LatinFinance / March 2006
By Larry Luxner
The opportunities offered by Cuba's vast consumer market are looking increasingly attractive for neighbors in the Caribbean who need to weigh the potential benefit of trade with the island against possible US sanctions.
Despite talk about regional and economic integration, the English-speaking Caribbean until recently had little to do with the biggest Caribbean island of all: Cuba.
But that's changing as Jamaica and Trinidad & Tobago shed their fear of U.S. retribution and deepen ties with the Castro regime; and as former British colonies from Belize in the west to Guyana in the east are lured by the promise of Cuban doctors in exchange for better relations.
Also strengthening ties with Cuba are the nearby Dominican Republic and French-speaking Haiti, where - despite kidnappings and violence - over 700 Cuban physicians have remained to bring health care to some of the most desperately poor people in the Western Hemisphere.
"We cannot afford to anger our big neighbor and benefactor, the United States," said Raymond Joseph, Haiti's ambassador in Washington. "But at the same time, we wonder whether the Cuban people should still be suffering for the sins of Mr. Castro."
Compared to Haiti, Cuba is a wealthy country. In fact, the Castro government claims that Cuba enjoyed 11.8% economic growth last year and will see a 10% rise in 2006, although its methodology for calculating GDP growth is based on a local formula yet to be accepted by any global organization.
Still, it's clear that Cuba has emerged from its "special period" of austerity imposed after the collapse of Soviet subsidies in the early 1990s. Since then, the island has moved away from sugar as its main export, with tourism, medical services, nickel, family remittances and pharmaceuticals now accounting for most of its foreign-exchange earnings.
Kept afloat with cheap Venezuelan oil and Chinese credits, the Cuban economy is no longer in a disastrous state. In fact, a record 2.5 million tourists are expected to visit the island this year, bringing in well over $2 billion.
Two Jamaican hotel conglomerates, SuperClubs and Sandals, already manage a number of all-inclusive resorts throughout Cuba, and a Bahamian company, John Bull Ltd., operates luxury retail shops in Havana and Varadero.
Cuba's strongest economic partner in the Caribbean appears to be the twin-island republic of Trinidad & Tobago.
In late November, Trinidad's House of Representatives passed a bill to improve trade relations with Cuba, which already enjoys associate member status within the 15-member Caribbean Community (Caricom). And in early February, Jerry Narace - Trinidad's ambassador to Cuba - declared his country would open a Havana trade and investment office within the next six months to promote bilateral commerce.
At the moment, trade between Cuba and Trinidad is negligible. In 2004, according to Trinidadian government statistics, the country's exports to Cuba came to TT$109.8 million ($17.4 million), almost all of which was ammonia and other petrochemicals. That represented just 0.26% of Trinidad's worldwide exports by value. Trinidad's imports from Cuba that year were even lower, at TT$12.1 million ($1.9 million), and consisted mainly of cigars and corrugated paper products.
Natasha Mustapha, CEO of the Trinidad & Tobago Manufacturers Association, says that while the challenges are numerous, so are the possibilities.
"What is difficult for us to understand is Cuba's way of doing business. It's not what we are accustomed to. It's a bit of a cultural shift for us. Cuba is still a communist state, you need a license to import everything and all that is controlled by the government," she said.
In addition, Trinidadian companies face repercussions from the United States for trading with Cuba under the Helms-Burton Act.
"Local [Trinidadian] companies have to decide which is more important," said Mustapha. "As long as the embargo is in place, if they're trading with the U.S., they can't trade with Cuba. If they do, they could lose their American business, including the shipment of raw materials and exports. It's sort of a double-edged sword."
That's led Trinidadian opposition leaders like Basdeo Panday to question Prime Minister Patrick Manning's open embrace of Fidel Castro.
"What is going to happen to our businessmen? Do they know the consequences of trading?" Panday recently asked, warning that it's illegal for companies that import raw materials from Cuba to ship them to the United States. "Third countries are forbidden to export goods to the U.S. if [the goods] contain Cuban material. I'm sure the business community is not aware of this."
An executive at a leading Trinidadian manufacturer of disposable diapers and sanitary napkins that exports 90% of its production to nearby Caribbean countries like Belize and Jamaica says that Cuba is the ultimate prize in the geographic region. Asking not to be named for fear of trade repercussions in the U.S., the executive said that every major company in the region is hoping to sell to Cuba because with a population of 11 million consumers, the island is the biggest consumer market in the Caribbean. He cautioned, though, that these companies might be chasing a white elephant. "To say there's demand is a lie," he asserted, "because demand has to be backed by money."
That's where Trinidad's largest financial institution, Republic Bank Ltd., comes in.
With a local portfolio of around $30 million, Republic is one of several foreign banks that currently maintain representative offices in Havana; others include Netherlands Caribbean Bank N.V. of Curaçao, Spain's Banco Bilbao Vizcaya (BBV) and Banco Industrial de Venezuela.
Says Lyndon Guiseppi, managing director of Trinidad's RBTT Merchant Bank Ltd.: "Through our corporate division, we've been doing trade financing in Cuba, a place where we see tremendous opportunity. We're very comfortable doing business there."
Not everyone is quite so candid.
"We conduct our dealings as any bank would from a credit standpoint," said one Caribbean-based banker who asked that neither he nor his institution be identified in this article for fear of provoking overzealous U.S. Treasury officials. "Our office in Havana offers trade finance lines, which we extend to Cuban government entities. We're looking to see if we could possibly establish facilities for foreign investors."
He added: "The buying potential is certainly there, so we don't have a problem with Cuba's ability to purchase. We also have financing arrangements in place that Cuban companies can benefit from. We take the risk away from suppliers by financing them up front, and then getting paid directly by the Cuban companies afterward."
How quickly this particular bank collects its debts from the Cubans depends on the nature of the companies themselves. "We deal mainly with [Cuban state-owned retail conglomerate] Cimex and [state telecom monopoly] Etecsa," said the official. "We have stayed away from smaller companies."