Today U.S.-Cuba Trade Relations Fly High. Tomorrow They Return To Earth.

Feb 16, 2016
Originally published on December 29, 2016 12:26 pm

For half a century, only charter flights have been allowed to ferry people from the U.S. into Cuba.

But today, the two cold-war foes will agree to let regular U.S. commercial flights land in the communist island: 20 a day into Havana and 10 daily into nine other Cuban cities.

“This means more people-to-people contact,” Deputy Assistant Secretary of State for Transportation Thomas Engle told reporters over the weekend. “All to the good of mutual understanding.”

The commercial aviation agreement is indeed another big step toward normalizing relations between the U.S. and Cuba. And there’s more: A small Alabama tractor company just won approval to build the first U.S. factory in Cuba since the 1950s.

RELATED: U.S. Techies: Wiring Cuba Requires Political Science More Than Computer Science

That’s the sort of momentum officials from both countries hope to carry into Washington tomorrow for their second meeting on bilateral trade regulations.

But even so, any American who’s talked to the Cuban government lately knows how far apart the U.S. and Cuba still are when it comes to commerce.

“It was almost like we were speaking a completely different language, even though their English was perfect,” says Melissa Duffy, an international trade lawyer with the firm of Hughes Hubbard & Reed in Washington, D.C.

I caught Duffy on her phone while she was in Havana last week on her first exploratory visit for clients in sectors like telecom. Although she says Cuban officials were cordial, they gave her an earful about how different their expectations for normalization are compared to America’s.

For one thing, while the Obama Administration is relaxing a boatload of restrictions on trade with Cuba, it’s doing so mainly to promote small private business owners there. In other words, fostering capitalism and Cubans’ independence.

The Cuban government wants Washington to focus instead on letting U.S. firms help rebuild Cuba’s ragged infrastructure.

“That is something that irritates them,” says Duffy. “The city of Havana is falling apart, so they ask, 'Why is the U.S. government focused on hair stylists and barber shops?'”

But here’s the rub: U.S. companies can’t do the big business in Cuba that Havana wants them to until the U.S. trade embargo is lifted. And only Congress can do that.

The Cubans might help their case in Congress if they made a positive gesture – like reassuring U.S. companies they won’t be forced into joint ventures with Cuban state-run firms in order to operate there.

Duffy points out that would strengthen the anti-embargo argument – and as a result, “U.S. companies can have some skin in the game and then go back and lobby Congress.

“And that seemed to me to be a point that the Cubans didn’t quite get.”

BULLDOZERS AND BASEBALL

But some U.S. firms seem confident the Cubans are starting to get it. One of them is Caterpillar Inc., the world’s largest maker of construction equipment, based in Peoria, Ill.

“Cuba is a huge market for us, in road construction as well as in the mining space,” says Marcos Sallowicz, Caterpillar’s Latin America director in Miami.

So last week Caterpillar named the Puerto Rican company Rimco to be its dealer in Cuba – even though it’s not yet clear if Cuba will even allow such private-sector distribution arrangements.

“I was in Cuba last year,” says Sallowicz. “We sat down and had a great discussion about being able to bring in hundred-percent private companies to operate in Cuba.

“I think gradually [the Cubans] are changing and they’re opening for business. But there is much more to be done.”

And executives like Sallowicz want to see the U.S. and Cuba get it all done faster.

Sallowicz, for example, is originally from Brazil. Thanks in part to his efforts, Brazil’s biggest construction firms use Caterpillar equipment. But because of the U.S. embargo, those Brazilian companies don’t use their Caterpillar hardware when they're on projects in Cuba – like the recent $1 billion Mariel port expansion.

“When we thought that we were isolating Cuba,” Sallowicz says now of the embargo, “we were isolating ourselves.”

Sallowicz notes that in the 1950s Caterpillar was the most popular heavy equipment in Cuba. Even the Cuban Revolution preferred the brand: In 1958 Fidel Castro’s guerrillas hijacked a Caterpillar D6 bulldozer to help win the key battle of Santa Clara.

“They do have Caterpillar equipment that has been there for more than 50 years,” says Sallowicz, “and it still works today.”

This week the U.S. and Cuban delegations may discuss baseball as well as bulldozers during their negotiations.

This month two of Cuba’s best baseball players – brothers Yulieski and Lourdes Gourriel – defected to play in the U.S. major leagues. It was a reminder that Washington and Havana need to hammer out a legal framework for letting Cuban players move between their island and the U.S.

Paul Minoff – a Fort Lauderdale attorney who represents another star Cuban baseball defector, Leonys Martín – says one immediate solution may be to exempt baseball from the embargo.

“But at the same time,” says Minoff, “how do you do a carve-out for baseball players? Why is the baseball industry more important than any other industry that might be impacted by the embargo?”

Good question. All we know right now is that if the Gourriel brothers ever return to Cuba from America, they can now take a commercial flight.  

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