Through the years I’ve advised many companies and individuals about the legal rules and regulations, as well as the business risks, that go along with doing business in Cuba. Most of the time, they proceed with the transactions after securing the necessary licensing from the U.S. government.
Yes, I’ve had many folks come back to me and say, “I should’ve listened to you,” or usually, “what a waste of time.” They will not be the first and certainly not the last folks to be lulled into the Cuba foreign investment trap. The regime works overtime – with the support of many Americans in this town – to paint a very distorted picture of what is truly happening in Cuba.
Transactions with Cuba, and with any Communist country for that matter, will inevitably result in very bad things including lost profits, legal headaches with the U.S. government, and even potential damage to corporate reputation. Ask any executive of a large company doing business in China. If they claim it’s easy, they’re not telling you the truth or they are not in a position to know the truth.
What are some of the issues that can arise from doing business in Communist Cuba? For starters, try enforcing a contract. If you’re a foreigner and you have a dispute, do not look to the Cuban court system for relief. There is no rule of law in Cuba. Commercial dispute resolution measures are, for all intents and purposes, non-existent. They make it up as the go along.
Without rule of law comes corruption, a lot of it. While Transparency International paints a somewhat rosy picture of corruption in Cuba, the reality is, as is the case in most communist countries, high corruption levels are the norm, not the exception. If you want to move product in Communist Cuba, be prepared to deal with institutionalized and sophisticated corruption. It goes to the very top of the system. You may not even see it, at first. But, you’ll eventually figure it out. It is very difficult to get around it.
The former Assistant Secretary of State for Western Hemisphere during the George W. Bush Administration Roger Noriega has this advice:
Noriega’s remark is prompted by the case of a 74 year old Canadian citizen, Cy Tokmakjian, accused by the Cuban regime of engaging in corrupt practices. This fellow is as guilty of corruption as Alan Gross was guilty of espionage. It simply is not true. But even if it were, Tokmakjian should be tried in a Canadian court, not via the Cuban kangaroo court justice system.
The only reason that Tokmakjian was detained, tried, and jailed, was the same reason that American Alan Gross was detained, tried, and jailed: leverage. Tokmakjian and Gross are now political pawns of the regime. They will use them to seek concessions from the United States and Canada in exchange for whatever it is that the regime may need at any given time.