Crowley's Jay Brickman has been visiting Cuba since 1978

Cuba's promise is tomorrow, and the path to success unclear

Florida International University economics professor Jorge Salazar-Carrillo has been a Cuba-watcher for decades, and after his opening assessment at WorldCity’s Global Connections gathering, fellow panelist Jay Brickman said, “We have a different perception of what’s going on, though we agree it’s in very bad shape.”

Brickman is vice president of Government Services for Crowley Maritime, which has been exporting frozen chicken and other permitted items since the loosening earlier this century of the U.S. embargo that went into place in the early 1960s. He has been visiting the island since the late 1970s, and now goes there three to four times per year.

Salazar-Carrillo is a longtime Cuba watcher

Brickman and Salazar-Carrillo were joined on the Cuba-focused panel by attorney Raul Valdes-Fauli, a partner in the law firm Fowler Rodriguez Valdes-Fauli. The focus of the Global Connections event, held Nov. 18, was doing business in Cuba — what could be expected and how it could be done at that time when the U.S. businesses were once again permitted to do business there.

Global Connections is sponsored by FIU’s Chapman Graduate School of Business and Discovery Networks, Latin America / U.S. Hispanic.

Salazar-Carrillo, who told participants he had agitated in the 1950s against Fulgencio Batista, the dictator and president before Fidel Castro became dictator and president a half century ago, called the Cuba of today “a basket case.”

He compared the current economic swoon to two previous ones — the first in the early 1960s, after the United States put the embargo in place, and the second, in late 1980s and early 1990s, when the Soviet Union fell apart and quit propping up the island’s economy.

This one, he said, is not as bad as when the Soviet Union collapsed, and quit buying sugar at vastly elevated rates, but is worse than when the U.S. embargo went into effect.

The big problem today is that the price of nickel, a key component in steel, has fallen after soaring in 2008 like a number of other commodities. Nickel has replaced sugar as Cuba’s leading export. “Nickel prices are about a third of their peak level,” he said.

“Cuba is very conscious they have a problem,” Crowley’s Brickman said. They have begun to sharpen their pencil. Cuba trades with the whole world. Cubans are used to dealing with the whole world. The new question: How do we get the best possible prices for Cuba?”

There are longer-term problems for Cuba, as well, Brickman said.

For starters, much of the transportation infrastructure required to handle increased imports as well as exports is at least 50 years old.

“Can trade increase? Yes. Will it increase significantly? Yes. Will it happen overnight? No.”

U.S.-Cuba trade, almost exclusively U.S. exports to the island because of the embargo, hit a record $717.91 million in 2008, up from $447.32 million the previous year and a mere $7.1 million in 2001, the year before changes in U.S. restrictions took effect. Cuba, in 2008, ranked as the United States’ No. 85-ranked trade partner, according to WorldCity analysis of U.S. Census data.

Brickman, in an earlier interview, predicted U.S.-Cuba trade could top that of Costa Rica, which ranked in the Top 50 in 2008, with almost $10 billion in two-way trade.

The Port of Havana can handle about 300,000 “TEUs” per year, he said, referring to a standard measure in the container industry that stands for 20-foot equivalent units. Most trucks on the roads today are carrying 40-foot containers. The Port of Miami and Port Everglades each handle about 800,000 to 1 million TEUs per year.

If all Americans were allowed to travel to the island and not just those of Cuban descent, currently a topic of discussion in the Congress, as many as 1 million Americans might want to go to the island. “Can Cuba handle an additional influx of tourists? I think it would be very difficult. They can barely handle it now.”

Cuba is additionally handicapped by having a quality of service lower than many Americans find acceptable, and the island’s repeat trip ratio is among the lowest in the world.

Valdes-Fauli compared the embargo, and the U.S. handling of it, to dandruff

What business will look like when the U.S. embargo is looking like is, indeed, difficult to know for sure, but the companies doing business there today from other parts of the world provide some clues, according to Valdes-Fauli, the attorney.

He cited a number of examples, from a Canadian bicycle manufacturer that entered into a joint venture on the island to a Spanish company in a joint venture building housing for non-Cubans. Another Canadian company fixes diesel engines, particularly for the sugar industry. Some have failed, some have managed to succeed.

While there are laws on the books related to repatriation of profits and intellectual property protections, for example, “It’s a very arbitrary system,” Valdes-Fauli said. “A very bureaucratic system.

“With Fidel disappearing, Raul or his successors will see a reason to charge,” Valdes-Fauli said. “It’s incredibly cumbersome to go through the system. Every bureaucrat has to make himself an essential part of the system.”

He then compared the embargo itself to dandruff. “If you have dandruff for 50 years and you don’t change shampoo, either you’re an idiot or you like dandruff.”

Brickman, representing Crowley, suggested that while it might be counter-intuitive, there are many people who are served by having the embargo in place. For example, other Caribbean islands would prefer not to have to compete with Cuba.

For his part, Salazar-Carrillo, the FIU professor, thinks that while lifting the embargo would have no impact that the United States is on solid ground. “The embargo is a statement of principle. The United States is a country of principles.”