Cuba could be key to Caribbean basin
Island is a sterling example of managing scarcity
Patrick Burnson, MarketWatch
SAN FRANCISCO - With the Panama Canal expansion on schedule for completion in 2014, supply chain specialists are anticipating a logistical hub to surface in the Caribbean Basin.
For those investors and traders eyeing opportunities in Cuba, the timing couldn’t be better. As noted in the Wall Street Journal recently, money managers are “optimistic” when it comes to finally eliminating this nation’s 50-year-old trade embargo. And initial barriers to entry should not include logistics, say industry experts.
Furthermore, Cuba may not need outside expertise to cope with immediate supply chain problems. According to some leading scholars and practitioners, Cuba is a sterling example of how to manage “scarcity.” They note that operating under resource scarcity already exists there, with businesses facing daily lack of food, medicine, electricity, and raw materials.
Despite this, the resourcefulness of Cuba’s people has triumphed to some extent. Reverse logistics experts observe that Cuba has created supply chains that re-use and recycle almost everything, despite the lack of government-mandated recycling programs. Indeed, such adaptation may augur the type of closed loop supply chains needed by other emerging nations in the future.
The long-term challenges around opening trade with Cuba would revolve around the issues of customs and export compliance, in particular the infrastructure to support the safe and fully documented movement of those goods.
With a drive to increase levels of electronic clearance and export documentation, the lack of investment in computerized systems — and the integration of those systems into the U.S. import/export world — would represent a complication, albeit a surmountable one, say compliance experts.
This could be ameliorated, however, by leveraging systems already in place through Cuba’s trade with the EU and Latin America, since our trade embargo with Cuba is increasingly unique.
To the extent that it has the hard currency to support trade at all, Cuba gets most of its imports from the EU and its neighbors to the south. But this can change in a hurry. Automotive parts, technology and manufacturing materials, as well as luxury items particular to the U.S. market are likely to be in high demand.
That said, it is likely that over the long term, U.S.-based producers would seek to build their own infrastructure within Cuba’s boundaries in order to better embed their business into the U.S. market.
According to the World Bank’s Logistics Performance Index, Cuba already performs in the median range. Cuba’s economy is mostly state-controlled, meaning most of the means of production are owned and run by the government.
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