State leaders in U.S. in rush to set up Cuban trade deals

WASHINGTON — The U.S. trade embargo on Cuba remains in place, but the re-establishment of diplomatic relations between the two nations has spurred a steady stream of state and local officials to visit the island nation in search of economic opportunity.

Democratic Gov. Andrew Cuomo of New York was the first state chief executive, in April, to visit Cuba after President Barack Obama announced plans to ease relations with Cuba. Atlanta Mayor Kasim Reed, a Democrat, went in June and Republican Gov. Asa Hutchinson of Arkansas went in September. A group of Iowa legislators and businessmen plan to go in December. Democratic Gov. Terry McAuliffe of Virginia hosted Jose Cabanas, Cuba’s ambassador to the U.S., in September, as well.

Though states may be eager for the end of the embargo, it’s not clear when Washington will lift the 50-year-old policy and allow free trade between the two nations. In the meantime, there are limits on what products American businesses can ship to Cuba, mainly just food and medicine, and how Cubans can pay for them.

Cuba’s Communist government also insists on having control over most of the business transacted on the island. That tight grip, along with Cuba’s infrastructure problems, will create problems for U.S. businesses even after the embargo is lifted.

Critics say many trade missions are overhyped boondoggles that rarely produce the economic activity promised, let alone concrete business agreements. But most of the trips are to countries that already have well-established diplomatic and business relationships with Americans. Cuba is a largely untouched frontier, and state and local officials are eager to be the first to cultivate it.

Hutchinson, who traveled to Cuba last month with Arkansas rice and poultry producers, said it would take time for the initial contacts to bear fruit.

“I see opportunities, but what underscores that opportunity is a requirement for patience,” Hutchinson told reporters. “For 50 years they’ve had their economy stymied and they’ve been isolated from technology. It’s going to take some time for them to adjust to new opportunities in the marketplace.”

The trip was paid for by Arkansas’ Republican Party, rather than state taxpayers.

Legislators in Iowa are also hoping to meet with Cuban officials, something Democratic state Sen. Steven Sodders said would make a big difference once the embargo is lifted.

“Every friendship you make up front, you have a better chance that they’ll work with you over New York or California. That’s the benefit of getting Iowa in first,” Sodders said.

Cuomo took about 20 business leaders to Cuba in April, including representatives from MasterCard Inc. and Pfizer Inc., but the biggest deal announced from the trip was between JetBlue Airways Corp. and Cuba Travel Services. The companies agreed to offer chartered flights from New York to Havana.

If the U.S. does open up trade with Cuba, there appears to be room for growth, at least in agriculture. According to the Congressional Research Service, agricultural exports to Cuba, which were worth $365 million from 2012 to 2014, might expand to match exports to the Dominican Republic, which took in $1 billion in U.S. agricultural products over the same period.

But politicians in some states aren’t rushing to shake the hands of Cuban officials. Many members of Florida’s Cuban immigrant population oppose ties to the Castro regime. The state’s governor, Republican Rick Scott, said closer economic ties to Cuba would only allow it to compete with Florida in selling agricultural products — like sugar, citrus and tropical fruit — while helping to fund an oppressive government. Republican Gov. Scott Walker of Wisconsin has expressed similar views.

Current U.S. regulations require U.S. businesses exporting food and medicine to Cuba to receive full payment up front, rather than extending credit to buyers. The Cuban government almost always insists on being the majority owner of any major business on the island, which includes doing the hiring, said Jose Azel of the Institute for Cuban and Cuban-American Studies at the University of Miami.

Lifting the embargo won’t change everything immediately, Azel said. He pointed out that non-U.S. companies have been trading with Cuba while the embargo was in place, but the economy of the country has changed little.

“People look at Cuba and say, ‘They have nothing; they need everything.’ But need alone does not make a market. You have to have money,” said Azel, a Cuban exile. “Cuba cannot buy from anyone because they are bankrupt. There are 190 other nations that Cuba has been able to buy from that make great products — and cheaper — but they’re not buying them because they don’t have the money.”