On Saturday, November 26th, I woke up to the news that former Cuban leader Fidel Castro passed away the night before. Upon hearing the news on the state-run television, I could only reflect on a conversation with Cuban citizens just two to four days prior. A couple of Cuban citizens shared their thoughts on how U.S.-Cuban political economic relations and the Cuban economy in general would fare once the current president of Cuba, Raul Castro, stepped down in 2018. Having similar conversations that Saturday morning about what Fidel Castro’s passing would mean revealed important things to consider when making assumptions about what we can expect moving forward.
This blog post answers two questions that many have asked me since my return to the United States: 1) What will this mean for U.S.-Cuban economic relations, and 2) Will the “economic opening” be rolled back?
The Immediate Future of U.S.-Cuban Economic Relations
During my overnight stay in Miami, Florida, there were celebrations in the streets and optimism about significant changes. This was a contrast to the sentiments that I witnessed in Cuba. The city was far more tranquil. Some with whom I spoke merely shared that they see little change forthcoming. As one gentleman explained to me, the recent economic reforms by Fidel Castro’s younger brother, Raul, were the result of necessity, but future change will not be so rapid. In his assessment, the slow change will be due to the fact that many of the leaders in government still support Fidel Castro and his ideals. Another individual also maintained that change will probably still be slow even after Raul Castro steps down.
As a U.S. citizen, I have had the opportunity to travel to Cuba to observe some of Cuba’s economic reforms and benefit from changes in U.S. policy. There are differing opinions in the United States regarding support for continued progress toward increased economic ties with Cuba. I am not so sure what to expect in terms of policy within the next year, especially since reading President-elect Donald Trump’s November 28th tweet, which read, “If Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate deal.” Is this even possible?
Rolling Back Recent U.S. Policies?
One thing to clarify is that the U.S. embargo against Cuba is still in place. (I mention this point after hearing several comments expressing joy that the embargo has been lifted and that U.S.-Cuban economic relations are completely open.) The recent changes in U.S. policy did not remove the embargo. Only U.S. Congress has the authority to remove or maintain the embargo. Therefore, there are still restrictions on U.S. exports and travel to Cuba.
From January to September 2016, the United States exported US$176 million worth of goods. Within the last two years, the United States loosened restrictions on the specific U.S. goods that can enter the island and on what U.S. citizens can import.
Although U.S. debit and credit cards were authorized in December 2014, cash is still a must. On my most recent visit, all financial transactions were conducted solely in cash. Also, when changing from the U.S. dollar to the Cuban convertible peso (CUC), be prepared to pay a 10% penalty and a 3% currency exchange fee.
Travelers still must fall into one of the 12 categories authorized by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury. Traveling for vacation remains restricted.
Going back to the aforementioned tweet, the United States and Cuba have not reached a single deal to allow for the increased flow of goods and people. Rather, the United States has implemented several policy changes going as far back as 2000 with the Trade Sanctions and Economic Reform and Export Enhancement Act, although the embargo still remains in place. It is not clear to what degree, if any, the incoming president would reverse the progress in U.S.-Cuban political economic relations. However, undoing the progress thus far may not be so feasible or even wise in the political and economic sense.
At least for now, there are still opportunities for U.S. companies in Cuba, as highlighted in several earlier posts. Maintaining a sense of optimism myself, there is an opportunity to be at the forefront of a new era. Now is the time to watch the market and develop a long-term strategy. GRIIT will continue tracking the Cuban market in its efforts to provide a useful service that will benefit Cuba, which was introduced during my recent stay in Havana, and provide select U.S. industries with useful information and tools.
To learn more about how specific companies are doing in Cuba, join the free GRIIT mailing list (click here).
To learn more about what type of business is allowed and still prohibited, visit the Office of Foreign Assets Control’s website at:
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.