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Why you shouldn't overlook post-embargo Cuba.

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The US’ lifting of the Cuba embargo will make history as not only the day of bridging international relations but as marking a new beginning for sourcing and supply chain opportunities for Cuba’s emerging private business sector.

President Barack Obama’s recent visit to Cuba in March has signalled the finish line is in sight for the 56-year old political stalemate between the two nations. The US trade embargo against Cuba was first imposed in 1960, diplomatic relations were severed and the two nations have been locking horns ever since. Obama is calling on US Congress to fully lift the embargo, rekindling relations with its estranged cousin, and offering a brighter future for private business owners in Cuba.


This olive branch may not be without its problems, with Fidel Castro scoffing at Obama’s ‘syrupy’ language and critics airing concerns that a lift will warrant a plethora of US corporate giants to come knocking at the border with their golden arches and paper coffee cups with misspelt names.
However, a free market will boost global sourcing opportunities for Cuba’s fast-emerging ‘DIY economy’.


In the last few years, the younger generation of Cubans have been silently staging a new revolution and planting the seeds for future economic growth. An emerging class of young entrepreneurs are launching their own private business ventures. Since Raul Castro became president in 2008, the Communist country has increased its support for private enterprise, and issued around 496,000 small business licences by the end of 2015, and it is now estimated that 20-30% of the entire Cuban workforce is self-employed, with a vast proportion of this being made up of the nation’s youth.


Although being heralded as a powerful emerging market, success has undeniably been stilted by the restrictions that the embargo enforces. Cuba has clocked that it has cost its economy in the region of $1.1trillion over the years, and, to small enterprises and their supply chains, it has curtailed any significant individual growth.


The ban on trade with US suppliers leaves these private businesses isolated, left to gaze enviously at their spoilt-for-choice US neighbours, while they struggle to source from within their own state. Cuban wholesalers are few and far between, and, to make matters worse, the state often positions itself in a seat of power between these already sparse suppliers and the businesses. Forced to adopt a ‘work with what you can get’ culture, productivity is stilted, supply chains are constantly disrupted and orders can be left unfulfilled. How can a shoemaker grow his footwear business without being able to source any more leather?


Many entrepreneurs resort to the so-called ‘suitcase commerce’ of physically importing goods, parts or ingredients across the border by hand. The truth of the matter is that without a stable and sustainable supply chain, Cuba’s entrepreneurial spirit is quashed and businesses must accept their positions as small, localised operations with little chance of growth or expansion.


And so, as a new relationship forges between the two nations, borders will open once more, and Cuba’s next generation of business leaders will no longer be faced with the supply chain risk of either smuggling supplies into the country in their suitcases or putting faith in unreliable domestic sourcing. Improved trade relations will create a broader supplier network in the US for Cuban private businesses to tap into, offering a step up the ladder to the young entrepreneurs and a more stable supply chain from which to grow their businesses.

The White House Foreign Policy has stated its commitment to authorising ‘expanded sales and exports of goods and services from the US to Cuba’ and empowering the Cuban private sector. For the first time, the nation’s shoemakers, hairdressers and technology entrepreneurs can also grow their footprints by expanding into the US market - an impossible daydream just six months ago.


There may be some way to go before Obama and Castro can say that they truly see eye to eye on all things, but they can at least agree that the embargo should and will come to an end. With that, the future of the Cuban entrepreneurial spirit is looking rosy, and with sourcing and supply chain opportunities emerging out of these restored relations, Cuba may well give the world the next Sir Richard Branson or Steve Jobs in the next few years.

 

Procurement chiefs would do well not to overlook the opportunity here. 


This article is a piece of independent writing by a member of Procurement Leaders’ content team.

Rachel Sharp
Posted by Rachel Sharp

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