When will Starbucks pop up all over Cuba? Don't count on it

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Marco Werman: I’m Marco Werman and you’re tuned to The World. How do you reconnect with someone who’s been your enemy for more than 50 years? That is what American and Cuban officials started figuring out today in Havana. Their talks this week are aimed at putting into motion what President Obama announced last month--the restoration of full diplomatic relations between the US and Cuba for the first time since 1961. Already the president has made it easier for Americans to travel to the island, and last night he asked Congress to end the broader embargo on trade with Cuba. That is not likely to happen anytime soon though, and even if it did, trade won’t necessarily happen right away.

 

Jake Colvin: Turning off sanctions isn’t like turning on a spigot to foreign investment in trade.

 

Werman: That’s Jake Colvin with the National Foreign Trade Council.

 

Colvin: What’s going to matter at the end of the day is the reality on the ground in Cuba, the ability for Cubans to sustain foreign investments, for Cuba to pay for things they might want to trade for, and the attitudes and policies of the Cuban government. So, I think everyone needs to get out of their head scenes from The Godfather: Part II. Cuba is not going to turn into a mini Las Vegas or Reno. The government wants to manage the transition, so it’s going to be awhile before there’s a significant amount of additional trade.

 

Werman: They will try and manage the transition--it sounds like that could be a whole lot of red tape, a whole lot of bureaucracy.

 

Colvin: The important thing to keep in mind is that it takes two to tango. If you look at the free trade agreements that we’ve signed with other countries, they’re as much an expression of political will and friendship than they are about economics much of the time.

 

Werman: One thing I think a lot of Americans may forget is that while the US has made Cuba a no-go country for 50 years, much of the world has been trading with communist government--countries like Canada. Are there lessons for US businesses that could be drawn from how those countries manage to work through what’s often been a troubled Cuban bureaucracy.

 

Colvin: Cuba right now is a managed economy, there is a controlled amount of trade and investment that goes on in Cuba, mostly with Venezuela and Canada and a handful of other countries from around the world--Brazil just invested heavily in upgrading Cuba’s ports. The challenge for American companies will be, first of all, understanding that there are some sanctions in place and navigating those, making sure that they don’t get wrong-footed with US law. But then also building a relationship with the Cuban government and the Cuban people over time, since much of the business that is done is based on relationships, and navigating the Cuban bureaucracy as they seek to do business.

 

Werman: If you had to make a prediction, what do you think will be the first US business that will be successful in Cuba? Not necessarily the first one to get there, but the first successful business.

 

Colvin: For awhile, the largest export market for US rice was Cuba. It’s not anymore. But agriculture has had some success thanks to some of the sanctions that were rolled back about 14 years ago. If you look at where Canada has had some success for example, it’s in agricultural machinery and basic machinery that helps the economy run.

 

Werman: How strong is the trade relationship these days between Russia and Cuba? Because back in the day, it was all about sugar for oil.

 

Colvin: It doesn’t even show up in the list of the top 3 export partners or import partners from Cuba. It’s Venezuela, it’s Canada that shows up, it’s Brazil. They transition from being dependent on Russia in the late “˜80s and early “˜90s to being dependent on Venezuela. now, Venezuela is going through their own challenges right now economically and politically. My sense is part of the calculation for the Cuban government was “We’re not going to be able to rely on Venezuela. We need to hedge our bets,” and that’s why, I think in part, they wanted to reconnect with the United States.

 

Werman: Finally, how concerned are you that the furniture of globalization, the big box stores, the Walmarts, the McDonalds, will kind of all settle in Cuba much sooner than we might think?

 

Colvin: I know there’s this concern among those that have a nostalgia for what Cuba is or was, or the old cars and the architecture that’s in Old Havana right now, and I think the Cuban government is mindful that they don’t want a Starbucks on every corner or a Walmart on every corner. So, I think they’re going to have a huge say in what kinds of investments come to Cuba. There’s still going to be a reluctance on the part of the Cubans to just open the floodgates.

 

Werman: Jake Colvin at the National Foreign Trade Council. Thanks very much for your thoughts.

 

Colvin: Thank you.