U.S. firms stand to gain from Cuba ties

Plans to increase trade and travel between the United States and Cuba should prove a boon to several industries, including Internet service providers, airlines and U.S. banks.

As the two nations begin discussions to normalize relations, opening access to Cuba for U.S. companies as well as fostering entrepreneurship in the island nation appear to be primary goals. And if the economic pipeline between the U.S. and Cuba is fully opened in the future, it could lead to billions of dollars in business for companies on both sides of the Florida Straits.

"The potential market for U.S. exports of goods and services is significant, even though not enormous,'' Gary Hufbauer, a senior fellow at Peterson Institute for International Economics and co-author of Economic Normalization with Cuba: A Roadmap for US Policymakers, said in an e-mail Wednesday. "At best, Cuba is a small economy.''

If economic relations are fully normalized, a change that Hufbauer notes "is a long way off,'' U.S. merchandise exports to Cuba could reach $4.3 billion a year, and the export of goods from Cuba to the U.S. could total $5.8 billion a year, according to Hufbauer's study.

And while in the U.S., there is currently no recorded trade in services between the two nations, if a financial company can sell mutual funds to Cuban investors, for instance, or Cubans can easily visit family living in Florida, those sales of services could potentially generate hundreds of millions of dollars for each country.

With relations just beginning to thaw, the U.S. industries most likely to initially benefit include travel-oriented businesses such as airlines and resorts, processed food companies, agriculture firms, financial institutions and medical clinics, Hufbauer says.

The White House said Wednesday that telecommunications companies will now be able to create infrastructure in Cuba that will open up a communication pipeline between that country and the U.S. Only about 5% of Cubans now have access to the open Internet, the White House said.

Travel restrictions will also be eased as the U.S. plans to open an embassy in Havana, and Cuba gains a diplomatic presence in Washington, D.C.

"This is fundamentally about freedom and openness,'' President Obama said Wednesday. "It will be easier for Americans to travel to Cuba, and Americans will be able to use American credit and debit cards on the island.'' Such contact, the president said, will ultimately empower the residents of Cuba.

Carnival Corp., the Florida-based company that is the largest cruise operator in the world, said Wednesday that there were opportunities to be explored in the largely untapped market.

"Cuba is the largest country in the Caribbean, so there's some exciting possibilities from a cruise industry perspective,'' Roger Frizzell, Carnival's spokesman, said in a statement. "Some infrastructure for cruising already exists in the country, along with several ports, so it offers great potential, but there are other issues that will need to be taken into consideration if this market opens up."

Victoria Day, spokeswoman for Airlines for America, the trade group representing most major U.S. carriers, said, "We believe this is a good first step toward realizing the economic benefits of opening new travel markets and reducing trade barriers that impact aviation.''

In a survey taken between March and April, Travel Leaders Group, which has more than 6,500 travel agencies, queried 246 of its agents about whether any of their clients had a desire to visit Cuba. The poll found that 55.3% of the agents had clients who'd mentioned interest in going to the island nation, and as of April, 11% of the agents had already finalized plans for at least one trip to Cuba for their clients.

However, 44.7% of the agents said none of their clients had shown interest in Cuba as a travel destination.

U.S. financial institutions will now be able to open accounts with their Cuban counterparts. And it will become easier for U.S. companies to sell their exported goods in Cuba, with a particular emphasis on materials that can be used to construct private residences, and tools that can be used by small farmers.

In a statement, U.S. Chamber of Commerce President Thomas Donohue applauded the changes in U.S. policy toward Cuba.

"The U.S. business community welcomes today's announcement and has long supported many of the economic provisions the president touched on in his remarks,'' Donohue said. "There is still work to do, on both sides of this relationship, but the changes outlined today are a substantive and positive step forward."

Jodi Bond, vice president for the Americas at the U.S. Chamber of Commerce, said in an e-mail that "it's important to look beyond just dollar values or market size when considering this historic milestone for U.S. business. This is one more market – and one that's only 90 miles from our shores – to which U.S. goods and service providers now have access.''

But Laurence Allan, head of Latin America Analysis at IHS Country Risk, noted in an analysis released Wednesday that the economic path ahead is strewn with potential roadblocks.

"U.S. legislation is likely to remain a major hurdle as the U.S. Congress can (penalize) companies who invest in or do business with Cuba,'' Allan wrote. Liberalizing "that aspect of U.S. policy will thus be dependent on U.S. domestic policies and, despite the positive messages forwarded by Obama today, indicates that more profound improvement in bilateral relations remains a work in progress."