Tampa investors long to reconnect with Cuba
By PAUL GUZZO | Tampa Tribune, Fla. | Published: April 6, 2014
TAMPA — Few lost more than the Lykes family of Tampa when Fidel Castro came to power in 1958 and nationalized Cuba’s private property.
Their 15,000-acre spread in Oriente province had been identified by Fortune magazine a few years earlier as one of the most productive cattle ranches in the Western hemisphere.
“Breathtaking,” said John Parke Wright, grandson of patriarch Dr. H.T. Lykes, of its landscape. “It’s a gorgeous part of the island.”
Recent signs of improvement in U.S.-Cuba relations have rekindled Wright’s hopes that his family will do business on that land again. He talks of a cattle ranch on the property, as well as a nature preserve and a five-star hotel.
Just last week, Cuba took new steps to encourage foreign investment. It eliminated its labor tax, cut its profit tax in half from 30 percent to 15 percent while exempting most companies from paying it for eight years, and authorized joint ventures with foreign interests.
But without moves on the U.S. side to soften a travel and trade embargo now half a century old, Wright and businessmen like him can only watch as nations such as Brazil capitalize on Cuba’s ovations.
“I have tw\o hats here,” Wright said during an interview in Tampa last week, holding a Cuban military cap in one hand and a rancher’s hat in the other. “The question I pose to you is which one do we prefer?”
Carlos Saladrigas of the Cuba Study Group, U.S. business leaders of Cuban descent, says it another way: “The embargo would force Americans to lose first-comer advantage and that is a big economic negative.”
Saladrigas said he doesn’t expect the business floodgates will open in Cuba just yet. There are still roadblocks. Every foreign investment, for example, needs government approval and businesses must use a government-run employment agency in hiring.
What’s more, he said, the Cuban government has been promising the world for years that it would allow companies that are 100 percent foreign owned to set up shop there. Not one has yet.
The first foreign investors will serve as guinea pigs, closely watched by other potential investors, said Carmelo Mesa-Lago, Cuban-born economist and University of Pittsburgh economics professor.
“Cuba needs to reverse the bad image it has had for foreign investment,” Mesa-Lago said.
Wright is resolved that in socialist Cuba, he cannot buy back the ranch once owned by his family but he does hold out hope of forming a joint venture and leasing the property. It is used now as a cooperative farm.
It’s not the perfect solution, he said, but as a businessman he knows there is rarely such a thing.
Like his ancestors, Wright has earned his living through the cattle industry. He also has a flair for drama and storytelling that has helped him navigate the political side of international trade. Most of his business is in nations such as China, Saudi Arabia and Cuba.
His cousin, Arthur Savage, president of a Tampa-based shipping company, is more to the point when he describes what U.S. business needs from its political leaders to make the most of Cuba.
“You don’t go to war,” Savage said, “with your top business partners.”
And that’s just what Cuba could be some day, he said.
Still, it may take a while for the Lykes family.
Even if the embargo were lifted today, Wright said, he would need to see growth first in a high-end tourist trade interested in meals of fine beef.
That would come if U.S. tourists flocked to the island, he said.
Wright and Savage already do limited business in Cuba, taking advantages of changes through the years in the embargo.
Wright trades cattle semen to Cuban farmers. Savage’s company is a shipping agent whose clients include cargo vessels travelling to Cuba.
It’s just a shadow of the bustling business their family did with the island in the days before Castro.
Savage is part of Tampa’s McKay family, which made its fortune in the Cuban cattle industry. The Lykes family did the same after marrying into the McKay family.
When the Lykes and McKays arrived Tampa in the 1800s it was wild and undeveloped. Using the fortune they made in Cuba, they turned it into a bustling city, said Rodney Kite Powell, curator at the Tampa Bay History Center.
Powell credits the two families with Tampa’s early successes as a port and banking center, earning them status as the founding families of the community.
Wright said Tampa could grow again with the money it earns from doing business with Cuba, either through investment or trade at its port.
Savage is focused on how ports can take advantage of the new foreign investment laws.
New investor-funded development in Cuba will require supplies, he said. And any money the Cuban government makes off these investments can go toward improving an infrastructure that’s crumbling from years of isolation.
“When I am in Cuba, I get fixated on the lights being too dim,” Savage said. “That is not just a problem that can always be fixed with new bulbs. Often it would need new bulbs, wiring and switches. Cuba is a country the size of Florida and near everything needs to be replaced.”
U.S. businesses could supply these necessities to Cuba. And he and others like him could transport them.
Under current U.S. law, such trade is forbidden. But as with trade in agriculture, the government could approve it without lifting the embargo.
Cuba already uses American construction supplies, but purchases them from the Dominican Republic, said Cuban native Arturo Lopez-Levy, a former policy advisor for the Castro regime who now lives in Denver.
“I think they would prefer to purchase them right from the U.S.,” Lopez-Levy said.
History backs such a claim.
Since 2000, the U.S. has allowed the export of agricultural products to Cuba as long as payments are made with cash upfront rather than on credit.
According to the U.S.-Cuba Trade and Economic Council, total agricultural exports to Cuba from 2001 through February 2012 amount to $3.5 billion. The figure has shrunk toward the end of the period, though, to just half of what it was annually at its peak in 2008.
Savage blames the decline on the cash requirement. Cuba has grown tired of it.
The government agreed to it, thinking it was a step toward normalizing relations with the U.S. When that did not happen, it began taking its business elsewhere.
In a normal trading atmosphere, Cuba would receive 50 percent of its exports from the U.S. simply because of proximity, said Al Fox of Tampa, president of the Alliance for a Responsible Cuba Policy Foundation, which lobbies for open relations with Cuba. The island lies just 90 miles off Florida’s shores.
Savage said Cuba used to purchase the bulk of its rice from Louisiana but now buys from Vietnam because it provides a line of credit. The trip from southeast Asia is so far that some of the shipment is ruined by the time it reaches its destination.
Under the new foreign investment law, Wright said, Brazil is poised to become a major player in Cuba as a developer and trading partner. Among Brazil’s top exports, said Wright, are cattle, citrus and sugar — all of them major Florida exports, too.
Leaders from Tampa have already begun establishing a relationship with Cuba. A delegation from the Greater Tampa Chamber of Commerce traveled to the island nation in 2013 and in January, José Ramón Cabañas Rodriguez, chief of the Cuban Interests Section in Washington, D.C., attended a Tampa chamber event as a guest.
But many still see the risk of doing business with Cuba as too great because they say its government has proven it cannot be trusted.
A host of examples are cited by Mauricio Claver-Carone, director of U.S.-Cuba Democracy PAC, a Washington, D.C., lobbying group promoting democracy in Cuba.
Cuba froze more than a billion dollars in foreign assets in 2009, imprisoned businessmen from Canada and England without due process, and has failed to pay a number of trade debts with other countries, Claver-Carone said.
This, coupled with the difficulty of working with the Cuban government, is why foreign ventures in Cuba have dropped from 400 in 2000 to 190 today, he said.?
Lopez-Levy, the former Castro adviser, disagrees with that assessment. The businessmen were jailed for corruption and their crimes would have warranted similar reaction anywhere in the world, he said. Further, he said, Cuba has bilateral agreements in place with its trading partners and could have its international assets frozen if it makes unlawful seizures.
Savage said trust in the Cuban government should not be the issue keeping U.S. business from investing or trading there. Risk is always a part of business, especially internationally, he said.
Russia is an example.
U.S. businesses that invested in Russia are concerned the nation will freeze their assets in retaliation against economic sanctions imposed in response to its invasion of neighboring Crimea, said Bill Reinsch, president of the National Foreign Trade Council, a Washington-based business organization advocating a rules-based world economy.
When some of those investments were made, Russia and the U.S. were on friendlier terms.
But for Claver-Carrone, it’s not just about business but about bringing democracy to an island ruled by what he calls an oppressive government. He said at some point dollars and cents need to take a back seat to decency.
Cubans, he said, receive an average wage of only about $20 a month.
“That’s like slave labor,” he said. “And because U.S. companies would have to hire through the government, they would be employing them at that wage. How is that OK?”
Cuba, he added, is desperate. Its patron the Soviet Union is long gone. It risks losing the $3.5 billion a year in oil supplied by Venezuela in return for the skilled workers it sends to Venezuela. And the economy is growing at a rate of just 2.7 percent a year when it needs a rate of 7 percent.
The new investment laws adopted last week are an effort to save the Castro brothers’ failing socialist government, Claver-Carone said.
“The problem is they are serial monopolists,” he said. “They have a very hard time letting go. They only relax laws when they need to and then when things turn around, they tighten control again.”
If restrictions are tightened rather than loosened, he added, the government may topple.
Tampa shipper Savage scoffed at this idea.
“Remember what Einstein said about insanity,” he said. “It’s doing the same thing over and over again and expecting different results. We’ve tried suffocating Cuba for years and it has not worked. Let’s try something different.”