Over the past 13 years, I have been asked what the cigar industry landscape will look like if the Cuban Embargo is lifted. In the United States, obviously you will see a prevalence of Cuban cigars. Sales of those cigars will skyrocket, causing a dip in sales of non-Cuban cigars. After a few years, at most, sales will subside, and non-Cuban cigars will come back since the American palate has changed over time. Further, you will find that there will be less of a distinction between Cuban cigars and non-Cuban cigars since cigar companies will liberally blend tobaccos from Cuba, Nicaragua, Honduras, and the Dominican Republic.
What is less understood, is what will the cigar industry look like in Cuba? Over the years, I have speculated as to different scenarios. But the truth is, I don’t know. Even though I am intimately involved in Cuban trademark disputes and other cigar trademark disputes, I can not tell you with any certainty what the future holds for business in Cuba. However, it is possible that the following 8 topics will be challenges to any company that is interested in conducting any business in a post-Embargo Cuba:
- Trademarks. There will continue to be trademark disputes both in Cuba, and in the United States. Therefore, you should register your trademarks in Cuba as soon as possible. For decades, large United States companies have registered their trademarks in Cuba, but smaller companies have not. Cuba has a Patent and Trademark Office like nearly every nation in the world. It is antiquated, but it runs surprisingly well. If you are interested in conducting business in Cuba, you need to first secure your trademarks in that country as a first step in conducting business.
- Real Property. Property rights issues stemming from exiles claiming confiscated lands/buildings will be a thorny issue for years to come in Cuba. Not all property will be challenged, but you can bet that desirable property (beach front, downtown, and Pinar del Rio farming land) will be hotly litigated in whatever legal forum that might exist at the time. Therefore, if you are holding a big bag of money and itching to buy land in Cuba, whether for the cigar industry or not, you should do your homework before handing the loot over to the first “fulana del tal” that you meet once you land at Jose Marti Airport.
- Cuban Partners/Employees. If you plan to run a business in Cuba, but are not able to live there full time, you should choose your Cuban business partners/employees with extreme caution. The cigar industry has countless stories of a gringo setting up a cigar factory in Honduras, Nicaragua, and the Dominican Republic with a local only to later be screwed in ways that are incomprehensible to the American psyche.
- Those That Are There Before You. If you are a newcomer to the cigar industry, don’t think that you are going to storm down there and pick up great farmland in Pinar del Rio, or have access to the best, or any raw materials. Remember Altadis, S.A. (a huge cigar conglomerate) is a 50% partner with Cuba tobacco’s Corporacion Habanos, S.A. They, along with some others have Cuba’s best tobacco fields and people on lockdown and will defend it in a post-Embargo landscape.
- Take a Cuban-Zen Approach. During the first few years of a new Cuba, just tell yourself that everything will be a financial and psychological challenge. As such, you will need to have substantial resources to weather the early days. For instance, there is currently no decent roadway system in Cuba. As such, transporting your Cuban made goods will take longer then expected. The banking system is a wildcard. There is no Internet infrastructure, so your American habits of communication will be slowed to a crawl. Countless other daily inconveniences will be frustrating. So, take a Cuban-zen approach to your start-up days on the island.
- Court System. As any person involved in business knows, threats of litigation, and litigation happen. It’s a cost of doing business. Lawyers are usually blamed for this, but the truth is that lawyers get involved once a dispute has heated up for some time and the parties make the costly decision to seek court intervention when business discussions have broken down. If you conduct business in Cuba, there is a very good chance that you are going to have business disputes. Most will be small and you will be able to resolve on your own. However, some will require the hiring of counsel and court intervention. What then? What court will hear your business dispute? I have no idea what a post-Embargo Cuban court system will look like. Will it continue as it has? Will it change to look like our American system? Will it become a hybrid of the Cuban law system and our American system? Again, I don’t know. However, you may want to consider including a choice of law provision that requires that all disputes be held in the United States. I believe that Miami, Florida would be a good venue, as I am certain that Cuba/US business disputes will be increasingly heard in Courts located there. You may also choose to include in your business contracts a provision that any dispute will be resolved by Arbitration. I am certain that will be a growing method of resolving business disputes in Cuba. It follows that you must exercise extreme caution when choosing who represents your interests. Cuban lawyers are not like United States lawyers. Both have their strengths and weaknesses, so you should research who (or what team) will represent you with the understanding that there are differences in legal culture and dispute resolution.
- No Risk, No Reward. Those currently producing cigars in Nicaragua, Honduras, and the Dominican Republic are well aware of the challenges set forth above. They will find success in Cuba just as they have in these other cigar-producing countries since the transition will not be as jarring. However, this article is written more for those of you that are dreaming about getting into the cigar business, or some other business in Cuba. There will be significant challenges, but no risk, no reward.
- Pa’Lante. Finally, many in the Cuban exile community have displayed outrage at the manner in which Obama et al made this announcement and the fact that the United States will be viewed as weak on the international stage. I agree that you can not negotiate with terrorists, communists, or others that use violence, human rights violations, and systematically manipulate the liberal media to justify their repressive agendas. Alan Gross’ alleged “crimes” of providing communication devices to facilitate Internet communications do not equal the crimes of Cuban spies for which he was exchanged. However, Cubans on both sides of the Florida Straits have a saying, “siempre pa’lante, para atras ni para coger impulso.” This translates as always move forward, never backwards, not even for a boost. So, to all of you interested in conducting business in Cuba, be cautious, be respectful, and do everything you can to instill that freedom of speech, the press, association, and other inalienable rights are part of your contribution to a new Cuba.
H New Media Law