Rolling Stones in Cuba: Glasnost

By | March 26, 2016

Written 07/08/2016

Looks like 8 airlines were given clearance to fly to Cuba here.

Written 03/26/2016

Cuba Glasnost. This is HUGE news for the US, Cuba, and the world. The United States severed diplomatic ties with Cuba and had a trade embargo for 50+ years. While only symbolic, President Obama’s visit and the concert by the once-banned, iconoclastic Rolling Stones is monumental, exciting, revolutionary, and promising. Embassies have opened up again, and Cuba is no longer on the list of countries the US believes supports terrorism. Small wins.

Consultantsmind - Rolling Stones in Cuba

The Economist (yes the fastest way to get smart on any topic) makes a few savvy points on what is driving this rapproachment with Cuba here:

  • The US trade embargo never really worked; it just hurt everyday Cubans
  • Latin America see the US stance on Cuba as imperialist – a shadow of the cold-war, and pretty foolish
  • China has been in favor with Latin America for the last 10 years, as China became a huge trading partner (raw materials); anti-American sentiment has grown
  • Venezuela aid to Cuba ($1.5 billion) is risk as Venezuela’s economy sinks (again)

Mr Obama’s diplomacy leaves a choice for the next president: turn your back on Latin America and feed its resentments and failings, or help it become America’s front yard, a region of increasingly prosperous democracies linked by economic and political ties. The visit to Havana is a welcome step down this path.  – Economist

Cuba is a huge business opportunity. There are 11 million+ Cubans with 75% of them under the age of 55 years old. The GDP per headcount is absymally low, less than $5K and yet Cuba has so many reasons to be optimistic on a more liberalized future:

  • #2 globally in education
  • #2 in physicians per 1,000 population
  • 90 miles from the US, the largest economy in the world

Biotechnology. A Brookings Institute report (somewhat dated 2013),says that the Cuban biotechnology industry is impressive and is comparable to one of the largest US biotechnology firms or a mid-sized international pharma company.  Not bad. . .

The industry employs about 10,000 people, of whom more than 3,000 have university degrees, more than 500 have masters degrees, and more than 250 have received PhDs in science. Their work is done in about fifteen separate facilities that operate in concert, but apparently semi-autonomously. More than 40 products and technologies created by the industry are currently in use. The industry now produces 33 different vaccines, 33 anti-cancer drugs, 18 products to treat cardiovascular disease, and 7 drugs to treat additional diseases.

Travel to Cuba. No surprise that Americans will want to visit Cuba – a large country only 20 minutes by plane from Miami that has been “off-limits” for half a century. The Economist shows that in 2015, there were 150K+ American visitors to Cuba.
Consultantsmind - Economist Cuba TravelCan’t fly there from the US.  I went to Delta.com to try and book roundtrip tickets to Cuba, and I guess we still have to wait. Open embassies, but no direct flights yet.

Consultantsmind - Delta Cuba

Oddly, you can cruise there.  Apparently, it is okay to cruise there from Miami. This cruise line has 7 and 10 days trips. Not sure I want to site-see in Cuba for that long.

Consultantsmind - Cruise Cuba

So far, direct foreign investment = nothing.  Looking at this graphic from the Financial Times, it’s clear Cuba has not done a good job of attracting capital.  Less than the Dominican Republic and Jamaica. . . . really?

Consultantsmind - Cuba foreign investment

Hard to hire Cuban workers.  The Marriott CEO notes that Cuban desperately needs foreign investment, technology and know-how, yet, the laws make it hard to do business there. Apparently, the government dictates which people can work for the company, and all wages go to the government first. . then the government pays the employee. It is like a government-sized staffing agency. . . which probably keeps WAY more than 30%.

It’s very promising, but a long-haul. Clearly, this is the start of the start. Most Cubans make less than $2K a year, and the US government has to repeal its embargo, and the Cuban government is still a one-man show.  As one trade consultant mentioned, companies need to think with a 10-year time horizon.

What is your opinion about this detente between the US and Cuba?

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