Running head: BUSINESS OPPORTUNITIES IF U.S. / CUBA TRADE EMBARGO WAS LIFTED1
BusinessOpportunities If U.S. / Cuba Trade Embargo was Lifted
BusinessOpportunities If U.S. / Cuba Trade Embargo was Lifted
USAand Cuba diplomatic relations soured more than 55years ago due todifferences in political ideologies. Throughout the entire period,there has been little business transactions between the two nations(González, & Aiken, 2007).There has been relaxed embargo in the last ten years, but theinvestors mainly from the USA have been cautious as they wait for thenormalization of the relations so that they can fully determine theirinvestment options. This paper aims to evaluate the Businessopportunities that exist in both the USA and Cuba if the embargo islifted as anticipated.
Tradebalance before embargo
Fromresearch, the USA provided a market for 75% of Cuban exports in the1930s, While 33% of total Cuban imports came from the USA(Brotherton, 2008).Itis clear that the two countries could massively benefit from eachother if the embargo is completely lifted. If the two nations couldrevert to that pattern of business, then it is clear there is greatpotential for business engagement. Studies reveal that one of theareas that Cuba and the USA could exploit is in the agriculturesector(González, & Aiken, 2007).With Cuba importing 90% of its food, the USA would benefit greatlyfrom the lifting of the embargo. Agricultural machinery exports wouldalso be a significant achievement for the American firms. On theother hand, Cuba`s agricultural sector could export its oranges andlime products to the USA to improve the balance of trade between thetwo countries.
Thereare massive opportunities in both The USA and Cuba. Cuba provides anopportunity for the American firms in the Agricultural sector. Citrusprovides 10% of the total revenue for Cuba and therefore, Americancompanies require exploring addition value measures and investing inthe product. With most of the grapefruit production being exported toJapan, Cuba would be eager to benefit from the proximity of the USAmarket. The USA firms would also line themselves up to import sugarfrom Cuba(Brotherton,2008).
TheUSA will have opportunities to exploit in the Cuban market whosepotential is yet to be tapped. Cuba requires capital, moderntechnologies, and jobs. The USA companies should endeavor to exploitthe existing market. The USA businesses could invest to exploit thehighly skilled manpower in Cuba.
USAfirms should endeavor to fill the gap. The American companies shouldtake advantage of the highly education unemployed workforce to investin tourism(González, & Aiken, 2007).The Caribbean nation requires massive infrastructures regardinghotels and conference facilities which would, in turn, create jobsfor the Cubans. The service industry in Cuba has not been tapped.There are therefore huge opportunities in the fields of informationtechnology, law, and banking and insurance. Another opportunityexists in the infrastructural development due to the old road network(Brotherton, 2008).Financial and construction companies from the USA could benefitgreatly from investing in the sector. The area of housing alsoprovides an opportunity for the American firms as there is a deficitof more than 2million housing units. The USA could befit greatly fromexports to Cuban. Currently, Cuba imports more than 90% of its foodrequirements. The market is huge as wheat, corn, meat soybean,chicken and beef products are in big demand in Cuba. The lifting ofthe embargo would, therefore, be a perfect opportunity for theAmerican firms in all the sectors(Brotherton, 2008)..
Onthe other hand, Cuba could reap greatly from exports to the USA. Thecountry still requires the market for its agricultural products.Citrus, which generate 10% of the Cuban revenue, could achieve muchmore for the country if the embargo is lifted(González, & Aiken, 2007).There has been improved production due to the improved farmingtechnology which implies that the country needs to expand the marketfor the product. Sugar would also be a major export product to theUSA as Cuba is one of the largest producers in the region. Otherproducts that Cuba could export to the USA are Grapefruits, whoseprincipal market has been Japan. Cuba also requires markets forrefined fuels.Tobacco, nickel and pharmaceutical are the otherproducts whose market the USA could provide(Brotherton, 2008).
Fromthe data collected after the relaxation of the embargo in 2005, TheUSA would highly benefit from lifting of the ban. The capability ofthe USA market together with the excellent investment environmentthat Cuba provides would be a plus for the American economy. In turn,the massive investments that would be expected would provideemployment opportunities for a considerable fraction of the 12million people in Cuba, most of who are unemployed.
TheUSA and Cuban markets are ready for business. The existence of adiverse population primarily influences the conclusion(Brotherton, 2008).The market size is quite substantial and open for exploitation by thetwo countries. With the employment of the appropriate entrystrategies, the firms from both countries would perform quite well inthe respective market. Franchising and licensing could be employed bythe USA companies to give the local entrepreneurs in the Cuban marketan opportunity to popularize their range of products of theenterprise. That is based on the fact that minimal resources arerequired to achieve the goals and objectives of the firms(Brotherton, 2008).
Thedemographic mapping reflects high levels of urban settlement in theUSA and Cuba which is a perfect condition for the establishmentbusinesses. Urban dwellers are known to spend more. The USA as acountry has well-distributed incomes which would assert thepurchasing power of the population(Brotherton, 2008).The literacy levels also have a significant role to play indetermining the penetration rates of companies in the foreignmarkets. With the high literacy levels in Cuba, the American firmswould benefit from the low cost of labor by lowering their productioncosts and hence bigger profit margins. It would be upon the firmsfrom the two countries to create strategies to enter the markets, onuplifting of the sanctions.
Thelifting of the embargo would provide immense opportunities to boththe Cuban’s and the American’s economies. The Cuban economy islargely undeveloped, and the USA should take the advantage of itsproximity to the Caribbean nation to invest in almost all thesectors. Tourism, housing, transport, agriculture among other areasprovide a huge opportunity for the USA companies. Cuba, on the otherhand, could access the USA market for its agriculture products suchas sugar, citrus, grapefruits, tobacco and oranges. The Cubanpharmaceutical industry could also benefit from trade partnershipbetween the two countries. The lifting of the embargo would greatlyenhance the Cuban economy. Apart from market accessibility for itsagricultural products, foreign direct investments (FDI) by USACompanies would provide the highly needed jobs in the country. Thegovernment of Cuba would also benefit from tax revenues.
González,E. J., & Aiken, E. C. (2007). Cubanexiles on the trade embargo: Interviews.Jefferson, NC [u.a.: McFarland.
Brotherton,P. S. E. A. N. (May 01, 2008). “We have to think like capitalistsbut continue being socialists”: Medicalized subjectivities,emergent capital, and socialist entrepreneurs in post-Soviet Cuba.AmericanEthnologist, 35, 2,259-274.