Commentary originally published by Fox News Latino on May 24, 2016. Written by Michael P. Hatley, Associate, Reneo Consulting, LLC.
Considered in isolation, the Cuban government’s mid-April decision to widen the purchasing prerogatives available to the island’s privately held cooperatives is a modest step of little international significance. But given the central role played by Cuban co-ops in the shifting regulatory landscape governing the relationship between Cuba and the United States, U.S. companies seeking business opportunities in Cuba should be paying close attention.
To be sure, the recent ruling from the Cuban government is narrow. It covers only former state-run entities that have been transformed into private cooperatives offering food and food-related services. These restaurant co-ops will, for the first time, have the latitude to buy supplies directly from government producers and competitively priced wholesale outlets — and not be forced to purchase expensive goods from retail outlets. The new rule gives certain Cuban restaurant co-ops a fighting chance to turn a profit and expand their offerings.
It is part of the Cuban government’s cautious experimentation with market reform — a topic that was debated at the April meeting of the Communist Congress in Havana. It marked the first gathering of the full Communist Congress since 2011, when the Congress announced a range of agricultural reform initiatives, some of which stalled or were never implemented.
Now, half a decade later, the climate in Havana is different, given the stirrings of rapprochement with the U.S., a visit from President Obama, and what appears to be an increased willingness to experiment with market-based policies.
U.S. businesses should be watching Cuba carefully to see if it addresses the agricultural reform process and perhaps pries open the rules governing co-ops in other sectors.
These reforms are important to American companies because, at least for the foreseeable future, co-ops are at the nexus of business opportunity in Cuba. The Obama administration’s recent amendments to the U.S. embargo regulations create numerous possibilities for U.S. companies to engage with private Cuban co-ops, including exporting tools and equipment, importing a variety of Cuban-made goods, and launching certain agricultural development projects.
There is little doubt that the obstacles to U.S.-Cuba trade, even business involving Cuban co-ops, are daunting. The U.S. State Department’s so-called 582 list – a litany of goods that can be imported from private Cuban co-ops – hasn’t been significantly updated or expanded since it came out a year ago. Onerous tariffs of 100 percent or more are still being foisted on certain Cuban goods — the same burden the U.S. imposes on goods made in North Korea.
But until our Congress repeals the U.S. trade embargo, deals involving private Cuban entrepreneurs and co-ops are a way for U.S. companies to demonstrate good faith while making connections and establishing a presence on the island. For example, Airbnb became one of the first American companies to establish a presence in Cuba after the recent reforms by partnering with private Cuban property owners. There’s running room for similarly bold and creative companies to get involved.
To seize these opportunities, U.S. executives should anticipate and prepare for how the Cuban regulatory climate is likely to change. Any cooperation in the Cuban co-op space should be of great interest to American businesses.
In and of itself, the recent restaurant co-op reform may not represent a major change in the course of U.S.-Cuban relations. But it may be a sign of things to come. When combined with the big thaw of the past 18 months and the prospect of additional co-op liberalization, U.S. companies should be focused on the opportunities in Cuba — not the obstacles.
Michael P. Hatley, Esq., advises companies on business opportunities in Cuba as an associate at Reneo Consulting LLC, the business consulting arm of the law firm Gilbert LLP