Post-embargo Cuba: How Risky?
cuba_economy

12th January 2015

By Jerry Haar
Last month’s announcement of a U.S.-Cuba normalization accord has produced euphoria among American companies and entrepreneurs, even though the trade and financial provisions of the agreement are more fine-tuning than major change. Only full removal of the embargo (which only Congress can do) will create a myriad of profitable opportunities in sectors such as tourism and agribusiness, despite the first-mover advantages of Canadian, European and Asian companies presently doing business with Cuba.
American business should be fully aware of the risks involved in a post-embargo environment. To begin with, there is the economic landscape. Cuba is an economic basket case and a deadbeat borrower with an anemic economic growth rate forecast to be 1.2%. Total hard currency debt is approximately $75 billion (making Cuba technically insolvent), and the country’s GDP is only $72.3 billion—less than Belarus, Angola, and Home Depot’s annual sales ten years ago.
Regarding trade, the U.S. and Cuba do have a trade relationship; however, it is restricted primarily to agricultural commodities and products, medicines, and health care products. Post-embargo, Cuba will be a fruitful market for telecom and IT equipment, agribusiness and construction products and equipment and scores of other goods. However, who is going to finance trade with Cuba and under what terms? Without U.S government guarantees for trade financing and insurance, neither banks nor companies will not …

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