Canadian Manufacturing

Improved U.S.-Cuba relations could benefit Canada, experts say

A boost in Cuba's wealth will be a net benefit overall for Canada, an expert said, though challenges may lie ahead



OTTAWA—Experts believe closer ties between the United States and Cuba will eventually make economic waves for Canadian business, though it remains unclear who stands to benefit—or lose out.

Steps taken toward rebuilding U.S.-Cuba relations will almost certainly lead to greater prosperity for the Caribbean country, which is also an important Canadian trading partner, said Carleton University economics professor Arch Ritter.

A boost in Cuba’s wealth will be a net benefit overall for Canada, he said.

“I believe that will help to promote economic expansion and greater prosperity in Cuba,” said Ritter, an expert on the Cuban economy.

“When that occurs, that’s going to increase the size of the market for Canadian exports. That should also occur with investment—the stronger the Cuban economy, the greater the potential for Canadian investment.”

But not everyone will welcome the change.

Ritter expects some Canadian firms to suffer from a bigger U.S. presence in Cuba.

He said a number of Canadian exporters will likely be “squeezed out” from an eventual influx of American competition, particularly in key sectors like agricultural products and machinery.

Canada did nearly $1 billion worth of trade with Cuba last year, including more than $465 million in exports.

For at least the last five years, the most exported products to Cuba have been machinery and parts, followed by cereals.

Canada has maintained ties with Cuba since the U.S. imposed an embargo in the early 1960s.

That continued relationship has allowed Canadians to forge business relationships in Cuba without having to contend with as many rivals, especially those from the U.S.

That looming American threat was addressed in a 2012 federal government document, which advised exporters to build and preserve strong relationships in Cuba to avoid losing market share if the embargo were ever lifted or modified.

“It may come to pass that any goodwill established by Canadian support of Cuba over the past 50 years will be quickly replaced by competition from U.S. producers,” said the paper, which noted Cuba was the 40th largest export market for Canada in 2010.

“Therefore, now is a most opportune time to establish a foothold in the market.”

Another expert on Canada-Cuba relations also predicted challenges ahead.

“It’s going to be tougher—we had a much wider road to travel on in Cuba,” said John Graham, an ex-Canadian diplomat who served as a spy for the Central Intelligence Agency (CIA) in Cuba in the 1960s.

“Canada does have a head start, but … my goodness, this is going to galvanize the investment climate in Cuba. It’s going to make Cuba a whole lot more attractive for outside investment.”

Sherritt International Corp., which runs a nickel and cobalt mining operation in Cuba, is one Canadian company with deep roots in the island nation.

David Pathe, the firm’s president and chief executive, said Sherritt is the largest foreign investor in Cuba, where it has had operations for 20 years.

Sherritt also produces 20,000 barrels of oil per day there and is involved in power generation, he added.

“We’ve been operating within the confines of the U.S. embargo the entire time we’ve been doing business there and we’ve been able to be successful, notwithstanding those restrictions,” Pathe said in an interview.

“If today’s announcements are a step toward alleviating some of those concerns from the market’s perspective, then I think that’s a positive development for Cuba and therefore a positive development for us.”

He’s hopeful the shift will eventually give Sherritt access to the U.S. market for products and supplies.

With U.S.-Cuban relations warming up, Pathe and his family also hope to benefit on the personal side.

Since the 1990s, American legislation has prevented some executives and officers from foreign companies operating in Cuba, as well as their families, from travelling to the U.S.

Pathe, a Canadian citizen, is among those who have been barred from entering the U.S. under the Helms-Burton Act.

“It is a strange phenomenon,” he said of the ban. “Hopefully, today is a positive step in that direction.”

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