At first glance, Cuba’s business potential looks as pretty as its postcards: A nearly five-decades-long embargo has made the island just 90 miles from Florida’s coast hungry for nearly every good and service a U.S. company might provide.

But the flip side tells a different story about the most populous country in the Caribbean: that of a cash-strapped state with crumbling infrastructure and an economy in the stranglehold of an authoritarian government.

Those conflicting realities, however, are not stopping entrepreneurs from planning for the day when the embargo is lifted — or from taking advantage of business opportunities already permissible under the embargo.

Tourism and telecom firms have been energized by recent regulations promising greater access; port operators and oil drillers are gearing up for a rush; and lawyers and consultants are lining up for a piece of the action.

“Every sector is going to be important,” said Richard Waltzer, the chairman of the Havana Group, a consulting firm that helps U.S. businesses lay the groundwork for the day sanctions are lifted. “This is an island that really hasn’t developed.”

But in the short term, Waltzer said, the “building of hotels and tourism infrastructure is going to be the new economy for Cuba.”

With its broad beaches, stunning colonial architecture and world-class artists, it’s not hard to imagine the island as a tourist mecca.

For Cuba, more foreign visitors would provide access to the quick cash that it needs to jump-start the economy.

The island received 2.3 million visitors in 2008, according to the Caribbean Tourism Organization.

If the U.S. government dropped its travel restrictions entirely, rather than just for Cuba-Americans — and Cuba proved as big a draw for American tourists as Jamaica, the Dominican Republic, or Cancun, Mexico — the island could expect more than 1 million additional visitors a year.

Mere curiosity — seeing ’58 Oldsmobiles and giant Che portraits on buildings — could lure many, said Damian Fernandez, a longtime Cuban policy expert and provost of Purchase College State University of New York.

“Post-embargo, the biggest, fastest impact would be in tourism,” he said.

But it’s unclear if Cuba could handle the influx. The island has about 50,000 hotel rooms, about as many as Miami-Dade County, according to a report released by the Cuba Committee of the Greater Miami Chamber of Commerce.

And while it is making improvements, its phone system, electricity and water supply infrastructure are struggling.

Cuba’s Old-World feel is part of its charm, but many visitors are also looking for modern amenities, said Mark Watson, 30, a tourist from Canada who recently visited the island.

Compared to other Caribbean tourist destinations, he found the island’s food mediocre, prices expensive and his hotel, the Tryp Habana Libre, where rooms start at $168 a night, outdated and shabby.

“I’m not sorry I came here,” he said. “But I will never be back.”

The infrastructure woes may not only scare away visitors but stunt the growth of other tourism enterprises, said Tim Gallagher, vice president for public relations at Carnival Cruise Lines.

“You can take people to the islands but you have to have a way to transport them once they are there, and have tours for them,” he said from the company’s Miami offices.

”Whenever Cuba does finally open up, it will take a while to put all that into place.”

Gallagher said Carnival will develop a Cuba strategy if and when visiting the island is viable. “It has been so many years that people have been saying that Cuba will open up, but no one really knows when that will happen,” he said. “At the time they do, then we are certainly interested.”

The infrastructure challenge is not easily overcome.

“It’s a chicken-and-egg problem,” said Jorge Piñón, a long-time Cuba analyst. “Cuba needs the infrastructure to attract investors, but it can’t pay for the infrastructure until it gets the investors.”

Retirement haven?

One way to skirt the issue is to look at businesses that might be created in self-sufficient compounds, said Leo Guzman, founder of the Guzman and Co. investment bank and a former board member of the Pension Benefit Guarantee Corp.

Cuba’s mild weather, proximity to the United States and surplus of trained doctors and nurses could make it ideal for Cuban-American retirees and those requiring long-term medical care, he said.

Such enclaves might also be more likely to win approval from the Cuban government, he said.

Cuban authorities would “want the Cuban-Americans in a community as opposed to interspersed in the community, to lower social friction,” he said. “And from a political perspective, (retirees) are the kind of people that the Cuban government would want, i.e. too old to cause problems.”

Calling Cuba

Rebuilding the island’s infrastructure is where many see the money.

Under regulations issued by the Treasury Department Sept. 3, U.S. companies can now offer cellular roaming services; satellite TV and radio; and fiber-optic cable to the island.

Sprint and AT&T would not comment on Cuba’s potential, saying they were still studying the rules, but there are a number of telecom companies actively seeking licenses to do business in Cuba.

It’s unclear what kind of opportunity this represents for U.S. companies, said Phil Peters, a Cuba expert at the Lexington Institute.

Cuba’s ally, Venezuela, is already laying a fiber-optic cable to the island. And Cuba routinely blocks radio and TV transmissions from the United States, which would make U.S. firms unlikely contenders for that market.

“It’s not clear where the U.S. would fit into their plans,” Peters said.

But the island also has one of the lowest telephone-density rates in the region.

Source: Brandenton Herald