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Cuban deals

Cuban deals
Despite the , America exports plenty of goods to its erstwhile enemy
Aug 15th 2015 | CHICAGO | From the print edition

“WE LEARNED that the steps taken by Obama to re-engage with
Cuba have launched a bit of a global race […] to leave as little as
possible for American business when the restrictions are lifted
altogether.” Arne Sorenson, the boss of Marriott, a chain, sounded
frustrated after he returned from his first trip to Cuba last month.
American business is losing out, he says, because European and Latin
American companies can cater to the millions of American tourists who
are expected to to Cuba soon, whereas Marriott and other American
companies are still barred by law from doing business there.

Before the Cuban revolution in 1959, the island’s farm exports to
America amounted to $2.2 billion a year (at current commodity prices)
while American agricultural exports to Cuba stood at $600m, according to
the United States Department of . Cuba supplied its big
neighbour with molasses, cane sugar, tobacco and coffee. America shipped
, pork, lard and wheat flour across the Florida straits. The embargo
ended all imports from Cuba but, just as the United States traded with
the Soviet Union during the cold war, American farm products, some
pharmaceuticals and medical equipment can be bought on the island—for a

America is a big supplier of to Cuba (which imports 80% of what it
needs). By 2008 it was exporting $685m-worth of corn, soyabeans and
poultry to the island. Since then, that figure has declined; last year
food exports were only $286m, and this year is shaping up to be
especially disappointing. One reason is that Cuba is paying down its
debts to Russia, Japan and Mexico and so has less money to spend.
Another is Cuba’s decision to stop importing American poultry after an
outbreak of bird flu. And a third is that Cubans must pay American
exporters in cash because they are not allowed to give them credit,
which puts Americans at a disadvantage to exporters in other countries.
Mr Obama has helpfully redefined Cubans’ obligation to pay cash in
advance as “cash before transfer of title”, but it remains a cumbersome

Despite these discouragements, several companies are venturing into the
socialist paradise. As well as allowing more Americans to visit Cuba
without special permits and to send more remittances to relatives on the
island, Mr Obama’s administration has let telecoms firms as well as
banks take steps towards operating in Cuba. In February IDT, a telecoms
firm in New Jersey, said it had reached an agreement with Empresa de
Telecomunicaciones de Cuba, the national telecom provider, to exchange
long-distance traffic. (Other telecoms firms are likely to find
suspicion of the NSA an impediment to doing business.) In May banks felt
easier about doing business in Cuba when the State Department took it
off the list of state sponsors of terror. In July Stonegate, a
Florida-based bank, signed a correspondent banking agreement with Banco
Internacional de Comercio, a government-controlled Cuban bank.

For trade to return to anything like its pre-revolutionary ,
though, the embargo will have to go. According to a Pew poll published
on July 21st, 72% of Americans would like to end it. More surprisingly,
55% of conservative Republicans now agree, compared with just 40% in
January. Among Republican presidential hopefuls, Marco Rubio, Ted Cruz
and Jeb Bush (all with strong connections to Cuban exile groups in
Miami) want the embargo to stay. Hillary Clinton, who has a keen sense
of what voters want to hear, once backed the embargo (her husband Bill
signed the Helms-Burton Act, which toughened it, in 1996, though he
later regretted having done so). She now wants to scrap it.

America’s farmers look forward to that day. According to Parr Rosson of
Texas A&M , agricultural exports to Cuba could exceed $1
billion annually, which, he says, would create an extra 6,000 jobs in
America. Yet this will only happen if Cubans become a bit more
prosperous and if Raúl Castro’s government, which has done little to
make trade easier since the thaw in December, embraces commerce with the
old enemy (see article). Until then American hoteliers, and most of the
American business travellers they would like to profit from, will
continue to fret that they are missing out.

Source: Cuban deals | The Economist –

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