Informacion economica sobre Cuba

Disappointing month for foreign investment in Cuba

Foreign companies look to be pulling out of oil exploration in Cuba, and

Havana Club rum is fighting to retain its name in US markets, writes a

guest blogger.

By Anya Landau French, Guest blogger

posted June 7, 2012 at 3:53 pm EDT

It's not been a banner week – or month – for Cuba on the trade,

investment, and economic front.

After its second attempt in 10 years to find commercial quantities of

oil in Cuban deep water in the Gulf of Mexico – its latest well came up

dry – Spain's Repsol is "almost certain" it won't try again. Repsol has

the option to drill again later this year before the Italian-owned

Scarabeo rig – which, due to the US embargo, had to be specially built

with no more than 10 percent of American parts for exploration in Cuba –

moves on to Brazil. Next up are two Malaysian and Russian firms, whose

explorations this summer could be crucial to Cuba's near-to-mid-term

hopes of accessing undersea reserves it estimates to be as high as 20

billion barrels (the US estimates it to have around 5 billion).

As Jorge Pinon, a former oil executive and an expert on Cuba's oil

prospects, points out, once the only rig in the world that can drill in

Cuban waters without violating the US embargo moves on, it could be

years before it's available and another player is willing to invest

millions in the gamble – especially when larger reserves beckon

elsewhere around the world. The prospect of an energy-independent Cuba

was intriguing from a geopolitical standpoint, and surely a blow to

Cuba's hopes of digging out of its continuing economic troubles. Just

as some wondered if success in the Gulf could derail the economic

reforms underway out of necessity, it might soon be time to ask if

failure could spur on the painfully slow pace of the reforms.

The pace seems even slower for foreign investments on the island as of

late. Cuban officials have cracked down on foreign investors and their

domestic partners found to be involved in corruption – two British

executives have recently landed in jail. Other partners such as

Unilever and a group of Israeli investors in Cuban citrus are on their

way out following unsuccessful contract renewal negotiations. It's

mystifying to watch Cuban officials working harder to chase off

investors than to bring them in when, as one western diplomat put it,

such concessions are "inevitable". With plans to drastically cut

government payrolls (that the small domestic private sector can't

quickly or totally absorb), Cuba's main benefactor and trading partner,

Venezuela's Hugo Chavez's health (and hold on power) uncertain, and big

bills to pay with not enough hard currency earnings to pay them, it's

hard to understand what's going on. And that is exactly the sort of

climate that will scare off investors for the time being.

And in perhaps the most bitter news for Cuba, the US Supreme Court has

rejected a petition over the US trademark rights to the Havana Club rum

name. Given that the US accounts for 40 percent of the worldwide rum

market, CubaExport and its French distributor partner Pernod Ricard,

which distribute Cuba's flagship rum to more than 80 other countries

around the world but not in the US yet, had hoped the US Patent and

Trademark Office (USPTO) would hold their seat in the US market until

the embargo is eventually lifted. That's because CubaExport had

registered the US rights to the name in 1976 (after the prior owner,

who's rum distillery was expropriated by the Cuban government, failed to

renew the US trademark rights in 1973), and renewed its rights every ten

years thereafter in order to keep its rights current.

Two decades and no US imports from Cuba later, Pernod Ricard's

competitor (and reigning worldwide rum distributor) Bacardi started

bottling its own Havana Club rum. Pernod Ricard responded by suing

Bacardi for the trademark infringement. Then, in 1998, Bacardi triumphed

by getting allies in Congress to pass a rider, Section 211 of the 1999

Omnibus Appropriations Act, to block registration and renewal of

trademark rights associated with expropriated Cuban properties (without

"consent" of the "original owner" of the trademark), and to even block a

US court from hearing a complaint on their behalf.

In pictures: Cuba's economy

Pernod would likely have argued in court that the new law didn't apply

because the original owner of the Havana Club label had failed to renew

their trademark rights in the US and thus was no longer considered the

original owner, but it never got the chance, since Section 211 forced a

Florida court to throw out the pending suit by Pernod Ricard against

Bacardi. Then, when CubaExport tried to pay for the Havana Club rights

renewal in 2006, as it had done for three decades, Section 211 now

prevented the USPTO from accepting the payment.

The Havana Club rum dispute remains as obscure as ever to the larger

American public. It's simply too complicated, and there isn't a big

enough constituency to care. And that's the real shame. Thanks to a

backroom deal on a fast-moving, must-pass bill , the intended targets

aren't the only losers. The United States' sterling reputation for

intellectual property rights protection has taken a hit, and if renewed

threats of retaliation by Cuba bear out, US businesses that have nothing

to do with the row and enjoy trademark protection in Cuba today could

lose that protection. Whatever one thinks of the Cuban government's

expropriation of businesses in the early days of the Revolution (and the

American business community that overwhelmingly opposes Section 211 is

surely no fan), it's hard to see how following Cuba's usurping example

is really the answer.

– Anya Landau French blogs for The Havana Note, a project of the

"US-Cuba Policy Initiative," directed by Ms. Landau French, at the New

America Foundation/American Strategy Program.

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