Cuba: Investing in the New Frontier

 

Josh Lockman and Jaime Carlson, on The World Post

(a partnership of The Huffington Post and Berggruen Institute)

 

As we stepped outside of Jose Marti Airport amidst the humidity and frenzy of locals eagerly awaiting relatives, we were greeted by our driver, a 45-year-old Czech expat who arrived to Havana five years ago. Having missed out on the capitalist transformation after the 1989 fall of the USSR, our "man in Havana" was determined to "strike gold" this time around but in Cuba.

 

We jumped in his white '59 Thunderbird convertible and sped down to the Malecon as he regaled us with stories of his Cuban wife's beauty salon, the paralysis of Cuba's bureaucracy, and his love of gambling. Pulsating amidst the beautiful country we would encounter over the next nine days was that indescribable allure of risk and the exciting unknown that await.

 

Shortly after President Obama's January landmark announcement that eased travel restrictions, we decided to travel to Cuba. Our primary purpose was to attend the Havana Biennial, an international art event to exhibit non-Western art, from Congolese sculptors to South Korean photographers. But having worked internationally over the last decade, we also wanted to see first-hand how the exuberance of improving Cuban-American relations was playing out on the ground. What doors to Cuba were really positioning to open to the international business community? Before our trip, we spoke to a range of legal and policy experts, who had varying opinions on almost everything. They did all agree on one thing: The future of Cuba is still largely unknown.

 

After all, the island nation is grappling with some significant questions to answer: Will Cuba be the new Dominican Republic? Will the bureaucracy of the Cuban revolution endure so long as either Castro brother is alive? Will it be the new international hub of the Americas? How long before the US embargo is overturned? Given the gridlock in DC and upcoming presidential elections, no one was willing to give odds on that last one.

 

The characters we met in Cuba--locals, expats and visitors alike--were all focused on how to seize on the future. There was the Cuban woman who saw the opportunity to be an aggregator for Airbnb rentals and now orchestrated more than a dozen bed & breakfasts. There was the Cuban-American finance executive, inspired to return for the first time since he left at age five. Even the Cuban-born wife of the Czech expat, who had established a successful beauty salon and catered to a diverse clientele, was enthused by the opening and saw a chance to grow her business. There was the Italian hotelier that arrived as a bartender 25 years ago and now dines with the likes of A list celebrities at his hotel, the finest in Havana. And finally, almost comically, was an older Tennessee man on our flight from Miami, dressed in safari gear and with PanAm bag in tow that proclaimed, "I'm headed to make money!" In this motley crew of characters, we encountered the sheer excitement of the unknown.

 

Many of the Cuban people we met were also eager for more "Yanqui brothers" to stay at their bed and breakfasts and hire their everyday classic American cars. By contrast, in front of the once and now reestablished US embassy in Havana, we gazed at one of many still provocative signs by the Cuban regime, reading "Venceremos" ("We will overcome/conquer," in Spanish). Despite the eagerness of both the American and Cuban peoples about this historic moment, we were left wondering how long until the rapprochement would truly occur.

 

Before the embargo, Havana was a playground for Americans. In the 1950s, the mafia dreamed of building a gambling haven that rivaled the glamour of Vegas and Monte Carlo. Many of the casinos designed by Meyer Lanksky, a famous Jewish American racketeer on whose life Godfather II is based, still dawn the Havana skyline and tell the story of a time when mobsters collected millions on slot machines and table games. The planning of Bugsy Siegel's death took place in Havana and was only the tip of the iceberg of a dangerous time of guns and violence on the island.

 

This all crumbled when Castro's revolutionary party took over in 1959 and stabilized the island from crime and violence for the first time in Cuba's 500-year history. The revolution's socialist laws now provide the tea leaves to predict who will prosper and what the major challenges will be as the United States and Cuba, if nothing else, talk of changing policies. These challenges include generations of government workers with vested interest and power in ensuring the bureaucratic ship charges forward on its existing path. There are also generations of Cubans who have been raised in a labor force with little to no incentives to be more innovative, entrepreneurial, or productive than the status quo.

 

Moreover, the current government is appropriately cautious of opening their doors without a long-term strategy for fear of finding Havana dotted with a Starbucks and McDonald's. The businesses or individuals, Cuban or otherwise, that will win will be ripe with perseverance and agility. They will be based on the ground in Cuba to build firsthand a strong network of Cuban locals and government officials, while having an international investor base.

 

We left Cuba with some of the same questions that policymakers, maverick entrepreneurs, and major American corporations are grappling with alike. Who do you bet on to win in Cuba and when? While the roulette croupier obligatorily says to his gamblers, "no more bets," such may not be the case in Cuba. The regime that has outlasted six decades of U.S. isolation is unlikely to make significant political or commercial changes in the immediate short term. From the CEOs of Fortune 500 companies to the quintessential "gold-rush" seeking pioneers to expats who have been patiently waiting a decade for this very moment, all must recognize that this is a longer term investment than what the political euphoria is portraying.

 

That being said, there will be significant winners in Cuba: namely, those with consistent feet on the ground and with a strong willingness to understand and perhaps even work alongside the Cuban government (even if it is unlikely to give much headway immediately). Those that choose to invest in and with Cuba may not see every bold move vindicated in the short term, but the long term will favor tremendous opportunity for both the Cuban people and the foreign entrepreneurs.

 

In short, Cuba may very well return to its historic significance of a place of risk, gambling, and betting. And in the long run, the house of the regime may not win.

 

Josh Lockman, Lecturer, USC Law School

Jaime Carlson, Fellow. Pacific Council on International Policy and Truman National Security

 

 

Cubanálisis - El Think-Tank

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