US-Cuba political thaw may bring commercial revival, but obstacles remain

IN 1961, President Dwight Eisenhower officially severed diplomatic relations with Cuba, shuttering the United States embassy in Havana. The move marked the beginning of half a century of diplomatic hibernation, a sleep so deep that it survived the thawing of the Cold War by a full generation. Then, near the end of 2014, Presidents Barack Obama and Raul Castro revealed that a process to normalise relations between the two nations had started. The question now is how far and how fast that process can go, writes World Review expert Edwina Rogers. The Stars and Stripes now flies over the embassy in Havana, prisoners have been released on both sides and the Obama administration has struck Cuba from the US State Department’s list of state sponsors of terrorism. Numerous regulatory curbs, including on trade and travel, have been lifted. The regulatory changes on the US side have included easing restrictions on religious, cultural and educational travel to Cuba; raising the cap on financial gifts to Cuban nationals, authorising the sale and export of a wider range of goods and services from the US; allowing US citizens to import up to US$400 worth of goods from Cuba (including tobacco and alcohol); permitting US institutions to open correspondent accounts at Cuban financial institutions, and letting travellers to Cuba use US credit and debit cards. In September even more restrictions were lifted. This relaxation marks President Obama’s most aggressive use of his executive power to circumvent the constraints of the US trade and financial embargo on Cuba. With these steps, he has largely exhausted the executive branch’s capacity to effect unilateral change. Further progress will depend on the Republican majority in Congress. Not surprisingly, Mr Obama’s bold move to re-establish ties with Havana won praise from countries that had long been harsh critics of US policy – among them Argentina, Bolivia, Brazil and Nicaragua. Potentially, it could put Washington into a position to recover some of its lost influence – provided policy makers follow through. Any accolades Mr Obama has collected must be weighed against the reality of the president’s individual capacity to effect change. The White House has generated most of the momentum, but further steps will face much bigger obstacles on both sides of the 93-mile Florida Strait. In the US, there is Congress, the only body that can change the laws that put the country’s 55-year embargo – called ‘the blockade’ by Cubans – in place. Nested within the embargo is a number of contentious issues, not the least of which is US$7 billion in claims by US companies and citizens who had their Cuban properties nationalised. The likelihood that Congress will make moves to lift the embargo before the 2016 presidential election is remote. Cuba has its own set of obstacles to overcome in facilitating a rapid reconciliation. Even if the US embargo were to end overnight, the thicket of Soviet-style bureaucracy and centralising tendencies would still make it difficult to do business. Even as it tries to foster commercial development, Cuba buries its firms under a blizzard of regulations, taxes and other disincentives. Foreign entrepreneurs are still prohibited from directly hiring Cuban employees, which makes it clear Cuba has a long way to go before it creates a business climate conducive to serious investment. One of the biggest problems is Cuba’s lack of a truly independent judicial system, since courts are effectively under government control. To make matters worse, Cuba and the US do not have a bilateral settlement mechanism in place for commercial disputes, an understandingly unnerving set of circumstances for foreign investors seeking legal protection for their investments on the Caribbean’s largest island. For a more in-depth look at this subject with scenarios looking to future outcomes, go to our sister site: Geopolitical Information Service. Sign in for 3 Free Reports or Subscribe.

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