• This Blog on The Cuban Economy is dedicated to Cuba's Generation "A". Although inspired by Yoani Sánchez' blog "Generation Y" this is not dedicated to those with names starting with the letter "A". Instead, it draws from Douglas Coupland's novel Generation A which begins with a quotation from Kurt Vonnegut at a University Commencement that was brought to my attention by Andrew Johnston of Ottawa: ".. ... I hereby declare you Generation A, as much as the beginning of a series of astounding triumphs and failures as Adam and Eve were so long ago."

    The objective of this Blog is to facilitate access to research resources and analyses from all relevant and useful sources, mainly on the economy of Cuba.

WHAT TRUMP’S NEW CUBA POLICY MEANS FOR AMERICAN BUSINESS

By Mimi Whitefield

Miami Herald, June 23 2017

Some U.S. executives that do business with Cuba breathed a sigh of relief after President Donald Trump outlined his new Cuba policy in Miami because it won’t have much impact on their companies. But others have pressed the pause button until they see how the new regulations implementing the changes are written.

Lawyers who help firms navigate the thicket of laws and regulations governing the embargo and dealings with the island have been combing through a memorandum that Trump signed on June 16 as well as three pages of frequently-asked questions issued by Treasury’s Office of Foreign Assets Control (OFAC) and a White House fact sheet to get a sense of the new policy.

Until the regulations are written, that’s all they have to go on. Trump has mandated that the regulation-writing must begin by mid-July.

“Until the regulations change, everything is status quo,” said Yosbel Ibarra, a Miami lawyer on Greenberg Traurig’s Cuba practice team.

How long it will take to write new rules is anybody’s guess, but it isn’t an easy task because multiple agencies and departments will be involved. Some key posts that would have oversight over the new policy also have yet to be filled by the Trump administration, according to lawyers.

Don’t expect a rush by U.S. companies that have proposals pending before the Cuban government to get deals inked before the new rules go into effect, say lawyers and business consultants.

“The way corporations are, when they know rule-making is underway, they are always going to hold up until the regulations are written,” said Robert Muse, a Washington lawyer who specializes in U.S.-Cuba law. “They are not going to set themselves at the far end of the branch based on a Q&A from OFAC.”

There will be important changes in the new policy: it bars most business by U.S. companies with Cuban entities owned or controlled by the military or intelligence services and cuts out people-to-people trips to Cuba by individuals. Group travel in that category is still OK – although there is expected to be more scrutiny of all Cuba travelers to make sure the purpose of their trips isn’t tourism.

The prohibition on doing business with the military is significant because since the 1990s, the Cuban military has been taking control of ever larger chunks of the economy, partly because military managers are viewed as more efficient. Many officers have been sent abroad for business training.

Now the military conglomerate GAESA controls an estimated 40 to 60 percent of the economy, with heavy involvement in the tourism industry, logistics and retail operations.  The military’s Gaviota Tourism Group, for example, controls or has joint ventures with foreign partners in 64 hotels and villas, including many resort hotels as well as the Saratoga, a favorite of visiting Congressional and business delegations, and the new luxury Gran Hotel Manzana Kempinski in Havana.

Even though former President Barack Obama opened up more opportunities for U.S. companies to do business in Cuba, not that many agreements have been finalized. Most are in the transportation sector, the telecommunications industry (notably roaming agreements and Google’s deal to install its servers on the island) and in the hospitality sector.

Some of the U.S. companies have inked deals with military entities. Telecommunications projects, for example, go through ETECSA, the state communications company that is controlled by the military, and Starwood Hotels & Resorts, now a part of Marriott International, has signed an agreement with Gaviota, the military tourism company, to manage a Cuban hotel as a Four Points by Sheraton.

But the administration has said it doesn’t want to hurt American businesses that have engaged in lawful commercial opportunities with Cuba and those agreements will be grandfathered into the new Cuba policy. That’s also true of any other projects that are in place prior to issuance of the new regulations.

Meanwhile, the coming prohibition on doing business with the Cuban military has prompted calls from clients who want to make sure exactly who their Cuban counterparts and business partners are, said Ibarra.

But even companies looking at business that seemingly have nothing to do with the Cuban military are wary.      “I’ve already had a client from New York call and say I guess I’m not going forward [in Cuba],” said Charles Serrano, a Chicago business and travel consultant who has taken clients on more than 130 trips to Cuba.

He is helping four other companies that have signed agreements, have submitted proposals or are in negotiations. But Serrano, managing director of The Antilles Strategy Group, said: “This will slow the interest of American businesses in exploring opportunities in Cuba. They calculate risk based on real things.”

The next battleground is how the new regulations are written.   “After the announcement there was a little sense of relief because companies now know more or less what the landscape will look like and the direction policy is going,” said Pedro Freyre, chairman of Akerman’s international practice, which includes clients doing business or trying to do business in Cuba. “But now the next level of anxiety is about what the regulations will look like. Depending on how they are crafted, they could shut down a lot of business activity.”

Hardliners can be expected to make the case that the rules should be written so as much U.S. business activity as possible is precluded. But the Cuban Study Group, which includes executives and professionals who favor engagement, wants the administration to narrowly interpret what it means to do business with the Cuban military.

“There is a vast difference between a Fortune 500 company forming a joint venture with the Cuban military and a U.S. humanitarian worker buying a water bottle at a government-run store,” said the group in a statement. Among the military’s holdings are retail stores where visitors often buy bottled water.

“Nothing stops business like uncertainty,” said Ibarra. “The more clear and transparent the new regulations are, the better.”

Eventually, the State Department is expected to publish a list of military concerns that are off limits for U.S. companies.

Despite military links to airport and seaport operations in Cuba, the new policy allows cruise lines from the United States to continue to call at Cuban ports, U.S .airlines to keep on flying and limited legal trade, under exceptions to the embargo, to keep flowing.  “Carnival Corp. is pleased that the policy changes announced by the Trump administration will allow our ships to continue to sail to Cuba,” said spokesman Roger Frizzell. He said Carnival plans to review how the tightening of travel rules potentially might affect its passengers.  But he said all cruise passengers since Carnival’s social impact line Fathom inaugurated the first regular cruise service by a U.S. line to Cuba in March 2016 have been traveling under permissible categories for travel to Cuba.  Carnival Corp. has discontinued its Fathom service to Cuba, but its Carnival Cruise Line currently calls in Cuba and its Holland American Line plans to begin sailing there in December.

Other cruise lines also have jumped into the Cuban cruise market. With current sailings and service that is planned, nearly 200,000 travelers are expected to sail from the United States to Cuba this year.

American Airlines, which offers 70 flights weekly to six Cuban cities, doesn’t expect too much impact from the new Cuba policy. Because all but one of its flights — a Charlotte-Havana route — depart from Miami, they have proved popular with Cuban Americans whose travel is not restricted by the new policy.  “Because Miami is the heartland of Cuban exiles, we have a strong market of passengers visiting family and friends in Cuba,” said Martha Pantin, an American spokeswoman.  Since it began regular scheduled flights to Cuba last year, American has opened a ticket office in Havana, begun selling tickets at the Havana airport and installed self-service kiosks there too. “By July, we expect to have self-service check-in at all the airports we serve in Cuba,” said Pantin.

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TRUMP’S HARD LINE ON CUBA IS A BLUFF, AND HAVANA KNOWS IT

William M. LeoGrande | Tuesday, June 20, 2017, World Politics Review

Original Article here:       World Politics Review


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TRUMP POLICY COULD CUT REMITTANCES TO A MILLION CUBAN FAMILIES

Huffington Post, 06/20/2017 12:45 pm ET

William M. LeoGrande and Marguerite Rose Jiménez

There is a poison pill hidden in President Donald Trump’s National Security Presidential Memorandum (NSPM) on Cuba that could deprive over a million Cuban families of access to remittances from their relatives abroad—a declaration of economic war on the very people that Trump claims his policy will empower.

Section 3(d) of the NSPM redefines “prohibited officials of the Government of Cuba” expansively, potentially including almost a quarter of Cuba’s entire labor force. The significance: Cubans who are “prohibited” are not allowed to receive payments from U.S. persons, and that includes remittances (Cuban Assets Control Regulations, §515.570).

The previous regulatory definition of prohibited officials was very narrow, limited to members of the Council of Ministers and flag officers of the Revolutionary Armed Forces. The new definition proposed by President Trump includes hundreds of senior officials in every government agency, thousands of ordinary Cubans who volunteer as leaders of their local Committees for the Defense of the Revolution, and—most importantly— every employee of the Ministry of the Revolutionary Armed Forces (MINFAR) and Ministry of the Interior (MININT).

Bottom of Form

MINFAR has some 60,000 active duty troops and MININT has some 35,000 police and Border Guards, and that’s not counting their civilian employees. Military service is compulsory for both men and women, so almost every family on the island will be affected by this new definition at some point.

More importantly, according to the U.S. government’s Cuba Broadcasting service, over a million Cubans are employed by the two big holding companies, GAESA and CIMEX, that report to MINFAR. If all these people are now to be considered “prohibited officials,” then a quarter of the Cuban labor force will no longer be eligible to receive remittances.

For Cuban state employees who are paid an average salary equivalent to about $25 a month, cutting them off from family remittances will have a devastating impact on their standard of living. By what possible logic can a clerk at GAESA, a truck driver at CIMEX, or a private in the Cuban army be defined as an “official” important enough to be prohibited from receiving help from their family abroad?

The alleged premise of Trump’s policy is to empower the Cuban people by directing U.S. funds to them, rather than to the Cuban government. Remittances are the very best way to do that because the dollars go directly to family on the island, at a rate of about $3 billion annually.

President Trump could have imposed limits on remittances directly and openly, as previous presidents have done, but that would have been very unpopular in the Cuban American community, so instead he has disguised a potentially massive cut behind the small print of an obscure regulation. Now it is up to the Treasury Department’s Office of Foreign Assets Control to write the new regulations in a way that averts this travesty.

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STATEMENT BY THE CUBA STUDY GROUP REGARDING THE CONCLUSION OF PRESIDENT TRUMP’S CUBA POLICY REVIEW

Original Statement: Trump and Cuba

President Trump’s announcement today indicates how far the Cuba policy debate has moved, despite intense pressure from scarce congressional hardliners. Many of the gains of normalization remain intact. At best, this is a partial victory for those who hoped to reverse increased bilateral ties. However, the Cuba Study Group reiterates its view that the completely free flow of people, ideas, information, and goods helps, rather than hinders, the cause of meaningful reform on the island. We therefore urge President Trump to reject the half-measures he proposed today and pursue a policy of full normalization with the island.

Restricting U.S. travel isolates Cubans from knowledge of American political, economic, and human rights norms. Also, it is tendentious to purportedly champion freedom in Cuba by limiting the freedoms of U.S. citizens. The U.S. does not impose similar travel restrictions on any other country, including North Korea and Iran. 81% of Americans, 75% of Cuban-Americans, and virtually all Cubans support the freedom of U.S. citizens to travel to Cuba. Claiming to support a “better deal” for Americans, Cubans, and Cuban-Americans, while ignoring their desires, is highly disingenuous.

Restricting U.S. travel as the Trump administration has proposed will also harm Cuban private business owners far more than the government. Even if not broadly applied, the threat of further enforcement will have negative repercussions on Cubans on the island. Individual U.S. travelers utilize privately-rented rooms at a higher rate than visitors from any other country. Beyond lodging, many small businesses (restaurants, shops, etc.) depend on U.S and other visitors for their livelihood. Limiting people-to-people travel once again to organized groups will significantly impact the Cuban people the President says his measures are intended to support. Moreover, contrary to the stated policy’s objectives, this measure will push remaining U.S. travelers into tours overseen by the Cuban government, rather than allowing real paths for citizen-to-citizen exchange.

President Trump should narrowly interpret the prohibition against trade with organizations tied to the Cuban military. There is a vast difference between a Fortune 500 company forming a joint venture with the Cuban military and a U.S. humanitarian worker buying a water bottle at a government-run store. Regardless, the task of enforcement and oversight will be onerous. We note the irony of a Republican administration burdening Americans with regulations of little clarity or use.

The limited scope of the review’s conclusions represents an admission of defeat by previously intransigent hardliners. In statements defending the new policy, they adopted pro-normalization positions they once scorned: the importance of continued diplomatic engagement and of supporting Cuba’s private sector.

Nonetheless, the tone of hostility in the President’s address may jeopardize crucial government-to-government ties on issues of mutual concern—counterterrorism, counter- narcotics, and migration cooperation—that administration officials ostensibly want to preserve. We urge President Trump to pursue a policy of full normalization that benefits the U.S. economy, serves U.S. interests, and can help place Cubans on a path to a better future.

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IN CUBA, TRUMP’S REVERSAL COULD HURT SMALL BUSINESSES

New York Times, JUNE 16, 2017,  Hannah Berkeley Cohen and Azam Ahmed

HAVANA — For Yasser González, a software developer who now makes his living as a bike tour guide in Havana, the onset of American tourism has been akin to a second Cuban revolution.  For a nine-hour tour marketed by Airbnb, Mr. González, 31, can pull down as much as $700, a princely sum in a country where the average state salary is just a little over $20 a month.  “The majority of my clients are American,” he said. “With Airbnb, I have become independent. I market and sell my own product that I have total control over.”

Such entrepreneurial dreams were precisely the sort of change that the United States government had in mind when President Barack Obama formally opened relations with the communist nation.

And now, many Cubans say, it is also the kind of economic transformation that could be threatened if President Trump follows through on his decision to reverse core elements of Mr. Obama’s Cuba policies, as Mr. Trump

Mr. Trump and White House officials outlined several major reversals to Mr. Obama’s policies, most notably scaling back the ability of Americans to travel to Cuba, which Mr. Obama had vastly expanded. Mr. Trump is also curtailing American transactions with companies controlled by the Cuban military, which largely runs the tourism industry.

Mr. Trump said the restrictions would pressure the Cuban authorities to embrace democracy and human rights by cutting off one of their most important lines of income — American dollars.  “For nearly six decades, the people of Cuba have suffered under Communist domination,” Mr. Trump said Friday in Miami after calling out the names of Cuban dissidents in the crowd. “The previous administration’s easing of restrictions on travel and trade does not help the Cuban people. They only enrich the Cuban regime.”

But from the perspective of many Cubans, the biggest victim will not be the state. Instead, they say, the small but growing group of entrepreneurs who have ridden the wave of tourism to a prosperity unthinkable even a few years ago will feel the brunt of the restrictions.“They want to return to a failed policy,” said Carlos Alzugaray, a former Cuban diplomat in Havana. “The failed policy is that by punishing Cuba and the Cuban people, they can produce a regime change in Cuba. That was the old way of thinking, and that didn’t work.”

Hundreds of thousands of American visitors have landed in Cuba over the past two years, bringing an enormous infusion of cash into an anemic economy that has long been starved of foreign currency.

Under the new policy described by the White House, Americans will be restricted from spending money at many military-controlled enterprises, like restaurants and hotels. That could represent a serious disruption for government revenue.

But Cuba’s budding private sector could take a serious hit as well. The surge of American visitors has been fed by a constellation of private restaurants, and many Americans have chosen to stay in a private residences through services like Airbnb as opposed to a state-run hotel.

In short, many Cubans believe that the Trump administration’s new policy will hurt those it is ostensibly meant to help: the average Cuban who has struggled under the weight of a battered economy for decades.

“It’s not just the people who have rental homes or who have a private business specifically targeted at an American audience like myself,” said Marla Recio, an event planner who created a business to serve the booming demand of Americans wanting to host celebrations on the island. “But there are also the people who have simple cafeterias or beauty salons whose audience is mainly Cuban, and those people are also stimulated by the flow of people who bring money to the island.”

Mr. Trump is taking aim at one of the principle changes made under Mr. Obama, who allowed Americans to organize trips to Cuba for cultural or educational purposes on their own, without special permission from the American government and without a licensed tour company.  Now, these trips, often called “people to people” exchanges, will again require a licensed tour group. That is expected to increase the costs of traveling to Cuba and significantly reduce the number of American visitors.

Policy analysts and Cuban citizens alike fear that many of the Americans traveling to Cuba — those most likely to dine at private establishments and stay in private housing — will simply stop going if they risk breaking the law by doing so.  “Trump claims to be a businessman, so he should understand that reversing the new policies would be bad business,” said Rafaelito Fiterre, 22, who is majoring in tourism at the University of Havana. “That should interest Trump.”

The issue is complicated, experts said, because it is difficult to target the military without affecting the Cuban people at large.   “While I understand and sympathize with the argument that when you travel and stay in a Cuban hotel you enrich the military, it is not a zero-sum game,” said Christopher Sabatini, a lecturer at Columbia University’s School of International and Public Affairs.  “Some dollars actually create political and economic space: Look at the paladares,” he said, referring to privately run restaurants, “or even the small pizza shops. They will be at risk too.”

Over all, 614,433 Americans visited in 2016, including 329,496 Cuban-Americans and 284,937 other Americans, according to Cuba’s government. While the travel restrictions are not expected to apply to Cuban-Americans, the restrictions on spending money at businesses controlled by the Cuban military are expected to apply to all Americans.

“Is the State Department going to print up a map that says where people can and can’t go?” asked John Kavulich, the president of the U.S.-Cuba Trade and Economic Council.

The impact on American business could also be heavy. Airlines from the United States have scrambled to arrange daily flights. Starwood Hotels & Resorts signed on to renovate and oversee three hotels in Havana. Airbnb in particular has had a profound entry into the market, offering more than 22,000 homes across the country and hosting more than half a million visitors.

In Havana, the presence of Americans on the streets these days is palpable. Old Havana, especially, teems with visitors from the United States, many of whom say they are eager to see the nation before it changes and becomes more like any another Caribbean destination.  Older Americans, Brooklyn fashionistas and families willing to pay top dollar come to stay in one of the opulent, albeit shabby, old homes that line Havana’s boulevards. Even in the hot months of the otherwise off-season, some hotels began doubling rates, paving the way for a boom in private sector accommodations.

Even though ordinary Cubans may find themselves hurt by a change in American policy, they are, in some ways, the best equipped to adapt. Having endured various iterations of hardship over the years — including the so-called special period in the 1990s, when Soviet largess vanished and daily life became a scramble — struggle has become something of a normal state of being for many Cubans.

Alberto González, 38, a chemical engineer who is now a taxi driver, has seen benefits from the influx of Americans to his country. But he also understands the fickle nature of international politics and opportunity in Cuba.  “I used to drive a standardized route, mainly for Cubans, charging the legal rate of .50 per customer,” he said. “And now since there are more tourists, many of them American, I can drive direct routes and charge more. But I never relied on an inflated market and I never got used to that comfort. If the day after tomorrow the Americans suddenly vanish, we will be fine.”

“We Cubans are always fine,” he said.

FOUR SMALL ENTERPRISE AREAS THAT WILL BE HURT BY THE TRUMP CHANGE IN US POLICY: RESTAURANTS, BED AND BREAKFASTS, TRANSPORT, AND TOURISM

Casa Particular Symbol

 

 

 

 

 

 

 

 

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TRUMP’S POLICY TOWARDS CUBA, JUNE 16, 2017.

The White House, Office of the Press Secretary, June 16, 2017

Full text:  National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba

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DID RUBIO TRADE THE INTEGRITY OF U.S. FOR A CUBA-POLICY SHIFT FROM TRUMP?

BY FABIOLA SANTIAGO, Miami Herald, June 8, 2017

It may be hard to fathom outside of Miami, but the faraway island of Cuba and Cuban-American politics could have played a role in Thursday’s historic hearing of the Senate Select Committee on Intelligence investigating Russian interference in the 2016 election.

Did the influential Republican senator from Miami on the committee, Marco Rubio, trade the integrity of this country for the pledge of a U.S. policy shift on Cuba from President Donald Trump? The optics — and the timing of a yet unscheduled visit by Trump to Miami to announce a rollback advocated by Rubio of President Barack Obama’s engagement policy — certainly make it seem that way.

Before Rubio’s intervention, the testimony by former FBI director James Comey had grown impressively damning to President Trump in the same manner a steady, thoughtful, and detail-oriented prosecutor builds a case.

Comey testified that, in a series of uncomfortable conversations before Trump fired him, the president had given him high praise and demanded loyalty. Trump made it known to him that he wanted the criminal investigation into National Security Adviser Michael Flynn dropped and the “cloud” of the investigation into Trump’s campaign ties to Russian interference “lifted,” Comey said.

There’s no understating the moment — it was grave.

Obstruction of justice easily came to mind — but then, it was Rubio’s turn to ask Comey questions.  Or, more like it, to turn Comey’s testimony around and ask rhetorical questions that inserted doubt into Comey’s candid revelations. Rubio shifted the attention from Trump to leaks to the media. As for information, Rubio seemed most interested in getting Comey to publicly admit that President Trump “was not personally under investigation” than in obtaining any new evidence for the Senate investigation.

It was as if Rubio — who has become a fixture at the White House and has voted to confirm all of Trump’s controversial appointments — was acting as Trump’s defense attorney instead of as member of a bipartisan committee investigating crucial national security issues.

Rubio’s defense comes from a senator who called Trump a “con man” when they were both running for the Republican nomination, and who vowed to become the checks-and-balances senator the president might need. Well, this was the moment — and Rubio was only there to cast doubt on Comey, whose testimony could cost Trump the presidency.

Plain old partisan politics, perhaps, but there’s more.

President Trump has a two-faced view of Cuba. Although he made a campaign pledge to Bay of Pigs veterans in Miami that he would restore a hard-line approach to dealing with its government, his administration includes executives who eagerly embraced engagement and traveled to Cuba to explore business ventures.

Donald Trump, the citizen, also wanted to do business on the island.

During former FBI Director James Comey’s testimony before the Senate Intelligence Committee, Senator Marco Rubio (R – Fla.) questioned the former director on his decision to not announce publicly that President Donald Trump was not under the investigation.

Long before President Obama restored relations with Cuba in 2014, executives from the Trump organization visited Cuba to explore opening a luxury golf course, buying a hotel and erecting a Trump Tower in Havana. These excursions without Treasury Department approval, in violation of the U.S. embargo against Cuba, were well documented by Bloomberg, Businessweek and Newsweek.

Despite the campaign promise, a reversal of Cuba policy wasn’t a sure thing. Trump’s inauguration Cuba policy has been “under study,” always a bridesmaid but never the bride to other policy priorities, as well as the president’s mounting scandals. But during the controversial healthcare vote, the Trump administration began making political deals.

For Rubio, an ultra conservative who courted Florida’s and the nation’s tea party voters with zeal, up-ending one of President Obama’s most significant legacy achievements in foreign affairs is a top priority — and personal.

When President Obama announced on Dec. 17, 2014, that he was shedding 50 some years of failed Cuba policy — a historic moment embraced on both sides of the Florida Straits — the president did the unthinkable: He didn’t consult with Cuban Americans in Congress.

Rubio called it “a new low” and “a slap in the face.”

With Trump’s troubles swept aside, Rubio gets the opportunity to slap back — and take his victory lap in his home turf of Miami.

Without Trump, the policy of engagement takes a backseat to the crisis in the nation’s leadership, and if only by default, remains intact.

The former FBI director testified that Russia unequivocally was coming after the United States. He also said that the White House “lies, plain and simple.” He made a case for the president to be investigated for obstruction of justice.

Trading the integrity of this country for a political shift on Cuba policy is disgraceful

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CUBA, RUSSIA, TRUMP AND COMEY

William M. LeoGrande, Contributor, Professor of Government at American University

Huffington Post, 06/05/2017 07:50 am ET

President Trump has a knack for bad optics. The day after he fired FBI Director James Comey in hopes of taking the pressure off the investigation into whether his campaign colluded with the Kremlin during the 2016 election, Trump received Russian Foreign Minister Sergei Lavrov and Ambassador Sergei Kislyak in the Oval Office. Now, as Comey prepares to testify before Congress about Trump’s request that the FBI halt the investigation of former National Security Advisor Michael Flynn’s ties to Russia, the president is preparing to announce a Cuba policy that would clear the way for Moscow to re-establish itself as Cuba’s principal foreign patron.

President Trump and Russian Ambassador Sergei Kislyak

According to press reports, Trump is on the verge of reversing key elements of Barack Obama’s policy of engagement with Cuba, even though his own government’s review concluded it is producing positive results across a range of issues, including security. If the United States reverts to a policy of hostility, U.S. adversaries will once again reap the rewards, and Russia will be first in line—just like it was in 1960.

The end of the Cold War severed Cuba’s partnership with the Soviet Union, but Vladimir Putin has been restoring Russia’s global influence by repairing relations with traditional allies. Russia’s resurgence in the Caribbean dates to Putin’s 2000 trip to Havana, followed by Raúl Castro’s 2009 visit to Moscow—the first since the end of the Cold War.

In July 2014, Putin visited the island again and agreed to forgive 90% of Cuba’s $32 billion in Soviet-era debt. By the time Raúl Castro returned to Moscow in 2015, Russia had signed agreements to invest in infrastructure development and oil exploration, and agreed to lend Cuba 1.2 billion Euros to develop thermal energy. When Venezuela failed to meet its promised oil shipments to Cuba, Russia stepped in to cover the shortfall.

 Russian President Vladimir Putin and Cuban President Raúl Castro, July 11, 2014.

The linkages extend beyond commerce. Both sides refer to their revived relationship as a “strategic partnership” with diplomatic and military components. Russia is refurbishing and replacing Cuba’s aging Soviet-era armaments. Russian naval vessels visit Cuban ports, the most prominent being the ostentatious arrival of a large Russian surveillance vessel in January 2015, the day before U.S. and Cuban diplomats began talks on normalizing diplomatic relations. Russia reportedly wants to establish a military base on the island.

At the Pentagon, the intrusion of extra-hemispheric powers in Latin America has been a serious concern since 2010 when the U.S. Southern Command’s annual Posture Statement first identified Russia, China, and Iran as challenging U.S. interests. Every year since, SouthCom has warned that Washington needs to increase its engagement with the region to counter the influence of outsiders.

Just this past April, Admiral Kurt W. Kidd presented the 2017 Posture Statement to Congress, declaring, “For Russia, China, and Iran, Latin America is not an afterthought. These global actors view the Latin American economic, political, and security arena as an opportunity to achieve their respective long-term objectives and advance interests that may be incompatible with ours.”

For some policymakers, this geostrategic challenge mandates support for engagement with Cuba, giving Havana less incentive to expand its economic relationships with Russia and China into politico-military ones. K. T. McFarland, who served briefly as Trump’s deputy national security advisor, succinctly summarized the argument for engaging Cuba before she joined the administration: “It would be foreign policy malpractice if we stood aside while our adversaries develop strong bilateral and economic — and possibly military relations.”

A few months after Donald Trump’s inauguration, 16 retired senior military officers, including a former commander of SouthCom, sent National Security Advisor H. R. McMaster an open letter urging the administration to maintain engagement with Cuba on national security grounds, citing successful cooperation on counter-terrorism, border control, drug interdiction, environmental protection, and emergency preparedness. “If we fail to engage economically and politically,” they warned, “it is certain that China, Russia, and other entities whose interests are contrary to the United States’ will rush into the vacuum.”

So why would President Trump reverse a policy that his own government judges to be largely successful, and that enjoys broad support with the general public, business community, and national security establishment—especially when that reversal would give adversaries like Russia, China, and Iran a new foothold in the hemisphere? According to the White House, the answer is human rights: “As the President has said, the current Cuba policy is a bad deal,” spokesman Michael Short claimed. “It does not do enough to support human rights in Cuba.”

The invocation of human rights is clearly an excuse rather than the real reason. The administration has shown no interest whatsoever in human rights in Saudi Arabia, Turkey, Egypt, or the Philippines. On the contrary, the president has gone out of his way to praise and encourage leaders whose human rights records are far worse than Cuba’s. Moreover, Secretary of State Rex Tillerson said explicitly that “America First” means human rights will take a back seat to U.S. national security and economic interests.

The real reason for changing Cuba policy is raw, naked politics. Cuban American Representative Mario Díaz-Balart (R-Fla.), one of the most vocal critics of Obama’s policy, reportedly extracted a commitment from the White House to be tough on Cuba as the price for his vote to repeal Obamacare. Senator Marco Rubio (R-Fla.), the other main proponent of turning back the clock, sits on the Intelligence Committee investigating the Trump Campaign’s Russian connections. Instead of draining the swamp, the Trump team has apparently decided that to swim in it, you have to feed the alligators.

It would be exquisitely ironic if Trump adopted Marco Rubio’s failed Cuba policy in order to curry favor with him in hopes of blunting the Senate’s Russia investigation— and by so doing ceded to Moscow a dominant geostrategic position on our doorstep in Cuba.

William M. LeoGrande is co-author with Peter Kornbluh of Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana (University of North Carolina Press, 2015).

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UNDOING ALL THE GOOD WORK ON CUBA

New York Times, THE EDITORIAL BOARD

 JUNE 5, 2017

To the long list of Barack Obama’s major initiatives that President Trump is obsessed with reversing, we may soon be able to add Cuba. In 2014, Mr. Obama opened a dialogue with Cuba after more than a half-century of unyielding hostility, leading to an easing of sanctions. Mr. Trump promised in his campaign to return to a more hard-line approach. If he does, as seems likely, he will further isolate America, hurt American business interests and, quite possibly, impede the push for greater democracy on the Caribbean island.

Soon after his election, Mr. Trump declared, vaguely but ominously, that if Cuba did not “make a better deal” he would “terminate deal.” He gave no specifics and no decisions have been announced. But details of what a policy reversal could look like are emerging.

The aim generally would be to reimpose limits on travel and commerce, supposedly to punish Cuba’s despotic government, now led by Raúl Castro, brother of the revolutionary leader Fidel Castro. Among the measures being considered are blocking transactions by American companies with firms that have ties to the Cuban military, which is deeply enmeshed in the economy, and tightening restrictions on Americans traveling to Cuba that Mr. Obama eased last year before his historic trip to Havana.

This hard-line sanctions-based approach was in place for more than 50 years after the 1959 revolution and never produced what anti-Castro activists hoped would be the result, the ouster of Cuba’s Communist government in favor of democracy. Isolating Cuba has become increasingly indefensible.

Mr. Obama’s opening to Havana has enabled the freer flow of people, goods and information between the two countries, even as significant differences remain over human rights. It has produced bilateral agreements on health care cooperation, joint planning to mitigate oil spills, coordination on counternarcotics efforts and intelligence-sharing. In April, Google’s servers went live in Cuba and thus it became the first foreign internet company to host content in one of the most unplugged nations on earth. Mr. Obama’s approach also encouraged Latin American countries to be more receptive to the United States as a partner in regional problem-solving.

A large pro-engagement coalition that includes lawmakers from both parties, businesses and young Cuban-Americans is pushing the White House to build on the foundation of engagement it inherited from Mr. Obama, not tear it down. Engage Cuba, representing business groups, economists and leading Cuba experts, has estimated that a reversal of Mr. Obama’s policies would cost the American economy $6.6 billion and affect more than 12,000 American jobs.

The group predicts that the hardest-hit areas will be rural communities that rely on agriculture, manufacturing and shipping industries, as well as Florida, Louisiana, Texas, Alabama, Georgia and Mississippi, all of which supported Mr. Trump in the 2016 election. Among the deals that could be squashed is one struck by Starwood Hotels and Resorts last year to manage hotels in Cuba; future ones would effectively be frozen.

The White House and its allies argue that the Cuban government remains despotic and must be pressured to reform. But pressure has had a minimal impact and the human rights concerns are disingenuous, given Mr. Trump’s effusive embrace of authoritarian leaders from President Vladimir Putin in Russia to President Abdel Fattah el-Sisi in Egypt. He also pointedly told Sunni Arab leaders in Saudi Arabia last month that he has no intention of lecturing them on their repressive behavior toward their citizens.

As with his decision to withdraw from the global climate agreement, Mr. Trump’s approach to Cuba reflects a craven desire to curry favor with his political base, in this case conservative Republicans from Florida who are viscerally anti-Castro. That might help him get re-elected in 2020, but it would help no one else.

Strengthening ties with Cuba cannot guarantee Cuban reforms, but it is the best bet.

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CUBAN ENTREPRENEURS START FIRST PRIVATE BUSINESS GROUP

A handful of entrepreneurs have quietly formed communist Cuba’s first private small business association, testing the government’s willingness to allow Cubans to organize outside the strict bounds of state control.

By ANDREA RODRIGUEZ, Associated Press. June 1, 2017

HAVANA (AP) — A handful of entrepreneurs have quietly formed communist Cuba’s first private small business association, testing the government’s willingness to allow Cubans to organize outside the strict bounds of state control.

More than a half million Cubans officially work in the private sector, with tens, perhaps hundreds, of thousands more working off the books. Cuba’s legal system and centrally planned state economy have changed little since the Cold War, however, and private business people are officially recognized only as “self-employed,” a status with few legal protections and no access to wholesale goods or the ability to import and export.

The government is expected to take an incremental step toward changing that Thursday when Cuba’s National Assembly approves a series of documents updating the country’s economic reform plan and laying out long-term goals through 2030. Those goals include the first official recognition of private enterprise and small- and medium-size businesses, although it could be years before any actual changes are felt on the ground in the country.

The Havana-based Association of Businessmen is trying to move ahead faster, organizing dozens of entrepreneurs into a group that will provide help, advice, training and representation to members of the private sector. The group applied in February for government recognition. While the official deadline for a response has passed, the group has yet to receive either an OK or negative attention from authorities, leaving it in the peculiar status known in Cuba as “alegal” or a-legal, operating unmolested but vulnerable to a crackdown at any time.

“People have approached with a lot of interest but they don’t want to join until we’re officially approved,” said Edilio Hernandez, one of the association’s founders. Trained as a lawyer, Hernandez also works as a self-employed taxi driver.

“Many people really understand that entrepreneurs need a guiding light, someone who helps them,” he said.

Another founder, Rodolfo Marino, has a construction license and has worked privately and under contract to state agencies. He said organizers of the association have gone door-to-door trying to recruit members by convincing them they need independent representation.

The group says roughly 90 entrepreneurs have signed up. Without legal recognition, the group is not yet charging membership fees, the organizers say. Until then, they meet occasionally in Marino’s Havana home to plan their path forward, which includes legal appeals for government recognition.

“We hope to push the country’s economic development forward,” he said.

The number of officially self-employed Cubans has grown by a factor of five, to 535,000 in a country of 11 million, since President Raul Castro launched limited market-based reforms in 2010. The government currently allows 200 types of private work, from language teacher to furniture maker. In reality, many officially self-employed people have become owners of small business, some with dozens of employees and hundreds of thousands of dollars in annual revenue — big number for a country where the monthly state salary is about $25.

Without access to government-controlled imports, exports or wholesale supplies, business owners are emptying the shelves of state stores, either by snapping up items as soon as they arrive or buying them stolen on the black market. That leaves them vulnerable to crackdowns and frequent extortion from state inspectors.

The government has taken a few tentative moves toward easing the situation in recent months — opening stores where owners of some of the country’s 21,000 bed-and-breakfasts and 2,000 private restaurants can buy large quantities of goods, although still at retail prices.

The state has also promised special access to gas and car parts to taxi drivers who comply with widely flouted government caps on fares.

Along with those small steps, the future of the Association of Businessmen is a gauge of Cuba’s openness to private enterprise and its ability to move forward, the group’s founders say.

“We really hope they approve us,” said Hernandez, the lawyer and taxi driver. “If they don’t, we’ll be in the hands of a state that considers us illegal and we won’t be able to reach our goal of representing entrepreneurs. If they do, it will be a sign that things are changing.”

Some Small Enterprises and Entrepreneurs

Photos by Arch Ritter, February 2014

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