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Cuban leadership shift recalls market potential

The Cuban paint and coatings industry is showing signs of potential for the future.

By Charles W. Thurston

Published March 19, 2007
The recent shift in Cuba's leadership from ailing Fidel Castro to his brother Raul Castro is rekindling interest in the potential of the Cuban market, which has long been unreachable for U.S. companies. Despite the U.S. economic blockade of Cuba, the island economy grew a surprising 12% last year, and many Cuba watchers are hopeful that the island could once again become the entertainment capital of the Caribbean.

Some political analysts suggest that under Raul Castro, Cuba's economy could change more rapidly, perhaps following the Chinese economic model, in which an essentially capitalist market is slowly decentralized under Communist political control.

In the mean time, international investors from a variety of countries, including Canada, Jamaica, Spain, Germany and France, are actively developing niches in the Cuban market. The potential for the paint and coatings industry is substantial in both the architectural and industrial segments, based on a strong nickel and oil industry, and on a tourist sector that now generates $2 billion a year.

"If the Cuban market opens, per capita consumption could be significant; the potential is huge," said Paul Alexander, director of Caribbean region marketing for Berger Paint Jamaica, in Kingston. "But more important than the volumes required in Cuba now will be the consumers' ability to pay, and the government's import tax rate."

While the Cuban housing market is in a shambles, hotel development is robust, led by companies like Spain's Sol Melia, which now operates two dozen hotels on the island. Tourism is now the largest source of foreign revenue for the country, for which Canada has been the leading source of tourists, providing about 500,000 visitors per year.

The funding for refurbishment of housing and for new housing construction could largely come from relatives of Cubans living in the Miami area. U.S.-government regulated remittances by U.S. individuals to family members in Cuba have run as high as an estimated $1 billion a year, and estimates are that $5 billion or $6 billion in U.S. funds would flow into Cuba during the first year of normalized relations between the island and the U.S.

Cuba's stunning colonial architecture, particularly in Havana and Santiago de Cuba, has been recognized by the United Nation's Unesco among other landmark agencies. Residential refurbishment is assisted by so-called micro-brigades, who work to expand the housing stock, estimated at less than four million units for a population of 11 million. Foreign-funded programs, like Habitat-Cuba also have helped ease the housing crisis, including participants like the global Methodist Church. The government needs to build some 50,000 units per year to alleviate the housing shortage, according to a published statement by a Cuban official.

One way U.S.-produced paint is reaching Cuba is through charitable donations. Caribbean Medical Transport, which solicits funding through a Lyndonville, VT office, indicates that it distributed 7,200 gallons of paint from an Oregon producer in 2002 to hospitals and clinics throughout Cuba.

At least one paint manufacturer has considered building a facility in Cuba. Tex-Color, of Efurt, Germany, was described in a 1998 press report as negotiating a joint venture to produce paint in Cuba for domestic use and for export to the Caribbean region, quoting Romeo Storari, then a vice president for the company. At the time, Cuba's paint import volume was estimated at 20 million liters per year.

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