Business Monday

Businesses on both sides of the Florida Straits get to know each other

In this March 22, 2013 file photo, miniature flags representing Cuba and the U.S. are displayed on the dash of an American classic car in Havana, Cuba.
In this March 22, 2013 file photo, miniature flags representing Cuba and the U.S. are displayed on the dash of an American classic car in Havana, Cuba. AP

Early on a recent Friday morning, four entrepreneurs visited the Greater Miami Chamber of Commerce to give a briefing on their business journeys. But the chamber breakfast in Miami, capital of Cuban exiles, was a bit unusual: All four were from Cuba, members of the island’s growing private business class.

One entrepreneur — Vanessa Pino, whose family business is selling brightly packaged sweets — even laid out a tray of her shortbread cookies among the breakfast offerings.

The visit was a first for the Miami chamber, said Barry Johnson, chamber president and chief executive.

Earlier that week, Guillermo Santa Cruz — a vice president with IMG, the global sports, management and media company — told an audience of tech entrepreneurs at the eMerge Americas conference in Miami Beach: “If you’re in business, you need a Cuba plan in the next six to 12 months. It will move that fast.”

President Barack Obama announced a rapprochement with Cuba just five months ago, on Dec. 17. Diplomatic relations still haven’t been reestablished, and there are still no established rules on the Cuban side for many of Obama’s initiatives to increase trade with the island’s small private sector. But there’s jockeying and movement on both sides of the Florida Straits as everyone from Cuba’s entrepreneurs to large American corporations try to get to know each other and scope out business opportunities.

Such activity would have been inconceivable a year ago when USAID subcontractor Alan Gross was still in a Cuban prison and U.S.-Cuba relations appeared solidly frozen. But “appeared” is the operative word: Since mid-2013, the United States and Cuba were involved in secret negotiations that led to the decision to renew diplomatic relations. Now even Gross, who came to Miami Beach on May 4 for a fundraiser for the New Cuba political action committee, has said he would like to return to Cuba and play a constructive role in building the relationship between the two countries.

At the recent Chamber breakfast, one goal was to develop a conversation with the Cubans about future opportunities with Miami-based businesses. Their trip was part of an entrepreneurial exchange organized by the Cuba Study Group — an organization that favors increased engagement with Cuba — and financed by the Knight Foundation. The Cubans had come to learn, visiting local businesses that corresponded to their interests.

For Pino, who runs Dulces Detalles (Sweet Details) in Havana, that meant visiting local bakeries. Victor Rodriguez, proprietor of Victor Bikinis, another Havana business, met with swimsuit designers. One gave him a big bag of materials, another coached him on how to get his suits into stores in the United States, and another helped him polish up his promotional materials with a photo shoot featuring professional models. Caridad Limonta, whose Guanabacoa-based company PROCLE makes women’s apparel and home goods such as bedspreads, and Rubén Valladares, proprietor of Adorgraf, a Havana firm that sells and prints promotional materials, also met with their local counterparts.

Niuris Higueras, who joined the group for some of its activities, runs Atelier, a popular Cuban fusion restaurant in Havana’s Vedado section. She has already felt the impact of the new U.S. opening: About 85 percent of her customers these days are Americans, she said. It just feels different, she said, than before Dec. 17.

Meanwhile, post-Dec. 17 also feels different for Miami attorney Richard Montes de Oca. Before, “an island only 90 miles away from Florida seemed like it was a million miles away,” he said. “But it’s getting closer.” Montes de Oca, who chairs the chamber’s international relations committee, said a possible chamber trade mission to Cuba is under discussion.

While many U.S. companies explore the niches they might occupy under the Obama’s administration limited opening toward Cuba, the big play for business won’t come for many others until the embargo is no longer in place. “The embargo has to be lifted and when it is, everyone will be there,” said Carnival Corp. Chief Executive Arnold Donald. “We can move pretty quickly.”

Some Cuban ports will need work to accommodate cruise ships, and Havana’s port is shallow so only smaller vessels will be able to call, Donald said. But he added, “There’s a huge pent-up demand. The reality is Cuba is an interesting place.” Because Cuba will be considered a new destination, he said, “it will bring in guests that might not choose the Caribbean as their first destination.”

Meanwhile, ferry companies champ at the bit to begin service between Florida and Cuba. Treasury’s Office of Foreign Assets Control recently gave out at least six licenses to companies that want to begin offering ferry service to Cuba. Now it’s up to the companies to negotiate port access with the Cubans. The U.S. Coast Guard also needs to inspect any port that will be used by ferries coming from the United States.

José Ramón Cabañas, chief of the Cuban Interests Section in Washington, suggested earlier this month that cruise ships home-ported in the United States might come to Cuba sooner rather than later. He noted that the OFAC license received by the potential ferry operators contained wording that might be interpreted to include other types of vessels. The licenses give permission “to provide carrier services by vessel to, from, or within Cuba in connection with travel or transportation between the United States and Cuba of persons, baggage, or cargo authorized pursuant to the Cuban Assets Control Regulations.”

To date, the opening is most evident in the hospitality industry as American visitors crowd the streets of Havana.

A recent poll released by San Francisco-based Airbnb, which added Cuba to its destinations last month and is the most visible U.S. player in the market since the opening, and YouGov found that 30 percent of U.S. adults are planning or would consider a trip to Cuba in the next two years and the percentage was even higher among Hispanics (40 percent).

When Airbnb launched in Cuba, it listed some 1,000 Cuban homes that would host travelers. Now that number has doubled, and Cuba has become Airbnb’s most searched site in Latin America: More travelers are searching for Cuba accommodations than for Airbnb lodging in Rio de Janeiro, Buenos Aires or Mexico City, said Kay Kühne, Airbnb’s regional director for Latin America.

“They are creating value for Cubans and their company,” said Secretary of Commerce Penny Pritzker during a visit to Miami earlier this month. She also praised Airbnb President Brian Chesky for helping Cuba’s “entrepreneurial ecosystem.”

Airbnb wasn’t even founded when Caterpillar, the Peoria-based manufacturer of mining, construction and other industrial equipment, first began calling for a new policy toward Cuba in 1998 after Pope John Paul II’s visit to the island seemed to indicate change might be afoot. “We were wrong,” said Bill Lane, Caterpillar’s director of global government affairs.

But Caterpillar persevered, and it is now among the U.S. manufacturing companies testing the waters in Cuba. During a recent trip to the island, “we found there was a lot more demand for American products than we expected,” Lane said.

New U.S. rules allow the export of U.S. telecom equipment, construction materials to build private structures and the export of products destined for private entrepreneurs as well as U.S. importation of a limited number of products produced by Cuba’s cuentapropista or self-employed sector. But it will be up to the Cuban government to decide how fast the opening will go and whether it wants to facilitate such commerce.

Because the state controls the economy, Cuba’s commercial and financial system isn’t really set up for U.S. trade with private individuals or cooperatives. “Cuba will become a much more robust market if they make changes. Now that we’re trying engagement, let’s see what happens,” Lane said.

“You actually need the Cubans to want you to come in and do business,” said Yosbel Ibarra, co-chairman of Greenberg Traurig’s Latin American and Iberian practice. He said it appears Cuba does want to engage with U.S. companies — even though it is moving at “an incredibly slow, measured pace.”

Some Cuban watchers say part of the problem is that Cuba is overwhelmed by all the delegations that want to visit and lacks capacity to deal with all the changes necessary to mesh with the business opportunities opened up by a new relationship with the United States. “The physical and legal infrastructure doesn’t exist yet in Cuba,” said Peter Quinter, a lawyer with GrayRobinson.

The embargo also puts a brake on U.S. investment and most major business opportunities. Companies in industries still blocked from entering Cuba might want to engage in philanthropic work in Cuba to build brand recognition for the future, Lane said.

That seems to be the path taken by some business executives in Miami who support an 80-hour training program, called Cuba Emprende, that’s run by the Catholic Church in Cuba. The program teaches management skills, the entrepreneurial spirit and best business practices. Among its graduates are the Cubans who visited Greater Miami Chamber of Commerce as part of the entrepreneurial exchange.

Limonta, for example, learned how to develop a business plan and has registered her PROCLE name and trademark. Now the women’s apparel, beach bags and household goods she makes are sold in state dollar stores, local markets and a few hotels.

All the Cubans taking part in the exchange came to Miami armed with their business cards and eager to soak in new practices and techniques that could be incorporated in their ventures. Their businesses also are bigger and more successful than most ventures started by Cuba’s nearly half-million cuentapropistas. The hope is that these meetings will lead to more permanent contacts with Miami entrepreneurs, said Tomas Bilbao, executive director of the Cuban Study Group.

For example, Higueras, the restaurant proprietor, was making her eighth trip to the United States. On a similar exchange last year, she visited Miami restaurants to discuss spices and flavoring, sourcing of supplies, and how to run a restaurant in a competitive environment.

When Rodriguez, of Victor’s Bikinis, started working in Cuba’s private sector, he started very small. The former mathematics professor lost his job in 1997 during the economic crisis known as the Special Period. He started as an assistant at a booth at a market set up in Havana’s Cathedral Square and then got his own license as an artisan.

After selling cheap goods made by others, he decided to launch his own product line: crocheted bathing suits. But the fiber he was using didn’t hold up to the water, and his stitch technique meant the suits were too transparent for most women’s taste. He went on to solve both problems and now has a network of 50 women who make his bikinis, one-piece suits and beach cover-ups. Now he has even bigger dreams: He’d like to sell his products in beach boutiques and stores in Florida.

Valladares began his printing business as a home-based operation with his wife three years ago. By reinvesting his profits and winning contracts with state entities and private clients, the business has grown to the point that it employs 50 people.

He chafes at the term “self-employed” and thinks Cuba’s budding entrepreneurs should be called “private workers.”

“We’re giving opportunities to many people to earn a better, more dignified salary, and that makes us feel good,” Valladares said.

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