Tag Archives: US-Cuba Normalization

LET’S MAKE A DEAL: DOING BUSINESS IN CUBA

Posted on December 21, 2015 by Arch Ritter

William M. LeoGrande, Professor at American University in Washington, D.C.

Original article here: Doing Business in Cuba

zzzzBy the first anniversary of President Barack Obama and Cuban President Raúl Castro’s decision to normalize relations last December 17, much had been achieved on the diplomatic front. But progress on the commercial front has been lagging, and unless both sides realize significant economic gains before Obama leaves office, the momentum toward lifting the embargo and fully normalizing relations could be lost.

The initial surge of excitement among U.S. businesses after December 17 was palpable: finally, an opportunity to enter a largely unexploited market, forbidden for half a century. In the past year, a parade of trade delegations has visited Havana. In April 2015, Democratic Governor Andrew Cuomo took a group of 20 New York business leaders. In September, Republican Governor Asa Hutchinson of Arkansas led an agricultural trade mission hoping to expand food sales. In November, Texas Governor Greg Abbott followed suit. Legislators and local officials led other trade delegations from Alabama, California, Kentucky, Illinois, Indiana, Louisiana, Missouri, New Mexico, North Carolina, Ohio, and Tampa, Florida.

In March 2015, the U.S. Agriculture Coalition for Cuba–a broad-based group formed after December 17 to promote agricultural trade–took 95 people to Cuba, including two former secretaries of agriculture. The U.S. Chamber of Commerce launched the U.S.-Cuba Business Council representing over two dozen major corporations, including Caterpillar, Kraft Heinz, Sprint, Boeing, Home Depot, and American Airlines. In October, Commerce Secretary Penny Pritzker went to Cuba, followed in November by Secretary of Agriculture Tom Vilsack.

Cuba needs the trade and investment that U.S. businesses can offer, and Cuban leaders appear eager to expand commercial ties. Yet despite this enthusiasm, few deals have actually been signed. “Up until now it has been going down. looking around, and saying, ‘this is an interesting place, but how do I make money here’?” explained deputy assistant secretary of state Alex Lee at a forum on doing business with Cuba organized by The Economist.

The case of The Home Depot, Inc. illustrates both the opportunities and the obstacles. Some 90 percent of Cubans own their own homes, most of which are in desperate need of repair. Dilapidated structures dot the island, from houses in need of a new coat of paint to apartment buildings literally falling down.

One way Havana has tried to ease the housing problem is by letting people do it themselves. Tens of thousands of families have taken advantage of new government grants and loans to finance home renovations. In 2015, private owners and contractors built more new housing units than the state construction company. That boom translates into a huge demand for tools and building materials–and a huge business opportunity for Home Depot.

The giant home improvement retailer is clearly interested. It is a founding member of the new U.S.-Cuba Business Council, and regional export manager, Heriberto Correa, attended the council’s inaugural meeting held in Cuba during Havana’s International Trade Fair. The Obama administration’s new regulations specifically license the sale of construction materials for private buildings, so Home Depot could legally sell to private Cuban construction cooperatives, contractors, and private home-owners.

It could even rent or build a warehouse in Cuba’s new Special Development Zone at the port of Mariel, where imports are duty-free and new businesses enjoy a ten-year tax holiday. In fact, any U.S. business legally selling goods to Cuba could take advantage of the favorable terms available for establishing facilities in the Mariel zone. And if the Cuban government would allow it, the company could open its own retail outlets and import a fleet of delivery trucks to ship goods from the warehouse to the stores.

Yet when asked if Home Depot planned to enter the Cuban market, the company’s CEO Craig Menear replied cautiously. “Cuba is an area we’re watching carefully,” he said. “We know at some in time when the environment is right, there’s opportunity for The Home Depot to be there. But we believe that before we go in there, it needs to benefit the people of Cuba.”

Caterpillar is another company well-situated to enter the Cuban market. Obama has licensed sales to Cuba’s private farms and cooperative, which are in serious need of better equipment. Moreover, Caterpillar is no late-comer to the island: it first called for an end to the U.S. embargo in 1998, and in 2004 donated generators to Cuban hospitals. “Caterpillar wants to do business in Cuba,” said Bill Lane, senior director of global government and corporate affairs. “Everything Caterpillar makes in the United States is needed in Cuba.” The company hopes to open a dealership on the island, Lane told The Economist‘s Cuba Summit in December, but it has yet to sign any contracts.

So why has progress been so slow?

To be sure, there are difficulties in doing business with Havana. Cuba’s infrastructure– its roads, energy grid, and digital network– lags behind neighboring countries. Foreign companies must still hire labor through the state’s hiring agency. Cuba’s bureaucracy is notoriously slow to make decisions and opaque, making dispute resolution problematic. But, as David Pathe, CEO of Canada’s Sherritt Corp., one of the island’s largest foreign investors, put it, “There is nothing unique about Cuba”– these are the kinds of problems companies face in any new foreign market.

The larger issue making U.S. companies reluctant to enter the Cuban market is uncertainty on the U.S. side. Although the Obama administration wants to see U.S. businesses engage with Cuba to demonstrate the benefits of the president’s new policy, the regulatory changes made thus far still leave too many obstacles in the way. If companies are not absolutely certain that their business plan is legal, they will not take the risk.

Financial regulations are a particular problem. Finance is the life blood of commerce; if funds cannot be easily transferred between Cuba and the United States, business will remain negligible. Although U.S. regulations allow for fund transfers involving licensed activities, companies are terrified of inadvertently violating the rules and being hit with enormous fines.

For example, it took months for the State Department to find a bank willing to handle accounts for Cuba’s diplomatic mission in Washington because the costs of regulatory compliance far outweighed the profit. Stonegate Bank in Florida finally agreed to do it because, as CEO David Seleski put it, they regarded it as a “moral obligation” to help re-establish diplomatic relations. Earlier this month, the Treasury Department had to reassure U.S. banks that they could process fund transfers to Cuba involving authorized travel without themselves having to certify that the travel was, indeed, legal.

The ultimate solution to these problems is to lift the U.S. embargo in its entirety, but that is not likely to happen in an election year when Republicans control Congress. In the meantime, President Obama should issue another round of regulatory changes that clarify what can and cannot be done.

In the financial area, Obama could license U.S. businesses to provide credit to Cuban customers to stimulate nonagricultural trade (agricultural credits are prohibited by law). He could authorize Cuban banks to establish correspondence accounts with U.S. banks to facilitate payments to Cuban customers. Finally, he could issue a general license to U.S. banks to process dollar-denominated transactions conducted by foreign banks (so-called “U-turn” transactions) that must be processed through a U.S. financial institution.

President Obama’s opening to Cuba was historic, but to make it irreversible, the policy needs to produce results–especially in the field of commerce. The interest is clearly there on both sides, but the barriers are still formidable. The exceptions to the embargo that the president has authorized thus far are impressive and lay the groundwork, but they have not yet gone far enough to reassure U.S. businesses that they can safely enter the Cuban market without running afoul of U.S. law.

As Cuba’s economic reforms open the country to foreign trade and investment, U.S. companies risk being left behind as competitors from Canada, China, and Europe jump in ahead of them. Companies that enter the market early and build relationships with their Cuban counterparts stand to benefit the most in the long run. As Caterpillar’s Bill Lane, an aficionado of the seafood in Havana’s private restaurants, put it, “The first movers in Cuba get the lobster.”

 

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HOW CUBA IS, AND ISN’T, CHANGING, ONE YEAR AFTER THE THAW WITH THE U.S.

Posted on December 15, 2015 by Arch Ritter

By Nick Miroff December 15 at 7:00 AM

HAVANA — No event in decades shook up Cuba like the announcement last Dec. 17 by presidents Obama and Raul Castro that their countries would begin normalizing long-broken relations. In the 12 months since, Cubans have witnessed scenes few expected to see in their lifetimes, or at least in the lifetimes of Fidel Castro and his brother, Raul.

A U.S. flag snaps once again in the sea breeze outside a U.S. embassy in Havana. Raul Castro and Obama held talks on the sidelines of a hemispheric summit in April. So many U.S. politicians, corporate executives, foreign leaders, tourists and celebrities have visited, that an island long known for isolation suddenly feels it is at the center of the world.

The psychological impact of these events, however, has far outpaced any physical one. So far, U.S. businesses have only completed a handful of new deals. Cuba remains the only closed, one-party state in the Americas, and if anything, normalization with Washington has left communist authorities increasingly anxious about dissent and more determined to stifle it.

Cuba is still very much the same country it was a year ago. And yet, not quite.

“For a lot of my friends who are university graduates, the news was positive, and we saw it as the beginning of a long and complicated process,” said Lenier Gonzalez, a founder of the group Cuba Posible, which advocates gradual reform. But for more of the population, “it produced an unrealistic expectation

That third group of Cubans heard in Obama’s words last Dec. 17 a cue to flee. They fear normalization will put an end to the immigration rules that essentially bestow residency and welfare benefits on any Cuban who reaches U.S. soil.

As many as 70,000 Cubans have left for the United States in the past year, in what appears to be the largest wave of migration from the island in decades.

zzzzzzzzzzzzzzzzzz18CUBA-slide-8QJE-superJumbo

The Legal Emigration Route to the USA: Early Morning Queue outside the American Embassy, April 2015

The changes of the past year have set Cuban authorities on edge too, bringing an escalating crackdown on public protest or opposition activity.

Dozens, even hundreds of activists are detained or arrested each Sunday, when the Ladies in White dissident group attempts to march in Havana and another group, the Patriotic Union of Cuba, stages a weekly mobilization in Santiago, the island’s second- largest city.

Though the government generally no longer locks up dissidents for long prison terms, it increasingly relies on short-term arrests to block protests by activists it considers “mercenaries” at the service of foreign interests.

The illegal but tolerated Cuban Commission of Human Rights and Reconciliation tallied 1,447 political arrests or arbitrary detentions in November, the highest monthly total in years.

In an interview published Monday, Obama said that the United States would continue to support Cuban rights activists and that he was considering a trip to the island — but on the condition that he can meet with dissidents. “If I go on a visit, then part of the deal is that I get to talk to everybody,” he said, in an interview with Yahoo News.

“Our original theory on this was not that we were going to see immediate changes or loosening of the control of the Castro regime, but rather that over time you’d lay the predicates for substantial transformation,” said Obama, whom surveys show is a widely popular figure on the island.

Cuban officials this year have tried to push back at public perceptions that Obama is a friend and the United States is no longer a threat or a foe. Relations will not be truly normal, they insist, until Washington lifts its trade embargo, closes the U.S. Navy base at Guantanamo Bay and makes reparations for a half-century of economic sanctions and other grievances.

Yet the rivalry has morphed from hostile confrontation into something more sportsmanlike: a low-intensity contest to set the pace of change, with Washington trying to move faster and Cuba preferring slow, cautious steps.

As Rafael Hernandez, editor of the Cuban journal Temas, put it: “We’ve traded a boxing ring for a chess board.”

For all its revolutionary slogans and lore, Cuba can be a profoundly conservative place, in the strict definition of the term. It is a country where the television programming, food rations and newspaper editorials seem to remain the same, year in, year out. This drives young Cubans crazy. But the continuity is a comfort to some, not least the communist party elders who have ruled for 57 years.

Raul Castro, 84, has pledged to step down in February 2018. Obama has 13 months left in office. That leaves a narrow window for the two men who charted the normalization course to see it through.

Rarely does a week go by without some new chess move. The Obama administration in May took Cuba off the list of state sponsors of terrorism, paving the way for the countries to formally reestablish diplomatic ties in July.

The two countries have signed new agreements on environmental cooperation. They’ve enhanced anti-narcotics enforcement. Direct mail service is set to resume on a trial basis. U.S. and Cuban officials have even started discussing their oldest grievances, opening negotiations to settle billions in U.S. property claims and Cuban counter-claims.

The U.S. secretaries of agriculture, commerce and state have all visited Havana in the past year, along with dozens of U.S. lawmakers, adding up to the highest-level government contacts in decades.

A U.S. tourism tsunami still seems to be building. U.S. travel to Cuba increased by 40 percent since last December, according to industry estimates. Overall tourism to Cuba increased nearly 20 percent, bringing billions in additional revenue for the government.

“Our booking activity has been off the charts,” said Tom Popper, president of Insight Cuba, the largest U.S.-based provider of the licensed “people-to-people” travel permitted under U.S. law.

Most of the U.S. travelers have come to Havana, where a shortage of hotel beds has kicked off a scramble among Cubans and their foreign business partners to buy, renovate and rent properties. Each city block seems to have at least one crew of contractors patching cracks and applying paint.

A deal to reestablish regular commercial flights between the two countries is said to be imminent, with United, JetBlue, American Airlines and other U.S. carriers pledging to begin service as soon as they’re cleared by the two governments.

Cuba established a direct phone link with a U.S. company, IDT, and a roaming agreement with Sprint. It has set up nearly 50 outdoor WiFi hotspots at parks and boulevards across the island, where Cubans gather round-the-clock to chat with friends and relatives overseas.

But the initial Cuba excitement among U.S. companies has been replaced by something more “sober” a year later, said James Williams, president of Engage Cuba, a group lobbying to lift the embargo.

Williams said he knew of at least two-dozen U.S. companies that had submitted formal business proposals to the Castro government, aimed at taking advantage of more flexible rules. “I would imagine it’s probably in the hundreds,” he said.

The companies want to lease office space, build warehouses, dock cruise ships and ferries. Not one has gotten a green light so far, he said.

“Frankly I think the Cubans have been overwhelmed with a surge in interest and the decentralized nature of how that interest is coming to them, with companies calling them up, consultants coming to them, and not a lot of clarity about how to make a deal,” said Williams. “The non-responsiveness has slowed things down.”

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RECONCILING U.S. PROPERTY CLAIMS IN CUBA: TRANSFORMING TRAUMA INTO OPPORTUNITY

Posted on December 8, 2015 by Arch Ritter

Richard Feinberg, December 2015,  Brookings Institute

Original Here: Reconciling U.S. Property Claims in Cuba: Transforming Trauma into Opportunity.” 

zzzzzzzzz CONCLUSION:  . A Grand Bargain?

In their opening meetings, the U.S. and Cuba will present their conflicting claims. One possible outcome is protracted and contentious negotiations. But there is a much more promising alternative approach: to take advantage of the very size and complexity of the conflicting claims and to make their resolution the centerpiece of a grand bargain that would resolve some of the other remaining points of tension between the two nations, and embrace an ambitious, forward-looking development strategy for Cuba.

There are precedents for such a grand bargain, in such cases as the Soviet Union, Vietnam, and China. The Roosevelt-Litvinov agreements—negotiated in the White House directly between the U.S. president and Soviet foreign minister—laid the foundations for renewing diplomatic relations, and one might argue for the World War II alliance that defeated the axis powers. Similarly, the claims settlement with Vietnam was one piece of a much broader normalization process between the two once bitter adversaries—two nations that now label themselves strategic allies. Pointedly, at the August 14, 2015 flag-raising ceremony at the U.S. Embassy in Havana, Secretary of State John Kerry remarked:

“And last week, I was in Hanoi to mark the twentieth anniversary of normalization of relations between the United States and Vietnam. Think about that. A long and terrible war that inflicted indelible scars on body and mind, followed by two decades of mutual healing, followed by another two decades of diplomatic and commercial engagement. In this period, Vietnam evolved from a country torn apart by violence into a dynamic society with one of the world’s fastest growing economies.”

In recent U.S.-Cuban relations, there is also the precedent of the December 17, 2014 announcements, when the return of Alan Gross and a CIA asset for three Cuba spies was wrapped in the larger story of normalizing diplomatic relations, and on the U.S. side, the relaxing of certain travel and economic restrictions.

The two-tiered settlement strategy outlined above allows for U.S. firms to re-engage in Cuba. At the same time, some individual claimants and their families harbor deep affections for Cuba and would probably be willing to contribute to its future development. Cuba could consider special incentives to regain this legacy of the island’s past, and for interested claimants to match their awards with re-investments in new projects.

With the right incentives, Cuba could also attract the capital and talents of many of the two million Cuban-Americans resident in the United States. With their separate legal issues and emotional charges, and the vastness of their numbers, the property claims of Cuban-Americans will require their own treatment (more on this in a subsequent paper). But the settlement of U.S. property claims might include a general framework for the future consideration of issues of concern to Cuban-Americans – with the overarching goal being reconciliation of the diaspora with the homeland.

The settlement of U.S. claims could be wrapped in a package of economic opportunities for Cuba. Importantly, the United States could further relax its economic sanctions (amending or repealing Helms-Burton), providing more trade and investment opportunities – and the capacity for Cuba to earn the foreign exchange needed to service debt obligations. In turn, Cuba will have to accelerate and deepen its economic reforms, to offer a more attractive business environment for investors and exporters. Politically, the Cuban government could present a significant softening of the U.S. embargo as a victory, offsetting any concessions made in the claims negotiations. A comprehensive package might also be more attractive to the U.S. Congress; formal Congressional consent would enhance the measures’ legitimacy and durability and help to close off any court challenges, should some claimants be unsatisfied with the final settlement. It is time for Cuba to enter the international financial institutions and the United States should no longer stand in the way. The IFIs can play a vital role, in providing capital and connections to the global marketplace. The IMF and World Bank are also deep repository of knowledge on transitions from central planning to more market-driven economic systems.

The claims settlement agreement between the United States and Hungary contained an annex where it was agreed, inter alia, that the Hungarian Government intended to settle outstanding dollar bonds through direct talks with bondholders; and that the United States would seek authority from its legislature to accord Most-Favored Nation (MFN) treatment to Hungary, subject to separate negotiations.

75 In a grand bargain, the United States could offer to work with Cuba and other creditors to renegotiate Cuba’s outstanding official (Paris Club) and commercial (London Club) debts on terms that take into account Cuba’s capacity to pay.76 The U.S. government continues to carry on its books $36.3 million of Cuban obligations to the U.S. Export-Import Bank (Ex-Im Bank), which could be addressed within the Paris Club framework.77 The United States could also agree to reconsider remaining trade and investment restrictions.

At this stage, it would be too much to expect agreement on a detailed development strategy for Cuba. But a process could be put in place whereby Cuba would work with its many international partners, including the United States, to forge a twenty-first century development model that preserves the social gains of the revolution but that also raises labor productivity and living standards.

Under President Raúl Castro, Cuba has initiated economic reform and the international community can accompany it by adding its expertise and resources. It would not be too much for the claims ettlement talks, if they agree on a two-tiered strategy, to include a discussion of the business climate, and what additional steps Cuba needs to take to attract badly needed foreign investment. As strict socialist property relations are gradually replaced by a more hybrid economic system, Cuba will need to design and  implement new property regimes that promote individual initiative but that also encompass land-use, housing, natural resources and other regulatory oversight protective of the public interest and consistent with sustainable and equitable growth.

The strategic goals in a massive claims resolution process must be political: to heal the deep wounds of past conflicts, to lay foundations for peaceful coexistence and the non-violent resolution of disputes, to avoid jeopardizing fiscal balances and crippling debt burdens, to build investor confidence and  international reputation, and to help render the Cuban economy more open and competitive. These vital goals will not always be fully convergent with the more traditional, legal objective focused narrowly on the rights of property claimants. In designing and implementing solutions, as claimants bang on doors and demand attention, policy makers should not lose sight of their overriding purposes. In the interests of both Cuba and the United States, the twentieth-century trauma of massive property seizures should be transformed into a twenty-first century economic development opportunity.

 zzzzzRichard-Feinberg

Richard Feinberg is a nonresident senior fellow with the Latin America Initiative at the Brookings Institution. He is a professor of international political economy at the School of Global Policy and Strategy, University of California, San Diego. His four decades of engagement with inter-American relations spans government service (in the White House, Department of State, and U.S. Treasury), numerous Washington, D.C.-based public policy institutes, the Peace Corps (Chile), and now in academia. He is also the book reviewer for the Western Hemisphere section of Foreign Affairs magazine.

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A NEW CRISIS OF CUBAN MIGRATION

Posted on December 8, 2015 by Arch Ritter

By WILLIAM M. LEOGRANDE, New York Times,  DEC. 4, 2015

Original Essay Here: Cuban Migration

zzCuban migrants remonstrated with a Costa Rican immigration official at the border with Nicaragua, in Penas Blancas, Costa Rica, on Monday.

 zzzNicaraguan soldiers and policemen stand guard in Penas Blancas, Guanacaste, Costa Rica, on the border with Nicaragua on November 16, 2015

 Washington — A standoff in recent weeks that has trapped hundreds of Cuban migrants at Costa Rica’s border with Nicaragua as they try to reach the United States is a graphic demonstration that Washington’s migration policy toward Cuba is no longer sustainable. Left unchanged it could produce a crisis on the scale of the 1980 Mariel boatlift or the 1994 balsero (rafters) crisis — if one hasn’t begun already.

Current policy, based on migration accords negotiated with  Havana in 1994 and 1995, commits the United States to accepting at least 20,000 legal Cuban immigrants annually, and to returning to Cuba migrants intercepted at sea as they try to enter the United States illegally.

Unilaterally, the United States also adopted a “wet foot/dry foot” policy, which allows Cubans who arrive in the United States (“dry foot”) to remain in the country under a special status called parole and, a year later, become eligible under the Cuban Adjustment Act of 1966 to seek permanent residency. No other foreign nationality enjoys such privileged status.

The Cuban government has long argued that these policies encourage illegal migration and human trafficking. Still, the problem of Cubans coming to the United States illegally has been relatively minor until recently.

In the years since the migration agreements were signed, about 4,000 Cubans annually have eluded the United States Coast Guard, reached Florida beaches, and claimed “dry foot” status. Some 2,000 to 3,000 others have been intercepted at sea (“wet foot”) each year and returned to Cuba. Because crossing the Florida Strait on rickety rafts or dilapidated boats is so dangerous, and the chances of being caught by the Coast Guard are high, the flow of illegal migrants remained manageable.

It is manageable no longer. The number of migrants has surged since last December, when President Obama and his Cuban counterpart, Raúl Castro, announced their intention to normalize relations. Would-be immigrants fear that reconciliation foreshadows repeal of the Cuban Adjustment Act, prompting Cuban migrants to act now lest they miss their chance.

With that in mind, Cubans have found an air-land route to the United States on which everyone can be a “dry foot” who can expect entry. In the past 12 months, more than 45,000 Cubans entered the United States from Mexico — without having to risk crossing a perilous desert as Mexicans and Central Americans do.  The new route is possible because in 2013, the Cuban government abolished its requirement that citizens obtain government permission to travel abroad. Today, most Cubans can travel to any country that will grant them a visa. Ecuador even admitted them without one until last Tuesday, and Guyana still does.

As a result, would-be migrants have been flying to Ecuador to begin a long, surreptitious trek north, without visas, through Colombia, Central America and Mexico. At the Texas border, they simply declare their nationality and are admitted under the “dry foot” policy.  Hiring “coyotes,” as smugglers of migrants are called, to guide the trek is expensive, but many Cubans have family members in the United States willing to pay. Recently, Cubans armed with cellphones have been crowdsourcing their own smuggling routes by following advice on social media from those who have gone before them.

The current crisis in Central America was triggered on Nov. 10 when Costa Rican authorities broke up a smuggling operation, leaving 1,600 Cubans stranded. When Costa Rica tried to send them north, Nicaragua closed the border. As more Cubans arrive daily, the number stuck there has reached 4,000, with no end in sight.

At a recent meeting of diplomats from the region, Costa Rica proposed creating a “humanitarian corridor” that would allow Cubans free passage to the United States border. Nicaragua rejected the proposal, but even the suggestion of such a plan should be a red flag for Washington. Latin Americans are getting tired of enforcing a United States immigration policy toward Cubans that isn’t working and discriminates against their own citizens. The contrast between Washington’s privileged treatment of Cuban migrants and its coldness toward Central Americans, including children fleeing criminal violence, is indefensible.

18CUBA-slide-8QJE-superJumboEarly morning que for migration visas, American Embassy, February 2015.

Nevertheless, the Obama administration has repeatedly declared that it has no intention of changing current migration policy, for fear that any hint of change will touch off a stampede. United States diplomats reaffirmed that position at a meeting with their Cuban counterparts last Monday. The meeting produced no new thinking about how to resolve the crisis.

There is a solution to this conundrum. If Cuban migrants trying to enter the United States by land were treated the same as those intercepted at sea and returned to Cuba, the incentive to make the long, dangerous passage north would be drastically reduced.

This would not require amending the Cuban Adjustment Act, which allows for the adjustment of status only for Cubans who have been admitted or paroled into the United States. It would require only changing the “dry foot” policy of admitting on parole anyone who sets foot on United States territory. That policy is a matter of executive discretion. To avoid a last-minute exodus from Cuba, it could be rescinded by the attorney general without prior notice.

An end to the “wet foot/dry foot” distinction should be accompanied by a significant increase in the number of Cubans admitted legally, so that those who want to immigrate to the United States have more opportunities to do so safely.

But to do nothing is to face a slow-motion migration crisis that will be interminable. Cuba will not reimpose travel limits on its citizens, and Latin America will not cooperate indefinitely by blocking Cubans’ transit when Washington’s policy is to let in all Cubans who arrive — and keep other Latin Americans out.  For Washington to refuse to change a policy when new circumstances have rendered it utterly ineffective makes about as much sense as King Canute trying to hold back the tide.

zWilliam M. LeoGrande is a professor of government at American University in Washington, D.C., and a co-author with Peter Kornbluh of “Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana.”

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CUBA DETENTE CREATES MIGRANT CRISIS IN MEXICO

Posted on November 9, 2015 by Arch Ritter

Financial Times, 9 November 2015

Amy Stillman in Tapachula, southern Mexico

Original article here: Cuban Migrants in Mexico

As Cuban president Raúl Castro met Mexican President Enrique Pena Nieto on Friday to strengthen trade ties and smooth over past tensions, a new political problem was mounting in the south with the huge influx of Cubans flowing across Mexico’s border.

Almost 6,500 Cubans arrived in Mexico en route to the US in the first nine months of the year, more than five times as many as a year earlier, according to official statistics. And the numbers have continued to surge. Mexico’s national migration institute, INM, said that more than 8,000 Cubans have been processed in Mexico so far this year.

The national human rights commission, CNDH, noted that over a thousand Cubans turned up at the Tapachula migratory station in the space of one week in October, overwhelming migration officials’ capacity to attend them.

zz

Many Cubans have spent days sleeping rough outside the Tapachula station awaiting processing. Local human rights groups have begun to open their doors to them amid the growing humanitarian crisis.

The Cubans are responding to rumours on the island that the US will soon remove their right to automatic asylum upon reaching US soil. The 1966 Cuban Adjustment Act deems Cubans fleeing the island to be political refugees, a product of the Cold War that sits uncomfortably with the recent restoration of diplomatic ties between Havana and Washington.  The law has already been amended once before, when the US implemented the “wet-foot, dry-foot” policy in 1995, enabling Cuban migrants caught at sea to be repatriated.

The Cubans, meanwhile, are sceptical that the gradual lifting of economic restrictions will improve their lives. Political freedom and economic opportunity, they say, are still lacking on the island.

“The [trade] opening is good, but it is not enough to change the culture in Cuba,” said López, 50, who had arrived at the Tapachula migration office with his wife and two grown children after a gruelling, month-long slog through South and Central America.

López, who asked to be identified with a pseudonym, had earned the equivalent of $25 a month working for the government in Havana. Fearing that the US law might change, in September he and his family made plans to join their relatives in North Dakota, selling their car and scrounging all of their savings to afford the trip, which cost $2,500 per person.  Like so many Cubans, López hopes to find better-paid work in the US. “America is a different democracy, it is a different opportunity,” he said.

While trade barriers in Cuba are slowly being chipped away, the US has yet to lift its 53-year old economic embargo on the Communist-run country, and political reform will take time.  Moreover, few people expect Cuba to become a market economy without going through some economic turbulence.

“Cubans understand that there is a good chance things will get worse before they get better,” said Duncan Wood of the Woodrow Wilson Center in Washington.  “Changing the economic culture of the country is going to be enormously disruptive, so I am not surprised that the number of Cuban migrants in Mexico is up.”

The lifting of travel restrictions in Cuba in 2013 has facilitated this process, with many countries along the route now providing Cubans with transit visas.

Also, increasing numbers of Cubans are choosing the circuitous trek across eight borders because it is less risky and cheaper than sailing directly to Miami. Cubans in Mexico told the Financial Times that the journey overland is half the price of the perilous sea voyage along the Florida Straits, which reaches $10,000.

Mexican immigration officials warn that the numbers arriving across the border continue to climb. Mario Madrazo Ubach, director-general of immigration control at the INM, said: “If 300 people show up in the same moment at the same station, what can we do, build a bigger station?”

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REP. GOSAR INTRODUCES BILL TO REPEAL ‘WET FOOT, DRY FOOT’ CUBAN AMNESTY

Posted on October 29, 2015 by Arch Ritter

By Zachary Leshin | October 28, 2015

 (CNSNews.com) — U.S. Rep. Paul Gosar (R-AZ) has introduced legislation to repeal “outdated policies” he says “provide amnesty to Cuban aliens” – including the Clinton-era “wet foot, dry foot” policy.

The Ending Special National Origin-Based Immigration Programs for Cubans Act of 2015 would repeal the Cuban Adjustment Act of 1966, which originally allowed any Cubans who had been living in the U.S. for two years to become legal permanent residents.

In 1976, the Act was amended to reduce the residency requirement to one year.

On Aug. 19, 1994, President Clinton announced his “wet foot, dry foot” policy: Any Cubans who landed on U.S. soil (“dry foot”) could remain in the U.S. even if they did not enter the country through the standard legal immigration channels.  However, migrants who were intercepted by the U.S. Coast Guard at sea (“wet foot”) would be returned to Cuba.  More than 2,600 Cubans were returned to the island between October 2014 and June 2015, the Associated Press reported.

“I introduced a bill to terminate three outdated policies that provide amnesty to Cuban aliens and are costing taxpayers billions of dollars,” Gosar said last week in a press release.  “The most disturbing part of this flawed immigration policy is that Cuba does not allow Cuban citizens convicted of crimes in the U.S. to be repatriated to Cuba.”

 “The Obama Administration continues to rule by executive fiat without any regard for our nation’s immigration laws or our country’s system of checks and balances that was established by the Constitution,” he continued.  “If President Obama has normalized relations with Cuba, why would we treat illegal immigrants from that nation any different than those from other countries?” Gosar asked.   “Cuban nationals should be treated under the same immigration rules as any other person seeking to immigrate to the United States and should not receive preferential treatment.”

Gosar’s bill has been endorsed by the Federation for American Immigration Reform (FAIR). In a statement, FAIR president Dan Stein called the law “an outdated relic of the Cold War. Continuing this policy serves no national interest and is perpetuated purely for domestic political purposes.”

“A recent investigative report by the Ft. Lauderdale Sun-Sentinel provides conclusive evidence that the Cuban Adjustment Act is being widely abused, at great expense to American taxpayers. It is time to end this special immigration policy and treat Cuban nationals the same way we treat citizens of every other country,” Stein continued.

But U.S. Secretary of State John Kerry is opposed to the repeal of the Cuban Adjustment Act. During an August press conference in Havana, where he attended a ceremony marking the reopening of the U.S. embassy, Kerry said: “We support full implementation of the existing migration accords with Cuba, and we currently have no plans whatsoever to alter the current migration policy, including the Cuban Adjustment Act, and we have no plans to change the ‘wet foot, dry foot’ policy at the same time.”

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Preparing for Departure, Playas del Este, Havana, August 1994

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CUBA’S LIMITED ABSORPTIVE CAPACITY WILL SLOW NORMALIZATION

Posted on October 22, 2015 by Arch Ritter

Fulton Armstrong*

 Fulton Armstrong is a Research Fellow at the Center for Latin American and Latino Studies. This is the third of four policy briefs that he will write as part of the Center’s Cuba Initiative, carried out with support from the Christopher Reynolds Foundation.  

 October 19, 2015

 As the U.S. embargo—the main obstacle to expanding U.S.-Cuban economic ties—is relaxed by presidential regulatory action and eventually lifted by Congress, limits on Cuba’s own willingness and ability to conduct trade, absorb investment, utilize information technology, and even accommodate tourists risk putting a brake on the normalization of economic relations. Five decades of embargo and failed socialist models have rendered key sectors in Cuba ill-equipped to take advantage of the surge in U.S. business interest in the island. In some areas, the political will to open up and reform is crucial. These problems do not translate into a rejection of normalization but rather into a slower timeline than many on and off the island would hope for.

After 50-plus years of estrangement, bilateral contacts since last December have given rise to high levels of optimism—among U.S. investors, importers, and exporters—about relatively rapid economic engagement. Press reports and information from Cuban and non-Cuban experts suggest that most Cubans, skeptical that their government will make reforms facilitating trade and investment quickly enough, are slightly more pessimistic. But hardly a week goes by that U.S. trade experts, think tanks, and media don’t reflect strong private-sector interest in Cuba. Visiting Havana in October, U.S. Commerce Secretary Penny Pritzker emphasized, “What we’re trying to do is be as open as we can until the blockade [sic] is lifted.”

Cuba has not been shy about its desires either. Secretary Pritzker said Cuban officials “have been very forward leaning and wanting more American direct investment.” Last year, the Cuban government announced its “Portfolio of Foreign Investment Opportunities”—some 246 projects in energy, tourism, agriculture, and industry—for which it seeks US$8.7 billion in investment. Moreover, Havana says it wants growth rates to rise to 4–5 percent per year (from an estimated 1.5 percent in 2014), fueled by at least US$2 billion in annual foreign investment. …….

Conclusion: VISION AND PATIENCE

The limits on Cuba’s ability to absorb a rapid expansion in tourism, trade, and investment are significant, but continuing U.S. controls are also imposing obstacles. The Obama Administration has chosen not to use its executive authority under the Cuban Asset Control Regulations, written into the “Libertad [Helms-Burton] Act,” to expand trade with state-owned enterprises beyond those currently licensed—in agriculture, pharmaceuticals, telecommunications, and for environmental protection. Apart from these exceptions, trade is only permitted with small entrepreneurs, who have minimal capacity to import and export. These limits, which can be reduced through executive action, pose a major hindrance to the broader normalization process.

Cuba’s challenges in taking advantage of new opportunities are not insurmountable—with political will and time. Havana’s approach to change usually has been gradual and halting,

 but change a la cubana has also been significant. Since the start of the disintegration of the Soviet Union in 1989, Cuba’s economy and economic culture have changed more than the government’s socialist slogans would suggest—and further change is certain. The economic contract between the people and the government has changed drastically as hundreds of thousands of workers have been laid off, social services have been cut, and the Cuban people have been admonished by President Castro to embrace reforms “without haste, but without pause.”

The pace of reform and corresponding expansion of Cuba’s absorptive capacity may be maddening slow for many Cubans and Americans alike. But insofar as the U.S.-Cuba normalization process is irreversible, so too is the conviction in Cuba on the need to “update” the systems through reform in order to take advantage of the opportunities it brings.

The challenges implicit in change are not new, and not unique to Cuba’s relations with the United States. Potential U.S. partners eager to engage are about to learn what their European and Canadian counterparts have long known: even with clear incentives on the table, Cuba proceeds at a pace that maximizes its own stability and advantage—which most often means slowly. Those concerns naturally will be especially intense as they inform dealing with the United States, which still rationalizes expansion of commercial ties in terms of the desirability of promoting democracy in Cuba. But Cuban national pride and the Communist Party’s fear of losing control could very well be assuaged as the island experiences the benefits of the engagement. Foreigners, especially the United States, who push too hard, too fast, and too haughtily could fail and even delay this aspect of normalization, just as Cubans who move too passively, too slowly, and too skeptically could stymie the process as well.

Continue Reading: Fulton Armstrong US-Cuba Policy Brief 3, October 2015 (003)

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U.S. HOTEL CHAINS CIRCLE CUBA AS VISITORS SURGE, RESTRICTIONS EASE

Posted on September 30, 2015 by Arch Ritter

By Mike Stone And Mitra Taj, Reuters, New York/Lima, Peru, Sept 30 2015

Original Article Here: U.S. HOTEL CHAINS

Cuba April 2015 012.jpgasdA Favouvorite Havana Bar, at the Hotel El Colina, Havana. Can US Chains compete for this for character? photo by A. Ritter

The race for Cuba’s beach-front is on.

Executives from major U.S. hotel chains have stepped up their interest in the Communist island in recent months, holding informal talks with Cuban officials as Washington loosens restrictions on U.S. firms operating there.  Executives from Marriott International, Hilton Worldwide and Carlson Hospitality Group, which runs the Radisson chain, are among those who have held talks with Cuban officials in recent months, they told Reuters.  

“We’re all very interested.” said Ted Middleton, Hilton’s senior vice president of development in Latin America. “When legally we’re allowed to do so we all want to be at the start-line ready to go.”

The United States and Cuba restored diplomatic relations in July after decades of hostility. Washington chipped away further at the half-century-old trade embargo this month, allowing certain companies to establish subsidiaries or joint ventures in Cuba as well as open offices, stores and warehouses in Cuba.  The United States wants to strike a deal that lets U.S. airlines schedule Cuba flights as soon as possible, a State Department official said last week, amid speculation that a U.S. ban on its tourists visiting Cuba could be eased.

U.S. hoteliers are not currently allowed to invest in Cuba, and the Caribbean island officially remains off-limits for U.S. tourists unless they meet special criteria such as being Cuban-Americans or join special cultural or educational tours.  Foreign companies have to partner with a Cuban entity to do business and U.S. hoteliers expect they will have to do likewise if and when U.S. restrictions are lifted.

While they wait for the politicians to iron out their differences, U.S. hotel bosses are conducting fact-finding missions in Havana and holding getting-to-know-you meetings with government officials in Cuba and various European cities.  This week, Middleton, along with executives from Carlson and Wyndham Worldwide Corp., which runs the Ramada chain, are meeting with Cuba’s Deputy Tourism Minister Luis Miguel Diaz at an industry conference in the Peruvian capital, Lima.

In the 1950s Cuba was an exotic playground for U.S. celebrities such as Frank Sinatra and Ava Gardener, as well as ordinary tourists, who travel led there en masse on cheap flights and ships from Miami.  A recent relaxation of some of the restrictions on U.S. travelers has encouraged over 106,000 Americans to visit Cuba so far this year, more than the 91,254 who arrived in all of 2014, according to data compiled by tourism professor José Luís Perelló of the University of Havana.

Overall, tourist arrivals are up nearly 18 percent this year after a record 3 million visitors in 2014, making Cuba the second-most popular holiday destination in the Caribbean behind the much-smaller Dominican Republic.  U.S. hoteliers expect the number of U.S. visitors to balloon if all travel restrictions are axed.  “If and when the travel ban is lifted. We estimate there will be over 1.5 million U.S. travelers on a yearly basis,” said Laurent de Kousemaeker, chief development officer for the Caribbean & Latin American region for Marriott.  De Kousemaeker accompanied other Marriott executives, including chief executive Arne Sorensen, to Havana in July to meet with representatives of management companies and government officials.

Even if sanctions were lifted soon, Cuba traditionally has been slow to approve foreign investment projects, making it unlikely that U.S. hotels would be popping up immediately.  Rivals from Canada and Europe have seized the opportunity, operating and investing in Cuban hotels and resorts, alongside Cuban government partners, for years.  Spanish hotel operator Meliá Hotels International SA, is aiming to have 15,000 rooms in Cuba by 2018. It currently has 13,000 rooms via 27 joint ventures.  London + Regional Properties Ltd, a U.K. hotel and real estate development firm, agreed a deal this summer for an 18-hole golf course, hotel and condominium project with state tourism enterprise, Palmares SA, which has a 51 percent stake in the project.

But even with government plans to add 4,000 new hotel rooms every year for the next 15, the island is not ready for a significant surge in tourism.  The island’s tourism infrastructure went into decline in the decades following the 1959 revolution. Five-star hotel rooms, good restaurants and cheap Internet access are all in short supply.

When and if they get a green light from both governments, executives said U.S. hotel chains will likely offer branding and management partnerships to Cuban government partners such as Palmares and Tourism Group Gaviota, the largest Cuban government tourism entity.

The ultimate goal would be to secure long-term leases on resort developments, which is how Cuban authorities have generally operated with foreign hotels.  But right now, U.S. hoteliers can’t even refer to tourism when they meet Cuban counterparts, let alone talk about actual deals. Instead the buzz word is “hospitality.”  Marriott’s de Kousemaeker likes to use an analogy from baseball, a sport loved both in Cuba and in the United States, to describe the situation.

“We’re learning, and taking batting practice, but we’re sitting on the bench.”

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RESTRICTIONS ON CUBA TRAVEL AND BUSINESS LIFTED BY U.S.

Posted on September 18, 2015 by Arch Ritter

By JULIE HIRSCHFELD DAVIS, SEPT. 18, 2015, New York Times

Original Story

The Obama administration on Friday announced wide-ranging changes to loosen travel, commerce and investment restrictions on Cuba, moving to fulfill President Obama’s goal of breaking down barriers between Washington and Havana even as the American embargo remains in place.

The rules will allow American companies to open locations and hire workers in Cuba, facilitate financial transactions between the nations, and remove limits on the amount of money that can be brought to the island nation. They are to take effect on Monday on the eve of the visit to Washington by Pope Francis, a proponent of the reconciliation between the United States and Cuba who quietly helped broker the agreement last year between Mr. Obama and President Raùl Castro to forge it.

Jacob J. Lew, the Treasury secretary, said the rules could lead to “constructive change for the Cuban people.”

 

“A stronger, more open U.S.-Cuba relationship has the potential to create economic opportunities for both Americans and Cubans alike,” Mr. Lew said in a statement. “By further easing these sanctions, the United States is helping to support the Cuban people in their effort to achieve the political and economic freedom necessary to build a democratic, prosperous, and stable Cuba.”

They also hold out the prospect of new business opportunities for American companies in Cuba, which some observers said were intended to increase pressure on Havana to take corresponding action to open its economy.

The White House is working to show momentum in the rapprochement with Cuba before Dec. 17, the one-year anniversary of when it was announced.

“In addition to expanding our commercial engagement with the Cuban people, these additional adjustments have the potential to stimulate long overdue economic reform across the country,” Penny Pritzker, the secretary of commerce, said in a statement.

American corporations have been working behind the scenes with the Obama administration for months to bring about the normalization the president promised, which began with an initial set of regulatory changes in January. But the new rules exceeded the expectations of some business leaders, who said they had sent a clear message to Cuba that it must do more to hold up its end of the process.

“They’ve gone farther at one time than most anyone expected,” said John S. Kavulich, the president of the U.S.-Cuba Trade and Economic Council. “It’s in keeping with President Obama’s strategy, agree or disagree, which is, ‘I’m throwing the proverbial ball into the Cuban court.’ ”

In Havana, Mr. Kavulich added, the changes are “too much, too fast.”

The regulations will for the first time in decades allow United States firms to do business directly in Cuba, setting up subsidiaries or opening offices or warehouses there, and allowing Americans to have bank accounts and Cubans to maintain bank accounts outside of their country. Cruise ships will be able to travel between the United States and Cuba without making a stop in a third nation. And close relatives will be able to visit family members in Cuba for a wider array of purposes.

The rules will also allow American telecommunications and Internet companies to situate in Cuba and market their services there, as well as to import mobile applications made in Cuba for development in the United States.

The changes came as the diplomatic opening between Washington and Havana inched forward. On Thursday, Mr. Obama received credentials at the White House from the first Cuban ambassador to the United States since 1961. The envoy, José Ramón Cabañas Rodríguez, had been the chief of the Cuban Interests Section in Washington for three years.

 

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CUBA: NOW COMES THE HARD PART.

Posted on August 25, 2015 by Arch Ritter

The new Havana embassy is the last big move left for the White House to make. Any progress after this won’t be so easy.

 Original essay here: Now Comes the Hard Part

 By Carl Meacham

 APTOPIX Cuba US Relations

 In 1961, Washington severed diplomatic relations with Havana. More than 50 years later, embassies in Washington and Havana have officially reopened. And today, Secretary of State John Kerry travels to Havana to raise the American flag over the embassy.

The flag is a powerful symbolic gesture, widely seen as the opening of a new chapter in the complicated, tense relationship between the U.S. and one of its nearest neighbors.

But in the messy universe of Cuban politics and policy, there’s another way to look at it. At least for the short term, Kerry’s ceremony is as likely to be the end of something as the beginning.

Since last December, when President Barack Obama and President Raúl Castro announced that they would lead the two countries toward bilateral normalization, events have moved at light speed, at least by diplomatic standards. We’ve had new regulations passed, prisoners released on both sides, and formal channels open for diplomatic negotiations. The Obama administration removed Cuba from the U.S. Government’s list of state sponsors of terrorism. Travel, money transfers, and bilateral interactions are all easier than at any point since the Cuban Revolution.

A lot has been achieved in very little time, and it’s easy to imagine that the change will only snowball. But so far the momentum has come almost entirely from the White House, and the newly opened embassies mark the final big step that Obama can take by himself. Reopening the embassies, as well as taking Cuba off of the list of terrorist sponsoring countries, were decisions that resided within the jurisdiction of the executive branch. Now the most significant next steps are going to lie with Congress, and get tangled up in the 2016 presidential race. They won’t be so easy.

The issues now hanging between the countries are serious ones with strong constituencies aligned against further movement. The big one is the embargo—or as Cubans call it, “the blockade.” Changing or ending the embargo has the biggest potential to transform the relationship, but it requires Congress to change the laws that put the embargo in place. And the likelihood of Congress moving to change that in the next 18 months is minimal.

A number of senators and representatives on both sides of the aisle are pushing for legislation that would ease elements of the embargo. But the Senate majority leader is set against normalization, so it’s unlikely that he would make time on the Senate floor to discuss measures that would strengthen the new approach.

One of the obstacles is substantive: many in Congress see any normalization as a concession to an authoritarian government with a poor record on human rights. The many outstanding issues between Cuba and the U.S. also include claims on expropriated property from US citizens which have not been settled.

And another obstacle is that in the political landscape right now, Cuba simply isn’t important enough to justify floor time in Congress. This fall’s Congressional agenda is already packed with the nuclear deal with Iran and the fight against ISIL, both of which require urgent foreign policy attention—not to mention ongoing battles over funding the government and the potential for government shutdown, new climate regulations, and government funding for women’s healthcare. Ultimately, these issues all trump maneuvers to lift (or ease) the embargo.

Finally, the window between now and the start of presidential primaries is very short. The Iowa Caucus is scheduled for late January or early February 2016. The Republican base, and the party’s leadership, are deeply divided on Cuba policy. As the primary season heats up and candidates jockey for political positioning, Cuba will only become more controversial and polarizing. All of these factors hamper the potential for any major new Cuba legislation.

So what could come next?

It’s likely that trade measures to facilitate commerce, which don’t require Congressional approval, would be the next meaningful step. By setting ground rules related to trade facilitation through bilateral negotiations, Washington and Havana could start to establish a formal framework for their nascent relationship.

The new embassies will help, though there are still a few key obstacles. The Cuban judicial system, which is far from independent, is a significant hurdle, and the two countries have nothing in the way of a bilateral dispute settlement mechanism. The absence of an independent judiciary poses a big risk for investors and businesses seeking to operate in Cuba. And though Cuba is a member of the World Trade Organization, its government hasn’t historically shown a commitment to attracting foreign investment.

Cuban laws stand in the way of smooth commercial relations. Foreign entrepreneurs, for example, are prohibited from directly hiring Cuban employees—a disadvantage for firms that want to set up shop in Cuba. The size of the Cuban market is challenging, too: Cuba’s GDP per capita is just $5,800—half of the Latin American average. Cuba is a promising market for the United States, but its economy’s capacity is limited—so its impact is limited, in kind.

Whatever happens next, it will have a lot to overcome. The history of the bilateral relationship is complicated and tense: the Cuban Missile Crisis, the Bay of Pigs invasion, Guantanamo, Cuban efforts to export its revolution in Latin America and Africa, and its continued role in Venezuela have all played a role. Even after the Soviet Union’s fall, the two countries have remained isolated from one another for decades.

But they also have a long shared history and culture, and even with all these obstacles, we’ve seen some logistical progress in the relationship. March saw the re-establishment of direct telephone links, an important first step in developing infrastructure and communications between the two countries. Stonegate, a small regional bank headquartered in Florida, now works directly with the Cuban government, allowing Cubans to function outside a cash-only basis when operating in the United States.

These steps suggest how the relationship might proceed for now even without doing away with the embargo, and during a very political presidential primary season. Transparency is key. Setting clear rules and regulations that govern how U.S. businesses operate in Cuba (and vice versa) will allow for a boost in confidence—and a parallel boost in investment. And ultimately, this would ideally include a process for settling disputes.

Finally, Washington and Havana can build on the financial reform efforts that have already been implemented. Though banking and financial services are already simpler, further easing the flow of money and investment would go a long way.

There’s a lot left to do. The first act may be over, but Cuba and the United States are slowly but surely just getting started.

Carl Meacham is director of the Americas Program at the Center for Strategic and International Studies (CSIS).

 

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