Tag Archives: US-Cuba Normalization

Carmelo Mesa-Lago: NORMALIZACIÓN DE RELACIONES ENTRE EEUU Y CUBA: CAUSAS, PRIORIDADES, PROGRESOS, OBSTÁCULOS, EFECTOS Y PELIGROS

Carmelo Mesa-Lago

 Documento de Trabajo 6/2015

Real Instituto Elcano | DT 6/2015 | 8 de mayo de 2015

Carmelo-Mesa-Lago-003Resumen

Ríos de tinta han corrido desde el 17 de diciembre de 2014 cuando se hizo el anuncio simultáneo del inicio de conversaciones para normalizar relaciones entre EEUU y Cuba después de 55 años de hostilidad. Este ensayo aborda un análisisl de as causas del cambio de política, las posibilidades y obstáculos en el comercio, los sectores económicos prioritarios, la inversión y entrada a organismos financieros internacionales, y las reclamaciones monetarias mutuas.

Índice

(1) Introducción

(2) Causas del cambio de política en Cuba y EEUU

(3) Avances y problemas en las relaciones económicas

(4) ¿Habrá un boom en la economía cubana si se levanta el embargo?

(5) ¿Mejorarán los derechos humanos y políticos con la normalización?

(6) Los escollos que afronta el proceso

(7) Los resultados de la Cumbre de las Américas

(8) Posibles explicaciones a un enigma

(9) Apostillas finales

(10) Referencias bibliográficas

 (1) Introducción

Ríos de tinta han corrido desde el 17 de diciembre de 2014 (17D en adelante) cuando se hizo el anuncio simultáneo por los presidentes Barack Obama y Raúl Castro, respectivamente en Washington y La Habana, del inicio de conversaciones para normalizar relaciones entre ambos países después de 55 años de hostilidad, un paso importante y positivo que abre una nueva etapa en las relaciones entre ambos países.

Este ensayo aborda un análisis de dicho proceso de forma abarcadora, documentada y lo más objetiva humanamente posible: las causas del cambio de política, las posibilidades y obstáculos en el comercio, los sectores económicos prioritarios, la inversión y entrada a organismos financieros internacionales, y las reclamaciones monetarias mutuas. También se intenta responder a dos preguntas clave: si el restablecimiento de relaciones tendrá un impacto sustancial en la economía cubana, así como en los derechos humanos y políticos. Por último, se analizan los escollos que afronta el proceso, los resultados de la Cumbre de las Américas, varias explicaciones a un enigma importante, y al final se resumen los puntos principales y se dan algunas pautas para una negociación exitosa.

Me parece justo que de entrada informe a los lectores que desde 1968 he mantenido una posición contraria al embargo de EEUU, por razones que se analizan aquí, a más de ser un partidario de los intercambios académicos y viajes a Cuba, aunque esto no ha impedido tres negativas de visa para ir a mi país de nacimiento a realizar actividades académicas, la última en 2014.

 El Ensayo Completo: Carmelo Mesa-Lago Real Instituto Elcano Normalizacion de Relaciones entre EEUU y Cuba New Picture (6)

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Airbnb: A US FIRM MANAGES TO CRACK THE CUBAN MARKET

By: Reem Nasr

CNBC, Tuesday, 5 May 2015

Original article here: Airbnb in Cuba

Airbnb Site on Cuba

Tatiana Zuniga started to rent out rooms in her Havana home two weeks into the new year. She had never done it before, but decided, along with her family, that it would be a good way to supplement their income.

Then about three months ago, Zuniga decided to try to attract a new type of visitor—tourists from North America. She connected with Airbnb, the U.S. accommodations broker, and listed her rooms for $33 a night. “They are basically teaching us how to make this a lucrative business,” she told CNBC in a telephone interview. “We are really taught how to reach out to clients and have them come to our home, our neighborhood and our city.”

Zuniga’s rooms are booked through the beginning of June. “It’s very good to get into the North American market, and this is what they seem to be helping us to do,” she said.

“We are an Internet company, and there is a 5 percent Internet penetration in Cuba. We couldn’t expect that hosts would access the site on a daily basis.”-Molly Turner, head of civic partnerships, Airbnb

Zuniga isn’t the only one excited about attracting visitors from the north. Airbnb has taken advantage of an easing of relations between the United States and Cuba since President Barack Obama’s announcement last December that he would seek an opening of links between the countries. Changes to certain trade licenses made it possible for travel services firms, like Airbnb, to finally enter and do business in the long-forbidden Cuban market. It puts the company ahead of most U.S. firms that want to do business there.

“Cuba presented a different case for us because we’ve never launched a market before,” said Molly Turner, global head of civic partnerships at the company. “We had to adapt a lot of our system to the Cuban context.”

The San Francisco-based tech firm launched in late 2008, hoping to link renters and travelers around the world through the Internet. (It is one of Silicon Valley’s many “unicorns,” or start-ups worth more than $1 billion). Travelers can search on the site to rent entire homes or just rooms in 190 countries, most of them at a fraction of the cost of staying in a hotel.

Like many other American companies, Airbnb was banned from doing business in the communist nation until this year. But the company found early success when it launched in Cuba with 1,000 listings on April 2. A month later, it’s consistently adding more listings to the site. It took the company about three months to launch in Cuba because doing business there required a lot of due diligence, Turner said. First, the company had to get in touch with the State Department to make sure it was complying with all U.S. regulations.

“In the beginning, it wasn’t entirely clear to us how the regulations would apply,” Turner said. “We had to work collaboratively with the U.S. government, which meant regular phone calls with them to make sure everything we did was compliant with the law.”

The same applied to figuring out regulations on the Cuba side. That required sending several teams to the island to do research and meet with Cuban officials.

Hagar Chemali, a spokeswoman for the Treasury Department and Office of Foreign Assets Contol , which deals with such trade issues, said that the government is doing a lot of private sector outreach to explain sanctions programs for Cuba and other countries. Interested companies should check the department’s website for more information, she said.

She wouldn’t comment on the specifics of working with Airbnb, but said, “it is very common for companies and individuals to reach out to OFAC to figure out sanctions compliance. In fact, we encourage and welcome that.”

Beyond tricky regulations, the company had to figure out how to do business in a country whose technology use lags much of the globe.

“We are an Internet company, and there is a 5 percent Internet penetration in Cuba,” Turner said. “We couldn’t expect that hosts would access the site on a daily basis.”

Because hosts use their listings on the Airbnb site to manage bookings and payments, the company had to reassess its expectations. Internet cafe culture is not big in Cuba, she explained, so people use the Internet at work to manage listings—providing they even have access on the job.

Zuniga is one of the lucky Cubans who can access the Internet at work, although she said the connection is slow. Like many others, she relies on the help of friends who have better connections at their places of work. “One always finds a way,” she said. “And I can’t miss out on the opportunity, so I try to make it work.”

Turner said that several Cuban hosts get help from friends and family in other countries to manager their online presence.

The company partnered with local payment companies that take payments from travelers made on the site, and put straight into the pockets of the hosts. “To the typical Airbnb customer, the website is no different, but we hacked the back end to make that possible,” Turner said. But Airbnb was lucky, said Turner, because it was able to capitalize on an already existing culture of Cubans who have been renting out their homes for years. The company was able to get into the market first and connect those hosts to the outside world.

“Airbnb was the perfect business at the perfect time,” she said. “If Obama’s talk had been five years ago, it would have been a different story.”

For Zuniga, using the site to list her home has been a start for her as a businesswoman—no small accomplishment for a nation where private property is largely forbidden. The company takes 3 percent of the rental fee she charges.

 5d29f7bb_original 5d592a1e_original 9cba793c_original ed044fde_originalSOME AIRBNB RENTAL ROOMS IN CUBA, from the Airbnb web site.

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US BUSINESS SCHOOLS SET THEIR SIGHTS ON CUBA

Business Education, May 3, 2015 11:37 pm

Jonathan Moules

Original here: US Business Schools and Cuba

9ce515d9-f339-4845-adab-106167a26600The long-term prospects for business education in Cuba are undoubtedly bright following the warming of relations between Washington and Havana. But how quickly such opportunities will unfold for those schools with connections to the Caribbean island state is a tougher question to answer.

For US business schools, the opening up of access to Cuba has been an unmitigated success in one regard, according to professors such as Stephan Meier at Columbia Business School in New York. His school is one of several to have taken advantage of the ability for US-based academic institutions to visit Cuba for study trips. In fact, his biggest headache has been running enough trips to satisfy the demand from students, particularly those with US passports who would not otherwise be able to travel abroad.

In three years, Prof Meier has taken 120 students to Cuba. But he could have taken many more, he says. “Cuba is exotic,” he explains.

Downtown from Columbia’s Manhattan campus, NYU Stern has run a similar programme called Doing Business in Cuba. This was the product of lobbying by Stern’s Association of Black and Hispanic Students, and proved somewhat complicated to organise.

To date, the 84 Stern MBA students who have taken the trip to Havana have only been able to do so thanks to connections provided by Ludwig Foundation, a not-for-profit body created to build links between the US and Cuba, primarily in the arts.

Emily Goldrank is one of these student. She has travelled widely, spending time in Argentina and Australia as part of her MBA studies, but claims Cuba — “the one forbidden place” — offered a particular value because it operated so differently to other countries. “How and what we learnt was of a different variety because the whole business environment was so different,” she recalls, adding that this was in itself valuable in that it showed the challenges of operating in such a different economy.

The pace of change in Cuba, where no business school yet exists, is a subject of debate. Tom Pugel, vice-dean of MBA programmes at Stern, is more confident than many of his academic peers and predicts that the country will have its own business school in five years.

“There are already people who are ready to work with that transition,” he claims. “They are well positioned to be the leaders of a business school.”

Carl Voigt, professor of clinical management and organisation at USC Marshall School of Business in Los Angeles, who led the first US business school delegation to Cuba in 2000 and has since taken about 1,000 students on study visits, is less optimistic.

“I feel Cubans would be a little bit suspect of plans to set up programmes in Cuba because they would want to know where the money came from,” he says.

“They are not anyone’s puppet and they do not want to be played.

“Money has been earmarked in the US to help Cuban students study here, but it is felt that there are people in the US government who would use that as a way of brainwashing students.”

There have been opportunities for Cubans to study freely in Europe and the US, Prof Voigt notes, but there has not been a lot of take up of these schemes because students in Cuba lack the funds to study overseas. Thus for the moment, the traffic is likely to be mainly the other way.

Those US students lucky enough to gain a place on Columbia’s Cuba programme have been able to meet some of the country’s small but growing population of entrepreneurs, who are currently restricted to a limited number of service sectors such as restaurants and hotels.

Visiting students have also been able to see first hand what an economy looks like without the capitalist trappings of widespread advertising and credit. “They learn that in a market economy we take a lot of aspects for granted,” Prof Meier says.

Cuba’s newly empowered entrepreneurs would be target candidates should a school like Columbia open in the country, although Prof Meier does not see this happening in the near future.

“I guess we are a long way from teaching an executive programme in Cuba to Cuban managers,” he says. “But they could definitely do with some business school education.”

Although the US has by far the most developed business education market, and almost all the top business schools, it faces significant competition, particularly from Europe.

Barcelona-based Esade, for instance, has been working directly with Cuba’s ministry of higher education on Forgec, a European Commission funded project to strengthen the managerial capabilities of Cuban institutions.

One of the key goals of the project is to establish long-term co-operation in management education between Cuba and Europe. Whether or not this would mean a school such as Esade opening a campus in Cuba is not clear, however, since the project plans to achieve its aims in part by improving the quality of Cuban universities and the ability to run business education programmes.

Schools in Latin American countries also sense an opportunity to serve Cuba as and when it is ready to allow business schools to open.

Carlos Martí Sanchis, academic director at Barna Business School in the Dominican Republic, claims that Caribbean and central American schools like his have expertise in subjects that would likely be of interest to Cuban business students, such as tourism. “Big and prestigious schools will have advantages but I think it will be a great opportunity for medium and small business schools that can have a better fit to the Cuban reality in different dimensions such as cultural, economic, idiomatic and business sectors similarities,” he says.

However, US-based schools are not giving up hope. Brandeis International Business School, for instance, has not just taken students and faculty to Cuba as a part of its Hassenfeld Overseas Fellows Immersion Program. It has also hosted Cuban visitors on its campus.

These include the founder of Cuba’s first private MBA programme, run by the Roman Catholic Church, the director of The Center for the Study of the Cuban Culture + Economy and a distinguished professor from the University of Havana law school.

Bruce Magid, dean of Brandeis, is looking forward to the future. “For academic institutions in the US, particularly business schools willing to make the first move, the opportunity exists to have a profound impact on the next stage of US-Cuba economic relations,” he says. “This is more than just an opportunity. It is a strategic imperative for business schools to make this move. Opening Cuba’s borders to trade and investment is the best way to ensure Cuba prospers.”

Having said that, Mr Magid believes that efforts to build ties with Cuba are part of a broader commitment that Brandeis needs to demonstrate towards the whole of Latin America.

In the past year, the school has announced two memorandums of understanding for joint degree programmes with Eafit in Medellín, Colombia and Insper in São Paulo, Brazil, all of which have added to the school’s roster of partnerships in the region.

For now, Cuba will have to wait.

Cuba Nov 2008 041Open Arms to US Business Schools?

Cuba Nov 2008 040For Now They’ll Have to Wait.

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WHAT ARE THE CONSEQUENCES OF TAKING CUBA OFF THE STATE SPONSORS OF TERRORISM LIST?

The Huffington Post,  April 27, 2015

Arturo Lopez Levy

Original here: http://www.huffingtonpost.com/arturo-lopez-levy/what-are-the-consequences_1_b_7144090.html

The April 14th decision to remove Cuba off the State Department’s State Sponsors of Terrorism list is the most important, concrete step towards normalization of diplomatic relations with Havana taken by the U.S. government since the Carter Administration. It has both tangible and intangible implications of historical importance to Cuba’s relations with the U.S and its triangular relations with other major international actors.

First, if Cuba is not a terrorist threat, it is difficult to say that it is a threat to the U.S. at all given the asymmetry of power between the two states, and Cuba’s renunciation of nuclear weapons by signing and ratifying the Tlatelolco and nuclear non-proliferation treaties in the late 90s.

Second, it clarifies Cuba in America’s official narrative not as a security threat but a country in transition, which is more in line both with Cuba’s own self-image and how Latin American and European countries see it. Such a description undermines any rationality for the embargo and lends itself to a U.S. policy that emphasizes engagement and people to people contacts.

Third, it enables Obama to stop applying the Trading With the Enemy Act of 1917 to Cuba, the law on which much of the executive branch’s sanctions regime, including limits on American citizens’ right to travel, is based. If next September the president decides not to renew his authority to impose sanctions to Cuba under this law, citizens could challenge in court the prohibition to travel and succeed.

Fourth, it reduces Cuban state’s liability for individual claims in U.S. courts for acts that occurred under Cuba’s jurisdiction; cases that have already cost the island’s frozen accounts in U.S. banks millions of dollars. Taking Cuba off the list of terrorist nations would help an eventual settlement of claims between Cuba and USA, as part of a normalization process.

Fifth, so long as Cuba was falsely designated on the terror list, it would not have agreed to opening embassies. Now the road to embassies in both capitals is open. Similarly, Cuba off the list lessens the regulatory risks and enforcement threats used by the U.S. government to pressure banks not to deal with Cuba, giving the nation greater latitude in gaining finance and benefitting from two-way trade.

Sixth, it encourages other countries to foster closer ties with Cuba, as it eliminates the drama involved in having commercial relations with a country designated a sponsor of terrorism by Washington. This will be especially meaningful for the European Union, which is also reviewing its policy towards Cuba, which has always resisted the extraterritoriality of U.S. sanctions on its companies.

Seven: taking Cuba off the list means countries can take the State Department list, a U.S. national security tool, more seriously. Cuba’s inclusion on the list was seen on the island as an insulting lie. Removing this unnecessary barb, that has prevented bilateral relations, will build confidence for more flexible Cuban nationalist positions. The gratuitous inclusion on the list has harmed U.S. soft power, in many sectors of Cuban and Latin American civil society. In Cuba, ending such charade became a nationalist cause. One statement that most hurt Yoani Sánchez, opposition blogger, was her insistence on keeping Cuba on the list of terrorist countries because according to her: “The Castros have not put their guns away.”

Another important element is the effect that taking Cuba off the list will have on American and Latin American perceptions of the power held by pro-embargo Cuban Americans. The legal procedure for removing Cuba from the list dubs them the losers from the start. The president simply gives Congress 45 days advance notice of his intention to remove Cuba from the list of countries that sponsor terrorism. Obama requires the advice of Congress, not its consent.  The president knows how to count and he realized the pro-embargo legislators don’t have the votes to pass a bill or a joint resolution immune from a presidential veto.

In conclusion, President Obama prevails. Legislators can comment, write letters to the president and reflect on Obama’s decision. Thus, opponents such as Senators Marco Rubio, Ted Cruz and Robert Menendez are stuck in the role of the chorus in Greek tragedies: shouting, screaming and crying but not playing a substantial role. Cuba will be off the State Department list of States Sponsors of terrorism. A major roadblock to the rapprochement track between Cuba and the United States has been removed

 

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TIME: FIVE FACTS EXPLAINING THE ECONOMIC UPSIDES OF AN OPENED CUBA

Ian Bremmer,  April 20 2015

Original here: The Caribbean country could be the next frontier of global business

Taking Cuba off the list of nations that sponsor terrorism is the latest development that will attract foreign companies to the island. So who wants in? These five stats explain which industries present the most opportunities as Cuba opens for business.

1. Remittances

One of the immediate benefits of renewed relations with Cuba is the increase in permitted remittance flows. The most recent figures put annual cash remittances to Cuba at approximately $5.1 billion, a level greater than the four fastest growing sectors of the Cuban economy combined. Now, permitted remittance levels from the U.S. will be raised fourfold, from $2,000 to $8,000 per year. This will help drive an increase in spending power in Cuba, which is expected to grow at a compound annual rate of 4.6% through this decade. For global companies seeking a foothold anywhere they can, more money in the pockets of Cubans means more fuel for expansion. Take Coca-Cola. With an open Cuba, Coke could be legally be sold in every country in the world save one: North Korea.

2. A lot more visitors

Just 110 miles off the coast of Florida, Cuba should be a natural magnet for American travelers. Despite needing to meet special criteria to receive a visa from the State Department—allowable categories include educational and journalistic activities—170,000 Americans visited the country last year. As the restrictions slacken, the sky is literally the limit. JetBlue already charters flights to Cuba from the U.S., but the budget airline wants to start running regular commercial flights. American Airlines Group now flies to Cuba 20 times per week, a 33% increase in flights compared to just a year ago. More flights—and more competition—will make airfare more affordable, driving additional tourist traffic.

Cuba Mar 2014 011April 2014: the Capitolio, under renovation, to be the new home of the National Assembly; the Centro Gallego (old community center for Cubans of Galician origin), being restored to its former glory; a hop-on hop-off Tour bus; 1950s American automotive beauties and a Russian Lada.

Missing from this photo: a Chinese Geely, currently taking over Cuba’s automotive market. 

3. Communication breakthroughs

Only one in ten Cubans regularly use mobile phones and only one in twenty have uncensored access to the Internet. Even state-restricted Internet penetration currently stands at just 23.2%. The telecom infrastructure is so underdeveloped that an hour of regulated Internet connectivity can cost up to 20% of the average Cuban’s monthly salary. There’s serious demand for the major infrastructure investments needed to improve these numbers. Some start-ups are making waves in spite of shoddy internet. Airbnb, a website that lets people rent out lodging, announced that it has started booking rooms in Cuba with over 1,000 hosts. It gets around the lack of Internet by teaming with middlemen who have long worked to link tourists with bed and breakfasts.

4. A cure for Cuba

Cuba has the third highest number of physicians per capita, behind only Monaco and Qatar. They’re even used as an export: Venezuela pays $5.5 billion a year for the almost 40,000 Cuban medical professionals who now make up half of its health-care personnel. Cuban doctors lack access to most American pharmaceutical products and, importantly, to third-generation antibiotics. For its part, Cuba’s surprisingly robust biotech industry makes a number of vaccines not currently available in the U.S. With the normalization of relations, Cuba can look to fully capitalize on its medical strengths.

5. Foreign investment

Cuba currently attracts around $500 million in foreign direct investment (FDI)—good for just 1% of GDP. Given its tumultuous political history and underdeveloped economy, it is difficult to accurately predict how quickly investors will flock once the embargo has been lifted. But a good comparison might be the Dominican Republic, another Caribbean nation with roughly the same size population as Cuba. The Peterson Institute for International Economics estimates that Cuba could potentially attract as much foreign capital as the Dominican Republic, which currently receives $17 billion in FDI ($2 billion from the U.S). But this won’t happen overnight—in the Heritage Foundation’s Index of Economic Freedom, Cuba ranks 177th out of 178, ahead only of North Korea.

 

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Ted Henken: EIGHT QUICK TAKEAWAYS ON FUTURE OF US-CUBA RELATIONS FROM THE SUMMIT OF THE AMERICAS

2015-04-11t201325z_1868389586_gf10000056251_rtrmadp_3_panama-usa-summit_x1x_jpg_1718483346Ted Henken has some quick and cogent comments on the Cuba US Mdeetings at the OAS Summit of April 2015. They are presented below.

The original is on Prof. Henken’s Blog here: QUICK TAKEAWAYS ON FUTURE OF US-CUBA RELATIONS
Sunday, April 12, 2015

 1. Embarrassing lack of tolerance and “civility” on part of Cuba’s official civil society delegation (major contrast with Raul Castro’s warm and respectful approach to Obama). Failed the test of tolerance but will have to learn as the days of the exclusive, official “Cuban delegation” representing the island at international events are over since the migration reform of 2013. Question: Cuba can open up to the US (and vice versa) but can it open up to ITSELF – listen to the diverse and often dissenting views and organizations of its emergent civil society?

2. Surprising personal regard Raul Castro expressed for Obama as “an honest man” who has “no responsibility for past US policy” – I loved when Raul admitted he had cut that part from his speech, then put it back, then cut it, & finally decided to include it and was “satisfied” with his decision. History is made in the details.

3. Obama’s clear understanding of the key role of civil society and public support for Cuban civil society – expressed both in his terrific speech at the civil society forum and by meeting with Manuel Cuesta Morua & Laritza Diversent. Obama later stressed that these two leading Cuban dissidents support his “empowerment through engagement” policy.

4. Obama-Castro historic handshakes, joint press conference, & private meeting – “agree to disagree,” “work together where we can with respect and civility,” “everything on the table based on mutual respect,” “patience x 2!” – Obama looking forward and not trapped by ideology or interested in re fighting Cold War battles that started before he was born (but appreciates lessons of history); Raul still passionate (and long-winded) about past US wrongs but admits that can disagree today but “we could agree tomorrow.”

5. Obama’s unequivocal clarification that “On Cuba, we are not in the business of regime change; we are in the business of making sure the Cuban people have freedom and the ability to shape their own destiny,” stressing that “Cuba is not a threat to the United States.”

6. Maduro/Venezuela issue did not steal the show as some had feared (or hoped); Maduro did not get support for his condemnation of US sanctions and even had to endure some countries expressed concern for his own jailing of dissidents.

7. Shift in the region away from ideology toward economic pragmatism fueled in part by China slow-down, Russia nose-dive, & Venezuela implosion. US ready to step in with strategic economic engagement and oil diplomacy – especially to Caribbean Basin (H/T to Andrés Oppenheimer).

8. Also, various economically and diplomatically powerful Latin American nations have big domestic corruption scandals (Brazil, Argentina, Chile) or violence and security issues (Mexico, Central America) that make them wary of any confrontation with the US

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Ted Henken

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Washington Post: NEW POLL ON CUBAN CITIZENS’ VIEWS ON NORMALIZATION, THE POLITICAL SYSTEM, THE ECONOMIC SYSTEM, THE LEADERSHIP AND MORE

Washington Post, April 8, 2015

By Joshua Partlow and Peyton M. Craighill

Original article here: NEW POLL ON CUBAN CITIZENS’ VIEWS

FULL RESULTS FROM THE CUBA POLL 

MEXICO CITY — The vast majority of Cubans welcome warmer relations with the United States, holding high expectations that closer ties pledged by the two countries will shake up the island’s troubled economy, according to a new survey of Cuban citizens. But they are doubtful that the diplomatic detente will bring political reforms to their Communist country.

The poll of residents on the island shows a people unhappy with the political system, eager to end the U.S. embargo and disenchanted with their state-run economy. More than half of Cubans say they would like to leave the country for good if they had the chance.

The survey, conducted in March through 1,200 in-person interviews by the Miami-based Bendixen and Amandi International research firm on behalf of the networks Univision Noticias and Fusion, is reported in collaboration with The Washington Post.

New Picture (12) New Picture (13) New Picture (14) New Picture (15) New Picture (16)

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ENTERPRISING CUBA: CITIZEN EMPOWERMENT, STATE ABANDONMENT, OR U.S. BUSINESS OPPORTUNITY?

 AU-SSRC Implications of Normalization: Scholarly Perspectives on U.S.-Cuban Relations April 2015

 TED A. HENKEN AND GABRIEL VIGNOLI

Original here: ENTERPRISING CUBA

After cautiously consolidating his new government once becoming president in 2008, Raúl Castro made a series of unprecedented moves in late 2010 to encourage the reemergence of private self-employment (known as trabajo por cuenta propia or cuentapropismo in Cuba)—explicitly ending Cuba’s previous policy under Fidel Castro that, according to Raúl’s own bold assessment, had “stigmatized” and even “demonized” it.

Subsequently, both the number of legally allowed private occupations (up from 178 to 201) and of Cubans licensed to practice them have grown significantly, with the island seeing a veritable “boom” in entrepreneurial activity between 2011 and 2015. Indeed, in that time, the number of Cuba’s cuentapropistas (self-employed workers or micro-entrepreneurs) has more than tripled, growing from less than 150,000 in 2010 to nearly half a million by early 2015. Additionally, 498 new non-agricultural cooperatives have been authorized to operate on the island between 2013 and 2014, with another 300 under review at the start of 2015.

Moreover, on December 17, 2014, as part of a momentous diplomatic thaw between Washington and Havana, the Obama Administration announced a new policy of engagement targeted explicitly at “empowering” Cuba’s new class of private entrepreneurs by allowing U.S. companies to “support the emerging Cuban private sector,” in Obama’s historic words.

How might Washington’s new policy of “empowerment through engagement” and the larger bilateral process toward normalization impact the island’s emerging entrepreneurs as well as the emergent “non-state sector” of its economy? While there are many potential economic benefits of concerted U.S. private sector engagement with Cuba’s cuentapropistas, the monopolistic Cuban government poses significant challenges to those who want to do business on the island, reach out to island entrepreneurs, and hire Cuban workers—as many European and Canadian companies can already attest. How will this work in practice, who will be the likely winners and losers (both in Cuba and abroad), and how can the Cuban government deal effectively with the growth in socioeconomic inequality that will inevitably follow an expanded private sector?

Direct U.S. engagement with Cuban entrepreneurs through freer travel and more remittances; access to banking and other financial services; increased exports of badly needed inputs to island cuentapropistas; the import of private or cooperatively produced Cuban goods and services to the U.S.; and technology and know-how transfer are all encouraging elements of Obama’s new Cuba policy. These changes have the potential to both “empower” individual entrepreneurs—the stated goal of the U.S. policy shift—and incentivize the initial, if exceedingly cautious, private sector reforms already begun by the Cuban government.

However, to increase Cuba’s economic independence and overall prosperity, the U.S. should focus on addressing the specific economic needs of Cuban entrepreneurs, rather than framing its engagement as a way to effect “regime change” by other means. That is, given the need to build bilateral diplomatic trust after more than fifty years of mutual antagonism, Washington should eschew any “Trojan horse” approaches to entrepreneurial engagement that aim to empower the Cuban people by undermining the government. Such an antagonistic and divisive approach has not worked in the past and could derail Obama’s promising effort to encourage the incipient pro-market reforms already underway.

At the same time, a U.S. policy based on empowerment through economic engagement—even when motivated by the best and most transparent of intentions—will be a dead letter if the U.S. Congress insists on clinging to the outdated and counterproductive embargo and the Cuban government stubbornly refuses to ease its own auto-bloqueo (or “internal embargo”) against island entrepreneurs. As it implements a self-described economic “updating of socialism,” will Cuba continue to hold fast to its monopolistic “command and control” economic model—one that “ya no funciona ni para nosotros” (“no longer works even for us”), as Fidel Castro himself famously admitted in a rare moment of economic candor in 2010?

Continue reading: AU-SSRC-Henken-Vignoli-Enterprising-Cuba-FINAL 

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CUBA: THE DAY PEACE BROKE OUT

Posted: 03/26/2015 2:17 am;  14 y medio, El Pais  and Huffington Post.

 Yoani Sanchez 

 Original here: CUBA: THE DAY PEACE BROKE OUT

Cuba's best-known dissident blogger Yoani Sanchez listens to a question after she delivered a speech to students of the Iberoamericana University in Mexico City “Peace broke out!” the old teacher was heard to say, on the day that Barack Obama and Raul Castro reported the reestablishment of relations between Cuba and the United States. The phrase captured the symbolism of a moment that had all the connotations of an armistice reached after a long war.

Three months after that December 17th, the soldiers of the finished contest don’t know whether to lay down their arms, offer them to the enemy, or reproach the Government for so many decades of a useless conflagration. Everyone experiences the ceasefire in his or her own way, but the indelible timestamp is already established in the history of the Island. Children born in recent weeks will study the conflict with our neighbor to the north in textbooks, not experience it every day as the center of ideological propaganda. That is a big difference. Even the stars-and-stripes flag has been flying over Havana lately, without the Revolutionary fire that made it burn on the pyre of some anti-imperialist act.

For millions of people in the world, this is a chapter that puts an end to the last vestige of the Cold War, but for Cubans it is a question still unresolved. Reality moves more slowly than the headlines triggered by an agreement between David and Goliath, because the effects of the new diplomatic mood have not yet been noticed on our plates, in our wallets, nor in the expansion of civil liberties.

We live between two speeds, beating on two different wave frequencies. On the one hand, the slow routine of a country stuck in the 20th century, and on the other, the rush that seems disposed to mark the whole process of the giant of the north. The measures approved this last 16 January, which relax the sending of remittances, trips to the island, the collaboration in telecommunications and many other sectors, suggest the idea that the Obama Administration seems willing to continue making offerings to the opposing force. Obliging it to hoist the discrete white flag of material and economic convenience.

The feeling that everything can be accelerated has made some within Cuba reevaluate the price per square foot of their homes, others predict where the first Apple Store will open in Havana, and not a few begin to glimpse the silhouette of a ferry linking the island with Florida. The illusions, however, have not stopped the flow of emigrants. “Why should I wait for the yumas to get here, if I can go and meet them there?” a young man said mischievously, as he waited in line for a family reunification visa outside the United States consulate in the Cuban capital at the end of January.

The fear that the Cuban Adjustment Act, which was passed by the U.S. Congress in 1966 and offers considerable emigration benefits to Cubans, will be repealed has multiplied illegal migration. Those who don’t want to leave are preparing to take advantage of the new scenario.

A few years ago emigration fever led thousands of compatriots to dust off their Spanish ancestors in hopes of obtaining a European Union passport, and now those who have family in the United States sense an advantage in the race for Cuba’s future. From there can come not only the longed-for economic relief, many think, but also the necessary political opening. Lacking a popular rebellion to force changes in the system, Cubans pin their hopes on conditioned transformations from outside. One of the ironies of life in a country whose political discourse has so strongly supported national sovereignty.

Those who have more problems dealing with what happened are those whose lives and energies revolved around the conflict. The most recalcitrant members of the Communist Party feel that Raul Castro has betrayed them. Eighteen months of secret conversations with the adversary is too much time for those stigmatized by a colleague in their workplace because they have a brother living in Miami or because they like American music.

Just outside the United States Interest Section in Havana (SINA), the government has not replaced those ugly black flags that used to fly between the anxious gazes of Cubans and the well-guarded building. No one can even pinpoint the moment in which the billboard boasting, “Gentlemen Imperialists, we are absolutely unafraid of you” was taken down. Even TV programming has a vacuum, now that the presenters don’t have to dedicate long minutes lambasting Obama and the White House.

Miriam, one of the independent journalists who is slammed by government television, wonders if now they are no longer demonizing anyone because of the rapprochement with American diplomats, or in order to cross the feared — but seductive — SINA threshold. Many wonder the same after seeing Cuban officials, like Josefina Vidal, smiling at Roberto Jacobson, U.S. Assistant Secretary of State for the Western Hemisphere.

In a house in the Cerro neighborhood where they have opened a pizza stand, a man in his 50s turned off the radio so he didn’t have to listen to Raul Castro’s speech on that Wednesday. He clicked his tongue angrily and shouted at his wife, “Look out, afterwards we get screwed!” Santiago, as he is called, couldn’t graduate as a doctor because his whole family left in the Mariel Boatlift in 1980 and he was declared “unreliable.” Although, since the mid-nineties he’s back in touch with his exiled siblings, he still feels uncomfortable because now what was previously forbidden is applauded.

Twenty-four hours after that historic announcement, all around the capital’s Fraternity Park it was like an anthill. Old American cars that operate as collective taxis in Havana converged there. The owner of a 1954 Chevrolet pontificated on a corner that now “the prices of these cars are going to go through the roof.” Surely, the man concluded, “The yumas are going to buy this junk like it’s a museum piece.” A country “for sale” waiting for the deep pockets of those who, until yesterday, were rivals.

This feeling that the U.S. will save the island from economic hardships and chronic shortages underpins an illusion clung to by millions of Cubans. We have gone from Yankee go home! to Yankee welcome!

The blacker official propaganda painted the panorama in the U.S., the more it helped to foster interest in that country. Every attempt to provoke rejection of the powerful neighbor brought its share of fascination. Among the youngest citizens this feeling has grown in recent years, supported also by the entry into the country of audiovisual and musical productions that celebrate the American way of life. “Sometimes, to annoy my grandfather, I put on this scarf with the United States flag,” confesses Brandon, a teenager who greets the dawn on weekends sitting on some bench on G Street. All around him, a fauna of emos, rockers, frikis, and even vampire imitators, who gather to talk loud and sing together. For many of them, their dreams seem closer to materializing after the embrace between the White House and the Plaza of the Revolution.

“We have a group of Dota 2 players,” says Brandon about his favorite pastime, a videogame that’s causing a furor in Cuba. He and his colleagues spent months preparing for a national tournament, but after 17 December they have begun to dream big. “The international championship is in Seattle in August, so now maybe we can participate.” Last year, the Chinese team was crowned champion, so the Cuban gamers haven’t lost hope.

The first Netflix user in Cuba was a foreigner, a European diplomat who rushed to get an account on the well-known streaming service, just to know if it was possible. It costs him just $7.99 a month, but the broadband necessary to reproduce video required him to pay the Cuban Telecommunications Company another $380.00 a month for an Internet connection. Now in his mansion he enjoys the most expensive Netflix in the world.

Baseball games with major league teams; famous rock bands coming to the island; Mastercards that work in ATMs all over the country; telecommunications companies that establish direct calls to the US; Colorado farmers willing to invest in the troubles of Cuban peasants; made in USA TV presenters who come to film their shows in the streets of Havana; and attractive models — weighed down by their own scandals – taking selfies with Fidel Castro’s firstborn. Cuba is changing at the speed of a tortoise that flies by clinging to the legs of an eagle.

Despite everything, the Plaza of the Revolution does not want to acknowledge its failure and has surrounded the reestablishment of relations with the United States with an aura of victory. It claims to have won through surviving for more than five decades, but the truth is that it has lost the most important of its battles. It doesn’t matter that the defeat is now masked with cocky phrases and boasts of having everything under control; as a jaded Santiaguan says, “After so much swimming they’ve ended up drowning on the shore.” Seeking that image of control, Raul Castro has not reduced the repression against dissidents, which in February reached the figure of 492 arbitrary arrests. The Castro regime extends a hand to the White House, while keeping its boot pressed on the non-conformists in its own backyard.

However, the disproportion of the negotiating forces between the two governments has been noted, even in popular jokes. “Did you know that the United States and Cuba broke off relations again?” one of the incautious mocked in December. Before an incredulous, “Noooo?!” the jokester responds with a straight face: “Yes, Obama was upset because Raul called him collect.” There is all the material poverty of our nation contained in that phrase.

While no one believes that the Castro regime will end up crushed by McDonald’s and Starbucks, the official propaganda occasionally revives a cardboard anti-imperialism that no longer convinces anyone. Like that in Raul Castro’s bombastic speech at the 3rd CELAC Summit in Costa Rica, in which he made tough demands for the reestablishment of relations with Washington. Pure fanfare. Or like Fidel Castro’s latest message to Nicolas Maduro, offering him support “against the brutal plans of the U.S. Government.” Or like the calls to defend the Revolution, “before the enemy that tries new methods of subversion.”

The truth is that on December 17 — St. Lazarus Day — diplomacy, chance and even the venerated saint of miracles addressed the country’s wounds. We needed a half century of painfully crawling along the asphalt of confrontation on our knees to bring us a little of the balm of understanding. Nothing is resolved yet, and the whole process for the truce is precarious and slow, but on that December 17th the ceasefire arrived for millions of Cubans who had only known the trenches.

*Translator’s note: This is the longer version of this article originally published in El País Semanal.

14 Y MEDIO14ymedio, Cuba’s first independent daily digital news outlet, published directly from the island, is available in Spanish here. Translations of selected articles in English are here.

Cuba Mar 2014 009 Cuba Mar 2014 046Dreaming of Major Capital Gains!

 

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Recent US-Cuba Policy Changes: Potential Impact on Self-Employment

Mario A. González-Corzo*   Cuba Transition Project, Institute for Cuban and Cuban-American Studies, University of Miami, Issue 239,  March 11, 2015

Washington’s “new course on Cuba” presents a new set of challenges, opportunities and new prospects for the Island’s emerging self-employed workers. There are several reasons for this:

1. Despite existing constraints and limitations, policy contradictions, and the predominance of bureaucratic economic coordination mechanisms and centralized planning, the expansion of self-employment is one of the principal elements of Cuba’s efforts to “update” its economic model.

2.The implementation of a series of reform policy changes in Cuba since 2007, and particularly after 2010, have contributed to the rapid expansion of self-employment and its growing share of total employment (Figure 1). 

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Source: Oficina Nacional de Estadísticas e Información [ONEI], 2014; author’s calculations.

  •  While limited openings to allow the expansion of self-employment are not a new phenomenon in the Cuban economy, the number of legally-registered self-employed workers has grown significantly since 2007.
  • Self-employment has grown at an even faster rate since 2010, when the Cuban government announced its plan to reduce its bloated State payrolls by 20% and after 2011 when the number of authorized self-employment categories was increased to 201.
  • The number of self-employed workers grew 206.6% from 138,400 in 2007 to 424,300 in 2013. By contrast, employment in the State sector fell 10.1% between 2007 and 2013, and employment in cooperatives declined 6.2% during the same period.
  • While the State sector accounted for 82.9% of total employment in 2007, this figure fell to 73.7% in 2013. Self-employed workers represented 2.8% of total employment in 2007, but their share of total employment grew to 8.6% in 2013.
  • Most self-employed workers in Cuba, however, are presently employed in relatively low-skilled (service-oriented) activities. They also face a wide range of legal prohibitions that limit their ability to grow and achieve economies of scale and their potential contributions to the country’s development and economic growth.

3. Despite facing strict State-imposed controls and limitations, self-employment has contributed to job creation, the provision of goods and services that were insufficiently produced by the State, and increases in the State’s tax revenues; it has also contributed to changes in attitudes, perceptions, and relationships between a growing segment of the Cuban population and the State, leaving a lasting “footprint” on the Cuban economy.

4. Since the limited liberalization of self-employment and the legalization of the U.S. dollar in 1993, self-employed workers have been among the principal recipients of remittances from abroad, particularly from the Cuban community in the United States, directly serving as one of the principal mechanisms to strengthen transnational ties between both countries.

While self-employment expanded significantly (206.6%), and its share of total employment increased notably during the 2007-2013 period, it has grown at a much slower rate, following the initial spurt experienced in 2011. This can be primarily attributed to existing restrictions on the types of self-employment activities that are currently authorized, excessive State regulation and intervention, the inexistence of input markets where self-employed workers and micro-entrepreneurs can obtain essential inputs at competitive prices in Cuban pesos (CUP), onerous taxation, and the remaining ambivalence of the State’s policies and attitudes towards the self-employed.

Cuba’s self-employed workers also have to contend with a dilapidated infrastructure, excessive bureaucratic constraints, insufficient sources of funding (excluding remittances), logistical difficulties do to the existence of primitive (quasi-formal) supply chains, government restrictions regarding the accumulation of capital (or concentration of wealth), and limited property rights. In addition, they lack access to mobile payment platforms, advanced (computerized) accounting and transactions (or sales) recording systems, and modern procurement and purchasing systems.

In terms of market segment concentration, it is worth noting that a notable share of self-employed workers is engaged in tourist-oriented activities such as food services (servicios de gastronomía), lodging or hospitality (alquileres), and transportation. Many of these depend on remittances from abroad as a primary source of working capital, and the majority of their client base consists of tourists and foreign visitors. Primarily catering to a limited (albeit affluent) market segment, rather than to a wider strata of the Cuban population, limits their market share and opportunities for growth and expansion.

Despite facing these challenges and limitations, the number self-employed workers in Cuba continues to expand (albeit at a slower pace in recent years), demonstrating the resilience of the entrepreneurial spirit that has historically characterized a significant portion of the Island’s population.

Given the growing importance of self-employment in the Cuban economy in recent years, the strong transnational linkages between a significant portion of self-employed workers and their friends and relatives in the United States, new U.S. policies towards Cuba are likely to impact this key sector of the Cuban economy in several ways:

  1. Continued expansion of self-employment activities, including new more value-added categories.
  2. Improved access to credit and equity capital to finance small-scale private business ventures.
  3. Opening to foreign investment, including partnerships with Cubans residing abroad.
  4. Future expansion of firm size, scope, and areas of operations.
  5. Greater share of total employment and contribution to Gross Domestic Product (GDP), tax payments, and social security system contributions.
  6. Adoption of modern point of sales (POS) systems, accounting systems, and inventory anagement systems to track sales and report business operations (and thereby improve the State’s ability to collect taxes from microenterprises and self-employed workers).

Despite all the potential (positive) effects of the new US policy approach with regards to self-employment, their real impact “on the front lines” depends on whether or not the Cuban government has the political will to implement deeper reform measures that will reduce the monopoly of the State, while permitting the expansion of the private sector by eliminating the “internal embargo.” On the economic front, this can be accomplished by lifting the internal restrictions, excessive regulations, onerous taxation, and bureaucratic limitations imposed by the State on the self-employed. On the political front, this process would require a radical shift in the State’s perceptions and attitudes towards the self-employed, recognizing Cuba’s emerging entrepreneurial class not only as a source of tax revenue for the State, but as primarily as a an engine of job creation, wealth formation, and the economic growth and development.

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*Mario A. González-Corzo, Associate Professor, Department of Economics and Business, LEHMAN COLLEGE, City University of New York (CUNY), and is a Research Associate, Institute for Cuban and Cuban-American Studies (ICCAS), University of Miami

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