Cuba thaw could open markets for Georgia

Georgia companies could be well-positioned to build new markets in Cuba amid President Barack Obama’s controversial move to relax trade and travel restrictions.

The most obvious sector is agriculture, which currently makes up the bulk of Georgia’s limited trade with the Communist nation. But state and business leaders also are intrigued by potential in the medical device, automotive, tourism, telecommunications and technology sectors.

At a recent meeting of the state Department of Economic Development board, officials didn’t necessarily endorse the Obama administration’s pivot from a half-century-old policy of Cuban isolation. But several board members stressed that Georgia businesses need to be in the mix if a U.S.-Cuba thaw leads to freer commerce.

“We have natural access to that market just geographically that puts us in a good position,” Tom Croteau, Georgia’s deputy commissioner global commerce, said in an interview with The Atlanta Journal-Constitution.

Havana, Cuba’s capital, is about a two-hour flight from Atlanta. Georgia boasts fast-growing seaports and Atlanta’s airport, the world’s busiest.

Experts said no one should expect an immediate gusher of new trade with Cuba. The nation of 11 million isn’t a very big U.S. trade partner thanks to decades of bitter relations, and its communistic bureaucracy might be cumbersome to navigate.

Trade is done in cash with payments by the Cuban government upfront. Among other things, Obama’s policy shift will trigger banking changes that could ease trade and travel.

The Cuban market also isn’t as robust as those of its neighbors such as Mexico, which has a more diverse economy and a population that’s more than 10 times bigger.

Then there’s the politics. Though there have been signs of support from Democrats and some Republicans, it’s doubtful Obama will win enough support for a full relaxation of relations, which would require congressional support.

A new middle class

Rene Diaz, an economic development board member and president and CEO of Atlanta-based Diaz Foods, said politics aside, Georgia businesses need to prepare for a new middle class that could develop on its doorstep.

“If we don’t open our eyes and get prepared for it we might lose that advantage,” Diaz said.

Diaz, whose company distributes Hispanic brand foods to 25 states, was born in Cuba in 1961. His parents left for the United States in 1967.

Beyond location, Georgia could be well-positioned politically. Miami-based firms may choose not to risk the ire of the powerful South Florida Cuban community who oppose the Castro regime, Diaz said, and frown upon doing business in Cuba while the Castros remain in power.

Diaz said it might be difficult for his family to immediately do business in Cuba because of Cuban visa requirements for people who fled the nation before 1971. But his company is preparing long-range plans for trade, and in the meantime is working on shorter term plans to distribute products through other companies already in Cuba.

Companies also need to plan for the potential that the Cuban customer base expands from a system where the government is the sole buyer to one where the citizenry becomes the end consumer, Diaz said. That can present its own challenges.

The administration said the new policy will increase travel, transfers of money between American Cuban immigrants and their families and help grow the nation’s nascent private sector.

Easier travel coming

Don’t expect to hop on a plane to Havana on vacation just yet. Tourism, in a traditional sense, is still banned. Permitted types of travel include visiting relatives, sanctioned sporting events and public performances, academic research, journalism and religious activities. That could change if further loosening is pitched by Obama or his successors.

The U.S. is Cuba’s No. 5 trade partner, but U.S. exports to the island amounted to only $299.1 million in 2014, according to the U.S. Census Bureau. That was the lowest figure since 2003, and down from a high of $711.5 million in 2008.

Georgia exports to Cuba in 2013 were about $27.5 million. Cuba ranked 87th among destinations for Georgia’s exports, and 31st for the state’s outgoing agricultural commodities, according to data from the state economic development agency.

Poultry is by far Georgia’s top export to Cuba, followed by animal feed products and prepared meat and seafood products.

Produce and timber could be big opportunities, said Bo Warren, director of business development for the state Department of Agriculture.

“We’re not talking about a huge market, but we’re not going to miss any opportunities,” he said.

Croteau said medical device makers, hospitality companies, Delta Air Lines and potentially auto companies could find an appealing market in Cuba. Cuba, famous for 1950s-era cars that roam Havana’s streets, could be tempting to auto parts firms, distributors and eventually automakers.

Croteau said new trade missions aren’t planned, but Georgia previously has held trade trips there.

Some of Georgia’s biggest companies had little to say about Cuba trade, but it’s clear they’re keeping an eye on the potential.

UPS said the shipping giant will “evaluate the market opportunity for trade in Cuba” and “is supportive of open markets and expanded global trade.”

Eyeing the market

InterContinental Hotels Group, which operates brands such as Hotel Indigo and Holiday Inn and has its North American hub near Perimeter Mall, has no Cuban hotels or resorts in the pipeline. IHG said Obama’s Cuba policy “is still quite fresh” and is monitoring the policy’s impact on tourism and travel.

Atlanta-based Delta once operated charter service between Miami and Cuba, and less frequent charter service out of New York and Atlanta. Those flights started in 2011 and ended in 2012 because of limited demand.

But if restrictions are relaxed Delta and rival carriers would likely vie for gates and takeoff and landing slots at Cuban international airports.

Any time an airline opens a new market, it must judge demand and figure out a profitable mix of aircraft and other resources. A Delta spokesman said the company is open to re-establishing and expanding operations in Cuba as opportunities occur.

Coca-Cola said in a statement that the company does not operate in Cuba, and the company “would only consider re-entering the market at the appropriate time and in accordance with the relevant laws and regulations governing US relations with Cuba.”

A spokesman for Home Depot said the home improvement retail giant is focused on growing within its current footprint and has no plans for operating in Cuba.

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