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    The Cuban Market Mirage

    The Cuban Market Mirage
    BY JOSÉ R. CÁRDENASMAY 27, 2015 – 1:18 PM

    It’s a safe bet that neither Cy Tokmakjian or Stephen Purvis will be
    attending a Brookings Institution event next week on doing business in
    Cuba. Canadian and British businessmen, respectively, they each suffered
    through Kafkaesque ordeals in Cuba after they did just that, somehow
    running afoul of some regulation in Cuba’s opaque and arbitrary judicial
    system. After being imprisoned for months and robbed of their assets by
    the Castro government, they were finally released only after heavy
    diplomatic pressure by their governments.

    Indeed, of all the justifications for President Obama’s about-face on
    Cuba policy — that it will serve to moderate the Castro regime’s
    behavior, improve human rights, or that it will transform U.S.-Latin
    America relations — perhaps the biggest whopper in defense of the new
    policy is that Cuba’s bankrupt economy represents a gold mine for U.S.
    producers and investors.

    Thus, we are currently being treated to a succession of trade
    delegations, assorted junkets, and conferences — encouraged by the Obama
    administration — selling the American public on the notion that a U.S.
    economic windfall lies right around the corner.

    Commerce Secretary Penny Pritzker, who told the Miami Herald that she
    will lead a trade delegation as soon as relations are normalized and
    embassies are open, was quoted as saying, “Companies are already going.
    Google led a delegation. You’re seeing people going to visit. That’s
    because, as I said, there’s enormous excitement — excitement from the
    entrepreneurial community in Cuba and excitement here in the United
    States about that. I think they deserve our support.”

    However, if you look hard enough, not all U.S. officials are so
    sanguine. Pritzker’s own undersecretary for international trade, Stefan
    Selig, told the Washington Post, “We are embarking on a process that is
    complicated. We should remember Cuba is a small country, and a poor
    country. I don’t think we should be overly excited about the near-term
    economic prospects.” U.S. Department of Agriculture under secretary
    Michael Scuse recently cautioned an eager Senate panel that it was
    important not to “minimize the obstacles” in Cuba, such as the country’s
    limited purchasing power and its widespread market underdevelopment.

    How could it be any other way? The reality of Cuba is that five decades
    of centralized political and economic control have impoverished the
    island both materially and spiritually. And the prospects are hardly
    uplifting. The dead hand of the regime still controls nearly 100 percent
    of economic activity and, to the extent there is any semblance of
    reform, it exists only at the margins.

    For anyone eyeing Cuba from abroad, the Castro government lacks hard
    currency and infrastructure, has an abysmal credit rating, and restricts
    internet use. As one experienced foreigner points out, “Your state
    partner is also the supplier, the employer of your staff, the buyer, the
    regulating authority and the entity that taxes you. So it’s a complex
    place to enter into a normal business transaction.”

    Pedro Freyre, a partner at the law firm Akerman who knows Cuba told
    Politico that, “While I think that the business community recognizes
    Cuba’s potential, there’s also the reality that Cuba is bankrupt. Cuba
    is grossly in need of investment … but they don’t have a philosophy,
    don’t have the legal infrastructure to support any kind of mid-level to
    even higher-level industry.” According to John Kavulich, president of
    the U.S.-Cuba Trade and Economic Council, “This is not Dubai just 90
    miles south of the U.S., saying, ‘Please sell us your products.’”

    To say trading with Cuba involves personal and financial risk is a gross
    understatement, as the ordeals of Tokmakjian and Purvis attest. Don’t
    look for or expect transparency, legal guarantees, and predictability —
    none of which the Cuban government is capable of providing. And don’t
    look for a local economy that rewards innovation, risk taking, or hard
    work. That’s the Cuban economic reality and no amount of irrational
    exuberance and ideological cheerleading changes those facts.

    It is clear by now that Obama’s reversal of five decades of isolating
    the Castro regime rests on little else than hope; hope that just doing
    something different could translate into something good developing
    organically sometime in the future. But hope is a pretty thin reed on
    which to base a policy under such scrutiny, and that means sexing up its
    about-face on Cuba by convincing people that there really are immediate
    and tangible benefits to it — and that means selling the notion that
    bankrupt Cuba is like an overripe mango waiting to plucked by American
    business.

    Source: The Cuban Market Mirage | Foreign Policy –
    https://foreignpolicy.com/2015/05/27/the-cuban-market-mirage/