US Cuba Embargo Pros and Cons: Renewed Relations Sets Caps and Limited Success for Businesses
American businesses are reportedly planning to utilize the renewed diplomatic relations between the U.S. and Cuba to expand their ventures in the island.
While President Barack Obama announced the normalization of relations with Cuba on Dec. 17, the U.S. Treasury Department and its related federal agencies have tasks to complete regarding business-related functions. The Treasury Department's Office of Foreign Assets Control (OFAC) announced it will implement "Treasury-specific" changes, in the form of amendments, to the Cuban Assets Control Regulations. The Department of Commerce will also implement changes via amendments to its Export Administration Regulations.
None of the changes Obama announced will take immediate effect until the new regulations are issued, noted the Treasury Department.
Soon, however, the renewed U.S. and Cuban relations will benefit the Cuban private sector and "make it easier" for Cuban citizens to receive access to some lower-priced good while gaining greater economic independence from the state.
General licenses will be available for authorized travelers that fit 12 existing categories, including family visits, journalistic activity, education purpose, religious activity, humanitarian relief and the "exportation, importation or transmission of information or information materials." The licenses will also be granted to authorized travelers with the purpose of traveling for "certain export transactions hat may be considered for authorization under existing regulations and guidelines."
U.S. travelers who will receive a license to go to Cuba are allowed to import $400 worth of goods from Cuba. Of the $400, the White House noted that "no more than $100" can consist of alcohol and tobacco products combined, not each.
Previously, the U.S. issued an "across the board ban" on imports of Cuban-origin cigars and other Cuban-origin tobacco products, even if the item was meant as a gift for another individual. The ban also impacted sales of Cuban-origin tobacco products offered through the Internet or magazine catalogs. Unless the Cuban-related items were artwork, publications or "other informational materials," goods or services, including alcohol, were not to be imported into the U.S. even through third-party countries such as Canada or Mexico.
With the normalizing relations, U.S. institutions will be permitted to open correspondent accounts at Cuban financial institutions and facilitate the processing of authorized transactions. Travelers in Cuba will also permit U.S. credit and debit cards.
"These measures will improve the speed, efficiency, and oversight of authorized payments between the United States and Cuba," the White House stated.
U.S. Chamber of Commerce President and CEO Thomas J. Donohue said the American business community welcomes the renewed diplomatic efforts as it may bring "shared benefits" for the U.S. and Cuban private sectors. According to Donohue, the new steps "will go a long way in allowing opportunities for free enterprise to flourish."
"There is still work to do, on both sides of this relationship, but the changes outlined [on Dec. 17] are a substantive and positive step forward," said Donahue, noting Cuba has made economic changes to lessen government control or ownership onto Cuban businesses. "It is imperative that the Cuban government build on today's positive steps with a more ambitious economic reform agenda at home, while we continue to push for the end of the embargo here in Washington."
The Peterson Institute for International Economics noted the new relations could result in billions in revenue for both countries. Economists from the institute estimated the export of U.S. goods to Cuba could peak at $4.3 billion, annually, which is an increase from $360 million during 2013. In return, Cuban exports to the U.S. could go from the current $0 to $5.8 billion.
Major businesses, however, may need Congress's help since it is the lawmakers' responsibility to lift the Cuban embargo on most exports.
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