Monday, June 26, 2017

Cuba Will be Forced to Make Internal Economic Reforms for Growth

By on December 1, 2016

By Eva Lloréns Vélez and Philipe Schoene Roura

The possibility that Puerto Rico may forge commercial ties with Cuba is uncertain after U.S. President-elect Donald Trump threatened to revert President Barack Obama’s efforts to normalize diplomatic relations with the communist island if the Cuban government refuses to make better reforms.

Trump made his remarks via Twitter just days after longtime Cuban leader Fidel Castro died on Nov. 25 at the age of 90. His death was received with tears in Cuba but with joy by Cuban exiles.

“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 [the] deal,” Trump said on a Twitter post.

Embargo

What would it take for Trump to push for U.S. Congress to lift the embargo? Trump has said he wants to see specific reforms—such as greater religious freedoms, commercial openness—and a greater flow of the U.S. dollar.

A high-level source within the GOP, however, said Trump would wait for the approval of top leaders of Cuban descent.

“For the president-elect to do the full-blown ‘let’s lift the embargo,’ he would have to get some pretty clear signals from Ileana Ross Lichtenen and Mario Díaz Balart; probably from Sen. [Bob] Menéndez, Sen. [Marco] Rubio and Sen. [Ted] Cruz that they are happy—whatever that means, with whatever changes have happened in Cuba. Temper that with the fact that the president has a lot of friends and advisers who have been pushing for opening Cuba, probably quietly, not overtly,” the source said.

Miami-Cuban connections

There are some “very rich folks in Miami of Cuban heritage or Cubans themselves” who have been living in Miami a long time who have been very active in opening trade with Miami, the source said. These include Mike Fernández, a billionaire, who was a Jeb [Bush] supporter and then became a Hillary [Clinton] supporter when Trump was the nominee.

“He has been putting a lot of money into attempting to do everything he can to do business in Cuba under the embargo. So, I think there is some momentum. But I think that the president himself would have to see what the signals are from the elected officials of Cuban heritage, who have been the most vocal opponents to opening trade with Cuba,” the source said.

P.R. business with Cuba?

Chamber of Commerce President David Rodríguez said there was already uncertainty about the future of relations with Cuba when he was in Washington, D.C. before Thanksgiving to meet with members of Congress. Chamber members are planning to go to Cuba in May to explore business opportunities that can benefit Puerto Rico.

He noted that there are Puerto Rican businesses eager to make deals with the goal of operating in Cuba. Already several Puerto Rican businesses, such as Danosa and Rimco, which deal with powerplants, and Puerto Rico Water Management were exploring making investments there.

“We have to see if they will revert all of the restrictions because there were already imports of rum and tobacco in place,” he said.

In December 2014, Obama announced that the United States and Cuba were going to start negotiations aimed at re-establishing diplomatic ties and ending the five-decade trade embargo against that island nation.

U.S. Treasury Department (CB Photo/Eduardo San Miguel Tió)

U.S. Treasury Department (CB Photo/Eduardo San Miguel Tió)

In October, the Department of the Treasury’s Office of Foreign Assets Control and the Department of Commerce’s Bureau of Industry & Security announced amendments to the Cuban Assets Control Regulations and Export Administration Regulations, respectively, to create more economic opportunity for Cubans and Americans. The changes took effect Oct. 17 when the regulations were published in the Federal Register.

These changes were intended to expand opportunities for scientific collaboration by authorizing certain transactions related to Cuban-origin pharmaceuticals and joint medical research; improve living conditions for Cubans by expanding existing authorizations for grants and humanitarian-related services; increase people-to-people contact in Cuba by facilitating authorized travel and commerce; facilitate safe travel between the United States and Cuba by authorizing civil aviation safety-related services; and bolster trade and commercial opportunities by expanding and streamlining authorizations related to trade and commerce.

A more significant change was that Americans and their companies could enter into contracts with Cuban entities contingent on the U.S. lifting the embargo.

Gov. Alejandro García Padilla, who became the first governor to visit Cuba, announced over the summer his intention to open an office in Havana to forge cultural and business exchanges. Puerto Rico has similar offices in Florida, New York, Dominican Republic, Colombia, Panama and Spain. He made his remarks after meeting with Cuban President Raúl Castro.

The Puerto Rico State Department created a publication to educate businesses about how to do business in Cuba. Several business groups also followed suit. There was also talk during the summer about the possibility of exploring direct routes from Puerto Rico to Cuba, something that has not happened yet.

Cuban economist Roberto Orro, who travels frequently to Cuba, said that although President Raúl Castro has absolute control over Cuba, he will have to ease restrictions on commerce and foreign investments because not only is the U.S. government assuming a hard line against the island but the Cuban government can also no longer rely upon Venezuela for aid. Venezuela’s oil shipments to Cuba declined this year by almost 20%, forcing energy rationing. Years ago, Cuba lost its main provider when the Soviet Union dissolved.

“He must undertake internal actions to ensure the economy is strong because matters externally are becoming more complicated,” Orro said.

Such reforms must include giving more liberty to farmers so they can grow more food. The government must also allow the small private sector to negotiate directly with investors. Right now, the Cuban government has control over the entire process related to allowing investors to operate in Cuba. The government also has total control of the distribution of goods.

Contrary to what the high-level GOP source said, Orro does not believe Trump will revert all new policies toward Cuba launched by Obama because there is “no way to turn back” some of them. “He is not going to be able to close the U.S. embassy now that it is there,” he noted.

P.R. Manufacturers Association President Rodrigo Masses said he believes Trump will change his hard line toward Cuba because the dynamics of an election campaign are different from when a person is elected. He noted that Trump promised, during his first 100 days in office, to shorten the Food & Drug Administration (FDA) process to approve medications.

“There are around four or five drugs manufactured by the Cubans that are important, or deal with cancer, in the pipeline for FDA approval,” he said.

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