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When Castro gets the boot.

Cuba watchers say the island nation will be rife with opportunity for Indiana businesses.

It's safe to say that Fidel Castro is on his way out. The question is when the post-castro era in Cuba will begin. After all, Castro came to power more than three decades ago and there's no indication that he's making any plans for retirement. But lately, a lot of informed and connected people have been betting that the end of the Castro regime will arrive sooner than later.

Cuba watchers in recent months have been advising corporate America to start thinking about post-Castro options. The Hudson Institute in Indianapolis recently conducted a siminar on Cuba and its potential as a trading partner, with the help of the Cuban-American National Foundation and its chairman, Jorge L. Mas Canosa. "We are confident that soon the Cuban people will live in a democratic society and enjoy the liberties that we sometimes take for granted each day," says Mas, whose name has been floated in the Cuban-American community as a possible successor to Castro.

Confidence that the end is near for Castro stems from a number of factors. Most obvious, the nation's historical benefactor, the Soviet Union, is no more, and its member states have economic problems of their own. With the Cuban economy already heading downward, the United States last year tightened the screws by enacting the Cuban Democracy Act, which extended the trade ban with Cuba to cover foreign subsidiaries of American companies. Those subsidiaries had been doing some $700 million worth of annual trade with Cuba, making the United States Cuba's largest trading partner.

The Cuban economy has become so bleak that so-called "people's violence" against th state is reported to be on the rise. And in what would seem to be a last-ditch effort to hold onto power, Castro in July legalized trade in the once-hated American dollar. While the move could help the economy somewhat, it could erode Castro's power base by giving any Cuban with access to American cash the economic privileges once reserved fro the loyal elite. According of Radio Marti, duluting the privileges of the party could ultimately be Castro's undoing. "It is a basic characteristic of societies that the repressive capacity of the state is usually in the hands of people who somehow enjoy a priviledged status within that society."

Why should anyone in the Indiana business community care about what's going on in a nation with whom we're not even allowed to do business? Because a free Cuba, if and when it comes to pass, would be a not-too-distant foreign market with a lot of potential.

"We're talking about what may turn into quite a substantial market," says Elliott Abrams, senior fellow at the Hudson Institute and the former assistant secretary of state for inter-American affairs in the Reagan administration. "We're talking about the possibility of billions of dollars of exports. American exports to the Dominican Republic are $2 billion, and that's a smaller country than Cuba."

Indeed, Cuba has some 11 million residents. About 2 million live in Havana, making it more populous than the Miami area. If economic relations between the United States and Cuba were restored--which, of course, is only likely to happen after Castro departs--trade between the countries could be worth $2.8 billion in the first year alone, according to the Cuban-American National Foundation's Blue Ribbon Commission on the Economic Reconstruction of Cuba. And that figure excludes tourist trade, which could be quite lucrative as well.

"I went to Indiana to explain the tremendous opportunity that will open in Cuba," Mas says. "We're thinking in terms of the reconstruction of Cuba."

"Cuba will grow fast," Abrams says. "They will need everything. If you are in the automative industry, for example, they're starting from scratch. They're driving DoSotos and Edsels now. If you think of a country of 11 million people that are starting to become prosperous, how many cars are they going to buy?"

An auto-assembly plant would be a wise investment in Cuba that could be of at least indirect benefits to Indiana, says Sid Guillen of Anderson, retired chairman of the foreign-language department at Anderson University adn a native of Cuba who moved to the United States before Castro came to power. "An assembly plant for small, compact cars would be nice, and we manufacture a lot of auto parts here in indiana."

Franchising is another areas with great potential, Abrams countinues, with opportunities in restaurants, video and car rentals, to name a few possibilities. "There's a tremendous opportunity in tourism and the hotel industry. And housing. We're talking about a country that has gone without economic development in decades."

"There is a tremendous need for basic medicines in Cuba at an affordable price," Guillen adds. "Another thing I think of is construction materials, everything from nails to cement."

And then there's tourism. Many Americans still recall from the pre-Castro days what a wouderful destination the island nation is, with beautiful beaches and the spectacular Sierra maestra mountains that Castro and his revolutionaries used as a refuge. Before Castro, Cuba had hundreds of thousands of visitors a year, mostly from the United States. Now, in addition to the many tourists who no doubt would flock to the island, "there are Cubans who live in the States who want to visit their families," says Mas.

In hopes of sparking American interest in a free Cuba, the Cuban-American National Foudation's Blue Ribbon Commission generated to detailed report on Cuban investment opportunities of the future. "U.S. companies will have a distinct competitive advantage over other Western producers of construction supplies, automotive parts, herbicides, fertilizer, telecommunications equipment, medical products, steel, grain and food-processing equipment," the report states. It also lists some of the products that subsidiaries of American companies sold in Cuba before such trade was banned last year, including pharmaceutical products, carpentry tools, compresors, electrical supplies, microswitches, engineering services and wheat flour.

Now compare those lists with some of the products for which Indiana is best known. The Hoosier state is America's top steel producer. It is tops in engine electrical equipment and third in automotive parts. Indiana ranks second in the nation in production of such electrical supplies as coils and transformers. It ranks fourth in the nation in production of pharmaceuticals, and also is fourth in surgical supplies.

A lot of Indiana companies excel at making the things the Cubans will need. For example, two of Indiana's largest companies--Cummins Engine Co. and Arvin Industries--are leading automotive suppliers. Smaller companies across the state make everything from bearing to bumpers. Indiana also produces its share of assembled motor vehicles, with GMC and Chevrolet trucks put together in Fort Wayne, Hummers created in Mishawaka and Subarus, Isuzus and a new model of Honda made in Lafayette. As for steel, National Steel Corp. is based in Mishawaka, and its Northwest Indiana production facility has steel-producing neighbors such as USX, Inland Steel, Bethlehem Steel and LTV.

Pharmaceuticals, of course, come from another big Indiana name, Eli Lilly & Co. of Indianapolis, which has acknowledged that it already is studying its potential Cuban options. More Indiana-made pharmaceuticals come from Miles in Elkhart, which specializes in over-the-counter remedies. The Warsaw area is a big player in the production of medical devices, with major players including Biomet, Zimmer and DePuy.

Quality food-processing equipment of the type the Cubans might need comes from Lincoln Foodservice Products in Fort Wayne and Indianapolis-based Thomas L. Green & Co. and Saniserv, to name a few. Indiana-made compressors come from big companies like Dresser in Connersville and Sullair in Michigan City to smaller firms like GrimmerSchmidit in Franklin. And will a newly domocratic Cuban society need new color televisons? If so, many could come from indianapolis-based Thomson Consumer Electronics, which with its RCA, GE and ProScan brands has made Indiana the leading producer of TV sets.

Indiana has tourism-related companies that could benefit from a free Cuba as well. One of the most obvious is Indianapolis-based American Trans Air, which already has regular flights to other key Caribbean destinations. Indeed, says Mas, add the needs of tourism with those of traveling Cuban-American families and international business people, and it's clear that "Cuba will need a shuttle every half hour between Havana and Miami." The old Pan American Airlines, in fact, started as a commuter service between Havana and Key West.

Another indianapolis company makes its living through tourism and could benefit from the downfall of Castro. Resort Condominiums International provides vacation-exchange and leisure-travel services. It has a couple thousand affiliated resorts and well more than a million time-shares around the world, and Havana would seem to be an attractive place to add business.

The key to all of these opportunities is money. That's something the Cubans don't have eonugh of at the moment. So the big question becomes, where will they get the money they need to buy all of these goods and services when the post-Castro era begins?

Abrams of the Hudson Institute is ready with an answer. "They'll certainly get a big shot in the arm from aid from the Inter-American Bank, the World Bank, the International Monetary Fund," he says. "There'll also be a tremendous amount of investment from the Cuban-American community. There are as half million Salvadoran Americans who now send $800 million to their country a year. There are a million Cuban-Americans who are as a whole much richer than the Salvadorans." And, he says, there will be considerable investment from American businesses setting up shop in Cuba.

Adds Mas, Cuban-Americans have proven just how industrious the Cuban people can be. "We came up here with nothing and have built an infrastructure that commonds some respect."

"The experience in Miami is that there's certainly no lack of talent and drive among the Cubans," agrees Lawrence Davidson, director of the Indiana Center for Global Business at Indiana University. Still, he's not sure the promised economic boom in Cuba will materialize all that quickly. "Whatever happens, it's going to take them awhile to get back on their feet. It's pretty poor there now."

Indeed, there are plenty of foreign markets with the potential to deliver more business, or at least more business sooner. "I would say Cuba is probably way down on the list for most manufacturers," says Pat Kiely, president of the Indiana Manufacturers Association. "Even if you get rid of Castro, you don't get rid of all of the problems right away. You'd get a much better chance of success in Mexico than with Cuba."

The people at the Indiana Department of Commerce who spend their days trying to interest Indiana companies in exporting also don't have Cuba at the top of their lists. Canada is the state's top trading partner. and Mexico is on the rise, and that's where much of the state's efforts lie. Notes Maria Mercedes Plant, director of the department's International Trade Division, there is too much business to promote in existing, open foreign markets for the state to spend its time exploring a market that currently doesn't even exist.

That doesn't mean individual companies con't do some research of their own, and that's what the Cuba watchers recommended. "There's a tremendous database at the University of Miami," Abrams notes. "Companies should tap into that and get the data about whatever industry they're interested in. They should also get in touch with the Cuban-American National Foundation."

"I would recommend to any company to keep informed and work out a plan," Mas adds. "If you are invited to Cuba tomorrow to do business, what would you do?"

Guillen, meanwhile, advises companies interested in Cuba to remember that, as close as Cuba is to the United States geographically, its experiences of the past will make it a very different place in which to do business. "Companies will have to go in with caution and an open mind. The labor force in Cuba for nearly 40 years has been used to a system. We must not go there arrogantly or with the feeling that 'I told you so.' Cubans are a proud people, even if the ideology has failed."

And while the ideology has failed, Castro obviously has not. When car we expect to see a new face running Cuba?

Concludes Abrams, "Castro has shown more power to stay than most people ever predicted, including myself." But the end of Castro's rule certainly seems near, he says. "We're talking about sometime in the 1990s."
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Title Annotation:Fidel Castro
Author:Kaelble, Steve
Publication:Indiana Business Magazine
Article Type:Cover Story
Date:Oct 1, 1993
Previous Article:Inflation on its last legs.
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