Capitalist Trappings Are Slow to Come to Cuba

But change is on the way

This week America takes another step toward normalizing relations with Cuba as it reopens embassies on the Caribbean's largest island. While the U.S. embargo remains in place, barring the business activities of domestic companies, foreign players have had more freedom in anticipating economic opportunities if and when Cuba's state-controlled economy opens up.

WPP is a case in point, tying its own ambitions to those of advertisers eyeing Cuba. In a first among industry holding companies, the London-based entity recently announced its move into the market in partnership with state-owned Palco Group and has hired an executive based in Havana.

WPP, a pioneer in China, has been down this road before, with Cuba more akin to China's centrally planned economy. One of the first things Cuban revolutionary leader Fidel Castro did in the '50s was to ban the capitalist tool of advertising. "Conspicuous consumption" and "illicit profit making" are still dirty words in Cuba, observed Joseph Scarpaci, executive director, Center for the Study of Cuban Culture + Economy.

The government still largely controls media and retail. Internet access is limited, although Cubans consume online content via an underground network providing it offline on flash drives.

Signs of change are apparent elsewhere in the country of 11 million people. Even with limited purchasing power and product choice, Cubans are students of international brands thanks to American films on TV, tourists and visits from American relatives. "People are sick of being told what to buy for the last 50 years," said Scarpaci. "There needs to be a change in infrastructure and mindset."

A country of state employees is giving way to more well-off self-employed. "The entrepreneurial class is slowly but surely becoming a middle class, although consumers are still taking baby steps," said Pedro Freyre, chair of the international practice at Miami law firm Akerman.

Some international companies like Unilever and Nestlé are in Cuba through joint ventures, and Coke is available because of an embargo loophole. However, other consumer multinationals may need to justify value.

"For a McDonald's it's going to take awhile [to get established] because they have to answer 'How does it contribute to the good of the Cuban economy?'" said Kirby Jones, an Alamar Associates consultant.

Ramiro Prudencio, head of Burson-Marsteller's new Cuba Specialty Team, explains how even within a more open economy, the Cuban government is expected to impose such criteria.

"PR is going to be more important than advertising [initially]. It will focus on corporate social responsibility and corporate positioning," said the B-M Latin America CEO. "Companies will have to show what they're doing, who they are and demonstrate they're bringing value to the Cuban people that's consistent with conditions for market entry."

Akerman law partner Freyre said among his firm's most active clients looking at Cuba are travel and charter companies. With travel restrictions eased by Presidents Clinton and Obama, more Americans are expected to flock to Cuba, already the eighth most popular destination in the Americas. An estimated 1.7 million visitors traveled to Cuba through May, according to Cuba's National Statistics Office.

"The real advertising play in Cuba is tourism," he said, predicting travel-related and b-to-b marketing will lead the ad industry's involvement.

This story first appeared in the July 20 issue of Adweek magazine. Click here to subscribe.