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    Meet the Entrepreneurs Breaking Into This Long-Forbidden Market

    Meet the Entrepreneurs Breaking Into This Long-Forbidden Market
    Less than 100 miles south of Key West sits a socialist country forbidden
    from doing business with the U.S. for 57 years. Now it’s on the brink of
    being opened to American entrepreneurs. Meet the ones hoping to cash in
    first.
    By David Whitford

    The Friday before Halloween, Josh Weinstein was set to take his first
    trip to Cuba: bags packed, visa in hand, leased Beechcraft turbo-prop
    booked for Sunday pickup at Sarasota Bradenton International. Then the
    dispatcher called. We have verbal approval to fly to Havana, he told
    Weinstein, but we’re still waiting on one last stamp from the Cuban
    government. Don’t worry, he explained, this happens all the time.
    Unfortunately, the government offices were now closed for the weekend.
    “we’ll keep pushing,” he promised.

    Weinstein is president of Witzco Challenger, a $12 million family
    business that builds heavy-haul trailers in Sarasota, Florida, and ships
    them all over the world. Witzco lost about half its sales in ’08 and ’09
    during the Great Recession. That was not long after Weinstein, former
    treasurer of his local stagehands union and grandson of Witzco’s
    founder, took over the company from his aunt and uncle, and he’s been
    scrambling to recover ever since. Exports are a big part of his
    business, about 35 percent, but they’ve been slipping lately. The
    stronger dollar hasn’t helped.

    His unlikely solution: Cuba. The forbidden market less than an hour’s
    direct flight from Witzco’s central Florida factory is suddenly bursting
    with pent-up demand. Tourism in Cuba is soaring, on pace to exceed
    2015’s record 3.5 million visitors, including a growing number of
    Americans who find a way to qualify for one of 12 exceptions to the
    Treasury Department’s limits on travel. (U.S. tourism is technically
    still banned.) Weinstein’s betting on a construction boom, spurred by
    the Cuban government’s plan to double the number of hotel rooms in the
    country by 2020, in pursuit of economic growth. “The first thing they’re
    going to have to do is infrastructure,” Weinstein says excitedly.
    “Water, septic, cable, electricity, communications. They’re going to
    need heavy equipment. My trailer moves the heavy equipment.” Not exactly
    a Cuba expert, Weinstein wants to see for himself. “I don’t really know
    the market, only what I’ve been able to Google,” he says. So he booked a
    booth at Cuba’s international trade show, slated for the fall.

    Sunday night, the stamp came through. Monday morning, he was on his way,
    a day later than hoped. (The first lesson anyone learns when dealing
    with Cuba: It’ll happen when it happens.) Forty-five minutes across the
    Everglades to Miami to top off the tank–gas is much cheaper in the
    U.S.–and then another 45 minutes across the Straits of Florida to
    Havana. Upon landing at José Martí International Airport, Weinstein and
    his posse of two–all wearing khakis and Witzco golf shirts–were met in
    an otherwise deserted terminal by unsmiling customs officials, who
    opened one of Weinstein’s bags. In it was a stash of trade-show
    paraphernalia–candy, logoed pens, and sales pamphlets in Spanish,
    English, and Russian (in case there were any Russians left in Cuba,
    Weinstein figured). The pamphlets raised eyebrows. Propaganda, declared
    one of the officials. Where is your approval? A discussion ensued.
    Weinstein turned on his charm. Maybe a little bit of money changed
    hands. “It’s the cost of doing business,” Weinstein says. “I’m OK with it.”

    And the Witzco delegation was in.

    When President Obama flew to Havana last March, it marked the first
    visit to Cuba by a sitting American president since Calvin Coolidge in
    1928. His posse numbered more than 1,000. Among them: Brian Chesky,
    founder of Airbnb, Dan Schulman, CEO of PayPal, and Fubu founder and
    Shark Tank judge Daymond John. The president drove straight to the Meliá
    Habana Hotel, where he addressed the staff of what used to be the United
    States Interests Section of the Embassy of Switzerland in Havana (it’s a
    long story) but is now a full-fledged U.S. embassy. There he spoke of
    his desire to “forge new agreements and commercial deals” with Cuba, in
    line with the main thrust of U.S. policy as of December 2014, when the
    current wave of reforms began.

    A lot’s happened since then, including the death of Fidel Castro; the
    removal of Cuba from the U.S. list of state sponsors of terrorism; the
    restoration of full diplomatic relations; the resumption of regularly
    scheduled flights by U.S. airlines, including American, Delta, United,
    and JetBlue; authorization for U.S. hoteliers Marriott and Starwood to
    pursue Cuba deals; service agreements involving U.S. cell-phone
    providers; and glory, hallelujah, the granting of permission for
    American visitors to bring home Cuban rum and cigars.

    But that doesn’t mean Cuba is open for business. There’s still the
    nettlesome matter of the embargo–a dense web of constraints,
    restrictions, and outright prohibitions, some in place since 1960, that,
    despite the recent thaw, prevents anything approaching normal business
    relations. Most commerce between the United States and Cuba is banned
    outright. Everything else is a hassle. For instance, while U.S.
    companies have been permitted to sell food and medicine to Cuba since
    the Clinton administration, the U.S. government often requires Cuban
    customers to pay the full amount up front. (That, in a nutshell, is why
    Cuba buys nearly all its rice from Vietnam, rather than from nearby U.S.
    growers.) And if you’re an American trying to do anything in Cuba, you
    had better bring plenty of cash, which is all anyone accepts. Unless you
    happen to have a credit or debit card from Stonegate Bank–a Fort
    Lauderdale, Florida, institution that has a temporary continental
    American monopoly on Cuba-ready cards–plastic credit is worthless, and
    ATMs barely exist.

    The embargo is like an argument that’s been going on for so long, nobody
    remembers anymore how or why it started. Initially, under President
    Eisenhower, it banned only sugar imports. After Cuba responded by
    confiscating the assets of U.S. companies, it was broadened to cover
    nearly all trade between the nations. Soon it morphed into a Cold War
    weapon to punish Castro for aligning with the Soviet Union, and
    supporting communist-led insurgencies in Nicaragua and Angola. Cuba’s
    dismal record on human rights didn’t help.

    But attitudes toward the embargo have changed. In a CBS News/New York
    Times poll conducted on the eve of Obama’s Cuba visit, more than half of
    Americans (55 percent) said they supported doing away with it. A more
    recent Florida Inter­national University poll of Cuban Americans living
    in Miami-Dade County–traditionally ground zero for the no-compromise
    camp–found an even bigger majority who would be happy at this point to
    move on. But we’re still stuck.

    Washington, D.C., attorney Robert Muse has been advising U.S. companies
    on Cuba for 25 years. He says that lifting the embargo is up to the
    United States. He equates Cuba’s position to that of an abused wife
    whose husband says he’ll stop beating her if she’ll start putting dinner
    on the table: “Her attitude, quite rightly, is, ‘It’s you attacking me!
    You have to stop. Then we can have normal relations.’ “

    If and when the embargo is lifted, American companies need to remember
    what kind of market they’re dealing with. Cuba indeed dominates the
    Caribbean, by landmass (it’s roughly the size of Virginia) and by
    population (11.3 million). But it’s poor. The average state salary is
    $25 a month. In 2010, according to the CIA’s latest estimate, its gross
    domestic product per capita was $10,200, one rung up on the world ladder
    from Swaziland’s. That’s partly why John Kavulich, longtime head of the
    U.S.-Cuba Trade and Economic Council, sees “a lot of inspiration and
    aspiration chasing very little reality” in Cuba. Americans assume, not
    unreasonably, that Cubans “need everything, they want everything, and
    they put a period there,” Kavulich says. “But there’s a next sentence:
    Do they have the resources to purchase everything? Dubai isn’t 93 miles
    south of Florida. Cuba is.”

    Even so, Weinstein and other eager Americans are stubbornly optimistic.
    Entrepreneurs like Saul Berenthal, for instance, a 72-year-old in
    Raleigh, North Carolina, who wants to sell small tractors to Cuban
    farmers. And Darius Anderson, a political consultant, lobbyist, and
    investor who’s been visiting Cuba since he was a college student, and
    now has a scheme to sell California wines to Cuban restaurateurs.
    Everybody wants to believe that we’re at the beginning of the end of an
    era; that no one–not unforgetting Cuban émigrés in Miami, not Fidel’s
    ghost, not a brash and unpredictable President Trump–can halt the
    momentum now. That the embargo must be, will be, swept aside, and the
    rivers of commerce will flow.

    But Cuba is not for innocents or neophytes. “People get besotted with
    Cuba,” Muse warns. “If you’re a little guy, you might think that because
    the big guys aren’t there, you can play in those waters. It’s exotic.
    You’re a pioneer! All these things combine to make some people abandon
    basic business principles.”

    The fairground for Cuba’s international trade show is 12 miles south of
    central Havana. It’s a slow cab ride, on crowded roads filled with
    mid­century Fords, Chevys, and Cadillacs, many of them refitted with
    diesel motors, not one of which would pass a U.S. emissions inspection.
    A mural of Che Guevara hovers omnisciently over the Plaza de la
    Revolución, while billboards flaunt slogans like socialismo o muerte
    (“Socialism or Death”) and normalizar no es sinónimo de bloquear
    (“Normalization and Blockades Don’t Go Together”), a blunt reminder of
    Cuba’s all-or-nothing stance on the embargo, which Cubans call “the
    blockade.”

    The American pavilion is a hike from the trade show’s main entrance, in
    the farthest corner of the grounds, beyond the scattered remnants of
    past exhibitions–a petrified pump jack, a stilled windmill, a parked
    Air Cubana airliner repurposed as a restaurant. JetBlue banners flank
    the entrance. Inside, ordinary Cubans who have managed to snag coveted
    trade show credentials graze the American booths, scooping up free hats,
    pens, and pistachios. Perhaps because there is no conventional
    advertising in Cuba (it’s illegal), Cuban consumers are adept at
    ferreting out whatever’s available, wherever it can be found.

    The National Auto Parts Association has a booth, looking toward the day
    when it can begin populating Cuba with its stores. So do a smattering of
    state-sponsored trade delegations representing poultry farmers, soybean
    growers, and the Port of Virginia; and all manner of small and midsize
    U.S. manufacturers, displaying motors, electronic controls, and other
    industrial gear, none of which are yet on the list of permissible
    products. The U.S. embassy’s chargé d’affaires, Jeffrey DeLaurentis,
    roams the aisles in a seersucker suit, chatting up exhibitors and
    awkwardly ducking reporters. (“There is still an embargo,” his aide
    explains apologetically.)

    Overall, attendance by American exhibitors is lower this year than last,
    when Obama’s first round of reforms created a kind of euphoria that has
    since dissipated. Those who have returned see the potential but
    understand the need for patience. Among them is investor Noel Thompson,
    decked out in a blue blazer advertising his ties to the U.S. Olympic
    Committee. Thompson is a former Goldman Sachs banker now running his own
    hedge fund in New York City. He’s been coming down to Cuba every few
    months for the past couple of years, working his way into the culture,
    gathering intel, developing contacts. He imagines doing a lot of
    business in Cuba one day-trading currencies, advising on deals, helping
    privatize government assets, and otherwise capitalizing on the explosion
    he thinks will surely come when the embargo lifts and America fully
    engages with Cuba’s suppressed capitalist passions. It won’t happen
    tomorrow, he knows, or even next year, but one day. “Maybe it’s my
    Goldman training,” Thompson says. “When you see a butterfly flap its
    wings … “

    Manning a nearby booth with sunglasses propped on his forehead and an
    unlit cigar clenched in his teeth, another American, Darius Anderson,
    presides over a winetasting led by his pal Fernando Fernández, Cuba’s
    preeminent blender of rums and cigars. Anderson first visited Cuba in
    1986 as a student at George Washington University, where he had a poster
    of Che Guevara on his dorm room wall. When his pals went to Florida for
    spring break, he went north to Toronto, from which he was able to get to
    Havana. His total visits since then: “Somewhere in the mid-60s,” he
    guesses. Every time the border agents run his passport, they ask, “Why
    so many times?”

    Originally, he went because it was forbidden, Anderson says, and now
    it’s because he’s long since fallen in love with “all things Cuban: the
    music, the culture, the cigars, the baseball.” After college, Anderson
    worked for a Democratic congressman on Capitol Hill, was an advance man
    for Bill Clinton in California, and apprenticed seven years at the right
    hand of super­market billionaire Ron Burkle–a useful résumé for
    navigating a market in which business and politics are inseparable.

    With his company U.S. Cava Exports, Anderson, 47, is trying to bring
    expensive wines from Napa Valley to Cuban consumers. He’s been laying
    the groundwork for years, hosting a seven-day tour of Napa and Sonoma
    wineries for his Cuban friends, and leading a party of more than 100
    California vintners on an educational mission to Cuba, where they met
    with chefs and sommeliers. Like Weinstein, Anderson is hoping to make
    money on tourism. Unlike Weinstein, he’s peddling an embargo-exempt
    agricultural product that’s not contingent on new construction. This
    should be easy.

    And yet, 2,500 miles northwest of Havana, in a refrigerated warehouse
    near Napa County Airport, sits a shipping container filled with
    Anderson’s stranded inventory: 1,200 cases of carefully curated
    California sauvignon blanc, zinfandel, pinot noir, cabernet, and
    chardonnay. Total value, just under $400,000. It’s been there all fall,
    costing him at least $500 per month, and not for want of a buyer. In
    fact, Anderson has one all lined up, a Cuban state-owned distri­butor
    willing to pay full price in advance, per U.S. law. But there’s a
    holdup. Anderson is waiting on final approval from the highest levels of
    government–in this case, Cuba’s foreign ministry.

    U.S. Cava Exports is only one of Anderson’s ventures at the moment, so
    he has the luxury to wait this bureaucratic purgatory out. He still sees
    a chance to have “a real, viable business and grow it over time.” The
    rest of the world is already here, he points out. Not just Cuba’s
    biggest trading partner, China, and Spain–it’s oldest–but also Brazil,
    Canada, Mexico, the Netherlands. The list goes on. “A whole litany of
    countries are here doing business,” Anderson says. “They trust the
    system well enough to invest hundreds of millions of dollars. This idea
    that it’s not happening? It’s happening, but it’s happening without us.”

    Saul Berenthal went to high school before the revolution. He was born in
    Havana, where his parents met after fleeing the Nazis in Eastern Europe.
    His father worked his way from Holocaust refugee to sole GM parts
    supplier for Cuba, which helped land Saul at the elite Havana Military
    Academy. In 1960, his parents sent their 16-year-old son to study in the
    United States. They visited him the following year, expecting to stay
    for a few months. Then came the failed Bay of Pigs invasion. Suddenly,
    they were unwilling to return to Cuba, refugees once again, this time in
    America.

    Bespectacled and trim, still at home in a loose-fitting guayabera,
    Berenthal has a complicated relationship with his birthplace. He belongs
    solidly to the generation of exiles whose grim resolve and political
    clout have defined U.S. aggression toward Cuba. But he’s also become a
    full-fledged American, having had spent 18 years at IBM, where he met
    Horace Clemmons, his future business partner. They bonded over their
    frustration with IBM’s stubborn attachment to proprietary product lines
    when the future was all about open-source computing. “We worked hard,
    lived the American dream, created three companies and sold them, and set
    ourselves up for a nice retirement,” says Berenthal.

    But, a couple of years into retirement, Cuba beckoned, and starting in
    2007, Berenthal was finding excuses to visit his birthplace. “It was
    curiosity more than anything,” he says. The surprise was that he felt
    instantly at home. The language, the mannerisms, the customs, the
    operating in a culture where it’s hard to make appointments (“You’ll be
    here next week? Look me up”) and a meeting might not happen because
    somebody’s car won’t start or he can’t find gas. Where checking email on
    the fly means locating a Wi-Fi hotspot and making sure you’ve got enough
    minutes left on your government-issued access card. “Not very well
    organized, but I understand why,” says Berenthal, revealing a trace of
    his native Spanish. “People take care of things as they come up. They
    don’t know where they’ll be at any time until it’s that time.”

    Berenthal still knew people who knew people in Havana. He was introduced
    to professors in the economics department at the University of Havana,
    organized academic exchanges, and got involved in studies that led to
    Cuba’s accelerated reengagement with the global economy in 2011. But it
    was Obama’s dramatic announcement on December 17, 2014–“Today, the
    United States of America is changing its relationship with the people of
    Cuba”–and the policy changes that followed that convinced Berenthal it
    was time to reunite with his old partner, Clemmons, and come up with a
    business idea for Cuba.

    Berenthal knew that an American company could succeed in Cuba only if it
    was sensitive to the socialist country’s motivations for doing business
    with outsiders. Cuba is not interested in inviting foreign companies in
    to make a few players wealthy. If Cuba is to embrace capitalism, it will
    be on socialist terms: to generate revenue and become less dependent on
    imports, and so protect what Cubans consider the lasting achievements of
    the revolution–free education, free medicine, subsidized housing, and
    subsidized food.

    Clemmons, a farm boy from Alabama, thought of tractors. Inexpensive
    tractors designed to meet the needs of small farmers in a poor country
    that’s rich in arable land but where many still work the land barefoot,
    behind a mule or an ox, without basic equipment. An alternative to a
    company like John Deere, which could come into Cuba with an expensive,
    proprietary product. Instead, Cleber, as their company is called, would
    assemble tractors according to open-source manufacturing principles,
    using standard components, making them easy to maintain and infinitely
    customizable. By creating an opportunity for Cubans to build an
    ecosystem of products around Cleber’s tractor, they would help
    kick-start the creation of a homegrown agricultural manufacturing industry.

    Berenthal and Clemmons proposed building their tractor factory in
    Mariel, a planned economic development zone about an hour west of
    Havana. When Cuban officials expressed support, the pair began working
    to persuade their own government to create an opening in the embargo
    that would allow them to proceed. “We spent a lot of time in the Office
    of Foreign Assets Control and the Department of Commerce, trying to get
    it through,” says Berenthal. In February 2016, after months of meetings,
    they succeeded. Cleber won U.S. approval to build the first
    American-owned factory on Cuban soil since the revolution. It was a
    happy story, shot through with hopeful symbolism, coinciding perfectly
    with the Obama administration’s initiatives. They even got a shout-out
    in a White House press briefing.

    But they still needed final approval from Cuba, and by last summer,
    Berenthal didn’t like the signals being sent from officials at Mariel:
    pushback on environmental standards and workplace safety, and worrisome
    doubts about whether Cleber fit with the development site’s larger goal
    of promoting high-tech manufacturing. Berenthal was baffled. None of the
    other projects in the Mariel pipeline–cigarettes, cosmetics,
    meatpacking, none of them U.S. backed–were obvious ways to achieve that
    goal. Here he was, trying to persuade higher-ups who opposed a simple,
    practical idea that somehow threatened them. He had flashbacks to his
    time at IBM. “Everybody is acting in their own best interests,” says
    Berenthal. “IBM wanted to protect the proprietary lab where they were
    building the proprietary technology and not accept change, because that
    would mean loss of power or prestige or even their jobs.”

    In late October, Berenthal drove to Mariel for a meeting with
    development zone officials. “They were very cordial,” Berenthal says.
    Then they proceeded to tell him that after much consideration, they had
    decided not to approve Cleber’s proposal after all.

    Weinstein had a good trade show. He didn’t arrive until late on the
    first day–after the delay at customs, and an errant cab ride to the
    wrong fairground–but he hit the ground running. Within an hour, every
    bottled-water peddler in the building had a Witzco bumper sticker on his
    cooler, and most were wearing Witzco baseball caps. He made no actual
    sales to actual Cubans, of course. The embargo forbade him, which he
    knew going in. But he met a lot of people there, and went home happy at
    the end of the week with a long list of proposals to prepare for buyers
    from Canada, Panama, Mexico, Belgium, and Spain.

    Then history happened. Days after the trade show ended, Donald Trump was
    unexpectedly elected president. Then Fidel Castro died. Suddenly
    American entrepreneurs with dreams of doing business in Cuba were forced
    to reevaluate everything.

    When it comes to Cuba, Trump the politician appears to have a different
    mind than Trump the entrepreneur. At least twice since the late ’90s,
    emissaries associated with Trump companies have visited Cuba to scope
    out investment opportunities for hotels and golf courses–acts that may
    well have violated the embargo. Since the election, however, Trump’s
    been all bluster and ill will. When the news broke of the former
    dictator’s passing, he tweeted gleefully: “Fidel Castro is dead!” He
    soon followed up with, “If Cuba is unwilling to make a better deal for
    the Cuban people, the Cuban/American people and the U.S. as a whole, I
    will terminate deal.”

    In reality, Trump’s tough talk is off base. As attorney Muse points out,
    there is no Obama-era “deal” between the nations. Only a “series of
    rolling measures” issued from various realms of the federal government
    that would be next to impossible to untangle one by one, and which few
    Americans object to anyway. But what Trump could do, says Muse, is “go
    big and go unilateral,” in a way that plays to his strength. That is, he
    could leapfrog Obama’s measured steps toward normalization by announcing
    his willingness to negotiate America’s $1.9 billion in outstanding
    property claims against the Cuban government as a “necessary predicate”
    to ending the embargo once and for all. “Where the embargo began is
    where the embargo should end: With a resolution of the certified
    claims,” Muse says.

    After the Cuban government derailed Berenthal’s factory plans, he was
    discouraged but not devastated. He understands why his company, in which
    he and Clemmons have invested $5 million, was used as a political pawn:
    Cuba wants the embargo gone; as long as it remains in effect, Cuba has
    little incentive to grant piecemeal exceptions that reduce the pressure
    on Congress to demolish it once and for all. At least, that’s the best
    explanation he or anyone else can come up with to justify what happened.

    So Berenthal and Clemmons have shifted plans. Now they’re building
    tractors for export at a factory in Paint Rock, Alabama. Clemmons, the
    more frustrated of the two, is focusing his energy on selling them to
    other markets–small farmers in Australia, Ethiopia, and Peru.
    Meanwhile, Berenthal’s contacts at Mariel have told him, “Commercialize
    your tractor and your products, and bring them to Cuba,” and he’s taking
    them at their word. Cleber’s new business model may in the end be more
    lucrative, albeit less transformational for Cuba than Berenthal had
    hoped for.

    Still, there’s one more wild card. Cuba’s current president, Fidel’s
    brother Raúl Castro, is scheduled to end his term in 2018. “In my
    opinion,” says Berenthal, “this will trigger the final removal of the
    embargo.” Castro’s likely successor, Miguel Díaz-Canel, was born nine
    months before the revolution. If there’s going to be real
    change–generational change–in U.S.-Cuba relations, that’ll be the
    turning point. “I hope others will take the long view and continue the
    efforts to bring the two countries together through commerce,” Berenthal
    says. He understands, as best as anyone can, how it works in Cuba. That
    things happen when they happen. But, eventually, they do happen.

    Source: Meet the Entrepreneurs Breaking Into This Long-Forbidden Market
    | Inc.com –
    www.inc.com/magazine/201702/david-whitford/crashing-into-cuba.html