Trump’s New Regulations Adversely Affect Cuban Entrepreneurs

The new travel regulations and anti-Cuba rhetoric of President Trump already are hurting ordinary Cubans, especially those who have become entrepreneurs and who employ 600,000 of the island’s 11 million people.  The “self-employed” sector, a euphemism used by the Cuban government to avoid the words “private” or “entrepreneur,” already is encumbered by Cuban regulations that leave little room for development.[1]

Now an “association of Cuban businesswomen has asked to meet with Senator Marco Rubio (Rep., FL), a Cuban-American who has never been to the island and who is believed to be a major influencer on the Trump Administration’s Cuba policies. These women want to explain ” the impact on the country’s nascent private sector of rolling back a detente in U.S. relations.” They say, “The current situation has us very worried and we would like to share our personal histories and perspective from Cuba.”

One of these women, Niuris Higueras, the owner of the Atelier restaurant in Havana, said her  “business is down 60 percent from a year ago.” Another woman, Julia de la Rosa, who runs a 10-room bed and breakfast, said rentals were down 20 percent in October and she expected a further decline as new U.S. regulations on individual travel kick in this month.

The Trump Administration’s evident hostility toward Cuba also has caused U.S. businesses to reduce their interest in trying to create and build business in Cuba. At this year’s Cuba trade fair only 13 U.S. companies had booths compared with 33 last year. Another cause of this reduction is growing awareness of the difficulty of doing business in Cuba.[2]

Former U.S. Secretary of Commerce Carlos Gutierrez, the Cuban-born head of the U.S.-Cuba Business Council, said, “This is a huge step backwards. We had made so much progress.”

U.S. airlines with licenses for flights to Cuba also are seeing the reduction in U.S. demand for visiting Cuba. As a result, five airlines have cancelled all flights to the island while others have reduced the number of their flights.[3]

A caveat to this negative reaction is the opinion of some that the new regulations on business dealings “produce brighter lines that may make it easier for companies to identify who exactly they can do business with when trying to operate on the island.”

One who expressed this view is Peter Harrell, an adjunct senior fellow at the Center for a New American Security who previously served as a deputy assistant secretary for counter-threat finance and sanctions in the U.S. State Department, said that the new regulations “made trade easier with the country’s private sector.” A significant point in this regard was the State Department’s FAQ document stating that “entities not on its restricted list, even if they’re subsidiaries of those on the list, are [not] restricted until they themselves appear on the blacklist.”[4]

Another caveat is “the new regulations limiting “disruption to pre-existing commercial activities, ensuring that U.S. companies can continue to do business with Cuba’s nascent private sector.” Examples of such preexisting deals are Deere & Co. and Caterpillar Inc.’s arrangements for distribution of their products on the island.[5]

Myron Brilliant, the head of international affairs at the U.S. chamber of Commerce, urged the administration “to continue to keep business in mind and avoid further steps to restrict the economic relationship between the U.S. and Cuba.”

Nevertheless, the U.S. regime of Cuba sanctions presents risks to U.S. companies. The latest example is the November 17 announcement by the U.S. Treasury of an OFAC settlement with American Express Co. for $204,000 for its 50%-owned Belgian credit-card issuer’s corporate customers’ 1,818 transactions in Cuba between 2009 and 2014.[6]

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[1] Reuters, Cuban Businesswomen Seek Rubio Meeting as U.S. Policies Bite, N.Y. Times (Nov. 17, 2017). The above topics and others are the subjects of earlier posts listed in the “Cuban Economy” section of List of Posts to dwkcommentaries—Topical: CUBA.

[2] Reuters, Blooming U.S. Business Interest in Cuba Wilts Under Trump, N.Y. Times (Nov. 10, 2017).

[3] Reuters, Alaska Airline Discontinues Los Angeles-Havana Daily Flight, N.Y. Times (Nov. 14, 2017); Assoc. Press, Alaska Airlines to Halt Flights to Cuba, N.Y. Times (Nov. 14, 2017).

[4] Rubenfeld, New U.S. Cuba Regulations May Make Compliance There Easier, W.S.J. (Nov. 9, 2017).

[5] Schwartz & Radnofsky, New Trump Rules Pare Back Obama’s Opening to Cuba, W.S.J. (Nov. 8, 2017).

[6] Rubenfeld, American Express Unit Fined Over Cuba Sanctions Violations, W.S>J. (Nov. 17, 2017).

Reactions to New U.S. Regulations About U.S. Travel to Cuba and Transactions with Cuban Entities  

On November 8, the Trump Administration announced new regulations regarding U.S. citizens traveling to Cuba and Americans transactions with certain Cuban entities, all as discussed in yesterday’s blog post. Here are initial reactions to that announcement in the U.S. and in Cuba.

 U.S. Reactions[1]

Engage Cuba, a major coalition supporting U,S,-Cuba normalization, released a lengthy statement criticizing the new regulations. It said they “create a more convoluted, confusing and counterproductive approach to Cuba policy. This ‘Keystone Cops’ Cuba policy hurts those it claims to help and helps those it claims to hurt.” In addition, this action has “fumbled our Cuba policy right into the hands of Vladimir Putin. While the Cuban people and U.S. businesses lose out, reverting back to our policy of isolation is a gift to the Kremlin. Russia is quickly expanding its foothold in Cuba, looking to regain its once diminished sphere of influence in our backyard. Abandoning Cuba and allowing Russia to fill a leadership vacuum is undoubtedly a threat to our national security.

Moreover, according to Engage Cuba, “These new regulations are a kick in the gut to Cuban entrepreneurs who are struggling to support their families. Americans are significantly contributing to the growth of Cuba’s private sector. Today’s announcement will only make it harder for Americans to travel to Cuba and support the growing private sector.”

Senator Patrick Leahy (Dem., VT), a leading advocate for normalization, said the new regulations “are reminiscent of the Cold War and what one would expect of a paranoid totalitarian government, not a democracy like ours. [They are] onerous and petty restrictions on what private American citizens can do in Cuba — an impoverished neighbor that poses not the slightest threat to the United States. Far from promoting human rights in Cuba, these new regulations will hurt fledgling entrepreneurs and the rest of the Cuban people by discouraging Americans from traveling there.”

Senator Diane Feinstein (Dem., CA) tweeted that “isolating the Cuban people did not serve US interests before and certainly will not now.”

Representative Mark Sanford (Rep., SC), who is the author of a pending bill for freedom to travel to Cuba, said the new regulations were “outdated and an unfair limitation of American freedom.”

Senator Marco Rubio (Rep., FL), a major force for harsh U.S. measures about Cuba, had a luke-warm reaction to the new U.S. regulations. He criticized the State Department for failure to include on the Cuba Restricted List “several entities and sub-entities that are controlled by or act on behalf of the Cuban military, intelligence or security services They Gran Caribe Hotel Group and Cubanacan,” which are owned by the tourism ministry, not the military.

Rubio asserted that “individuals within the bureaucracy who support the former administration’s Cuba policy continue to undermine President Trump.” Similar views were expressed by Representatives Mario Diaz-Balart (Rep., FL) and Ileana Ros-Lehtinen (Rep., FL)

Cuba Reactions[2]

Josefina Vidal, Cuba’s top diplomat in the 2015-16 bilateral negotiations, said the new rules were a “serious reversal” in ties between the two countries. She believed the new regulations were unjustified and a great political nuance. They adversely will affect U.S. businessmen, who will lose interesting business opportunities existing on the island today, as opposed to their competition. At the same time, they will harm the Cuban economy, both the state and the private sector.

The U.S. category travel for ‘Support for the Cuban People,’ she said,’ does not “hide its subversive background, such as the one that encourages travelers to carry out activities to justify the U.S. legality of their visits to Cuba. These activities include maintaining contacts with the Cuban people, supporting what the U.S. defines as civil society and promoting their independence from the Cuban State.” She also said the U.S.’ Cuba Restricted List is an “arbitrary list that is made up of “a diversity of Cuban entities supposedly linked, in an unfounded manner, to the defense and national security sector.”

Conclusion

 This blogger sides with the critics of the new regulations.

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[1] Engage Cuba Statement on New Cuba Sanctions (Nov. 8, 2017); Leahy, BREAKING: Leahy REAX To New Treasury Dept. Regs. Restricting Travel & Transactions By American Citizens In Cuba (Nov. 8, 2017); Rubio Statement on New Regulations to Implement the President’s Policy to Empower the Cuban People (Nov. 8, 2017); Rubio: ‘Bureaucrats’ to blame for softening Trump Cuba policy,’ Miami Herald (Nov. 8, 2017); Diaz-Balart: Regulations Are First Step Towards Implementing POTUS’ Cuba Policy (Nov. 8, 2017); Ros-Lehtinen Responds To Announcement of New Cuba Regulations (Nov. 8, 2017).

[2] Assoc. Press, The Latest: Cuba Says New Trump Rules Mark Reversal for Ties, N.Y. Times (Nov. 8, 2017); Gomez, Washington deepens retreat of relations with Cuba (+ Video), Granma (Nov. 9, 2017); Measures restrict rights of the Americans and will damage the Cuban economy: Josefina Vida (+ Video), CubaDebate (Nov. 8, 2017).