TEXAS TRADE WITH CUBA
By David J. Cibrian
In the wake of Fidel Castro’s declining health that resulted in his ceding power to his brother Raul last summer, America’s corporate interest has peaked with the prospect of access to the more than 11 million consumers who are only 90 miles from America’s coast.
Cuba holds promise for Texas business due to the state’s port system and export potential. A Democratic Party president in 2009 coupled with a Democratic controlled Congress could be the catalyst for calibrated change of U.S. policy.
From agribusiness to off shore oil drilling, Cuba has tremendous potential for U.S. business. Last year, representatives of San Antonio-based Valero Energy Corporation and Exxon-Mobil attended a conference in Mexico City with Cuban officials to explore energy opportunities. The possibility of joint U.S./Cuba oil drilling projects has spurred legislative activity in the U.S. Senate as Cuba continues to develop plans for deepwater oil drilling. In 2007, Senator Byron Dorgan (D–ND) introduced legislation that would allow U.S. energy companies to proceed with exploration for oil and natural gas in Cuban waters. Senator Dorgan also supports expanded trade with Cuba that would allow US farmers to sell their crops in Cuba.
Sen. Dorgan is one of several members of Congress pursuing an end to the embargo. After earlier attempts by former presidents Carter and Clinton failed to relax the embargo, Congress enacted legislation to permit the commercial sale of food and medicine to Cuba in 2000. Since then, the normally cash-strapped Cuban economy has managed to purchase more than $1.5 billion of food and agricultural products -- $340 million in 2006 alone. Cuba experts believe that this is just a small window into a potential multi-billion dollar trade relationship with Cuba if the embargo repealed.
With the largest agricultural production area in the Caribbean region, Cuba represents a unique opportunity for agribusiness investors. Agribusiness, large industrial scale farming, has helped transform U.S. agriculture, especially in Texas. The exportation of agribusiness equipment and technology to Cuba from Texas coupled with the importation of additional agricultural product into the U.S. could create a major new industry for both countries.
The Texas Gulf port system would make it easy for both countries to reestablish a successful trade relationship. Critical will be the Port of Houston, which is ranked first in the United States in foreign waterborne tonnage and second in total tonnage. The legislation passed by Congress in 2000 has caused the Ports of Houston and Corpus Christi to develop new relationships with Cuba.
Texas trade with Cuba is not limited to energy and agriculture. Cuba’s dated infrastructure could benefit from U.S. trade and technology. A prime example is Cuba’s antiquated phone system, which has a shortage of international circuits with poor installation and repair services. With AT&T’s international headquarters in San Antonio, the opportunities for investment in the Cuban telecommunications industry are extensive. Infrastructure for airports, ports, warehousing, and railroads will also need major investment. San Antonio-based construction companies, such as H.B. Zachry could capitalize on the infrastructure needs.
No one can predict with certainty what type of economy or government will form in a post-Castro brothers Cuba. After 80 year old Fidel, the two most powerful men in Cuba are brother Raul Castro, 76, and Ricardo Alarcon, the 70 year old President of the Cuban National Assembly. Given the seniority of this triumvirate, it is possible that lasting reform will not develop until the next generation takes power. Regardless of who leads Cuba next, many Cuba watchers believe that a change in U.S. policy toward Cuba is much more likely to come from a power-shift in the U.S., not Cuba. With the pending U.S. power-shift, now is the time for corporate America, to plan for investment in Cuba.
David Cibrian is the partner in-charge of the Strasburger & Price law firm’s international practice. A Cuban-American, he has testified before U.S. Congressional Committees regarding Cuba and has traveled extensively in Cuba.
