The Business Logic Driving Cuba-U.S. Rapprochement
If nothing else, the United States and Cuba stand to earn plenty of cash with a future end to sanctions feeding booms of American exports, Cuban tourism and infrastructure development.
There is a legend that when President John F. Kennedy had to sign the Cuban blockade law on Feb. 7, 1962, he waited a couple of hours, which gave an aide enough time to legally deliver to him 1,000 Cuban cigars he had ordered shortly before.
This week's stunning announcement of renewed relations between the two neighboring nations was made by President Barack Obama, a Democrat and the 11th U.S. President since Kennedy signed the blockade into force. Henceforth if an Obama aide were to visit Cuba he or she could bring back $100 worth of cigars and alcohol, and up to $400 total in products bought in Cuba.
While tourism to Cuba remains unauthorized, visiting the island on government business is one of the 12 items now allowed. In addition, the hypothetical aide sent on a mission to get his or her boss some cigars, could pay for them with a U.S. credit or debit card, which was hitherto, absolutely forbidden. And if that aide happened to know somebody in Havana who needed money, he or she could wire them more cash than before, from $500 per quarter to $2,000.
What has not changed since the Dec. 17 announcement is the United States' overall importance as a Cuban trading partner. In spite of the blockade, the United States was already today was the fifth biggest exporter of products to Cuba. Rice, wheat, corn and soya are the main export products to Cuba, paid for in cash and under special provisions. The CIA's figures indicate that 4.3% of all products entering Cuba are from the U.S., respectively after Venezuela (38%), China (11%), Spain (9%) and Brazil (5%).
To these special provisions allowing for trade in farming products, President Obama is now allowing sales of telecommunication equipment intended to improve Internet services in Cuba. For now, while everyone believes the recent announcements to be but a first step in dismantling the blockade, a general ban on the sale of U.S. products to Cuba, and vice-versa, remains in force.
[rebelmouse-image 27088431 alt="""" original_size="499x220" expand=1]Port of Havana. Photo: Giam
Before the victory of the 1959 revolution in Cuba, tourism was the first word that came to Americans' minds when they thought of Cuba. If the blockade is lifted, the most plausible estimates are putting the number of U.S. citizens visiting Cuba every year at around five million. In dollar terms, that represents revenues of some $8 billion annually.
Spain has been ahead of the game here for two decades. With the fall of the Soviet bloc, Cuba began looking for investors and trading partners in its former motherland, which never cut ties during 50 years of communist rule in Cuba or decades of conservative government under General Franco.
The top investor has turned out to be the Spanish-based Melía chain, with 27 hotels on the island. It was threatened with penalties in 1999 pursuant to the Helms-Burton Act, which expanded to non U.S. firms its ban on doing business with Cuba.
The European Commission resolved the quarrel two years after taking a firm stance and insisting it would not accept U.S. intervention in the business of EU firms. The tone of its language, not to mention the terms and vocabulary, may soon sound as outdated as the words Cold War themselves.