Gonzalez Case Could Reframe U.S.-Cuban Economic Ties

The time may be right to ease tense trade relations.
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After 6-year-old Elian Gonzalez was rescued three miles from Florida's shore in November, John Kavulich began to worry that his efforts to organize a health care exhibition for American businesspeople in Havana were about to fail. After two years of planning, Kavulich, president of the

U.S.-Cuba Trade and Economic Council

, expected that the growing custody struggle over the Cuban boy would foil his efforts to build economic ties between the two nations.

Surprisingly, representatives from both governments called to tell him the exhibition was on.

For Kavulich, whose non-partisan organization provides commercial information about Cuba, the willingness of both sides to go ahead with the trade exhibit signaled a significant turn in U.S.-Cuba relations.

"The tragedy of Elian Gonzalez has demonstrated a maturation in the relationship," said Kavulich. "In the past a problem in one area -- commercial, political or economic -- meant the other two areas shut down. With Gonzalez we saw an effort by both governments to compartmentalize the issues."

Now, with the Gonzalez boy and father reunited and the story headed toward an apparent conclusion that has placed

Fidel Castro

and

Bill Clinton

on the same side, business executives and trade officials are hoping that Havana and Washington will seize the moment to liberalize economic ties.

Such a move, which could eventually lead to the lifting of the 38-year-old U.S. trade embargo against Cuba, could potentially generate billions of dollars in business and create more jobs for both countries.

Castro's willingness to warm up to his archenemy 90 miles across the sea is difficult to measure, but he might be more amenable once the Gonzalez boy and his father return to their homeland, giving the Cuban leader a political victory over the U.S.

Clinton, who is seen as favoring increased trade with Cuba but has feared repercussions from the predominantly anti-Castro Cuban-American population, may also believe that the time is now right to ease trade relations.

U.S. public opinion came out strongly in favor of the government's position that custody should go to Elian's father, who came to the U.S. earlier this month to retrieve him. And polls show a majority of Americans approved of the

Justice Department's

armed predawn raid in Miami last Saturday to remove Elian from his relatives' house in Miami and reunite him with his father.

"For 40 years, the Cubans have been engaged in a long-distance civil war and the U.S. government has sided with those in Miami," said Ana Julia Jatar, the Cuban-American director of the

Cuba Project of the Inter-American Dialogue

, a Washington-based non-government organization. "For the first time Cubans in Cuba are now looking at us (the U.S.) not as an ally but not as an enemy either."

The next signal about the future of U.S.-Cuba trade relations could come as soon as next week, when the

Senate

is scheduled to vote on a bill to remove restrictions on the export of health care products and food to countries under unilateral embargos by the U.S. The bill includes Cuba.

Bipartisan support for trade with Cuba and other ostracized nations is building. Experts said they expected the legislation to pass in the Senate after Sen. Jesse Helms, the Republican chairman of the

Foreign Relations Committee

, came out in favor of the bill. Helms' support also bodes well for approval in the Republican-heavy

House of Representatives

.

"It's quite possible that by the end of this year, there would be legislation that would allow the commercialization of trade in medicine, medical equipment and food to Cuba," said James Whisenand, a Miami-based lawyer who advises European and Canadian businesses operating in Cuba.

Whisenand estimated that such opportunities could generate $100 million to $200 million for American business in the first year. A fully commercialized relationship would create an estimated $2 billion to $4 billion in trade after three years with American agriculture, fisheries, manufacturing, pharmaceuticals and tourism among the industries that would gain significantly.

Pressure on the U.S. government to open the door to Havana is also likely to increase as corporate America grows increasingly tired of watching Canada, Europe and other

NAFTA

-member nations strengthen trade relations with Castro. American entrepreneurs have not been able to participate in Cuba's relatively vibrant growth rate in recent years, which has been lucrative for foreign investors in Cuba.

"The U.S. embargo was cheap 10 years ago but it is becoming expensive for the U.S.," said Jatar. "Ten years ago no one wanted to invest in communist Cuba, but now tourism from Canada, Mexico and Europe is growing."

Businesspeople such as Thomas Herzfeld are sitting on pins and needles. For the past five years, Herzfeld, a Miami-based money manager, has been registering his Cuba-only closed-end mutual fund with the

Securities and Exchange Commission

, so that he would be ready to pounce on the island economy if full economic ties were resumed.

"We've managed to do very well investing throughout the Caribbean in companies that will do well even if there's no political change in Cuba," Herzfeld said. "But some companies will get an enormous boost if the embargo is lifted."

American companies, such as

Florida East Coast Industries

(FLA)

, a holding in Herzfeld's

Caribbean Basin

fund, would also stand to gain from improved relations. Florida East Coast Industries runs a freight line between Miami and Jacksonville that could be instrumental in transporting Cuban goods around the U.S.

Yet, while hungry American investors grow anxious, they are also aware that the process to free trade ties with Cuba is lined with obstacles, especially Cuban ones. Castro's mood is likely to remain difficult to measure.

"Castro's traditional modus operandi has been to maintain a balance between those who want to normalize relations with Cuba and those who want to maintain the existing relationship," said an expert on trade relations with Cuba, who requested anonymity. "It's going to be two steps forward, one step back."