Gradual Warming Trend Seen for U.S.-Cuban Business Ties

Despite the flare-up of rhetoric between the U.S. and Fidel Castro over Elian Gonzalez, the business climate in Cuba for American companies is warmer than it’s been since 1962, when President Kennedy imposed a full trade embargo on the island nation.

Incremental changes to the embargo made by President Clinton during the last 16 months now permit U.S. firms to sell medical and food items to nongovernmental groups in Cuba.

And, in January, the Cuban leader allowed Havana’s first-ever U.S. Healthcare Exhibition, which attracted 97 American companies. The exhibition was the largest trade show ever held in Cuba featuring U.S. firms, and it gave the American exhibitors a glimpse at a market that many believe is ripe for exploiting.

“We went down on a fact-finding mission because Cuba is a natural market for us,” said Sol Sparer, president of Miami-based laundry boiler firm, Sandy Hark Boiler Sales. “The show was very encouraging for us.”

The exhibition was packed with prospective Cuban buyers all four days, with long lines to booths that offered free eye exams, and coffee containing the sugar substitute Equal (unavailable in Cuba). Even the booths displaying specialized equipment received a steady flow of serious inquiries.

Castro’s hatred of Washington still runs deep. But with the loss of billions of dollars in Soviet support during the early 1990s, Cuba was thrown into a global economy with new rules to which the dictator had to adjust.

Cuban economic reports have long been filled with flattering untruths. Today, to attract foreign investment, many of the government reports are audited by PricewaterhouseCoopers, and they often contain statistics about the Cuban economy that would make a central banker frown. Meanwhile, Castro has approved the dollar as legal tender in Cuba.

Anticipating further easing of the embargo, more U.S. business events are scheduled. The fourth-annual U.S.-Cuba Business Summit in Cancun and Havana this June is likely to attract more than 100 American executives.

In addition to meeting potential buyers and distributors, Sparer was surprised to learn that there is a ready market in Cuba for his boilers. Although the embargo prohibits sales to hospitals that cater to foreigners and soldiers, there are 60 medical centers in Havana alone that are potential customers.

“We had one inquiry from a hospital representative who told us their boiler has been down for four years because they haven’t been able to replace parts,” Sparer said. He intends to apply soon for a license to do business in Cuba.

Last year, the Commerce Department granted licenses to 183 American companies seeking sales in Cuba, 55 more than in 1998.

With U.S. approval, Genesis Medical Technologies, based in Denver, last year conducted a clinical trial in Cuba for its needle-free syringe, which was designed for mass-vaccination programs. The tubular syringe is about the size of a fat cigar. The device is placed against the skin and shoots a stream of medicine that penetrates the skin. Because no needle is used, the risk of needle-related diseases is eliminated.

The trial, which involved 6,000 volunteer patients, used a Cuban-made vaccine and resulted in certification of the injector by Cuba and the World Health Organization. In February, Genesis made its first sale in Cuba: $10,000 for 2,500 vials and five injectors to a Cuban vaccine-production company for further testing.

Genesis director Todd Callender said his company hopes to partner with the Cuban vaccine company. Genesis would provide the vials and injectors and the Cuban company the vaccines. Speaking recently at a cafe overlooking the Bay of Havana, Callender said he hopes to begin selling in large quantities to the WHO and to Cuba and other countries.

Callender was steered to Cuba in 1997 by some friends in the Commerce Department “who said we’d love to see a U.S. company get in there.”

Encouraged, Callender met with Cuban authorities and convinced them of the benefits of using Genesis’ injector in the vaccination program. With U.S. and Cuban approval, Callender packed his plane with syringes, vials, rubber gloves and rubbing alcohol and flew to Havana.

The American embargo does not permit the export of items to Cuba for reexport to third countries, but that may soon change as U.S. leaders come under increasing pressure from American business to scale back the embargo.

A bill that would allow the sale of U.S. farm and medical products to the Cuban government recently won support of Sen. Jesse Helms (R-N.C.), chairman of the Senate Foreign Relations Committee, who has bitterly opposed closer economic ties with Cuba.

Bill Maddox, president of Maddox Management of Tampa, Fla., isn’t waiting. Maddox, a middleman for Midwestern commodities brokers, said if the bill passes, he hopes to arrange the sale of 400,000 tons of wheat and smaller amounts of corn and rice to Cuba this year.

Cuba is primarily an agrarian economy, and the country has yet to recover from a big drop in in donations of wheat, rice, corn and fertilizer from the Soviet Union era.

Maddox notes that Cuba’s red clay is similar to soil found in Georgia and that before the revolution, Cubans were planting seeds produced at the agricultural experimental station in Tifton, Ga. This week, he and soil experts from the University of Georgia will be in Cuba, trying to determine the ideal seeds to grow grass for Cuba’s cattle.

“Hopefully, we’ll be able to supply the grass seeds and the fertilizers, but right now we’ve got to find out exactly what seeds they need,” he said.