Cuba 4I continue my exploration of the issues raised under the Foreign Corrupt Practices Act (FCPA) when doing or attempting to do business in Cuba. On Monday, I referred to the one person I am aware of you might consult for advice in Cuba, who is not a Cuban government official. That person is Gregory Biniowsky, who is a Canadian by birth but has lived in Cuba for nearly 20 years. He is a Consultant with Gowlings Consulting Inc.

On the firm’s website, Biniowsky is listed as a “Havana-based business consultant for Gowling WLG. He has experience in providing strategic advice to companies assessing potential ventures in Cuba, assisting clients in navigating the complexities of the Cuban legal, political and economic systems, and has assisted in the negotiation of investment projects in Cuba on behalf of foreign investors. Gregory’s professional work in Cuba has also included working as a consultant for Canadian and European business ventures, a consultant for the United Nations development program in Cuba, a consultant overseeing development funds of the Canadian International Development Agency, and as a locally based consultant for the Canadian Embassy in Havana.”

Biniowsky is also the founding partner of Havanada Consulting Inc. which is a consulting firm specializing in giving advice to philanthropists, charitable foundations and developmental NGOs who desire to undertake or fund non-profit projects in Cuba. I should also note that he is also the founder of the restaurant Nazdarovie, which is a Cuban-Soviet inspired eatery with a homage to all things Soviet and those Soviets who settled in Cuba during the country’s close relationship with the former Soviet Union.

As Biniowsky is a private Canadian citizen, business interactions with him directly do not implicate the FPCA. This does not mean that if you hire him as your business consultant to advise you on the steps to do business in Cuba, the FCPA will not apply to his interactions with Cuban government officials. He will be like any other agent you might retain in any other country who will interact with the government on your behalf.

Biniowsky spoke to our state bar group. One of the things he emphasized was that corruption is not a problem in Cuba. He believed that Cuba scored well in the Transparency International – Corruption Perceptions Index (TI-CPI). However when I reviewed the TI-CPI I found that Cuba ranks 56 out of 168 countries on the scale, coming with a score of 47 out of 100. It is ranked just below Kuwait and just above Greece. Not exactly a singing recommendation.

Although it is not clear precisely what led to such a low score, the country was given low marks for freedom of the press, the rule of law, human development and voice and accountability. That sounds like they were penalized for being a closed, communist country without much consideration about actual bribery and corruption. However, as Biniowsky correctly noted, it has the third best score in Central and South America, which says something on its own about the perception of corruption in the entire region.

He also had some interesting insights in what the Cuban government may be looking for from an investment partner or other foreign company coming to Cuba. First and foremost, it is not simply the economic priority driving the government. The government is seeking to grant licenses to companies which will further its political and social priorities. For instance, the country is not able to feed itself and must import foodstuffs. With a national population of 11.2 million, a current annual tourist number at 3.5 million and the government looking to increase this amount to bring in hard currency, you can quickly see that increasing food production is a top priority.

Understanding these underlying issues, usually guided by a local expert, such as Biniowsky, is critical to beginning to grasp the issues you will face in doing business in Cuba. Your counter-party in all negotiations, some department or ministry of the Cuban government may not respond to what you believe are clear economic arguments.

Another key aspect is trust. This is something different from the Chinese concept of Guanxi or the system of social networks and influential relationships that facilitate business dealings in China. It comes from what might be termed as a society that has been under one party rule for most of the collective memory of island residents. It is even more than your word is your bond. It is your word and your actions are your bond. It is not your contract rights but what you said you would do and then actually did going forward.

Finally, you will need to understand the Cubans are a fiercely nationalistic people. Insulting them as little brothers and sisters or anything similar is about the quickest way to be shown the door. Lording some US laws, technology or cultural aphorism over them will simply not work. This does not mean you go hat in hand but with a large modicum of respect.

It does take patience and time to do business in Cuba. The Cuban government will be the most active business partner for the foreseeable future in almost all endeavors so there will be full FCPA scrutiny at all times. Nonetheless simply because the government will be so intimately involved in all business activity does not mean there will always be bureaucratic dogmatism at every turn.

Biniowsky emphasized there may be many things possible that you might not have considered. He provided on example that he was involved in for a US client. Recognizing there is still a commercial embargo, the client proposed meeting with the appropriate government representative to negotiate on a ‘what if’ the embargo is lifted basis. This permitted more than simply sitting across the table sizing up your potential business partner, as it allowed the parties to discuss into the weeds on many aspects of a proposed business relationship going forward.

Biniowsky ended his remarks by laying out three strategies that US companies might employ at this point. The first is to simply wait out the lifting of the embargo, however many years down the road this might be. The second is to invoke something called the 49-49 rule, which generally speaking says that a 49% investment in a company that is 49% foreign owned in Cuba could possibly meet the current embargo standard. Finally, there is something called the Herzfeld Caribbean Basin Fund, Inc. which invests primarily in equity securities of public and private companies, including US-based companies, which it believes will “benefit from economic, political, structural & technological developments in countries within the Caribbean Basin, including Cuba.”

Doing business in Cuba can be very challenging. You will certainly need competent US counsel to advise you on trade sanctions as well as good FCPA counsel and Cuban advisors as both counselors and business advisors. And you will need all of this before you start talking to the Cuban government.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2016

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