President Barack Obama on Sunday will be the first U.S. commander-in-chief to visit Cuba in 90 years, opening the way for stronger trade ties with a longtime Cold War rival.
American businesses are preparing for the possibility of gaining new customers in a country of more than 11 million people, the largest in the Caribbean ahead of Haiti, the Dominican Republic and Puerto Rico.
“Cuba is open for business,” said Richard Feinberg, a senior fellow at the Brookings Institution who spoke Thursday at the 2nd Cuba Opportunity Summit in New York
. He said the country has taken steps to resolve past impediments to the lifting of the U.S. embargo, including negotiating debts owed by Cuba’s pre-1959 government and resolving 6,000 claims by people whose property was confiscated during the Cuban Revolution.
He also warned that Cuba’s communist government, which has held power for more than 50 years, will proceed gradually and deliberately in broadening trade ties with the U.S.
“There is a strong commitment to sticking with their way of life,” he said. That’s especially true among older generations who fear change, in contrast with entrepreneurial millennials who are less risk-averse, he said.
U.S. businesses seeking to do business in Cuba can expect to confront major regulatory hurdles that limit the scope of their activity, said Alex Lee, deputy assistant secretary for South America and Cuba at the U.S. State Department.
Companies have to work through Cuba’s state agencies to hire local employees, who can receive salaries from American companies. He said the State Department is working to get the 10 percent levy on the U.S. dollar removed to make foreign exchange transactions less cumbersome to U.S. companies.
Americans also need to understand that Cubans have very limited purchasing power, with an average household income of $1,800 to $2,000 a year, according to data presented at the conference by Marguerite Fitzgerald of the Boston Consulting Group.
She said Obama’s trip to Cuba is significant in opening up the country to U.S. businesses and the possible lifting of the trade embargo, which requires an act of Congress. Critics of the Cuban government want to see a stronger commitment to respecting human rights, she said.
The travel industry is among the pioneers in bringing U.S. citizens to Cuba on vacation, although the country is constrained by its inventory of 60,000 hotel rooms, said Ebbie Lubbers, CEO of the Cuba Travel Network. By comparison, Las Vegas has about 168,000 hotel rooms and Orlando has 121,000, according to USAToday
Cuba also needs upgrades to its ports and other infrastructure, said Frank Del Rio, president and CEO of Norwegian Cruise Lines Holdings Ltd.
He was born in Cuba and left with his family at age seven in 1962. He said he eagerly awaits the possibility of bringing the company’s first cruise ship into Havana Harbor by the end of this year.
Carlos Gutierrez, the former U.S. Commerce Secretary appointed by President George W. Bush and a native Cuban, said he recognizes that Cuba’s gradual liberalization may be frustratingly slow for U.S. businesspeople confronted with major regulatory hurdles, but change is coming.
“We can’t let this opportunity go by,” he said in an interview with CNBC’s senior international correspondent Michelle Caruso-Cabrera.
About 200 people attended the Cuba conference at the Nasdaq headquarters in New York.
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