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October 2015
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Investing in Cuba remains ‘very risky,’ panelists say

Investing in Cuba remains ‘very risky,’ panelists say

Exploring business potential on the Communist island has surged since
The infrastructure is dated but so is the mindset
For now investors must get used to the state as the majority partner

Panelists at a CEO roundtable about the future of Cuba painted a mixed
and ever-evolving picture of the opportunities — and risks — for
businesses that want to invest in the Communist island.

“Cuba is like the Galapagos Islands,” Augusto Maxwell, chair of Akerman
LLP’s Cuba practice told a standing-room only audience in the community
room of the Miami Herald/El Nuevo Herald on Tuesday. He went on to
describe a country in evolution, where what holds true today may not
work tomorrow and where establishing a business remains a “very risky”

But like other panelists in the morning program titled “The Future of
Cuba — Investing and Tourism,” he said changes are occurring, though not
as always as quickly or as efficiently as foreign investors would like.
He pointed to the entry of Airbnb, the San Francisco-based company that
launched its home-booking service in Cuba in April. Since it went live,
Airbnb, has accumulated more than 2,000 listings, making it the
fastest-growing launch in the company’s history.

But Airbnb’s entry into the island, Maxwell said, “was inconceivable a
few years ago.”

Maxwell was among a group of Cuban experts — a lawyer, a bank president,
an airline vice president, three travel and tourism executives and even
a former U.S. senator — who debated the business potential on the island
in a pair of panels that focused on investing and tourism in Cuba.
Restrictions on both travel and business have eased since the Dec. 17
announcement by President Barack Obama and Cuban leader Raul Castro that
the two countries would renew diplomatic ties and open embassies after
half a century of frosty relations.

While the panelists steered clear of the political fireball that the
recent rapprochement sparked in Miami, they all agreed on one theme:
Cuba is still the great unknown. Those who venture there should be
prepared to commit time, effort and capital without a clear or quick
return on their investment.

Steven N. Zack, a partner with Boles, Schiller & Flexner and the first
Cuban-American president of the American Bar Association, said he is
often asked about the legal system in Cuba. His response? There is no
legal system in Cuba because there is no due process and a businessman
has to be willing to take a back seat to a government that acts as a
majority owner in all enterprises.

He told the cautionary tale of a Canadian businessman who had invested
on the island for almost two decades, until he was thrown in jail on
corruption charges. The Canadian, Sarkis Yacoubian, spent more than two
years in jail before being found guilty and expelled. His case is not

“We know one thing for sure,” Zack said. “He didn’t get his business
back. Raul Castro’s son-in-law did.”

He added that any time he asked a question of a Cuban lawyer during a
recent law conference on the island, he never got a concrete reply. “The
answer is always the same: Es muy complicado.” (It’s very complicated.)

Other panelists talked about the difficulties of dealing with an
inefficient system that, even when trying its best, simply didn’t have
the technology or infrastructure to meet business or tourism demand.
Tessie Aral, president of ABC Charters, which has provided limited air
and travel services to the island since 2000, said there aren’t enough
hotel rooms to meet the surging demand. Casa particulares (or bed &
breakfasts) have picked up on the demand.

But lack of rooms is only one of many obstacles, she added. Government
bureaucracy is a problem, too, and any investor considering Cuba needs
to “learn to work with their infrastructure but also their mindset.”

Cuba’s interest in opening itself up to the United States is all about
economics. The island desperately needs about $2.6 billion a year in
foreign investments. But, said former U.S. Senator Mel Martinez, opening
the door “is not an invitation to business.” Martinez, who came to the
U.S. as an unaccompanied minor in the Pedro Pan airlift, warned that the
government rhetoric may have changed but the rules of the game haven’t.
He expressed dismay that the U.S. had made too many concessions.

“What did we give? What did we get? What should we have gotten?” he asked.

Zack compared the complicated relationship between the U.S. and Cuba —
and their respective business interests — as a complicated dance in
which the first step has been taken but the question remains: Do
potential American investors truly have a partner in Cuba?

“My position is we should engage in the dance,” he said, “but we
shouldn’t dance by ourselves.”

Ana Veciana-Suarez: 305-376-3633, @AnaVeciana

Source: Investing in Cuba remains ‘very risky,’ panelists say | Miami
Herald –

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