US Brands in Cuba

Posted on Sat, May. 12, 2007

AP Centerpiece: U.S. brands get to Cuba

By WILL WEISSERT
The golden arches are nowhere to be found. There's not a single Starbucks or Wal-Mart, and no way to buy a Budweiser, a Corvette or a Dell.
But even in Cuba, you can get a Coke.

Despite the U.S. Trading With the Enemy Act, which governs Washington's 45-year-old embargo, sales on Fidel Castro's island are lining the pockets of corporate America.

Nikes, Colgate and Marlboros, Gillette Series shaving cream and Jordache jeans - all are easy to find. Cubans who wear contact lenses can buy Bausch & Lomb. Parents can surprise the kids with a Mickey Mouse fire truck.

Dozens of American brands are on sale here - and not in some black-market back alley. They're in the lobbies of gleaming government-run hotels and in crowded supermarkets and pharmacies that answer to the communist government.

The companies say they have no direct knowledge of sales in Cuba, and that the amounts involved are small and would be impractical to stop. But it's hard to deny that a portion of the transactions wind up back in the United States.

"We try and do what we can to police ... but in a globalized economy, it's impossible to catch everything," said Vada Manager, director of global issues management for Nike Inc.

Trade sanctions bar American tourists from visiting Cuba and allow exports only of U.S. food and farm products, medical supplies and some telecommunications equipment. But wholesalers and distributors in Europe, Asia, Latin America and Canada routinely sell some of America's most recognizable brands to Cuban importers.

Cuba has for years sought out American goods as a way of thumbing its nose at the embargo. Officials at three foreign-owned import companies operating in Havana, who refused to have their names published for fear of economic repercussions, said the communist government itself still imports the vast majority of American goods.

Christopher Padilla, U.S. assistant secretary of commerce for export administration, said from Washington that Cuba even sends delegations on "buying missions," hunting for specific American products in third countries for resale back home. Cuban press authorities did not make relevant officials available to discuss the practice.

In a country where tourism is the leading revenue source, stocking American brands helps reassure visitors, according to Daniel Erikson, a Cuban economy expert at the Inter-American Dialogue in Washington.

"People, average Cubans included, would rather have Coca-Cola than a no-name generic soda they're not familiar with. That means the government can charge more," Erikson said. "And obviously for the tourist industry it's important for the foreigners who visit Cuba to see products that they know and trust."

All American products are sold in Cuban convertible pesos, considered foreign currency and worth $1.08 apiece - about 25 times the island's regular peso. Although government salaries have increased in recent years, the average monthly pay is still around $15, meaning few Cubans can afford U.S. goods.

But last month, Economy Minister Jose Luis Rodriguez said 57 percent of the population has access to hard currency - dollars or convertible pesos - either through jobs in tourism or money from relatives abroad. A 2004 report by the U.S. Commission for Assistance to a Free Cuba estimated that remittances from the United States alone total $1 billion a year.

The influx of American brands began in earnest in 1993, when Cuba scrapped laws that had made it illegal for its citizens to possess dollars. Cubans know the products, despite an almost complete lack of advertising on the island. Angel Hernandez, a 62-year-old retiree, didn't hesitate when presented with a pair of "Air Jordans."

"That swoosh. That's Nike," he said. Like most Cubans, he pronounces the company name with a silent "e" as in "Mike."

Made in China, brick-red Nike Air Max 90 sneakers sell for 129.40 convertible Cuban pesos - about $140 - at a store off Havana's Central Park. High-priced fakes also abound. Several stores, including one inside the Havana Libre Hotel - the Havana Hilton before Castro's 1959 revolution - offer authentic-looking Max Air 80s, but Nike makes no such product.

At the Comodoro Hotel, a boutique wants $40 for assorted small gym bags with pastel or silver swooshes. Their tags read "Made in Indonesia" in Spanish and "Nike de Mexico," providing a hint of their route to Cuba.

Manager said all Nike products for sale in Cuba are probably knockoffs. He conceded, however, that legitimate distributors outside the U.S. could be selling products to Cuban importers - and that Nike could make money off such sales.

"But what you're talking about is such a small volume there," he said. "And if we are able to detect where ... the products came from, that distributor or retailer runs the risk of having their account discontinued with us."

John Kavulich, senior policy adviser for the U.S.-Cuba Trade and Economic Council Inc. in New York, said "in no way should it be said that this is an end run by U.S. business around U.S. restrictions, because it's not."

"It's almost impossible for American companies to stop," Kavulich said. "Of course, at some point in the transaction, at the very beginning when the legitimate distributor bought the product from Nike, or any company, money went to the U.S."

Kavulich estimated the value of U.S. brands sold in Cuba as "probably $20 million or less on an annual basis," but noted that less than 5 percent of that amount likely represents combined profit for American companies, given all the layers of transactions the products go through to get to the island.

Decades-old Walt Disney cartoons air on state television every afternoon and stores have Mickey Mouse toys and wrapping paper and Snoopy products.

In Havana's Vedado district, fishing supply store DSY offers goods made by U.S. supplier Seachoice Products. A "Heavy Duty Waterproof Flashlight" from the company proudly proclaims "Made in USA."

Saleswoman Dayne Barrios said the products were shipped from Florida to a Mexico distributor, which sent them to Cuba through a government importer. Calls to Seachoice offices in Pompano Beach, Fla., were not returned.

At least two Havana clothing stores call themselves Jordache, one even using the company's horse head logo on its marquee. The shelves inside are crammed with jeans, shirts and blouses with Jordache labels.

Steven Nakash, director of licensing for Jordache Enterprises in New York, said the company heard about unauthorized use of its brand in Cuba several years ago but took no action because "an American company dealing with a foreign territory and battling it out on foreign soil is very, very hard."

Nakash, a member of Jordache's founding family, said the company has international distributors but also licenses its brand to manufacturers, including one in Mexico. He said he was unsure where the products in Cuba came from.

"Is any of the revenue from Cuba coming back to me? Certainly not," Nakash said.

Even after Castro took over, more than 100 U.S. corporations - including Ford Motor Co. - obtained licenses to operate here through foreign subsidiaries.

The U.S. Cuban Democracy Act of 1992 made such third-country transactions illegal, while also authorizing the export of U.S. medicines. Eight years later, the U.S. Congress allowed direct sales to Cuba of food and farm goods, everything from rice, ice cream and livestock to wood products, down feathers and cigarettes.

Since then, Heinz ketchup, Tabasco Sauce and Tyson's chicken have been sporadically available at Cuban government supermarkets, and the United States has become the island's leading supplier of food and farm products.

Prices can be about twice as much as in U.S. stories. Tubes of Colgate toothpaste start at $4.85. You can also find products including shampoo, conditioner and anti-bacterial soap from New York-based Colgate-Palmolive Co. A shaving "mousse" from Gillette Series, distributed by Procter & Gamble Zurich, costs $4.80 a bottle.

Could those items be considered medical supplies? Not likely, say U.S. officials.

But pinpointing whether any American product is in Cuba legally is difficult because the U.S. Treasury Department does not disclose who secures export licenses, citing trade secrets acts.

No American brand is more prevalent in Cuba than Coke, but the Atlanta, Georgia-based Coca-Cola Co. has not sought Cuban export licenses - even though its product would qualify as food.

Bottled mostly in Mexico, Coke goes for $1 at stores - about the same price as at a U.S. convenience store - and up to four times that at touristy restaurants.

Charles Sutlive, a Coca-Cola spokesman in Atlanta, said the company has not authorized any bottler to sell or distribute any of its finished products in Cuba. But he added that the company "does not have the authority to prevent these type of activities in countries where Cuban import-export companies are free to operate."

Indeed, distributors of American goods operating in other countries often insist they are doing nothing wrong - and can even be fined by their own governments for refusing to export to Cuba.

Mexico fined the Sheraton Maria Isabel Hotel in Mexico City in 2005 after it bowed to U.S. Treasury Department pressure and evicted Cuban officials staying there. In January, a Norwegian hotel owned by Hilton Hotel Corp. sparked an uproar when it refused to book rooms for a Cuban delegation, citing the American embargo.

The Commerce Department's Padilla said the U.S. sanctions have international reach, applying to American products anywhere in the world.

"If companies knowingly sold to a Cuban importer, they can be prosecuted," he said. "Willful blindness is not an excuse to violate the law in these matters."

Despite potential legal hot water, Nakash confessed a certain pride that his brand has cracked Havana.

"I can very much appreciate seeing a Jordache shop there," he said. "I, as an American, can't go to a country like Cuba. But our brand can."





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