Center for International Policy

As printed in
The Philadelphia Enquirer
April 22, 2007

Readying for the Cuba Rush

By Chris Mondics

Despite persistent opposition in Congress and from the Bush administration to Cuba’s communist government, American trade and travel restriction on that island nation likely will be lifted one day.

And when they are, the Duane Morris L.L.P. law firm in Philadelphia wants to be there to reap what some think will be a windfall in legal and consulting fees.

Duane Morris, one of Philadelphia’s largest law firms, with 650 lawyers, is one of a handful of professional-services firms nationwide positioning themselves to guide clients who want to do business in Cuba through the thicket of bureaucratic and political obstacles.

The concept is simple, and even a bit seductive: Cuba is a nation stuck in time, with markets and public infrastructure that are woefully underdeveloped, much like China 30 years ago. It has more coastline, and more undeveloped beaches, than all of the other islands in the Caribbean combined. It also has the potential for offshore energy development.

With so much investment capital sloshing around the globe, and millions of American baby boomers beginning to think about retiring to warmer climates, a green light from the United States would surely trigger an overnight boom.

Or so the thinking goes.

“Once it opens up, it could be ‘Katie bar the door,” said Sheldon Bonovitz, chairman of Duane Morris.

Yet, because of fierce political opposition in the United States from Cuban émigrés and others, prospects for lifting the embargo and travel restrictions in the short term are uncertain. Although Congress passed legislation in 2003 that would have lifted the travel restrictions as part of a larger legislative package, the provision was removed by Republican leaders during negotiations between the House and Senate.

Democrats who now control both houses of Congress, are deemed more sympathetic to the idea of closer relations with Cuba. But President Bush, whose administration has aggressively pursued sanctions against Cuba and companies that violate the trade embargo, likely would veto any measures that got to his desk.

Political observers say prospects for lifting the restrictions will not improve measurably until Bush leaves office after the 2008 election.

“This is a policy that has had tremendous staying power,” said Dan Erickson, a senior associate at the Inter American Dialogue, a Washington think tank. “There have been many times going as far back as the 1970s when things opened up under President Carter and people said the embargo was in its final days, and somehow it manages to continue. It has proven difficult to change.”

What gives hope to firms like Duane Morris is the burgeoning trade that already exists between the United States and Cuba. Under a series of exemptions, American firms can export pharmaceuticals and other health-related products, and agricultural goods. Agricultural trade alone between the two nations now is $500 million a year.

Other nations do substantially more trade. Total committed foreign invesement was about $6 billion, according to a 2006 report by Ernst & Young L.L.P. Cuba’s largest trading partner was Venezuela, followed by China, Spain, Canada, and Holland.

A study by Florida State University researchers Tim Lynch and Necati Aydin estimates that the Cuba trade embargo costs the United States $3 billion to $4 billion in lost exports each year.

Helping lead the Duane Morris initiative on Cuba is lawyer Tim Ashby, a former U.S. deputy assistant secretary of commerce.

Ashby, who is based in the firm’s Miami office, also manages a separate consulting firm called Cabesterre L.L.C., which advices American and foreign clients on Cuba. Ashby was recruited by Duane Morris for his expertise on Cuban and Latin American trade. Bonovitz said he expected clients of both firms to benefit: Duane Morris will provide legal services, while Cabesterre will furnish political and commercial expertise.

“I won’t have a condo there,” Bonovitz said. “But we would like to be representing condo developers.”

Ashby describes the Cubans as eagerly anticipating American investment, but on their own terms. Cuban officials have told him that the country would need a minimum of 250,000 new hotel rooms once the trade embargo was lifted.

“They do believe they have a future with America,” he said.

By way of explaining Cubans’ dire need for basic commodities and equipment, he said his Cuban friends often asked him to bring things like hammers and nails on return visits.

Although federal law lays out substantial penalties for companies that violate trading restrictions there is nothing to prevent companies from meeting with Cuban officials to discuss potential projects or even to sign letters of intent. In this way, Ashby says, firms are positioning themselves for an eventual opening up of trade between the two countries.

Ashby said he had been approached by major airlines, building-supply companies, energy-development firms, and others seeking advice on how to do business in Cuba once the trade restrictions are ended.

One significant obstacle is Cuba’s abysmal human rights record, which fuels the congressional opposition. Dissent is suppressed, and political opponents of the Castro government are harassed and jailed. Political gadflies often find their houses surrounded by mobs of screaming Castro supporters, who sometimes break windows and prevent occupants from leaving, or conduct other “acts of repudiation.”

The hope among trade proponents such as Ashby is that Fidel Castro’s failing health will help to loosen his iron grip on Cuban and that the already robust trade with Europe and Canada will foster a more democratic climate.

But staunch Castro opponents in Congress are skeptical, and they doubt that trade alone will improve the climate there.

“I think that is naïve in the extreme,” said Rep. Chris Smith (R., N.J.), a harsh critic not only of Castro but also of other authoritarian governments, such as China. “The Europeans and the Canadians have been trading robustly with Cuba, and there has been no amelioration of the democracy and human rights issues. If anything, the situation has gotten worse.”

But Ashby, a former Republican appointee, said it was not trade alone that would help Cuba change course. The country’s proximity to the United States also will help bring about change, he maintains.