The biggest opening in U.S. relations with Cuba in more than half a century could be a boon for farmers, telecommunications firms and construction suppliers, but any broader economic impact is limited for now by the trade embargo that remains federal law.
President Obama’s action Wednesday relaxes but does not lift restrictions on travel to Cuba. It also allows larger remittances and authorizes expanded trade in a small number of goods and services between the United States and Cuba.
“This has got some limited capabilities,” said Jodi Bond, vice president of the Americas at the U.S. Chamber of Commerce. “The agriculture sector has some prospects. There are opportunities for communications and software companies, multilevel marketing companies and construction supply companies.”
Bond took part in a trip to Cuba this year that left U.S. chamber leaders impressed with the country’s long-term business potential. The group saw the new $1 billion Mariel port aimed at trade with the United States. They also met with Cuban officials and visited with some of the estimated 450,000 small-business owners who have started firms since the communist regime began easing restrictions on private business ownership in recent years.
For years, the chamber and other corporate interests have urged Congress to lift the trade embargo. Bill Lane, global government affairs director for heavy equipment manufacturer Caterpillar, applauded the warming relationship with Cuba. “The reopening of diplomatic relations between the U.S. and Cuba is a welcome development, a move which Caterpillar has been a long-standing proponent,” he said in a statement.
Automakers, agricultural conglomerates and telecommunications companies are among those that have long eyed Cuba as fertile territory. The country has nickel deposits and offshore oil reserves, and it produces widely coveted cigars. Only 5 percent of the population has access to the full Internet.
Meanwhile, its tropical climate and abundant beaches have made it a popular destination for Canadian and European tourists, just as it was for Americans before the 1959 revolution. Cruise companies, airlines and hotel operators are among those poised for the moment that Congress might lift the embargo.
“We look forward to the day, hopefully soon, when all Americans have the opportunity to travel to Cuba,” said Barney Harford, the chief executive of Orbitz Worldwide, a travel company. “There are numerous economic, social and cultural benefits that will flow from free and open access, and our customers are eager to visit Cuba.”
Five years ago, Orbitz launched an online petition urging the Obama administration to liberalize access to Cuba. The effort generated more than 100,000 signatures.
Americans are prohibited from traveling and spending money in Cuba unless they receive a license from the U.S. government. Typically, those licenses are restricted to journalists, scholars, relatives of Cubans and people involved in sports and cultural exchanges. Last year, about 170,000 Americans traveled to the island, mainly on charter flights that regularly leave the United States. Obama’s executive action will make those licenses easier to get, but it will not open up full-scale tourism.
“You no longer have to go through any bureaucratic process on the front end,” said Julia E. Sweig, a senior fellow at the Council on Foreign Relations. “You just sign a document saying what you’re going to be doing there and you go. And that is a huge difference. It’s not the lifting of the travel ban, because it doesn’t permit tourism. But it pretty much will streamline travel and grow travel, I think, quite substantially.”
Business leaders said the Commerce Department has been discussing a possible trade mission in the coming months to Cuba to familiarize more business leaders with the island’s economic potential.
Still, obstacles remain when it comes to U.S. investment in Cuba. The country’s economy has been reeling in the 25 years since the breakup of the Soviet Union, once its biggest benefactor and trading partner. The vast majority of Cubans work for the government, and the annual salary is less than $300 a year, limiting the market for many commercial goods.
Earlier this year, for the first time since the embargo was imposed, Cubans were given the ability to buy cars without special permission from the government. But the vehicles were marked up several times their book value by the government, putting them out of reach even for Cubans who receive generous remittances from relatives living abroad.
European, Russian and Chinese cars can be seen on the streets in Cuba, but most of them are owned by government officials. Before recent reforms, ordinary Cubans could buy and sell only cars that were on the island before the 1959 revolution.
“There is clearly a need for affordable transportation and cars in Cuba,” said Jorge Duany, director of the Cuban Research Institute at Florida International University. “But the issue is, how many people would be able to buy them?”
Although the trade embargo has been in place since 1960, there have been exceptions for certain items, including some agricultural and medical products. Last year, the U.S. government issued licenses for the sale of nearly $300 million in medical products and $3 billion in agricultural exports to Cuba, a senior Commerce Department official said.
But those licenses resulted in just $359 million in actual trade, according to the U.S. Trade Representative’s office. U.S. law requires the country to pay cash for all imports, making large transactions difficult. Any change in that policy would come with risks.
“Yes, you could sell to Cuba,” said Frank Calzon, executive director of the pro-sanctions Center for a Free Cuba. “But selling and getting paid are not the same thing.”
Also, even with the country’s recent economic reforms, the Cuban government controls almost every big business on the island, from car dealerships to hotels. For example, foreign firms doing business there do not hire workers directly. Instead, they hire them through the government, which often pays a fraction in wages of what it collects.
The two countries will also have to settle competing claims for property seized by the Cuban government after the revolution, and Cuba’s contention that the embargo and other actions by the United States have damaged its economy to the tune of trillions of dollars.
“The most likely scenario I see is that we’ll have a kind of incrementalism that this very big set of announcements will permit,” Sweig said. “But I don’t think that we’re going to see broad-scale American investment on the island the day after tomorrow.”