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Cuba
Stocks US Brands Despite Embargo
Yahoo!
News. By Will Weissert, Associated Press
Writer, May 15, 2007.
What Embargo? Distributors
Abroad Ensure Some Top US Brands Get to
Cuba
HAVANA (AP) -- 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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