NO TRADING WITH THE ENEMY !

February 28, 2008

The Cuban Economy: After the Smoke Clears

For most Cubans, life remains a slog. But here's the surprise: There's plenty of potential for growth in everything from oil exploration to upscale tourism
Roger Johnson knew that Fidel Castro would step down eventually. But the Cuban leader's Feb. 19 retirement announcement, while Johnson was in Havana, added an unexpected bit of drama to an otherwise routine visit. As North Dakota's agricultural commissioner, he was on his seventh trip to Cuba in as many years, signing a contract to sell $7.5 million worth of peas and lentils.

Wait a minute. What was a North Dakotan doing peddling beans to a country that Americans aren't supposed to trade with? He was taking advantage of rules that, since 2000, have allowed U.S. companies to sell food and agricultural products to Cuba. And he's far from alone. The U.S. shipped $438 million in such goods there last year. "We have a lot of commodities that Cuba wants," Johnson says. American business, meanwhile, is eager to join the party. A growing number of U.S. farmers, manufacturers, and oilmen argue that they're missing a chance to get a foothold in post-Fidel Cuba.

In their place are companies such as nickel and oil producer Sherritt and Spain's Sol Meliá, which runs two dozen hotels across the country. All told, Spanish companies have 73 joint ventures in Cuba, particularly in tourism. Canada has 38 and because of Sherritt is the country's single biggest investor. Relative newcomer China has 12, and even Iran has gotten into the game, selling freight cars to Cuba's state railway.

Only a handful of Americans have managed to get a foothold, using the few licenses that the U.S. Treasury Dept. has issued to food exporters. One of them is John Parke Wright IV, a 58-year-old rancher from Florida whose family began trading with Cuba in the 1860s. At the time of the revolution, he notes, Cuba "was one of the richest cattle countries in the world," with 6 million head. Today, there are fewer than 2 million. "We've witnessed agricultural decline on a massive scale," he says. That drop, though, has created a big opportunity for Parke Wright, who has visited Cuba frequently over the past eight years to help restock the country's herds.

Don't expect Cuba to achieve the kind of hypergrowth seen by Asia's stars anytime soon. The U.S. embargo will continue to bite, forcing Havana to pay higher prices for everything from powdered milk to satellite telephone connections. But 7.5% growth isn't bad, and if Raúl Castro can ease in changes that his brother might not have tolerated, the regime isn't likely to collapse in the near future either. "Raúl needs legitimacy, and the only way he can get it is by delivering results through significant economic reforms," says Carlos Saladrigas, a Cuban-American businessman in Miami who heads a group drafting strategies to deal with post-Castro Cuba. "He doesn't really have much choice."