When Will Cuba Be Open for Business?

February 29, 2008, 11:00PM EST
When Will Cuba Be Open for Business?
It's unclear whether a new U.S. President would lift the 45-year trade
embargo, but public opinion favors improved relations between the countries

by Geri Smith

For 45 years, Fidel Castro had a convenient scapegoat for many of the
island's problems: a U.S. trade embargo that since 1962 has barred
American companies and individuals from investing in or trading with Cuba.

Ask Cubans why their lives are so difficult and why store shelves are so
bare, and they'll respond without hesitation what has been drummed into
them by schoolteachers, local news commentators, and Fidel's speeches
over the years: "It's because of the U.S. blockade."
A Tale of Many Restrictions

The Cuban government has always referred to the embargo as a "blockade,"
a word that has a more sinister tone than "embargo" and makes it sound
as if the U.S. Navy has encircled the island to keep ships packed with
goods from reaching Cuba's 11.4 million people. In fact, it's the harsh
penalties for individuals and companies that do business with Cuba
without special permission from the U.S. Treasury that have made the
embargo effective for four decades.

Washington imposed the embargo in retaliation for Cuba's expropriation
of U.S. business interests. Over the years the embargo grew in scope as
American politicians and the anti-Castro Cuban American community in
Miami grew frustrated by Havana's ability to withstand the economic
sanctions. In 1992 the U.S. Congress approved the Cuban Democracy Act,
restricting Americans from visiting the island, banning family
remittances, and prohibiting foreign subsidiaries of U.S. companies from
doing business with Cuba. And in 1996, Congress approved the
Helms-Burton Act, which allows Washington to ban entry into the U.S. of
executives and major shareholders of foreign companies that do business
in Cuba.

But will a new U.S. President lift the trade embargo with Cuba? When
Raúl Castro was chosen as Cuba's new President on Feb. 24, Washington
dismissed him as "Fidel Lite" and said he did not represent change. U.S.
law stipulates that Washington may not recognize a transitional
government in Cuba if it includes Fidel or Raúl Castro in the leadership
ranks. So, even if the new occupant of the White House were to favor
lifting the embargo, it could not be done without changing the law.
Diplomacy, with Conditions

Of the three leading Presidential candidates, only Democratic contender
Senator Barack Obama (D-Ill.) has said he would be willing to sit down
and talk with Raúl Castro's government, as long as human rights are on
the agenda. Senator Hillary Clinton (D-N.Y.) has said she wouldn't do so
until Havana starts implementing economic and political reforms, while
Senator John McCain (R-Ariz.) has said talks are off until Cuba begins a
"transition to a free and open society" and releases all political
prisoners.

For years, American politicians have been wary of crossing the powerful
Cuban American lobby, especially in Florida, a key state for any
national election. But polls show that sentiment among Cuban émigrés has
moderated over the years, as the aging ranks of people who fled Castro's
Communist rule in the early 1960s have thinned. More recent arrivals,
who fled in the 1980s and 1990s because of economic hardship, favor
greater people-to-people contacts and believe it makes sense to engage
the Cuban leadership in talks aimed at improving life for relatives left
behind.

A Gallup survey released on Feb. 27 showed that while 83% of Americans
view Fidel Castro negatively, 61% favor establishing diplomatic
relations with Cuba.

Representative Charles Rangel (D-N.Y.), the chairman of the powerful
House Ways & Means Committee, on Jan. 24 introduced a measure that would
end the ban on travel by Americans to Cuba. Until 2004, Cuban Americans
were allowed to travel only once a year to visit family in Cuba. That
year, the Bush Administration cut back such visits to once every three
years. New restrictions were also placed on money remittances and
academic and scientific exchanges. Democrats in Congress have vowed to
eliminate the restrictions imposed in 2004, in the belief that greater
people-to-people contact will hasten the move toward democracy in Cuba.
A Willingness to Barter, on Both Sides

U.S. business also is lobbying for a lifting of the embargo, saying
American companies could easily sell $1 billion in goods to Cuba a year,
from the outset. Last year, U.S. firms sold $438 million worth of
chicken, rice, wheat, corn, and other agricultural goods, as well as
some forestry products—such as newsprint and thousands of wooden utility
poles—to Cuba under special permits first granted in 2000 for
humanitarian reasons. Even though Cuba must pay cash up front for such
transactions because financing the Cuban government is not allowed under
the embargo, U.S. sales of such products to Cuba have tallied $2
billion, according to the U.S.-Cuba Trade & Economic Council.

Cubans have been closely following the U.S. Presidential elections. They
eagerly approach the few Americans who visit the island—under journalist
visas, academic exchanges, or as tourists defying the embargo—to ask
whether they think the winner will lift the decades-old blockade.
William, 28, a waiter who earns around $25 a month at a government-owned
hotel, says he would like to see his father and three brothers in the
U.S. more than once every three years. Like many Cubans, he didn't want
to reveal his last name for fear of losing his job. "What's the point in
keeping the blockade in place?" he asks. "It hurts the average Cuban
more than it hurts the government. We just want access to consumer goods
that everyone else in the world can buy. And it's inhumane to keep us
from seeing our families."

Raú:l Castro has said on three occasions over the past 18 months that he
would like to talk with the next U.S. Administration to discuss ways of
improving relations. "Cuba is ready and willing to sit down at any table
with the U.S. government to discuss every difference we have, without
preconditions," says Josefina Vidal, the Cuban Foreign Ministry's
director of North American affairs. Havana used to insist that it would
not talk until the embargo was lifted or until the Americans gave up
their military base at Guantánamo Bay.
Our Least-Favored Communists

In recent years, Vidal says, Havana has noted an evolution of public
opinion in the U.S. "We have to wait and see if the next Administration
will be willing to try a different policy toward Cuba," she says.
"Unprecedented sanctions have been applied to collapse the Cuban
government for decades now, with no results."

Washington has managed to do business with other Communist regimes: The
U.S. normalized relations with China in 1979 and lifted the trade
embargo on Vietnam in 1992. While relaxation of the 2004 travel and
remittance restrictions on Cuba may well be possible under a new
Administration, mending relations with the world's smallest Communist
country may continue to be a much tougher proposition.

Smith is BusinessWeek's Mexico bureau chief.

http://www.businessweek.com/magazine/content/08_10/b4074000185600.htm