Can We Expect Better Business Relations with Cuba?

Faculty Member Jo Olson

Faculty Member Jo Olson

President Obama’s announcement on December 17 that the U.S. will work with Cuba to restore normal diplomatic relations between the two countries after more than 50 years should be good news to the majority of Americans who support better relations with Cuba.  It is particularly exciting for an old-timer like me, whose father regularly traveled to Cuba on business in the 1950s.  I remember how much my father loved Cuba and how excited he and his Cuban colleagues were when a young Fidel Castro overthrew the brutal dictatorship of Fulgencio Batista in 1959.  Unfortunately, Castro was not the democratic liberator those middleclass Cuban businessmen had expected, and soon they all fled Cuba.  My father always hoped to visit Cuba again, but he died without doing so.

According to The New York Times[1], President Obama will take executive actions that will reduce restrictions on banking and remittances of Cuban Americans to family members in Cuba. Actions should also permit telecom and Internet connections between the two countries and travelers will be allowed to bring back $400 in goods, including $100 in Cuban rum and cigars.  The President has asked Secretary of State John Kerry to work on re-establishing diplomatic relationships with Cuba and re-opening a U.S. Embassy in Havana.  Secretary Kerry will also investigate whether Cuba can be removed from the list of countries that sponsor terrorism, a list it has been on since 1982.  High-level delegations will begin talks on issues such as Cuban-American migration, narcotics, the environment, human rights and human trafficking.  Travel restrictions will be eased for the 12 categories of visitors currently allowed to visit Cuba, but not for the ordinary American tourist looking for an inexpensive vacation on a sunny beach in Cuba.

Despite the good news that the U.S. is finally seeking better relations with Cuba, it is not yet time to pack your suitcase to go to Cuba to find business opportunities unless you plan to sell agricultural goods, medical goods, building materials or telecommunications.[2]  Congress must remove the embargo and related laws described below which affect the ability of Americans to do business in Cuba. Already Cuban American members of Congress such as Senator Marco Rubio of Florida and Senator Robert Menendez of New Jersey have attacked the announcement of President Obama as have many other Republican members of Congress. Moreover, Cuba is still a Marxist state that despite reforms under Raúl Castro has not moved nearly so far in the direction of a market economy as China and Vietnam.

us-cuba2In the early 1960s, the U.S. imposed an embargo on trade and financial transactions with the Cuban Assets Control Regulations (CACR), which has been amended several times and is still in force today. The sanctions were strengthened with the Cuban Democracy Act (CDA) of 1992, which prohibited subsidiaries of U.S. firms from engaging in trade with Cuba and ships from loading or unloading freight at U.S. ports if they had traded with Cuba within six months. The Cuban Liberty and Democratic Solidarity Act of 1996, better known as the Helms-Burton Act, included a provision that prevents the executive branch from “lifting the economic embargo without congressional concurrence until certain democratic conditions are met.…”[3]  This act also held anyone financially liable in U.S. courts who used U.S. property (including property of Cuban Americans) seized by the Cuban government. Not surprisingly, aspects of these laws were very unpopular with other countries that did business with Cuba, and the seized Cuban property provision of the Helms-Burton Act has been regularly suspended.  Despite the sanctions, U.S. policy allows some humanitarian transactions with Cuba, and the Trade Sanctions Reform and Export Enhancement Act of 2000 allowed U.S. agricultural exports to Cuba but under tight financial terms.[4]

Some restrictions were eased under the Clinton Administration only to be tightened under the Bush Administration. The Obama Administration has wanted to ease restrictions, and now that Alan Gross has been released from Cuban prison, President Obama can make stronger moves.  Nevertheless, the major changes have to be made by Congress and, given the Republican control of the 114th Congress, change is likely to be slow.  Opportunities for Americans to export to or invest in Cuba should gradually improve, particularly if Cuba allows more liberalization of its economy and improves human rights, but progress is likely to take years.  On the more positive side, I am looking forward to visiting Cuba in the near future to fulfill my father’s dream, but I am still going to have to go as an “educator” or such, not as a casual tourist.

[1] Peter Baker, “Obama Announces U.S. and Cuba Will Resume Relations”, The New York Times, Dec. 17, 2014, http://www.nytimes.com/2014/12/18/world/americas/us-cuba-relations.html?_r=0,

[2] “How America’s Relationship with Cuba Will Change,” The New York Times, Dec. 18, 2014, p. A14.

[3] Mark P. Sullivan, “Cuba: U.S. Policy and Issues for the 113th Congress,” Congressional Research Service, July 31, 2014, p. 23.

[4] Ibid.

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