Keys to Business between the United States and Cuba
Before the U.S. Sprint Company signed an agreement with the Cuban ETECSA, the cellphones of its clients who traveled to Cuba were only good for taking pictures and checking the time. But after the joint establishment of the roaming service, in November 2015, a new symbolic situation was established: the sensation of isolation when touching Cuban soil is no longer that big.
The president of Sprint, Bolivian Marcelo Claure, wanted to be the pioneer in the field of joint telecommunication ventures and “rob the takeoff,” as is said in athletics, after President Obama relaxed the measures to establish business deals with Cuba.
Minutes before signing the agreement in a crowded and hot room of the Havana International Trade Fair, Claure confessed to the journalists present there that the negotiations had taken place “surprisingly fast.”
“At the beginning I thought, ‘My God, it’s the Cuban government, the negotiations are going to be slow’…but I was surprised and we signed an agreement in record time,” he affirmed.
David Seleski also likes the adrenalin of races in the world of business. That’s why he did not doubt in taking risks with his bank (Stonegate Bank) where others are more cautious.
First, it was the only U.S. banking institution that accepted taking over the accounts of the then still Cuban Interests Section in the United States (after 15 months of interrupted consular services, since no bank wanted to expose itself to the government sanctions for moving “Cuban money”), and in 2016 it was able to be the first bank authorized by the Treasury Department’s Office of Foreign Assets Control (OFAC) to operate directly with Cuba.
“The process was not difficult and the negotiations were fair and cordial. Things moved rapidly. I’m very satisfied with the relations, it is a veritable association where each party respects the perspective of the other,” Seleski told OnCuba.
“I think that the biggest obstacle we faced were the many points that had to be worked in person, which meant a great deal of trips. Fortunately, the travel experience will improve with the commercial flights,” he said from his office in Pompano Beach, Florida.
Sprint and Stonegate Bank are two of the few U.S. companies that have been able to establish businesses with Cuba, after more than 50 years of prohibition and under the pressure of a commercial and financial embargo against the island, which is still in force. In a few months, these “standard bearers” have been joined by major corporations like Carnival Cruises, AT&T, Verizon, the Starwood hotel company and the American Airlines, JetBlue and Delta airlines, together with other actors of similar caliber.
The opportunity to seal a commercial agreement between actors of the two countries depends on a great many factors, but it seems two of them are fundamental: the political will in the two countries to accept proposals and the willingness to be creative, f lexible and patient to find solutions.
In 2015 the AirBnB online reservations company was an example of creativity. With a license to facilitate the accommodations for U.S. citizens in private homes in Cuba, the San Francisco-based company found two solutions to the biggest problems to provide an effective service: the low connectivity to Internet on the island and the difficulties to make direct payments.
The landlords and landladies in Cuba smoothed the way by subcontracting a person with access to the Internet to manage at the same time the reservations and confirmations of several hostels, while the Californian company sends the payment to the lessors through a private remittance agency from Miami.
The business has proliferated so much that the number of registrations of Cuban hostels on the collaborative web continues growing and the operation license was expanded until it allowed for any traveler in the world to be able to reserve a room in Cuba
through AirBnB. The Cuban government, meanwhile, has not objected to this system, despite the fact that strictly speaking it has gaps, according to the domestic legislation (especially regarding the payment from the United States). It’s simply a win/ win operation.
BUREAUCRACY: A TRUE RISK
Saul Berenthal is Cuban by birth, but together with a partner he has proposed one of the most favorable synergies for commercial relations between Cuba and the United States: manufacturing relatively cheap tractors for farmers in Cuba.
The idea was well-received in Havana, to the point that it has been the first U.S. company to get authorization to present an installation dossier in the Mariel Special Development Zone, a planned industrial hub that is barely taking its first steps.
But this happened only after more than a year of negotiations with the two governments. Berenthal and his company, Cleber LLC, have gotten a license to export already-assembled equipment to Cuba, and not by pieces to assemble on the island as was his aspiration.
“There’s bureaucracy in the United States as well as in Cuba,” said Berenthal in an interview for a Spanish digital media, “which is why one must understand, know how to endure and adapt to the Cuban commercial culture; on the island the bureaucracy is more formal than in the United States, where it is more used at the service of business and of businesspeople; on the island, on the other hand, the agencies are more directed at carrying out the process and not necessarily to provide service to the entrepreneur.”
The Illinois-based company had to hire a team of lawyers on the archipelago and another in the United States to handle the details of the processes in each place. According to Berenthal, the governments of the two countries apply “a very intense scrutiny to the process so that all the details are correctly carried out.”
Others who have had to put on wait their eagerness are the representatives of the ferry companies that, after the re-launching of relations on December 17, 2014, had expected to be sailing f luidly by the close of 2016.
The Office of Foreign Assets Control (OFAC) has already issued six licenses to U.S. companies to operate port movements in the south of the United State to Havana. But, on the Cuban side, the response has been that the port infrastructure is not ready to receive direct trips. The founder of one of the authorized companies, United Caribbean Lines, told the press that the Cubans had decided on other infrastructure projects they had to do first.
Meanwhile, Joseph J. Hinson, managing partner of another of the shipping lines with a license (Baja Ferries), commented that they were expecting that at some time in the near future they will have the opportunity of meeting with the Cuban authorities to understand their needs.
Hinson affirms that his company has made known to the island’s authorities its “sincere interest” in this project. But, as he said, the Cuban authorities are still not ready to hold discussions regarding the possible opportunities of the ferry service from the south of Florida to Cuba.
SOMETHING IS ALSO BREWING IN OFAC
While some of the principal officials of OFAC travel to Havana to transmit a new attitude of the U. S. administration toward the rapprochement, officials of the same organization continue applying sanctions against companies and individuals associated to Cuba.
In early September 2016 it was announced that Anthony J. Fox, an active promoter of relations between the United States and Cuba, had been fined 100,000 USD. The measure, according to the trial documents, was for supposed violations of the travel regulations between 2010 and 2011. For OFAC, Fox did not meet the requirements about hotel reservations and payments to Cuba.
A few days later it was known that the Spanish Santander Bank had refused to handle the Caribbean nation’s financial transactions under the risk of receiving sanctions by the United States.
The banking institution thus joined a list of similar actions that, according to the Cuban government, included between 2015 and 2016 the Society for Worldwide Interbank Financial Telecommunication, the Bank of Bahamas, the Royal Bank of Canada, the Mitsui Sumitomo SMBC of Japan and the Spanish Caixa Bank. A total of almost 50 fines were imposed during Obama’s two terms (2009-2016) for violating the regulations against Cuba and other countries, and their accumulated value amounts to some 15 billion dollars.
In all the cases, they are measures applied for “violations” committed before the reestablishment of diplomatic relations,
given that OFAC adduces that the faults they sanction are not prescribed. It is evident that in the world of business any step taken is thought out cautiously or simply problems are avoided by refusing to deal with Cuba.
According to U.S. officials, this extreme caution (unnecessary, supposedly, in view of the Obama administration’s recent relaxing of measures) happens to a great extent because the companies from one or the other side are not completely familiarized with the content of the regulations in force. And although the U.S. authorities are increasingly boosting what they call “education actions” and promoting the “regulation talks” (to clearly understand their Cuban government peers), the permanence of sanctions can put a break to the enthusiasm.
Although, of course, the audacious are always the ones who break the inertia.