Cuba Not Likely to Engage U.S. Supply Chain Managers Soon

The joint announcement between the U.S. and Cuba signaling a limited warming of bilateral relations may have broader supply chain implications. But analysts tell managers here that several barriers exist before the communist nation can play a key roll as a Caribbean Basin hub.

According to Dr. Laurence Allan, Head of Latin America Analysis, IHS Country Risk, the U.S. legislation that underpins the embargo on Cuba is in the hands of U.S. Congress…and is unlikely to be scrapped anytime soon.
“President Obama’s position parallels wide-ranging but slow-moving economic reforms the Cuban government has been pushing since the April 2011 Fifth Communist Party Congress,” notes Allan. “Cuba announced 300 economic guidelines to drawdown the economic role of the state and to promote private enterprise.”

Allan adds that is recognition of the fact that a lack of opportunity for ordinary Cubans in an economy increasingly distorted by a dual currency system was at least as likely to threaten Cuban political stability as all the pro-democracy efforts of the U.S. and allied countries.

“The presidential statements will spur guarded optimism in widening business interest in Cuba,” says Allan, noting that the U.S. already exports significant quantities of agricultural goods to Cuba under humanitarian exceptions to the embargo.

The huge Mariel port development project potentially positions it well as a transhipment hub in the Caribbean, but as reported in SCMR, Cuba has also preserved its “rogue nation” status by permitting North Korean vessels to carry undeclared military cargo through its ports.

Finally, a key issue yet to be addressed will be how to scrap the Cuban Law of Foreign Investment, which proposes significant benefits for foreign investors who partner with Cuban state-owned enterprises, notably including tax exemption on profits for eight years.

Raúl Castro’s intention to restructure the Cuban economy while maintaining the core political values and structures of the Cuban revolution have yet to be tested, concludes Allan.

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