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Cuba's new appeal to LI businesses: A tale of two islands

Jon Cooper, president of Westbury-based Spectronics Corp., is

Jon Cooper, president of Westbury-based Spectronics Corp., is hoping to sell his company's automobile fluid leak detection kit in Cuba. Cooper poses with the kit in the manufacturing area of the plant on Friday, Oct. 16, 2015. Photo Credit: David L. Pokress

The re-establishment of full diplomatic relations between the United States and Cuba offers Long Island businesses that rarest of opportunities: access to a brand-new market.

JFI Jets, which operates from East Farmingdale's Republic Airport, is already flying to Cuba.

The air charter service began taking passengers, including some from here, to Havana in August. The cost of the plane, which typically picks up passengers at Kennedy or another major airport after leaving Long Island, starts at $35,000 to $40,000 for a round-trip.

JFI Jets executives expect to have completed about a dozen flights by Dec. 31. They predicted Cuba would be among their top destinations next year.

"Cuba is a place of incredible opportunity. . . . I wanted to be in on the ground floor," said David J. Rimmer, who began researching the Caribbean island in January after being named company president. "We are pioneering a new market, and that's an advantage we want to preserve for as long as we can."

Rimmer, like the heads of companies across the United States, was spurred to look at Cuba after the surprise announcement on Dec. 17 that diplomatic relations would be fully restored, ending more than a half-century of hostility.

In the past 11 months President Barack Obama has eased restrictions on U.S. companies doing business with Cuba.

Even though numerous hurdles remain, deals are being struck. Netflix is streaming U.S. movies and television shows. Americans can now use Airbnb to book a room in Cuba. And JetBlue Airways Corp., based in Long Island City, is flying weekly to Havana.

In April, JetBlue participated in a first-of-its-kind trade mission to Cuba led by Gov. Andrew M. Cuomo. "We placed New York State businesses at the front of the line for new prospects in Cuba, and that will, in turn, support jobs and economic activity here at home," he said in May.

Trade opportunities seen

On Long Island, executives are optimistic about doing business in Cuba, a country with a population of 11 million. A May workshop by the Long Island Import Export Association on trade opportunities in Cuba and elsewhere in Latin America drew about 80 people to a Woodbury catering hall, according to association founder Pat Moffett.

Trade experts identified transportation, health care, agriculture and hospitality as local industries that could benefit from ties to Cuba over the next few years.

"Cuba represents an excellent medium- to long-term business opportunity," said Antonio C. Martinez II, a trade attorney of counsel to the Garden City law firm of Gerstman Schwartz & Malito.

At this point, the key is laying the ground work, said Martinez, who has been traveling to Cuba since 1999. "You need to go down there, meet the people, see how the business structure works there. You have to establish relationships. . . . The Cubans are only going to do business with people that they know," Martinez said.

To be sure, obstacles abound. Congress has yet to lift the 55-year-old trade embargo, which, among other things, stipulates that Cubans pay for imported goods before receiving them. That's difficult because Cuba has two currencies, one for Cubans and one for foreigners, and cash is hard to come by when monthly wages average just $22 per person.

President Raúl Castro is loath to take steps that could weaken the Communist Party's grip on power.

The Cuban legal system also doesn't yet provide adequate protections for foreign investors, experts said. And the creaky infrastructure, particularly the absence of cellphone and Internet service in some areas, makes communications difficult.

Still, the Cuban government has expanded what can be imported, allowed for entrepreneurship, and permitted joint ventures in telecommunications.

Martinez said Long Island firms shouldn't hesitate: "I see Cuba being a major trading partner with New York State."

State officials forecast that sales to Cuba could eventually equal those to the nearby Dominican Republic, which totaled $218 million last year.

New York exported $88 billion worth of goods and services in 2014, according to U.S. Commerce Department data, with Canada and Hong Kong being the largest buyers.

Westbury-based Spectronics Corp. is looking to sell its leak-detection equipment in Cuba, part of a plan to double the company's annual sales to $50 million by 2020.

The maker of ultraviolet lighting and fluorescent dyes already exports to 120 countries. Next year it plans to secure distributors in Cuba to supply the repair shops that fix airplanes, automobiles and farm equipment.

Cuban mechanics can use the lights and dyes to find leaks of oil, coolants and industrial fluids. The equipment could be extremely popular in a country where 1950s-vintage American cars are still a major form of transportation.

"The rest of the world is doing business with Cuba," said Jon Cooper, president of Spectronics, which has 185 workers. "It's just the United States that has been left out, and that makes no sense because we're the closest to Cuba."

He said he's patient about expanding in Cuba: The embargo is "a straitjacket which President Obama has loosened, but it's still there."

Embargo vote possible

Experts such as Diego Moya-Ocampos of the research firm IHS Country Risk don't expect Congress will remove the embargo before 2018, when Castro has said he will step down. Key stumbling blocks are reparations for U.S. assets seized in the Cuban revolution of the 1950s and Cuba's claim to the Guantanamo Bay Naval Base.

Rep. Tom Emmer (R-Minn.), lead sponsor of an embargo-lifting bill, said a vote could come next year. Democrats in both houses of Congress would join with small groups of Republicans to back the bill if U.S. businesses clamored for its approval, he said in Manhattan.

December's diplomatic thaw started a race among businesses from Asia, Europe and South America to strengthen their positions in Cuba before corporate America arrives. U.S. companies that wait for the embargo's cancellation risk seeing competitors from other nations capture the lion's share of Cuban sales.

"U.S. companies that take advantage of the Cuban market in the early stages will have a much better position than those that wait to see what's going to happen," said Robert P. Imbriani, international executive vice president for Team Worldwide, a Texas-based freight forwarder. From his Valley Stream office, Imbriani is helping businesses navigate the process of selling to the Caribbean island.

Some experts are worried the Castro government's reluctance to remove trade barriers suggests the regime is using the enthusiasm of U.S. businesses to get better deals from those of other nations.

"The U.S. business community is being used as bait," said John S. Kavulich, president of the Manhattan-based research group U.S.-Cuba Trade and Economic Council Inc.

Local firms should continue preparing for a more open Cuba, but not spend money going there unless it and the United States have approved a transaction, said Kavulich, who has provided research to local makers of medical care products.

Asked about the slow pace of change under Castro, a professor from the University of Havana's Center for the Study of the Cuban Economy said considerable progress has been made, if one takes the long view.

"You don't get everything you want at the beginning," economist Ileana Díaz Fernández said last month at a meeting of the Americas Society/Council of the Americas, Manhattan-based groups calling for an end to the embargo.

Officials at the Cuban embassy in Washington did not respond to requests for comment.

NY officials optimistic

New York officials said businesses across the state are likely to "realize benefits over time" from trading with Cuba.

"There is no shortage of interest among the Cuban people for rapid change," said Howard Zemsky, the state's economic development czar who accompanied Cuomo on his trade mission to Cuba.

Zemsky, a Buffalo businessman raised in Woodbury, said Long Island executives "would be warmly and eagerly received. But you have to respect the fact that you are doing business in a different culture. Be adaptable and be patient."

At JFI Jets in East Farmingdale, Rimmer, the company's president, said his flight crews have been treated well in Cuba. "We were just another private jet flying into their airspace," he said.

JFI Jets can accommodate groups of eight to 14 people -- but none can be tourists. The U.S. Treasury Department issues licenses for only 12 categories of travel to Cuba, including research and professional meetings, educational activities and family visits.

"I'm pleasantly surprised by the demand" for flights to Cuba, Rimmer said. "It really has caught on quickly."

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