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American businesses eye Cuban opportunities – Part 3

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    Many U.S. businesses have long wanted to extend their reach inside of the communist island nation.

    Joining me now to talk about which industries would be most affected if there was an embargo lift is Wall Street Journal deputy business editor Marcelo Prince.

    Thanks for joining me.

    So, well, who is in line? Who is waiting in the wings?

  • MARCELO PRINCE, The Wall Street Journal:

    Well, there's plenty of U.S. businesses looking to get in, from the airlines to Caterpillar, which wants to open up a dealership on the country.

    But there are some limitations. This is a market that has been off-limits to American businesses, but it's still a centrally run, state-run economy, which is strapped for cash, and plays by its own rules, which currently foreign businesses in the country have to work with joint venture partners with Cuban firms, which limits who they can hire and how they can operate.

    And it's also worth remembering that Cuba is a relatively poor country by international standards. Most of the citizens still work for the government. There isn't much in the way of spending power there. And, thirdly, it's untapped — it's not an untapped market. There's plenty of foreign companies. There is a Spanish hotel chain called Melia that has resorts around the country.

    There's a Canadian mining company called Sherritt that's been there for 20 years. There's a British tobacco company that already has a deal to distribute Cuban tobacco around the world. So, while there's an opportunity for American businesses, it is not an untapped business.


    Right. If this is not that virgin territory, if this not a green field, if there is international competition already there, what is the business opportunity for hotel chains or casinos to be so excited about?


    Well, I think that they see tourism, which is now Cuba's biggest economy, part of the economy now, as one area that they could tap into.

    If you go on a Carnival Cruise today, it just sails around the island, then goes to Jamaica or Mexico. There are Canadian cruises that stop on the island. The airlines — like, American Airlines flies chartered flights to the country, but they see an opportunity to resume the kind of travel that existed before the Castro regime took over.

    There is opportunity, also, for agriculture companies. An interesting fact is that Cubans consume about 110 pounds of rice a year, which is five times what Americans eat, despite rationing in that country. And so rice farmers and others see an opportunity. Even with the small restrictions that were lifted, the agriculture industry could benefit, because they buyers may not have to — buyers may not have to prepay them, for example, for them to ship goods to the country.


    So, you mentioned spending power earlier. Let's kind of unpack that a little bit. I mean, even with the 11 million people that are there, who can actually afford the Caterpillar bulldozer or even Coke and Pepsi, which aren't there right now?


    That's right.

    I mean, Coke, you bring up, is a great example. Coke exists — sells its product in every country on this planet except two. One is North Korea. The other one is Cuba. And the Cubans need — I'm sure they would enjoy to drink Coca-Cola, but what they really need are bricks to build their houses and tiles to put on roofs and asphalt to repave the roads.

    So, really, the opportunity is more of an infrastructure play. I mean, the best business you probably could open in Cuba if there was no embargo is a Home Depot, because that — there's plenty of labor and there's a great need. If you go outside of like the tourist areas, the infrastructure, the buildings are crumbling. There's no street lamps really.

    Telecommunications is another area that's been underfunded. There's a state-run telecom company, but Cuba basically lags much of the world in broadband penetration. There's fewer Internet connections than in places like Sudan or even a tiny island like Fiji.

    That's because the government has control of Internet access. There's basically one fiberoptic cable connecting Cuba to the world through Venezuela. But there's no 3G or 4G. So, companies like Verizon or AT&T see an opportunity there. They don't even have roaming agreements.

    If you travel to Cuba, whether you're a Cuban or a tourist, it's actually prohibitively expensive to make cell phone calls.



    So, what sort of businesses can open without much infrastructure being laid? Credit cards, for example?


    Sure. Yes, that's right.

    The one measure the government has taken is it will allow U.S.-issued credit cards to be used in the country. Previously, if you were traveling there, you either had to travel with a large amount of cash or you had to use a non-U.S. bank card. So that's one concrete step the White House has taken.

    They also say they're going to allow imports of residential goods, as well as services that are for small businesses, like for restaurants or barbershops, that sort of thing. So there is an opening there for that sort of service industry business.



    Marcelo Prince of The Wall Street Journal joining us from New York, thanks so much.


    Sure. Thanks for having me.

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