New rules loosening the U.S. embargo against Cuba will allow more Americans to travel there, expand the island’s access to the U.S. financial system and permit Cuban athletes to play Major League Baseball in this country without having to defect.
The regulations, announced Tuesday just days ahead of President Obama’s historic visit to Cuba, are the fifth and potentially most significant round of changes since Obama and Cuban President Raúl Castro announced in December 2014 that the two countries would normalize relations. Diplomatic ties were reestablished last summer after more than half a century of estrangement.
Ben Rhodes, White House deputy national security adviser, cited “strong support” in this country for Obama’s use of his executive powers to dismantle as many financial and travel restrictions as possible until Congress agrees to lift the embargo. “We also know that our companies and our people are very interested in taking advantage of new opportunities to engage with and empower the Cuban people.”
Obama’s goal is to lock in the changed relationship before he leaves office, creating economic, diplomatic and cultural ties that will be difficult for a new administration to undo. Republican Sens. Ted Cruz (Tex.) and Marco Rubio (Fla.), both candidates for the GOP presidential nomination and sons of Cuban immigrants, have vowed to reverse the opening.
GOP front-runner Donald Trump has said, without elaborating, that he would get “a better deal with Cuba than Obama.” Republican leaders in Congress have refused to allow votes on a number of pending bills to lift the embargo and all remaining travel restrictions.
On the Democratic side, Hillary Clinton and Sen. Bernie Sanders (Vt.) support Obama’s policy.
Obama arrives in Havana on Sunday evening on the first visit by a U.S. president to Cuba in almost 90 years and the first state visit by a U.S. president. During his two-day stay, he will meet with Castro and members of Cuban “civil society,” including political dissidents, and he will hold a roundtable with Cuban private-sector entrepreneurs and U.S. business leaders, dozens of whom will travel there with him under the auspices of the U.S. Chamber of Commerce.
On Tuesday, Obama will attend a baseball game between the Cuban national team and the Tampa Bay Rays before leaving to visit Argentina.
Critics of the visit charge that the Castro government has done little to reciprocate U.S. gestures. While the number of political protests has been steadily rising, so has the government’s efforts to stop them. More than 1,000 demonstrators have been detained each month since the beginning of the year, most of them held for several hours and some physically assaulted.
The administration argues that the more opportunities it has to talk to the Cuban government, the more it can push its concerns. “Even as we pursue this opening between our people, between our governments, we will continue of course to have differences with Cuba on a number of issues, including human rights, which we will be pursuing directly,” Rhodes said.
On an economic level, Obama’s efforts to chip away at the embargo have so far left U.S. businesses disappointed at the slow pace of Cuban deal-making. There has been some progress, including an aviation agreement that is likely to result in commercial U.S.-Cuba flights by late summer.
Two U.S. companies — Alabama-based Cleber tractors and Florida Produce — have been approved by the Treasury Department to open plants in Cuba, although only Cleber has been approved by the Cuban government.
But overall, despite visits by dozens of U.S. official and business delegations over the past year, the Cubans have been concerned about the cost of doing business with U.S. companies and remain suspicious of U.S. intentions.
Cuba, with a 2014 gross domestic product of $81 billion and imports of only $14 billion in goods and services, “desperately needs massive flows of foreign investment,” said Richard E. Feinberg, a professor at the University of California at San Diego who has written extensively on the Cuban economy. While the island is a “modest” market for U.S. exports in the best of circumstances, an expanding Cuban economy “could make a real difference for many individual U.S. businesses,” he said.
Carlos Gutierrez, a former U.S. commerce secretary and chair of the U.S. Chamber of Commerce’s U.S.-Cuba Business Council, acknowledged the difficulties of doing business, saying that “it’s not easy to get to Cuba. You’ve got to get a visa, you’ve got to get the right people in the room, then at least go back a couple of times to fine-tune the deal. It does take time.”
“But what I hear from companies is that when Cuba is fully open, we don’t want to be number three or number four” behind foreign competitors. “Companies want to be the first in,” Gutierrez said.
Many of the rules announced Tuesday were promulgated in direct response to concerns expressed by U.S. business and the Cuban government, administration officials said.
Americans will be allowed to travel to Cuba for individual “people-to-people” visits. Previously, they were required to travel with organizations granted Treasury Department licenses in 12 approved categories, including education, religion and culture. Although travel purely for tourism remains prohibited, the new regulations shift the responsibility for legal trips to individuals who declare that they will engage in “educational” purposes.
Treasury retains the right to question travelers and demand documentation for up to five years after a trip, but in reality has rarely done so. “It’s basically the honor system on steroids,” said John Kavulich, head of the U.S.-Cuba Trade and Economic Council, assessing the new regulations. The change was partly driven, he said, by the need to “fill those planes” on the commercial airlines that will now fly into Cuba.
Non-immigrant Cubans can now be paid for work they do in the United States “without forcing them to defect,” according to Andrea Gacki, acting deputy director of Treasury’s Office of Foreign Assets Control. While not directed to any particular profession, the measure responds to complaints from Cuba and Major League Baseball that Cuban players have had to renounce ties to their homeland before they could sign contract to play in the United States.
When the regulations go into effect Wednesday, U.S. banks will be allowed to process payments to and from Cuba through third countries, including in U.S. dollars, and to open accounts through which dollar remittances can be paid to Cuban residents.
“Restrictions on the dollar have always been a challenge for the Cubans and a challenge for the business community,” because the need to operate in a third currency has always “increased the cost of the transactions,” Kavulich said. Cuba is expected to remove a 10 percent surcharge on all exchanges from dollars into Cuban currency on the island.
Separately, the Commerce Department has authorized cargo transit through Cuba, a measure that will allow companies such as FedEx to store in Cuba goods destined for onward delivery. Companies, such as airlines, authorized to have a presence in Cuba will now be allowed to set up offices there.
Finally, Commerce has authorized some Cuban exports to the United States, provided that they come from the private sector.