Law student Cole Pfeiffer contributed to this piece.
In August 2016, passengers on JetBlue flight 387 from Ft. Lauderdale travelled just 256 miles, but their trip was historic: theirs was the first commercial flight from the United States to Cuba in more than 50 years.
U.S. businesses are hoping that the opening to Cuba initiated by President Obama – an enormous policy shift that led to putting commercial planes in the air – will continue once he is out of office. But just how quickly a further normalization of relations will take place is still up in the air.
The Embargo Against Cuba
What does this mean for your business? First, it helps to take a quick look back.
The United States imposed an embargo on exports to Cuba in 1960, after the Castro government nationalized U.S.-owned oil refineries on the island without compensation. The embargo was expanded to include imports in 1962, and has remained in effect ever since. The U.S. government has said it wouldn’t lift the embargo unless Cuba democratized and demonstrated greater respect for human rights. In fact, at the end of the Cold War, President Clinton expanded the embargo when he signed the Helms-Burton Act, which further restricted U.S. citizens from doing business with Cuba.
Although the embargo remains in place, recent political developments suggest that more open trade relations are finally on the horizon.
The Obama Administration Initiates a Thaw
One turning point in U.S.-Cuba relations came in 2009, when President Obama reversed certain restrictions on remittances – funds sent from U.S. citizens to their relatives in Cuba – that had been put in place by George W. Bush.
The Obama administration then took a major step in 2014, when it began a process of normalizing relations with Cuba: embassies were re-opened and there was a further easing of remittance, banking and other restrictions.
Then, in spring 2016, President Obama made a historic three-day trip to Cuba. (Especially historic if you consider that Calvin Coolidge was the last sitting U.S. president to visit the island.)
Even with the embargo still in place – an act of Congress is required to end it – significant change is clearly in the air. For example, a recent poll suggests that the majority of Americans support easing tensions with Cuba. This even seems to be the case among many Cuban Americans, a group that until recently was vehemently and almost uniformly in favor of the embargo. Moreover, many in the global community, especially in Latin America, want to see a full normalization of relations.
A recent poll suggests that the majority of Americans support easing tensions with Cuba
Small Steps, Big Hopes
The loosening of restrictions – which actually began in 2000, when certain bans on exporting farm products to Cuba were lifted – has meant that some American companies have been able to do some business on the island. This includes food giants such as Cargill and Tyson Foods, which had sought access to the Cuban market for decades. Since 2000, agricultural products have accounted for hundreds of millions of dollars in exports to Cuba.
Now that some banking and trade restrictions have been loosened, it’s expected that certain American corporations deemed useful to growth by the Cuban government will be welcomed – among them, Home Depot, Caterpillar and John Deere. In addition, numerous airlines and cruise lines have applied to make direct trips to Cuba from U.S. transportation hubs.
Likewise, Cuba appears poised to exploit opportunities in the United States. For example, Cuba has a surprisingly sophisticated biomedical industry, and hopes to be able to export to the United States, where it could offer new drugs at low prices.
U.S. Internet Companies Jump In
Interestingly, despite internet restrictions – only an estimated 5 percent of the Cuban population is said to have online access – some U.S.-based e-commerce companies have already put down roots in Cuba:
- Airbnb has more than 4,000 hosts on the island, and last year, more than 13,000 U.S. travelers stayed in Airbnb accommodations in Cuba.
- In a largely symbolic move, Netflix has made streaming video available. (Given the paucity of internet access, of course, the vast majority of Cubans – and tourists visiting the island – are not yet able to binge-watch House of Cards.)
- Paypal hopes to make inroads by offering an online remittance service that will make it easy for Cuban residents to receive funds from relatives in the United States and elsewhere.
The Shifting Political Climate
All of this suggests that the forecast for Americans wishing to do business in Cuba is encouraging – but next steps are still unclear.
American corporations deemed useful to growth by the Cuban government will likely be welcomed.
Although some say that many members of Congress privately favor lifting the embargo, given that Congress is practically at a standstill – even on mundane matters – and given that President Obama is soon to be a lame duck, a successful vote to end it is still not at hand.
Which brings us to the positions of the two main candidates for the presidency.
On this particular issue, Donald Trump has said he supports President Obama’s policy. True to form, however, he also said about the decision to reengage diplomatically, “I think it’s fine, but we should have made a better deal.”
As for Hillary Clinton, she was originally a supporter of the embargo, including when her husband tightened it during the 1990s when he was president. But her position shifted when she was Secretary of State, and she has said that, as president, she would use her executive authority to lift it.
A Question of When?
It would be foolish to predict with any certainty what is likely to happen with regard to the embargo in the coming year, given the highly charged political climate surrounding the presidential election and given the extreme partisanship in Congress.
That said, with the predicate laid down by President Obama, it can fairly be said that the prospects for U.S. businesses seeking to makes inroads on the island are looking up. Increasingly, it seems that the question is when, not if, the embargo will end and significant opportunities will open up for U.S. businesses in Cuba.