The hot issue of trade with Cuba -- by the U.S. and other nations -- was the topic of the Mar. 9 event, with guests John S. Kavulich II, president of the U.S.-Cuba Trade & Economic Council, and Gail DeGeorge, chief of Business Week's Miami bureau. Ms. DeGeorge was one of the principal authors of the Mar. 17 BW package on Cuba, which was the Cover Story in the European edition.
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OnlineHost: Welcome to Business Week Online! Tonight's topic is trade with Cuba and the game plan Castro has for his troubled economy. The guest is John S. Kavulich (Usctec), president of the U.S.-Cuba Trade & Economic Council, which informs business on what's happening in Cuba. Also online is Gail DeGeorge (GailDG), BW's Miami bureau chief and a frequent visitor to Cuba as a reporter.
JackBW: Good evening to all of you on AOL. Welcome, John Kavulich, our expert on trade with Cuba. Hi, Gail DeGeorge.
Usctec: Thank you.
GailDG: Glad to be here.
JackBW: I'm Jack Dierdorff, of BW Online, your moderator tonight. Gail, you wrote most of this week's big BW package on Cuba. So that entitles you to ask John the first question. Then we'll move to the audience.
GailDG: Who is trading with Cuba, and how much interest is there in the island? What about investment? Who leads the pack?
Usctec: The big three are Russia, Spain, and Canada. There is continuing interest -- exports are increasing, and the customers for those exports are increasing. Cuba's trade with Russia is mainly in sugar and oil. Spain imports tobacco and is involved with financing of various crops. Canada imports seafood, nickel, and textile products. As for investment, Canada is No. 1, with Sherritt International having invested several hundred million dollars in mining, agriculture, energy, and financing. Sherritt International has invested mainly in nickel mining -- also, Sherritt has invested approximately $100 million in oil exploration.
JackBW: Sherritt is discussed prominently in this week's BW story. Now, John, we have a question from JAT910 with your name on it. After you answer, maybe Gail can address the part about Castro.
Question: Mr. Kavulich, with Castro's days numbered, aren't U.S. sanctions depriving U.S. companies of what could be the greatest opportunity in North America -- and who are the members of USCTEC?
Usctec: The opportunities are just about limitless. There are opportunities in tourism, energy, consumer products, agriculture, and, of course, in biotechnology. The membership of the U.S.-Cuba Trade & Economic Council includes companies from throughout the United States and other countries.
GailDG: As for Castro's days being numbered, that's been predicted for years now. His grip on power is still quite strong. He is still popular with much of the population, and indeed, there already has been economic change with him in power.
JackBW: Inferno549 sends us this question for John Kavulich of the U.S.-Cuba Trade & Economic Council.
Question: Do you think trade with Cuba would be beneficial to the economy of the U.S.?
Usctec: Absolutely. Estimates are that Cuba-U.S. bilateral trade could reach $6 billion annually. That translates into approximately 120,000 new jobs for U.S. workers.
JackBW: I was wondering how long it would take for us to get to the Helms-Burton Act [imposing sanctions on foreign companies trading and investing in Cuba]. This comes from BobABW in New Jersey.
Question: Do you see any harm on Jesse Helms's position on U.S.-Cuba relations?
GailDG: It heightens the pressure and tension with Cuba, and as an economist told me, "it makes needed reforms appear as concessions." There is a wide range of debate on how best to bring change to Cuba. I would point out that one of the leading dissidents, Elizardo Sanchez, has repeatedly said that the U.S. embargo helps Castro maintain power.
Usctec: There are many leaders in the U.S. business community who believe that Senator Helms's position does not serve the interests of the certified corporate claimants. And, as Gail said, there are many, many people within Cuba who feel the Helms-Burton law only serves to entrench the conservatives within Cuba who want slower or no change whatsoever.
JackBW: Cage N Y in New York City asks the next question.
Question: Wouldn't opening up trade with Cuba boost their economy and thereby improve the quality of life there?
Usctec: U.S. trade with Cuba would certainly help improve the Cuban economy, and the quality of life would improve. But the Cuban government wants to continue with significant social programs that are very, very expensive to maintain. So, reestablishing trade would be beneficial to the Cuban people as long as the Cuban government made changes in the way in which it spends revenues.
GailDG: Moreover, I'd like to point to a recent study that indicated that the embargo on medicine in particular was detrimental to overall health conditions of Cuban people.
JackBW: This question hearkens back to something Gail said earlier.
Question: Gail, you alluded to Castro himself changing the Cuban economy. Can you -- and John, too -- as frequent visitors to Cuba tell us how it is changing?
Usctec: I just returned from Cuba on Friday evening. The economic situation continues to be problematic. The trade imbalance has worsened. The sugar harvest will increase, but not as much as expected. The price of sugar on the world market is lower. Politically, the country is reacting to Helms-Burton -- any commercial and economic changes that may have been scheduled are now being delayed because the government does not want to be seen as reacting under the pressure of the U.S.
GailDG: I returned from a two-week trip in December, which was my first trip since October, 1994. The changes I saw were quite marked in the area of private "enterprise." There were dozens of small restaurants, artisans, and other self-employed Cubans making their way in this transitional economy. It made me realize how much more could be done if the next logical step -- legalizing small business, for instance -- was taken.
Usctec: During my just-completed visit, I met with Ian Delaney, chairman of Sherritt International. He made an interesting point: He said that Cuba is a victim of its own success, that problems of liquidity were promoting both institutional change and structural change. However, he said that Cuba continued to need to make regulatory changes, especially in the areas of what small and medium-sized foreign companies had to deal with.
JackBW: User14447 has an unusual angle.
Question: Are the U.S. casino companies pressuring the U.S. government to loosen trade restrictions with Cuba in order to establish a relationship with Castro?
Usctec: Two years ago, many gaming -- the politically correct word today -- companies were eager to re-enter Cuba. Cuba, however, continued to officially say that gaming was not welcome. However, Cuba did and continues to permit gaming aboard ships as soon as they depart Cuban territorial waters. Also, I have heard from a growing number of U.S. corporate executives who are also telling the Cuban government that it should not permit gaming.
JackBW: JTV871WJV asks this one.
Question: Would Castro have to die first before trade would begin?
JackBW: Or what other factors would have to be in place?
GailDG: The Helms-Burton law makes it extremely difficult for relations to be normalized with Castro in power, as it names both Fidel and Raul, his brother, specifically. However, I've been around the Cuba issue far too long to say "never."
JackBW: Reeseyboy asked this early in our event.
Question: Hi, John. When Castro is ousted or dies, whichever comes first, do you think Cuba will return to a democratic government, and if so how long will it take economically to get Cuba back into the global market?
Usctec: I do not think that upon President Castro's death the country will be democratic in the U.S. sense. The most dangerous period of time for Cuba after the death of President Castro will be the first three to five days. During that period, there will be some people in the U.S. who will push for U.S. military action. This will, in turn, cause the government of Cuba to use the "nationalism card" as a way to say that the U.S. could not "defeat the revolution with guns or ideas, so now it will invade."
JackBW: This next question comes from South Plainfield, N.J.
Question: We've been hearing a lot about ingrained corruption and bribery in Russia and China. Is Cuba as bad, or worse?
GailDG: I've not been to Russia or China, but have traveled through much of Central America and parts of Latin America, and I must say that the petty corruption that is so rampant in many of these countries isn't pervasive at all in Cuba. Moreover, while the ministers and high-ranking government officials have their "perks" in cars, houses, food, etc., the appearance of gaining wealth at the people's expense has been cause for dismissal in several instances.
Usctec: I have worked within Russia and China. Cuba has instituted a very visible policy against corruption. There are, of course, the instances of dinners and small gifts. However, there have been no reported cases of substantial payoffs, etc.
JackBW: Here's a two-part question.
Question: Is the rate of crime high in Cuba because of their economic situation? And how do the Cubans react to you Americans?
GailDG: Crime is higher than when I first traveled to Cuba, as the economic situation has worsened. As for how they react to Americans, always very warmly -- once in a while you meet a real ideologue, but in general there is little rancor against individual Americans for U.S. policy.
Usctec: There have been some cases of purse-snatchings, etc. However, crimes against tourists are rare.
JackBW: June Boca in Boca Raton, Fla., has the next question.
Question: Many Cubans in Miami cling to the dream that someday Cuba will be "liberated" and they will all reclaim their wealth. It seems incredible that after 30+ years it could be possible. Do you think that there is even a remote possibility of that happening?
Usctec: I think that the answer to the question depends upon the definition of "liberated." In Miami, there are some people who will not feel that Cuba has been liberated until President Castro is dead. There are some who feel that Cuba will not be liberated until President Castro leaves Cuba. There are some who want President Castro to remain in order that U.S. political significance is sustained. In Cuba, "liberated" can mean the same as in Miami. It can also mean an end to the problems between the U.S. and Cuba.
JackBW: Inferno549 has a practical question.
Question: How can you go to Cuba when citizens of the U.S. can't visit Cuba?
Usctec: U.S. citizens are not prohibited from visiting Cuba. You should contact the Office of Foreign Assets Control of the U.S. Treasury Dept. in Washington, D.C., at 202 622-2480. They will provide you with the information. In 1996, almost 75,000 U.S. citizens visited Cuba. Approximately 60,000 were legal.
JackBW: Gail, what are the rules for journalists visiting Cuba?
GailDG: A license is not required if they are accredited with a news service. I am not sure about the rules for freelancers and would recommend, as John mentioned, contacting the U.S. Treasury Dept.
JackBW: VCOLOR asks this.
Question: What about the drug trade?
JackBW: Is there drug trade with Cuba?
Usctec: Cuba has gotten very, very tough with drugs. An increasing number of tourists have been arrested and imprisoned for drug crimes. Also, the U.S. government has said that Cuba is being cooperative with efforts to deal with drug interdiction.
JackBW: Now here's a question of absolutely cosmic importance.
Question: Any hope soon for being able to buy Cuban cigars?
Usctec: If you are licensed to travel to Cuba by the U.S. Treasury Dept., you are permitted to bring up to $100 worth of cigars into the U.S. The only other way is to purchase some "pre-revolution" cigars.
JackBW: TChance238 in Texas brings up Guantanamo.
Question: What effect does the American naval base on Cuba have on the relationship of the U.S. and Cuba?
GailDG: Guantanamo is a nationalistic issue within Cuba and a thorny one at that. The Castro government has used and still uses the existence of the base as a way to illustrate the power the U.S. could have over Cuba if Cubans "let down their guard." But as the situation stands, I don't see much change in the offing on status of the base.
Usctec: The Cuban government wants the U.S. out. The annual rent checks have never been cashed.
JackBW: Reeseyboy returns to the travel question.
Question: Couldn't an American get into Cuba by just flying out of Canada?
GailDG: Yes, an American could do so -- and I am not advocating such a trip unless you have checked with U.S. Treasury, as the potential fines are steep. However, the travel restrictions generally relate to spending of dollars and other hard currency in Cuba. So therefore, as John mentioned, many Americans do travel to Cuba every year on so-called fully hosted trips.
JackBW: For an online event, this is an appropriate question.
Question: Is the Internet accessible in Cuba?
JackBW: And could it be a political and social force?
Usctec: The Internet is now available in Cuba. The access is being restricted just as in other countries -- the Middle East, Asia, etc. There are more than 2,000 Internet addresses in Cuba. Many Cuban companies have Web pages.
JackBW: This question comes to us from KDaley880 in New Orleans.
Question: Do you think opening trade would lead to a return to a more moral, capitalist system in Cuba and free, internationally monitored democratic elections? Or do you think it will just help capitalists finance a repressive Communist dictatorship?
Usctec: The primary goal of U.S. policies throughout the world is to promote, in a cost-effective manner, the commercial, economic, and political interests of the U.S. There is no "perfect solution." Generally, engagement by the U.S. business community has helped to develop commercial, economic, and political changes within countries. But there are instances where governments have remained the same and, in some cases, gotten worse. But, overall, the U.S. must always understand that for every country in which our companies are restricted from operating within, there will be other companies, from countries that we consider to be allies, who will feel that engagement is more cost-effective toward achieving desired goals than is containment or isolation.
GailDG: Since John took the "macro" view, I'll make a "microcosmic" observation, which is that during this last trip to Cuba, I was struck by the attitudes of workers and managers within joint ventures. Those with some experience of working in other systems, of being able to think and make decisions for themselves, described it as the most important change made within their individual enterprises and the Cuban economy -- in their opinion.
JackBW: That's it for tonight. Thanks to John Kavulich of the U.S.-Cuba Trade & Economic Council for being our guest.
Usctec: Thank you for this opportunity.
JackBW: And thanks, too, to Gail DeGeorge of BW's Miami bureau.
GailDG: Glad to do it.
JackBW: You are both seasoned observers of the Cuban scene. Special thanks to the audience for all the questions -- sorry we don't have time for more. Transcripts of this and all BW Online conferences and chats are available soon after the event. Look under Talk & Conferences on the BW Online opening screen. Thanks again, and goodnight to all!
Copyright 1997 by The McGraw-Hill Companies, Inc. All rights reserved.
