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What does the Cuban embargo announcement mean to your small business?
President Obama did not quite lift the U.S. embargo on Cuba with his landmark announcement on December 19th, but many businesses are looking to America’s southern island neighbor as a bourgeoning market, once we’re actually able to do business there. Some industries are already able to work with Cuba, although it’s rare. So what is it like doing business in Cuba? Some says it’s actually pretty tough.
For one, many believe that the leaders of Cuba truly do not believe in capitalism, which is a glaring incompatibility with the U.S. There are about 11 million people in Cuba, compared to the 1.4 billion of community China and 90 million in Vietnam. This case is most comparable to the recent restrictions against Myanmar as it is a much smaller country, closer to that of Cuba, and is going through similar political transformation. In that case, the U.S. bars individuals and companies from investing in or doing business with people or companies linked to the repression of democracy in that country.
If Myanmar is any indicator, a change in policy may not be as popular among investors as one may hope. Even after sanctions against the Asian nation were eased, investors were slow to come to the table. They are turned off by poor infrastructure, complicated laws and zoning restrictions, and tax codes.
Likewise, investment and trade with Cuba has complicated parameters. Cuba also has an aged infrastructure, a mire of bureaucracy, and the still withstanding U.S. embargo. Although there is plenty of opportunity here for American small businesses, it’s a no-go until Congress drops the embargo altogether. However, the Cuban government is no peach either, insisting on holding the majority stake in most businesses.
Earlier in 2014, Cuba passed foreign investment law that cut taxes on profits while ensuring legal protections to investors, but that hasn’t been enough with stalwart bureaucracy, as American businesses have reported. The announcement last week will not open Cuba to tourism from the U.S. and will not completely open trade between the countries, it will make it easier for American businesses in the construction, telecommunications, agricultural, and related sectors to export to Cuba.
Diplomatic relations between Cuba and U.S. are just getting started so only time will tell what the benefits and drawback will be to doing business in Cuba.
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