likely to happen in an election year when Republicans control Congress. In the meantime, President Obama should issue another round of regulatory changes that clarify what can and cannot be done.

In the financial area, Obama could license U.S. businesses to provide credit to Cuban customers to stimulate nonagricultural trade (agricultural credits are prohibited by law). He could authorize Cuban banks to establish correspondence accounts with U.S. banks to facilitate payments to Cuban customers. Finally, he could issue a general license to U.S. banks to process dollar-denominated transactions conducted by foreign banks (so-called “U-turn” transactions) that must be processed through a U.S. financial institution.

President Obama’s opening to Cuba was historic, but to make it irreversible, the policy needs to produce results–especially in the field of commerce. The interest is clearly there on both sides, but the barriers are still formidable. The exceptions to the embargo that the president has authorized thus far are impressive and lay the groundwork, but they have not yet gone far enough to reassure U.S. businesses that they can safely enter the Cuban market without running afoul of U.S. law.

As Cuba’s economic reforms open the country to foreign trade and investment, U.S. companies risk being left behind as competitors from Canada, China, and Europe jump in ahead of them. Companies that enter the market early and build relationships with their Cuban counterparts stand to benefit the most in the long run. As Caterpillar’s Bill Lane, an aficionado of the seafood in Havana’s private restaurants, put it, “The first movers in Cuba get the lobster.”

 

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U.S.-CUBA AGRICULTURAL TRADE: PAST, PRESENT, AND POSSIBLE FUTURE

Posted on September 2, 2015 by Arch Ritter

Full Document Here: US-Cuba Agricultural Trade, Past, Present and Perspective, USDA,2015

By Steven Zahniser, Bryce Cooke, Jerry Cessna, Nathan Childs, David Harvey, Mildred Haley, Michael McConnell, and Carlos Arnade, all from the United States Department of Agriculture

Abstract

Establishment of a more normal economic relationship with Cuba has the potential to foster additional growth in U.S.-Cuba agricultural trade. Prior to the Cuban Revolution of 1959, bilateral agricultural trade featured large volumes of Cuban sugar and smaller volumes of molasses, tobacco, and pineapple from Cuba and rice, lard, dried beans, wheat, and wheat flour from the United States. In 2000, the U.S. economic embargo on Cuba was loosened to allow for U.S. exports of agricultural products and medicine. As a result, the United States soon became Cuba’s leading supplier of agricultural imports. The remaining prohibitions on issuing credit to Cuba, however, give other exporting countries a competitive advantage in the Cuban market, and the United States slipped to being the second leading supplier in 2013 and the third leading supplier in 2014. A more normal economic relationship between the two countries would allow Cuba to resume exporting agricultural products to the United States, while U.S. agricultural exporters would be able to develop commercial ties in Cuba that approximate their business relationships in other parts of the world.

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EL LABERINTO DEL SISTEMA IMPORTADOR CUBANO/ CHALLENGES POSED BY CUBA’S LABYRINTHIAN SYSTEM OF IMPORTS

Posted on August 25, 2015 by Arch Ritter

DR. OMAR EVERLENY PÉREZ VILLANUEVA

AUGUST 13, 2015; Published in “From The Island.“

Complete document in English here:  Cuba’s Labyrinthian System of Imports

Spanish version:       Sistema Importador Cubano

INTRODUCTION

The international market allows countries with limited internal markets, such as Cuba, to take advantage of economies of scale. That means there is a need to harmonize increases in exports with the substitution of imports. As a result, it is important how leading export items in international trade are supported, while at the same time maintaining the necessary flow to guarantee the import of inputs for that balance.

Cuba’s foreign trade sector, which currently maintains trade relations with more than three thousand foreign companies, possesses the characteristics of an open economy. It is thus greatly relevant that trade policy be designed to contribute to a necessary improvement in productivity and to increase economic efficiency. To that end, it is essential that the methods applied match the goals of economic policy.

The international environment, the national economic structure and the regulatory framework are factors with notable impact on the performance of foreign trade. In particular, the role of institutions is especially important to the effectiveness of regulations in this sector of the economy. In the Cuban economy, it should be noted, the only entities that import products into the country belong to the state, despite the stated intent of Cuban authorities of having the non-state sector occupy a larger portion of the economy.

In Cuba, new Resolutions issued by the General Customs of the Republic (Aduana General de la República or AGR) that took effect on September 1st, 2014 have raised a number of concerns among the Cuban people. The following is a brief overview of this controversial issue.

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CONCLUSIONS

The weakness that currently persists in Cuba’s productivity, such as obsolete technology, insufficient quality, and logistical problems; combined with complexities in the international arena, highlight the urgency to act on domestic conditions and on improving adaptability to external conditions.

It is imperative that the new dynamics of the international context and their impact on the country’s economic and social performance be considered in the gradual changes made to the Cuban economic model.

The development of trade regulations should not lose sight of the significance of achieving the greatest possible consistency between what is required and what the priorities are for the economy, generally, but for the citizens in particular.

The state itself has made it evident that there is a set of activities that should not be administered by the state, but rather in a cooperative way or through the private sector, and it has created the mechanisms to develop it, though in a restricted manner. Thus the question that could be asked of the state is, if these non-state entities create wealth for everyone, why can’t they gain access to inputs through imports that are so necessary for their productivity or services? No doubt the answers they’ll be able to raise are about the lack of foreign currency loans to carry out said imports. Another question could be, why not allow those imports to enter the country with natural persons, and then use the tax system to collect revenue once those services or goods have been provided?

These contradictions should lead to reflection on the part of those who formulate policy. In an economy like the Cuban economy, it is vital to increase imports so that they facilitate the creation and growth of national wealth, independent of the type of property involved. That, in turn, will lead to an improvement in everyone’s well-being.

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OMAR EVERLENY PÉREZ VILLANUEVA

 

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AMERICAN FOOD PRODUCERS SEE BONANZA IN CUBA, BUT STEEP BARRIERS REMAIN

Posted on June 19, 2015 by Arch Ritter

Karen DeYoung, Washington Post, June 18, 2015

Original here: Us Food Exports: Bonanza In Cuba

Before the U.S. embargo, Cuba bought more American rice than any other country in the world. Now, most Cuban rice comes from Vietnam. Last year, Cuba imported $200 million worth of wheat — virtually all of it from Europe and Canada and none from the United States, the largest global exporter.

Many U.S. agricultural producers thought those facts would begin to change this year, as U.S. relations with Cuba improved.  But in the six months since President Obama announced a new opening to the island, sales of U.S. foodstuffs — among the few U.S. products allowed, with restrictions, under the embargo — have dropped by half, from $160 million in the first quarter of 2014, to $83 million this year.  Even frozen chicken, which has led U.S. food exports to Cuba for years, had lost favor in Havana long before fears of the U.S. bird flu epidemic led this month to a ban on all poultry purchases.

Cuba Nov 2008 009Silver Creek, Seaman’s Orchards Apples from Tyro Virgina, arriving in the “Barrio Chino”, Havana, November 2008, Photo by A. Ritter

As the administration wraps up negotiations with Cuba that are expected to lead to restored diplomatic ties this summer, only Congress can lift the embargo that still prevents nearly all financial and trade relations and severely limits even the few permitted exports.

Obama has said he wants that to happen, and U.S. producers from major agribusiness  companies to small farmers have joined a bipartisan force of farm state governors and lawmakers to help overturn restrictions they say are keeping them out of a $2 billion annual market.

“Opening a new export market means a new source of revenue,” said Devry Boughner, vice president at Cargill Inc., the Minnesota-based agribusiness giant and a co-founder in January of the U.S. Agriculture Coalition for Cuba.

While Cuba’s 11 million people are not the world’s biggest market, Boughner said in an interview, “it’s a market that’s right in our target zone.” With Cuba only 90 miles away, she said, it makes little sense “to be losing out to competitors who take longer to ship it there, who might not even have the same quality” as U.S. products.

Cubans rival Southeast Asians as prodigious consumers of rice. Within two years, Riceland Foods vice president Terry Harris told the Senate Agriculture Committee in April, American rice could be providing up to 135,000 metric tons, 30 percent of the Cuban market. Within a decade, he said, that figure could rise to 75 percent or more.

Doug Keesling, a fifth generation Kansas wheat farmer, told the panel he saw no “compelling reason” for Congress to “restrict the freedom of Americans to engage in commerce, especially for those who are just trying to sell wholesome, American-grown food.” “I can put my wheat in an elevator in Kansas, send it by rail down to the Gulf, put it on a ship that’s a couple days away from Havana harbor,” Keesling said. “But my wheat’s still going to lose out to wheat that has been on a boat for a week from Canada, or even two weeks from France.”

Yet despite a series of hearings, conferences, concerted lobbying and a stream of trade delegations to Cuba from both Republican and Democratic states this year, the embargo remains firmly in place, with little promise of early action.

Many lawmakers are receptive to Obama’s call to jettison a policy he says has failed for more than a half century to effect change in Cuba. But for most, lifting the sanctions remains just one more unwelcome controversy in a contentious Congress. Others want to retain congressional power to block a White House initiative they deeply oppose. They include GOP presidential candidates Sen. Marco Rubio (Fla.), who has accused Obama of turning his back on Cubans oppressed by their communist government, and Sen. Ted Cruz (Tex.), both sons of Cubans who emigrated before Fidel Castro’s 1959 revolution.  Obama, Cruz charged, had thrown an “economic lifeline” to Cuba just as the embargo and diplomatic freeze had left its communist regime “gasping for air.”

Malnutrition rates in Cuba are “very low,” according to the World Food Program, on par with the United States and the rest of the highly developed world. Staples are guaranteed via government-issued ration cards. But domestic agricultural production rates are abysmal, equipment and farming methods are antiquated, and up to 80 percent of Cuban food is imported.  Subsidies from the then-Soviet bloc helped fill the food gap for decades after the U.S. embargo was first imposed in 1960. The Soviet collapse left Cuba in deep recession in the early 1990s, and Havana welcomed the lifting of some U.S. restrictions on food and medical exports in 2000.

Despite permitting cash-only transactions, U.S. food sales rose to a 2008 peak of $710 million before starting a downward trajectory that appears this year to have gone off a cliff, according to figures compiled by the New York-based U.S.-Cuba Trade and Economic Council.

When current President Raul Castro took over nearly a decade ago he adopted more pragmatic policies than his older brother, and U.S exports increased. But the complication and high expense of buying American in recent years has diminished Cuban zeal. U.S. prices may be competitive and transportation cheaper over the short distance, but the cost of doing business with the United States is high.

Cash-only limits remain, although Obama has eased the restriction somewhat by requiring payment when title to the goods is transferred in Cuba, rather than up-front before goods are shipped.  But Cuba’s lack of cash makes that a rarely used option. Most purchases are made on credit, and the embargo allows no U.S. financing. Instead, Cuba must go through third countries, with Havana obtaining a loan from a foreign bank. That bank then communicates with the bank of a U.S. producer, which arranges the sale with the producer himself. The process is then reversed, with each stage involving lengthy bureaucracy and significant fees.

Cubans “are not going hungry; they’re just buying wheat from other countries,” said farmer Keesling. “That may be more expensive than mine in a free market, but it is now a much better value because there aren’t massive compliance costs accompanying every purchase.”

Some opponents of lifting the embargo maintain that increased U.S. sales will only benefit the Cuban government, since all agricultural imports must go through the state agency, called Alimport.

Boughner and others point out that Cuba is not unique in that regard. Until recently, both Canada and Australia handled all of their wheat imports with state boards. “We’ve had examples through history where states have been involved in trading, but it doesn’t mean we don’t trade with them,” Boughner said. The U.S. food business also sees potential in the eventual lifting of remaining restrictions on American travel to Cuba. In addition to sampling Cuban cuisine, tourists will want to eat and drink what they are used to from home, industry analysts believe.

 

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FRENCH GROUP TRUMPETS CUBAN DRUGS INNOVATION

Posted on May 26, 2015 by Arch Ritter

Financial Times, May 26, 2015

Andrew Ward, Pharmaceuticals Correspondent

Original here: Cuban Drugs Innovation

Cuba has the potential to become a force in the life science industry as its economy gradually reopens to the world, according to Abivax, a French company that has licensed a hepatitis B treatment from Cuban researchers.

Abivax is planning an initial public offering in Paris to finance clinical trials of the ABX203 therapeutic vaccine developed by the Center for Genetic Engineering and Biotech in Havana.

Hartmut Ehrlich, Abivax chief executive, said that Cuba had world-class medical science ready to be tapped as the country re-engages with the US and the broader global economy.

He highlighted the 500 products developed by 40 pharmaceuticals companies during past decades when Cuba’s isolation made it difficult to access some foreign drugs.

“They have a strong public health system and a strong science base because [Fidel] Castro decided in the 80s that in order to fulfil the medical needs of the population they needed to develop their own medicines,” said Mr Ehrlich.

Abivax was among the French companies that accompanied President François Hollande on a visit to Cuba this month — highlighting growing international interest in the commercial opportunities created by Cuba’s economic reforms. The Paris company owns the rights to ABX203 in 80 countries across Europe, Asia and Africa and will share revenues with its Cuban partners should the treatment reach market. Late-stage trials of the vaccine started in February.

Cuban products are still barred from the US, the world’s biggest pharmaceuticals market, by a trade embargo but the chances of this being lifted appear to be rising as talks continue about resuming diplomatic relations severed since the cold war.

Mr Ehrlich said that Abivax would be interested in US rights to ABX203 should the market open. European companies hope they will have a head start in Cuba over US rivals held back by the embargo.

“It takes time to build trust with our partners in Cuba and we believe we have achieved that trust,” said Mr Ehrlich. “We have found the Cubans to be very collaborative. For us it has been a real pleasure to work with them.”

ABX203 is a first-in-class immunotherapy that aims to provide longer-lasting suppression of the virus than existing treatments — and potentially a cure. An estimated 350m people worldwide have the chronic form of hepatitis B, which kills more than 1m people every year.

Analysts say that both ABX203 and a separate HIV treatment being developed by Abivax in France have lots of potential if trials prove successful. Mr Ehrlich said that the company was open to a partnership with a larger pharmaceuticals group to help reach market. He would not say how much money would be raised in the IPO, announced last week, but Abivax was on course to burn €20m of cash this year and €30m next year.  fbb5f4388c59ee22ea6925023b66b419PPG: Cuba’s Wonder Heart Drug, (also Cuba’s Viagra)

CUBA-INSTITUTO DE INGENIERIA GENETICA-CARTERInstitute of Genetic Engineering and Biotechnology, Havana

 

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Brookings Institution: CUBA’S ECONOMIC CHANGE IN COMPARATIVE PERSPECTIVE

Posted on April 28, 2015 by Arch Ritter

Edited by RICHARD E. FEINBERG AND TED PICCONE

Full Document Here: Brookings, 2014:  Cuba’s Economic Change

                         TABLE OF CONTENTS

 Introduction and Overview    Richard Feinberg

Policies for Economic Growth: Cuba’s New Era,  Juan Triana Cordovi and Ricardo Torres Pérez

Economic Transformations and Institutional Changes in Cuba. Antonio F. Romero Gómez

Institutional Changes of Cuba’s Economic-Social Reforms: State and Market Roles, Progress, Hurdles, Comparisons, Monitoring and Effect. Carmelo Mesa-Lago

Economic Growth and Restructuring through Trade and FDI: Costa Rican Experiences of Interest to Cuba, Alberto Trejos

Monetary Reform in Cuba Leading up to 2016: Between Gradualism and the “Big Bang” Pavel Vidal Alejandro and Omar Everleny Pérez Villanueva

Exchange Rate Unification: The Cuban Case. Augusto de la Torre and Alain Ize

New Picture (2)

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CANADIANS SUDDENLY RACING NOT TO SQUANDER HEAD START IN CUBA

Posted on February 2, 2015 by Arch Ritter

Peter Kuitenbrouwer | January 30, 2015, Financial Post

Original here: Canadians Suddenly Racing

Mark Entwistle could not resist a smile at lunch time Tuesday as he gazed out over a packed room at Gowlings’ head office in Toronto’s First Canadian Place office tower. He had not seen some of these lawyers and business leaders in many years.

“In the mid 1990s, after the fall of the Soviet Union, Cuba was the new frontier,” Mr. Entwisle, Canada’s ambassador to Cuba from 1993 to 1997, recalls in a later interview. “We had almost an invasion of junior Canadian mining companies. We were doing all kinds of deals. Then Cuba stopped experimenting as much with foreign investment. Bre-X happened on the mining side, and all the juniors left because the money dried up.” The U.S. Helms Burton Act of 1996, which penalized foreign (such as Canadian) companies trading with Cuba, also scared companies off.

The world shifted again Dec. 17, when Raúl Castro, president of Cuba, and Barack Obama, president of the United States, restored diplomatic relations after 55 years. On Bay Street, Cuba is sexy again.

“You can tell Cuba’s kind of moved its way up the food chain,” Mr. Entwistle joked to the assembled at the Gowlings lunch, “The new Cuba equation: the Cuban economy, Canada’s opportunity and America’s new place,” organized by the Canadian Council for the Americas. A think tank with a 40-year history, the council holds events to discuss politics and business in the Western Hemisphere.

On the surface this interest in Cuba seems paradoxical. Canada never broke diplomatic relations with Cuba after its revolution in 1959, and Canadians have longstanding and deep connections with Cuba, as tourists and as investors. Why show interest in Cuba now that the U.S. is thawing relations? To some extent, with the exception of Sherritt International Corp. — which generates about 75% of its income from nickel it mines in Cuba — Canada has squandered its opportunity to solidify its place as the premier business partner with Cuba during the many years when U.S. policy froze out American companies. But that is just half the story.

Cuba has been reluctant to let anyone invest very much in its economy; foreign direct investment in Cuba is less than a tenth of 1% of gross domestic product. That policy of going it alone has kept out many Canadians, too. U.S. laws have also frightened off Canadians. Now, with Cuba and the U.S. playing footsie, investors sense that Cuba may be opening up more generally, offering renewed opportunities for Canadians, who already know Cuba well, to make some money.

“The interest is rising again, getting back on the radar screens where it had been off,” Mr. Entwistle says, sipping an espresso macchiato in Nespresso, a grand coffee shop near his office that feels more like a Mercedes dealership. He arrived home from Havana on the very day of the US-Cuba deal. “I got off the plane on Dec. 17, my BlackBerry was exploding with stuff,” he says.

 TORONTO, ONTARIO: JANUARY 29, 2015--FOREIGN--Former Canadian ambassador to Cuba Mark Entwistle spoke with Financial Post reporter Peter Kuitenbrouwer at Toronto's Nespresso Cafe, Thursday January 29, 2015. Entwistle is now active in advising Canadian companies who may wish to invest in Cuba. [Peter J. Thompson/National Post] [For Financial Post story by Peter Kuitenbrouwer/Financial Post] //NATIONAL POST STAFF PHOTO fp013115-pes-cuba

Mark Entwistle

Mr. Entwistle has teamed up with Belinda Stronach, the former MP and Magna International Inc. executive, and Anthony Melman, a former managing director at Onex Corp., among others, to form a boutique merchant bank, Acasta Capital. One investment that interests the firm: Cuba. In the past month Americans have started calling him, seeking his advice on investing in Cuba, he says.

At the Cuba lunch, Mr. Entwistle warned Canadians not to be smug about their connection to that country.

“There is this mythology that we have a special influence with the Cuban government. That does not give Canada a free ride in Cuba. Cuba is already a bustling, crowded place. Canadians will have to compete head-on.” Despite Canada’s world-class expertise in telecom, he noted, Orange SA, the French telecom company active across Europe and Africa, recently signed a deal to help Cuba’s telephone system. “It’s the kind of deal we could have done,” he says. “We just didn’t bother to go there and do it.”

And there was one consensus in the room: Cuba is poised for takeoff. Juan Triana Cordoví, an economist at the University of Havana, spelled out the potential of his country. Cuba’s health care system is among the best in the Americas; its infant mortality rate is below that of the United States. Of its 10.5 million people, 11% have a university education. Cuba has 14 universities. At the same time, he did not seem overly optimistic about the possibility of more foreign investment. Mr. Triana also noted the impressive bond between Cuba and Canada: 1.2 million Canadians visited Cuba in 2014, compared with just 90,000 Americans.

 “That was one of the best things about Cuba,” a lawyer at the lunch in Toronto remarked ruefully. “No Americans.”

Now the Yanks are coming. By one estimate, with the Obama administration relaxing rules on travel, a half-million Americans will visit Cuba this year. “Too many Americans in Cuba,” one Cuban remarked at the lunch.

The Canadian Council for the Americas brought the same panel to a Wednesday event at the Borden, Ladner Gervais law firm in Ottawa. Diplomats from Switzerland, Indonesia, Korea and the Dominican Republic attended. Ken Frankel, who runs the Canadian Council for the Americas out of Washington, D.C., says Canadians’ current interest in Cuba is partly motivated by fear. “Does this mean that U.S. business is going to flood into Cuba and push out the Canadians?” he asks.

Americans are certainly keenly interested. Devry Boughner Vorwerk, vice-president of legal affairs at Cargill, Inc., the agricultural giant, heads the U.S. Agricultural Coalition for Cuba, and spoke to the Toronto lunch from Washington via Skype.

Agriculture in Cuba has a lot of upside potential, thanks to rich soil and an educated workforce, experts agree. “You throw seeds in the ground and things grow,” says Mr. Entwistle. “You have a professional agronomist class.” However, historically Cuba has focused on growing sugar, and the country has little farm equipment. “Conceivably Cuba could become a major exporter of fruits and vegetables to the U.S.,” he suggests. “There is a perfect storm of untapped ingredients for agriculture.” Brazil has already begun to invest in agriculture in the island nation.

“I am working with people in agriculture,” Mr. Entwistle said, declining to name them. “I think it’s a big strategic sector for Canadian interests.”

Ricardo Alcolado Perez, who grew up in Cuba, runs his own law practice in Toronto and helps Canadian companies invest in Cuba. But many investors are gun shy. Historically, Cuba defaulted on some of its debts to Canadians, he says. U.S. laws pose another obstacle. It may seem odd, given the flood of Canadian tourists, that Canadians have not invested in hotels in Cuba, as the Spanish have. “The Four Seasons are not going to go to Cuba, over fear of losing business with the U.S. They also face the risk of being incarcerated,” he notes.

“I am working on a few projects,” Mr. Alcolado Perez adds. “One is a Canadian company who would like to raise funds in B.C. to build a hotel in Cuba.” He also has U.S. clients who do business in Cuba through Canadian firms. Information technology also offers opportunity, he adds.

“In the last 10 years Cuba has invested in training high-tech specialists. There are a lot of young guys who are very skilled,” says Mr. Alcolado Perez. “Already companies in Canada outsource software development to Cuba.”

In the last 10 years Cuba has invested in training high-tech specialists. There are a lot of young guys who are very skilled

Tom Timmins, a partner at Gowlings, heads the firm’s global renewable energy law practise. Like many Caribbean countries, Cuba produces electricity with generators powered by imported bunker oil, he says — even though wind energy costs 6.7¢ per kilowatt-hour, compared with up to 35¢ for diesel. Mr. Timmins is working with Carbon War Room, a charity founded by Richard Branson of the Virgin Group, to help Caribbean islands generate power from wind, solar and biomass.

“Cuba has a goal of 40% renewables and I think they will exceed that,” he says. “Because of [Ontario’s] feed-in tariff program, we’ve gotten really good at renewable energy and integrating it into the grid. A lot of the solar panels and wind turbines will be coming from China, but we can supply Canadian project developers, Canadian equity and Canadian debt.”

Cuba also has reserves in gold, silver, copper, other metals, as well as oil and gas.

Not much will change overnight, though. Polls show Americans favour lifting the U.S. embargo on trade with Cuba, but Mr. Obama, a Democrat, will face challenges getting a bill through the Republican-controlled Congress. And Cuba, concerned about social cohesion, will move cautiously to expand its small private sector.

Even so, the stars are aligning for major change in Cuba, and Canada will be there, says Mr. Entwistle.

“This not a hermit kingdom,” he says. “It is not an isolated place, but it’s one of the few markets around with a sense of untapped potential. There are a lot of ingredients for an economic takeoff in Cuba.”

Cuba Mar 2014 011 Cuba Mar 2014 042 Cuba Mar 2014 066

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DESPITE CHANGES, U.S. BUSINESSES STILL FACE A MINEFIELD OF SANCTIONS IN CUBA

Posted on January 12, 2015 by Arch Ritter

Washington Post,  January 11, 2015

By Joshua Partlow and Nick Miroff

Original here: MINEFIELD      

MEXICO CITY — To the Cuban government, it is “The Blockade,” and sometimes, “The Genocidal Blockade,” as if U.S. Navy gunboats had circled the island and cut off its inhabitants.

The “Cuban Embargo,” as it’s known in the United States, has failed for 54 years to push the Communist government from power. The U.S. economic sanctions have left Cuba neither fully isolated nor able to conduct completely normal business relations with other countries and foreign companies.

Now, as President Obama plans to poke new holes in the patchwork of financial, commercial and travel restrictions first imposed by the Eisenhower administration, American businesses are eagerly awaiting new opportunities on the island. But a maze of regulatory obstacles remains, and the embargo may endure as the defining feature of U.S.-Cuba relations long after an American embassy reopens in Havana.

For American companies, the sanctions look “like a scary forest of monsters,” said Robert Muse, a Washington lawyer who specializes in Cuba trade issues. It is also not clear whether the Cuban government will truly be open for business and ready to allow U.S. firms to regain a foothold on an island where American brands and products are revered but the government remains deeply wary of steamrolling Yanqui capitalism.

With only 11 million people and a gross domestic product about the size of West Virginia’s, Cuba isn’t exactly a grand prize for corporations. But it represents pure potential for the U.S. tourism industry, as well as agriculture companies, firms that can overhaul its rudimentary telecommunications infrastructure, and many others.

The top State Department official focused on Latin America, Roberta S. Jacobson, is scheduled to arrive Jan. 21 to begin laying the groundwork for the reopening of a U.S. Embassy on the island. She will be followed by Commerce Secretary Penny Pritzker and a U.S. business delegation on a “commercial diplomacy mission.”

The Obama administration has proposed a few basic changes to the Cuba rules, such as allowing U.S. companies to export building materials for private homes, agricultural equipment for farmers, and telecommunications equipment. The U.S. government will allow new relationships with Cuban banks, and limited imports of Cuban goods such as rum and cigars.

Raúl Castro and other Cuban officials have been quick to temper enthusiasm on the island for Obama’s moves with reminders that the sanctions remain a formidable obstacle to truly normal relations. They can be lifted only by the U.S. Congress.

According to Havana, the sanctions have inflicted $1.1 trillion worth of damage on the island’s economy over the decades — a figure that will almost certainly enter into future negotiations over the billions of dollars’ worth of pending claims by U.S. litigants whose property was seized after Fidel Castro’s 1959 revolution. Cuba claims the sanctions hurt its citizens by depriving them of U.S. medical technologies and pharmaceuticals, although U.S. officials say such sales are generally allowed with export licenses from the Treasury Department.

Though the restrictions block most U.S. commerce with the island, the Castro government, which has a virtual monopoly on foreign trade, does business with other nations all over the world, though not always smoothly. On the streets of Havana, new Hyundai and Kia sedans from South Korea dart among the old Soviet Ladas and battered Chevrolet Bel Airs from the Eisenhower years. Cuban resort kitchens are stocked with Spanish wine, Chilean salmon and filet mignon flown in from Canada. There’s a Lacoste store selling polo shirts under the colonnaded archways of Old Havana.

With shipments of subsidized petroleum, Venezuela, Cuba’s top trading partner, keeps the island’s lights on. From China, the Cuban government can get just about anything. These competitors have eaten away at whatever small beachhead certain American companies gained in Cuba over the past decade or so. After a series of devastating hurricanes in the island nation, Washington made it easier for Cuba to take advantage of exceptions to the embargo, allowing for the purchase of American food on a cash-only basis.

Within a few years, the United States had become one of Cuba’s top 10 import partners. U.S. food sales peaked at more than $700 million in 2008. Today, state-run supermarkets still stock cornflakes, Heinz ketchup and American oatmeal. Apples from Virginia show up in big white boxes at holiday time. Sales have slowed, though, as Cuba has boosted trade with ­Brazil and European countries that can offer financing and credit. American companies sold an estimated $300­­ million worth of food to Cuba last year, nearly half of which consisted of frozen chicken parts.

“We’ve lost a lot of market share over the years, and we want to get that back,” said Mark Al­bertson, director of strategic market development at the Illinois Soybean Association. His organization, and American producers of poultry, soy, pork, corn, milk and other goods, have banded together in a new coalition to try to lobby Congress to end the embargo. Obama’s proposal, although a good step, Al­bertson said, “doesn’t go far enough.”

Even with the new changes, companies expecting to do business in Cuba say they are going to be hamstrung by U.S. restrictions on financing and credit. There are “so many exemptions and hoops we have to jump through that make it not competitive,” Albertson said.

Banking is a big problem. The Obama administration has hit foreign financial institutions with more Cuba-related fines than any previous administration, according to Cuba’s Foreign Ministry. In July, the French bank BNP Paribas agreed to pay an $8.9 billion fine from the U.S. Treasury Department for Cuba-related violations. The German financial ­giant Commerzbank said last month it will pay $1 billion in a similar settlement. The banks broke the law because they routed the transactions through U.S. territory, regulators said.

Muse, the trade attorney, said American banks remain skeptical that Cuba is worth the trouble. The confusing overlay of U.S. laws — from the USA Patriot Act to money-laundering statutes — convinces some that it is easier to avoid the island entirely.

These hurdles, as well as the Communist-ruled island’s difficult business climate, have led some to conclude that the current excitement over the U.S.-Cuba rapprochement is mostly hype and wishful thinking, and that little will change for American businesses seeking to invest in Cuba.

“They’re believing what they hope will be,” said John Kavulich, senior policy adviser at the U.S.-Cuba Trade and Economic Council, a nonprofit group that includes major American businesses. “And they’re forgetting that the Cuban government is not about to say: ‘We’re going to accept everything that you want to do to us, knowing that your goal is to change us.’ ” “The Cuban government will allow only what it believes it can control,” he added.

In an interview, Commerce Secretary Pritzker highlighted travel, agriculture and telecommunications as areas of opportunity for U.S. firms.

Though many are skeptical that Cuba will allow the U.S. government to fiddle with its Internet or cellphone services, given Communist officials’ concerns about spying, Pritzker said there were still opportunities created by the president’s opening. With relatively few Cubans owning cellphones, and even fewer with Internet access, she said, “there’s enormous telecommunications infrastructure that needs to be put in.”

“We have to respect the fact that by statute the embargo is still in place,” Pritzker said, but that “commercial engagement can change the diplomatic relations between our two countries.” And, she added, “the president is encouraging us to go.”

Gabriela Martinez contributed to this report.

Joshua Partlow is The Post’s bureau chief in Mexico. He has served previously as the bureau chief in Kabul and as a correspondent in Brazil and Iraq.

Nick Miroff is a Latin America correspondent for The Post, roaming from the U.S.-Mexico borderlands to South America’s southern cone. He has been a staff writer since 2006.

 OLYMPUS DIGITAL CAMERA Manzana_Gomez-Interior,_Centro_Habana_-_April_2003Above two photos: Manzana de Gómez (Gómez Block), Parque Central, Havana’s first shopping mall, converted to apartments, probably on the way back to its original function.

Cuba, Havana Plaza Carlos III Shopping Mall

Plaza Carlos III Shopping Mall, Central Havana

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