Barriers Remain for American Business in Cuba
Barriers Remain for American Business in Cuba
It had become a political sticking point: As long as Cuba remained on the American government’s list of states that sponsor terrorism, there would be no historic opening of America’s first full-fledged embassy in Havana in more than 50 years.
President Obama’s decision, announced on Tuesday, to take Cuba off the list unclogs the process of restoring diplomatic relations between the countries and removes a much-resented stigma that has kept foreign banks and investors away. It also opens the way for the poor island to access multilateral loans.
But while the change in designation will make it easier for non-American companies to do business with Cuba, in practical terms, it goes only a short way to reconnecting American businesses, experts said.
American companies hoping to export televisions or cars to Cuba, or build hotels there, still face the tangle of sanctions that make up the United States trade embargo — a complex scaffold of statutes, regulations and executive orders that only Congress can eliminate.
“It’s a long road,” said Philip Peters, president of the Virginia-based Cuba Research Center. “Americans still can’t invest in Cuba. They can’t trade in a whole series of goods and services.”
That said, the economic impact of removing Cuba from the terrorism list will be “very big,” he said by telephone. That is because being on the list created “the presumption that everything Cuba is doing is illicit,” Mr. Peters said. “It makes Cuba radioactive in the financial world.”
The United States labeled Cuba a sponsor of terrorism in the early 1980s because of its support for leftist insurgent movements in Latin America. The island also harbored a number of American fugitives, including Joanne D. Chesimard, who is wanted in the killing of a New Jersey state trooper in 1973 and is among the F.B.I.’s most wanted terrorists.
The State Department said Wednesday that Cuba and the United States would open discussions about Ms. Chesimard and William Morales, a Puerto Rican fugitive wanted in connection with a series of bombings in New York during the 1970s, as part of talks on law enforcement cooperation.
John Kavulich, president of the U.S.-Cuba Trade and Economic Council, said that taking Cuba off the terrorism list “immediately lessens the cost of doing business for the Cuban government.”
“It will lower the interest rate they have to pay because interest rates reflect risk, and the risk has now been reduced,” he said by telephone, adding, “This change is exponentially of greater value to the Cuban government than it is to U.S. companies.”
And there are plenty of restrictions on the Cuban side, he noted, adding, “American companies need to be sober, not drunk, about this.”
The terrorism designation added a separate layer of financial sanctions to the trade embargo, introduced by President Dwight D. Eisenhower in 1960 and strengthened by John F. Kennedy. In 1996 Congress passed the Helms-Burton law — named for its sponsors, Senator Jesse Helms, Republican of North Carolina, and Representative Dan Burton, Republican of Indiana — that extended the reach of the embargo and passed authority for ending the embargo from the executive branch to Congress.
Mr. Obama eased the embargo in January when the government announced that Americans could travel to Cuba more freely and send more money to ordinary Cubans. The government also allowed broader exports of telecommunication equipment and services and said Americans could use credit cards in Cuba.
But American companies still cannot invest in Cuba or do business with the state, except for exporting goods intended to help Cubans, like food or medicine.
Even those American exporters with a special licenses to sell to Cuba cannot offer Cuban importers credit, which puts the exporters at a disadvantage, said Paul D. Johnson, vice chairman of the U.S. Agriculture Coalition for Cuba, and founder of Chicago Foods International, which exports food to Cuba.
Food exports from the United States to Cuba, allowed under an exception to the embargo, peaked at about $700 million in 2008 but slumped to $265 million last year as American exporters lost out to others who can offer credit, he said.
Removing the terrorism designation was a positive step, he said by telephone, but “we have to allow credit, two-way trade, investment opportunities.” He added, “What we’re looking for is for us to be competitive.”
In order to lift the embargo, Mr. Obama — or a future president — would have to certify to Congress that a transitional, or democratically elected, government was in power in Cuba, said Stephen F. Propst, partner at Hogan Lovells, an international law firm, who has written legal papers on the embargo. Alternatively, Congress could vote on its own to change the law.
While it would take Congress to repeal the embargo, experts said, the executive still has latitude to loosen the sanctions.
For example, Mr. Obama could establish a license that allowed American ships to dock in Cuba, Mr. Propst said — potentially allowing travelers and cargo to shuttle between Miami and Havana. He could also expand the scope of goods and services that American companies can trade with the island, he said.
Even with the embargo still in place, Mr. Peters said, the momentum that will be created by renewed diplomatic relations and incremental changes in policy will make it hard for future presidents to backpedal.
“We will have embassies, we will have more travel,” he said.