A New Frontier: Cuban market intrigues businesses, but future remains hazy

Fidel Castro, former president of Cuba and one of the century’s most controversial leaders, passed away on Nov. 25, 2016 at the age of 90. Castro’s death is one of a series of significant events over the last two years that have left people questioning what the future for Cuba looks like and how the country’s relationship with the United States will evolve.

At this pivotal time in history, the Salt Lake Chamber and World Trade Center Utah are preparing to take a group of Utah business leaders to Cuba for a fact-finding mission in May. While the trade embargo imposed by the United States against Cuba is still in place, this trip will help Utah businesses position themselves as trade restrictions ease.

The history

Historically, the relationship between the United States and Cuba has been complicated. At the conclusion of the Spanish-American War, the United States gained control of Cuba. In 1902, Cuba was granted formal independence from the United States, but with stipulations. In an effort to maintain U.S. influence in the region, the Platt Amendment allowed the U.S. to intervene in Cuban affairs and prevented Cuba from acquiring foreign debt or selling land to other countries.

To improve relationships between the U.S. and Latin American countries, President Roosevelt rescinded the Platt Amendment more than 30 years after it was instated. Over the next several decades there was little political stability in Cuba. In 1959, revolutionary leader Fidel Castro successfully overthrew the president of Cuba and took control of the country, establishing a socialist state.

The United States government was initially open minded to Castro’s leadership, hoping he might bring democracy to Latin America. However, after Castro legalized the Communist party and executed hundreds of Cubans who opposed his regime, the U.S. broke off diplomatic ties. During this time, Castro formed a close relationship with the Soviet Union and began to accept subsidies from the fellow communist nation.

Seeing Soviet alliance with Cuba as a threat, President Kennedy attempted to overthrow Castro through an invasion at the Bay of Pigs. This effort failed and worsened the already tense relationship. In 1962, the United States placed the embargo on Cuba that restricted travel and trade. This embargo, which remains in place today, severely hurt the Cuban economy and caused increased feelings of animosity toward the United States.

The Castro regime led to an influx of Cuban immigrants to the United States. These Cubans traveled across the ocean in often dangerous circumstances to escape oppression and persecution.  Since Castro took power, the number of Cuban Americans has grown from an estimated 125,000 people to about 2 million. There is a strong anti-Castro feeling among Cuban Americans, and many have mixed feelings about engaging with Cuba under its current administration.

The economic embargo on Cuba has forced American businesses to watch from the sidelines for more than 50 years as other countries traded with Cuba. A mere 90 miles from the United States, Cuba has been heralded by U.S. businesses as the last great frontier.

Looking forward

In recent years, the icy relationship between the United States and Cuba started to thaw. In Dec. 2014 President Barack Obama and Cuban President Raúl Castro, who took over for Fidel more than eight years ago, announced the restoration of full diplomatic ties between the U.S. and Cuba, including the reopening of embassies. Since that time travel restrictions have been eased, bilateral cooperation in the science and arts has increased, and Obama visited the island nation—the first president to do so in almost 90 years.

In the midst of this trajectory change for the Cuba/U.S. relationship, the death of Fidel Castro and election of Donald Trump have caused a new wave of unknowns. Some people believe the death of Fidel Castro will open up the door for significant political reform in Cuba, while others predict Castro’s death will create a nostalgic desire to return to socialist roots.

President Trump has said he is open to continuing discussions with Cuba, but insists the country will have to make changes before the U.S. is willing to make concessions. He wrote on Twitter, “if Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate deal.”

Reversing the progress Obama has made with Cuba would not be a simple task, but it is possible. Most of the changes made by Obama were done through executive action, so it is within the power of Trump to reverse the policies. Whether Trump will do so remains to be seen, since airlines and tourism-related businesses have already made significant investments in Cuba.

Preparing for change

No one knows when the trade embargo will be lifted, but it is important for businesses to be ready to jump on opportunities as soon as they become available. The exploratory trip to Cuba May 3-10 led by the Salt Lake Chamber and World Trade Center Utah is a great opportunity to explore Cuba’s business environment and culture. U.S. businesses that enter the Cuban market first will have a competitive advantage. When there are so many unknowns in the equation, preparation and positioning will be crucial to success.

Worldview-Derek-MillerDerek B. Miller is president and CEO of World Trade Center Utah, an organization dedicated to helping Utah companies think, act and succeed globally.