BY TRIET LEMINH – On Tuesday, October 28, 2014, the United Nations General Assembly will try yet again to urge the United States to end the 52-year-old trade embargo against its Caribbean neighbor. Amid strong opposition in the assembly, with last year’s vote at 188-2[1], the United States looks to remain steadfast in keeping the embargo. In short, any movement on the current U.S.-Cuba trade policy “is viewed as a nonstarter in Congress.” [2]
While the embargo evinces the longstanding tensions between the Castros and Washington, some say that it serves predominantly as a “symbol of defiance in exile – more gospel than policy.”[3] Especially among the younger Cuban-American community, outspoken opposition has been replaced by a view in favor of more engagement with Cuba.[4]
There is also increased political pressure to the same effect from prominent political players and lawmakers.[5] In his campaign this year, former Florida governor Charlie Christ denounced the embargo as an “ineffective relic.”[6] In May, even a number of conservatives urged President Obama to relax the embargo in a letter urging Obama’s use of his executive powers to “help Cubans increase their self-reliance.”[7]
So why exactly might it be a good idea to ease back from more than five settled decades of economic sanction? Cuba has never been a great place to do business, for locals and foreign investors alike. The government keeps a short list of permissible private enterprises.[8] It still maintains an inefficient dual currency system.[9] To make matters worse, the country suffers from a severe capital shortage.[10]
American companies are mostly forbidden by el bloqueo to participate in most forms of commerce in the country by six statutes and the federal code, including the Cuban Democracy Act[11], and the Helms-Burton Act.[12] The result? An outlook for the Cuban economy that has consistently been grim. It underperformed official predictions in 2013, growing at only 2.7%[13], and has fallen short of investment targets for the past five years.[14]
However, Cuban lawmakers approved a new international investment law earlier this year aiming to open the country up to more investment.[15] The law offers steep tax cuts and deferred payments for international investors, and aims at using foreign capital to resolve the struggling economy’s structural problems.[16] As part of reforms designed to encourage more private enterprise, Cuba’s new law sounds forward thinking on paper.
But practically speaking, the issue is how enticing the new incentives are to investors who are required deal with the one-party state in joint-venture agreements, and how Cuba has been and will continue to be viewed by the international community. Some actions the government has taken in the past including imprisonment of foreign executives, and attempts to seize more control of successful businesses,[17] do not look good for a country purportedly aiming to save face.
A desire to rescue relations is at least in the mind of Washington. Obama this year was urged to relax the embargo, and Charlie Christ suggested better relations as an economic driver not only for Cuba but also for Florida.[18] But if the Castro regime really is contemplating more participation in the world economy, further reform is necessary.
[1] Paul Guzio, U.N. vote on Cuba embargo again pits U.S. against world, The Tampa Tribune, Oct. 26, 2014, http://tbo.com/news/politics/un-vote-on-cuba-embargo-again-pits-us-against-world-20141026/.
[2] Jason Seher, Crist: End the Cuba embargo, CNN Political Ticker, Feb. 8, 2014, http://politicalticker.blogs.cnn.com/2014/02/08/crist-end-the-cuba-embargo/?iref=allsearch.
[3] The Editorial Board, The Shifting Politics of Cuba Policy, Oct. 25, 2014, The New York Times, http://www.nytimes.com/2014/10/26/opinion/sunday/the-shifting-politics-of-cuba-policy.html?_r=0.
[4] Id.
[5] Id.
[6] Seher, supra note 2.
[7] Tim Padgett, How Business Can Change Cuba, Oct. 16, 2014, Bloomberg Businessweek, http://www.businessweek.com/articles/2014-10-16/how-business-can-change-cuba#p1.
[8] Id.
[9] Id.
[10] Daniel Trotta, Cuba approves law aimed at attracting foreign investment, Mar. 29, 2014, Reuters, http://www.reuters.com/article/2014/03/29/us-cuba-investment-idUSBREA2S0EJ20140329.
[11] 22 U.S.C. § 6005.
[12] 22 U.S.C. § 6022.
[13] Patrick Oppmann, Cuba acts to draw more foreign investors, Mar. 31, 2014, CNN, http://www.cnn.com/2014/03/29/world/americas/cuba-international-investment-law/index.html?iref=allsearch.
[14] Trotta, supra note 10.
[15] Id.
[16] Id.
[17] Id.
[18] Seher, supra note 2.
