In the article entitled “Cuba could be key to Caribbean basin” (and subtitled “Island is a sterling example of managing scarcity”), Patrick Burnson writes about upcoming opportunities in Cuba in view of the completion of the Panama Canal expansion in 2014 and the optimism for elimination of the 50-year-old trade embargo imposed on the island by the United States. See excerpts with a link to the full article below:
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. View MarketWatch slide show, “The revealing faces of today’s Cuba.”
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.
[. . .] Finally, U.S. investors might wish to look to another hemispheric partner as a model for doing business with this tiny island nation: Canada. Our northern neighbors figured out Cuba’s supply chain long ago. Canada’s investment, trade and cultural links with Cuba are substantial. In fact, Canada is the second-largest foreign investor in Cuba (after Venezuela) and the third-ranking country in terms of joint ventures. Canada is also Cuba’s fourth-largest merchandise trade partner, behind Venezuela, China, and Spain.
[. . .] “Have a Havana?” The supply chain seems ready to oblige. But while rum supplies are likely to meet U.S. demand, tobacco growers and cigar manufacturers are likely to be overwhelmed with orders. As a consequence, industry experts are forecasting a surge in that other great Cuban export: counterfeit Figurados.