November 25, 2013
Matthew Aho & Pedro Freyre, Daily Business Review
When Cuban President Raúl Castro first announced in 2008 that his government would begin to "update" the country's economic model, most observers were understandably skeptical of both his intentions and his ability to implement much-needed reforms. Yet, five years later the trend is clear: Cuba is shifting away from a centrally planned command economy toward a 21st century mixed market economic system.
Even the most jaded skeptics and the Castro regime's harshest critics can no longer deny the changes sweeping the island. Since 2010, more than 430,000 Cubans have received licenses to operate private businesses as everything from hair stylists and auto mechanics to birthday party clowns; untold thousands more have left jobs at inefficient and low-paying state-owned companies to seek employment in Cuba's burgeoning private-sector enterprises; farmers are forming autonomous agricultural cooperatives and new private transportation companies are arising to move their produce to faraway wholesale markets where supply and demand dictate prices. According to a recent report by the Brookings Institution, more than one million people—a full 20 percent of Cuba's total national labor force—are now working in the private sector.
FEET IN, OUT
This is not to say that Cuba is rushing headlong into American-style capitalism. On the contrary, every reform seems to come with a socialist-style catch. Cubans can start businesses, but they don't have access to the land (with clear title), labor or capital needed to make them grow. Self-employment is allowed, but the legal and bureaucratic hurdles to hire staff are insurmountable. Cooperatives are permissible, but full-fledged companies with one or few majority equity partners are prohibited. Cooperatives can lease land, but they can't own it outright. The Cuban government may think it can successfully dabble with market economics—one foot in, one foot out—but any successful businessperson knows that excessive regulation, taxation and chronic political oppression will stop an otherwise profitable enterprise dead in its tracks.
According to a survey Akerman conducted at last month's ALM U.S. Latin America Legal Summit in Miami, a sweeping majority (95 percent) of general counsel and senior executives doing business in the region were skeptical that Cuba will offer any significant investment opportunities in the near future. Among countries in Latin America, respondents were more optimistic that Argentina (43 percent) or Ecuador (30 percent) would present the best business opportunities.
Clearly, the island still has a long way to go and the future is uncertain. But the changes sweeping Cuba are already affecting Florida's legal and business communities from Calle Ocho to Ybor City. Take Fabián Zakharov, a Hialeah-based entrepreneur whose auto parts store caters exclusively to Cuban Americans trying to find parts for Soviet-era cars for their relatives in Cuba. Or there are the dozens of Little Havana stores serving as a de facto pipeline of wholesale apparel for upstart clothing shops in Big Havana. Just last month, Tampa International Airport announced the recommencement of weekly Cuba flights, in addition to the 17 flights from Miami. And, according to some estimates, Cubans in the United States will send nearly $2 billion this year to their island relatives. Some of those funds will surely go toward financing nascent private enterprises.
The broader point is that as Cuba changes, Florida will adapt. The day when the Cuban people become our full-fledged business and trading partners is not as far off as it was just five years ago. And as with any partnership, Florida's business and legal communities should do everything possible to support the Cuban people in their pursuit of greater economic self-determination.
Although money is flowing to Cuban entrepreneurs through family remittances—thanks in large part to 2009 policy changes that removed restrictions on money transfers to family members—it is still illegal for U.S. persons to make formal loans and/or grants to Cuban individuals and businesses. Removing this impediment would not only increase the volume of capital flows, they would also be better targeted. An even simpler approach would be to encourage Florida's business and legal institutions to directly engage their Cuban counterparts. Local bar associations and chambers of commerce have a wealth of knowledge and experience on how to build successful businesses and commercial ecosystems. U.S. changes to travel policy in 2010 and 2011 have made organizing such exchanges easier than ever and there are several potential Cuban partners, such as the Catholic Church, that have begun carving out a space for such discourse.
There are myriad ways for Florida's best and brightest legal and business minds to lend a hand during this crucial period in Cuba. The best part is that a few small steps today can lay the foundation for a freer, more prosperous future on their side of the Florida Straits, as well as ours.
Pedro A. Freyre is based in Miami and is chair of the international practice group of Akerman. Matthew D. Aho is a corporate practice group consultant at the firm's office in New York.
|11/6/13||Cuba — A path toward national healing
Ricardo Herrero, The Miami Herald