Despite changes, U.S. businesses still face a minefield of sanctions in Cuba
Despite changes, U.S. businesses still face a minefield of sanctions in Cuba
Pedestrians walk past Fin de Siglo, a department store dating back to
pre-revolution Cuba, in Havana on Monday, Dec. 22, 2014. U.S. is moving
to restore diplomatic relations with Cuba for the first time in more
than a half-century. (Bloomberg)
By Joshua Partlow and Nick Miroff January 11 at 3:30 AM
MEXICO CITY — To the Cuban government, it is “The Blockade,” and
sometimes, “The Genocidal Blockade,” as if U.S. Navy gunboats had
circled the island and cut off its inhabitants.
The “Cuban Embargo,” as it’s known in the United States, has failed for
54 years to push the Communist government from power. The U.S. economic
sanctions have left Cuba neither fully isolated nor able to conduct
completely normal business relations with other countries and foreign
Now, as President Obama plans to poke new holes in the patchwork of
financial, commercial and travel restrictions first imposed by the
Eisenhower administration, American businesses are eagerly awaiting new
opportunities on the island. But a maze of regulatory obstacles remains,
and the embargo may endure as the defining feature of U.S.-Cuba
relations long after an American embassy reopens in Havana.
For American companies, the sanctions look “like a scary forest of
monsters,” said Robert Muse, a Washington attorney who specializes in
Cuba trade issues.
It is also not clear whether the Cuban government will truly be open for
business and ready to allow U.S. firms to regain a foothold on an island
where American brands and products are revered but the government
remains deeply wary of steamrolling yanqui capitalism.
With only 11 million people and a GDP about the size of West Virginia’s,
Cuba isn’t exactly a grand prize for corporations. But it represents
pure potential for the U.S. tourism industry, as well as agriculture
companies, firms that can overhaul its rudimentary telecommunications
infrastructure, and many others.
The top State Department official focused on Latin America, Roberta S.
Jacobson, is scheduled to arrive Jan. 21 to begin laying the groundwork
for the reopening of a U.S. Embassy on the island. She will be followed
by Commerce Secretary Penny Pritzker and a U.S. business delegation on a
“commercial diplomacy mission.”
The Obama administration has proposed a few basic changes to the Cuba
rules, such as allowing U.S. companies to export building materials for
private homes, agricultural equipment for farmers, and
telecommunications equipment. The U.S. government will allow new
relationships with Cuban banks, and limited imports of Cuban goods such
as rum and cigars.
Raul Castro and other Cuban officials have been quick to temper
enthusiasm on the island for Obama’s moves with reminders that the
sanctions remain a formidable obstacle to truly normal relations. They
can be lifted only by the U.S. Congress.
According to Havana, the measures have inflicted $1.1 trillion worth of
damage on the island’s economy over the decades — a figure that will
almost certainly enter into future negotiations over the billions of
dollars’ worth of pending claims by U.S. litigants whose property was
seized after Castro’s 1959 revolution.
Cuba claims the sanctions hurt its citizens by depriving them of U.S.
medical technologies and pharmaceuticals, although U.S. officials say
such sales are generally allowed with export licenses from the Treasury
Trade with the rest of the world
Though the restrictions block most U.S. commerce with the island, the
Castro government, which has a virtual monopoly on foreign trade, does
business with other nations all over the world, though not always smoothly.
Where U.S.-Cuba relations stand and what may change VIEW GRAPHIC
On the streets of Havana, new Hyundai and Kia sedans from South Korea
dart among the old Soviet Ladas and battered Chevy Bel Airs from the
Eisenhower years. Cuban resort kitchens are stocked with Spanish wine,
Chilean salmon and filet mignon flown in from Canada. There’s a Lacoste
store selling polo shirts under the colonnaded archways of Old Havana.
With shipments of subsidized petroleum, Venezuela, Cuba’s top trading
partner, keeps the island’s lights on. From China, the Cuban government
can get just about anything.
These competitors have eaten away at whatever small beachhead certain
American companies gained in Cuba over the past decade or so. After a
series of devastating hurricanes in the island nation, Washington carved
out new exceptions to the embargo allowing Havana to buy American food
on a cash-only basis.
Within a few years, the United States had become one of Cuba’s top 10
import partners. U.S. food sales peaked at more than $700 million in
2008. Today, state-run supermarkets still stock Corn Flakes, Heinz
ketchup and American oatmeal. Apples from Virginia show up in big white
boxes at holiday time.
Sales have slowed, though, as Cuba has boosted trade with Brazil and
European countries that can offer financing and credit. American
companies sold an estimated $300 million worth of food to Cuba last
year, nearly half of which consisted of frozen chicken parts.
“We’ve lost a lot of market share over the years, and we want to get
that back,” said Mark Albertson, director of strategic market
development at the Illinois Soybean Association.
His organization, and American producers of poultry, soy, pork, corn,
milk and other goods, have banded together in a new coalition to try to
lobby Congress to end the embargo. Obama’s proposal, although a good
step, Albertson said, “doesn’t go far enough.”
Even with the new changes, companies expecting to do business in Cuba
say they are going to be hamstrung by U.S. restrictions on financing and
credit. There are “so many exemptions and hoops we have to jump through
that make it not competitive,” Albertson said.
U.S. fines fuel skepticism
Banking is a big problem. The Obama administration has hit foreign
financial institutions with more Cuba-related fines than any previous
administration, according to Cuba’s Foreign Ministry.
In July, the French bank BNP Paribas agreed to pay an $8.9 billion fine
from the U.S. Treasury Department for Cuba-related violations. The
German financial giant Commerzbank said last month it will pay $1
billion in a similar settlement.
The banks broke the law because they routed the transactions through
U.S. territory, regulators said.
Muse, the trade attorney, said American banks remain skeptical that Cuba
is worth the trouble. The confusing overlay of U.S. laws — from the USA
Patriot Act to money-laundering statutes — convinces some that it is
easier to avoid the island entirely.
These hurdles, as well as the Communist-ruled island’s difficult
business climate, have led some to conclude that the current excitement
over the U.S.-Cuba rapprochement is mostly hype and wishful thinking,
and that little will change for American businesses seeking to invest in
“They’re believing what they hope will be,” said John Kavulich, senior
policy adviser at the U.S.-Cuba Trade and Economic Council, a nonprofit
group that includes major American businesses. “And they’re forgetting
that the Cuban government is not about to say: ‘We’re going to accept
everything that you want to do to us, knowing that your goal is to
change us.’ ”
“The Cuban government will allow only what it believes it can control,”
In an interview, Commerce Secretary Pritzker highlighted travel,
agriculture and telecommunications as areas of opportunity for U.S. firms.
Though many are skeptical Cuba will allow the U.S. government to fiddle
with its Internet or cellphone services, given Communist officials’
concern over spying, Pritzker said there were still opportunities
created by the president’s opening. With relatively few Cubans owning
cellphones, and even fewer with Internet access, she said, “there’s
enormous telecommunications infrastructure that needs to be put in.”
“We have to respect the fact that by statute the embargo is still in
place,” Pritzker said, but that “commercial engagement can change the
diplomatic relations between our two countries.”
And, she added, “the president is encouraging us to go.”
Gabriela Martinez in Mexico City contributed to this report.
Joshua Partlow is The Post’s bureau chief in Mexico. He has served
previously as the bureau chief in Kabul and as a correspondent in Brazil
Nick Miroff is a Latin America correspondent for The Post, roaming from
the U.S.-Mexico borderlands to South America’s southern cone. He has
been a staff writer since 2006.
Source: Despite changes, U.S. businesses still face a minefield of
sanctions in Cuba – The Washington Post –