Week In Review: Trade, Travel, and Telecomms

This week, President Obama again used his executive authority to expand travel and trade with Cuba.  The new travel rules have different dimensions to them, but they will surely intensify the cultural connectivity between our two countries.
 
As press accounts again proved this week, the President’s earlier reforms are driving up the number of U.S. visits to the island substantially. While increased trips provide cashmoney needed for Cubans and their economy, the surge of Americans, as Reuters reported, may be testing the capacity of the Cuban tourism industry.
 
While Cuba’s government unrolled the red carpet for a delegation of U.S. government officials and industry leaders for ongoing negotiations about telecommunications,Ambassador Daniel A. Sepulveda (lead diplomat on the talks) worries that slow progress in striking deals to improve connectivity and the island’s high-tech infrastructure derives at least in part from a lack of trust (seems like a well-founded concern to us).
 
With lots of news – and new ideas – to consider, we sat down on the floor of our modest offices (cue sad trombone and then send donations) to see how the pieces fit together.
 
Reforms Resume in 2016
As the New York Times, the BBC, and myriad other news agencies reported, the Commerce and Treasury Departments made substantial changes in the rules relating to the U.S. embargo (still in place, sigh…) as they affect travel, exports, activities by U.S. business in Cuba and more.
 
If readers want to hash through the details, may we recommend the two Departments’ joint press release (viewed here), and Akin-Gump’s detailed summary can be accessed here.
 
There’s much to like about the changes.  As the BBC reports, “The key difference between this announcement and earlier efforts to ease trade with Cuba by the Obama administration is that this time the new rules will apply to trade with Cuban government agencies.”  This means the President’s reforms – which previously benefitted Cuban individuals, private entrepreneurs – are getting bolder.
The reforms unveiled this week relieve restrictions on payment and financing terms, allow exports for the construction of infrastructure and energy facilities, and will give applicants in the telecommunication field an easier time getting their exports licensed as well.
 
Travel & Culture
The new rules will increase travel to Cuba from the U.S. even further.  As Reutersreported this week, “Cuba received a record 3.52 million visitors last year, up 17.4 percent from 2014. American visits rose 77 percent to 161,000, not counting hundreds of thousands of Cuban-Americans.”  These numbers will rise – since the regulations give more travelers more legal means to get Cuba for business and professional activities – and because the rules anticipate more travelers arriving by commercial aircraft and ferries and cruise liners.
 
With demand comes pressure on supply and so, according to XINHUA, Cuba’s Tourism Ministry is considering an increase in the country’s 63,000 hotel rooms, and building more resorts and golf courses with foreign investment.
 
The Obama administration is also making it easier for U.S. actors and producers, writers and musicians, to work and perform in Cuba, and engage with Cubans in the process of creating their art.
 
We have come a long way since the days when Cuban artists of the caliber of the lateIbrahim Ferrer, of the Buena Vista Social Club, and Manuel Galbán were barred by the Bush administration from picking up their Grammy Awards, incidents our friend Jackson Browne recalled in his essay, Songs of Cuba, Silence in America.
 
Fast forward to the forward-leaning rules issued by the Obama administration.  As theWall Street Journal observed, “Moves by art and culture travelers to reconnect with Cuba are far outpacing efforts to reopen business with America’s former Cold War foe.”
 
Travel Moving at Warp Speeds, While Telecom Diplomacy is Like Dial-up Connection
While progress on cultural exchange and travel itself is moving at warp speed, the movement on telecommunications is more like dial-up, despite our earnest efforts at digital diplomacy. Officials at Cuba’s Ministries for External Relations, Communications, and Trade and Foreign Investment said this week’s round of talks took place in a positive climate.   The Cuba’s government takes pride in having added 58 hotspots, lowering the cost of access, and granting roaming agreements to Verizon and Sprint.
 
Ambassador Sepulveda has a warm relationship with his Cuban counterparts.  Outside the negotiating room, he delivered a speech at the University of Information Sciences and talked to Cuban bloggers – all the while delivering a pretty clear message: Cuba should do more.
 
He challenged Cuba to increase access, increase investment in faster technologies, and more closely integrate the Internet into what he calls their “industrial” policies (something Cuba already has done). He is also asking Cuba to allow for a new submarine cable from Miami to Havana which, given the history between the two cities, and recent comments by Cuban American leaders reported by NBC News, made us wonder how his counterparts reacted to that.
 
Sepulveda, who clearly feels tyrannized by the clock – his term in office ends with President Obama’s – wants the Cubans to do more and do it faster.  He put it this way in an interview with Milena Recio, “I perceived that they are open to talks; it’s just going to be a very slow conversation. [We in the U.S. are] not used to this pace of progress. But again, I respect that, they have the right to move at the pace they want.”
 
So long as we have been watching, Cuba has operated strictly by how it defines its own national interest and – although we agree, there are few foreign governments or audiences better attuned to U.S. politics – we expect they view the calendar with slightly less dread; they’ve seen administrations and reforms come and go.  While they doubtlessly appreciate, truly, what President Obama has done, and appreciate the risks he has taken, we imagine they will continue to move at their own speed, even as the end of the Obama era is coming.They will determine their priorities.  The notion that Cuba’s government is not rushing pell-mell into the arms of U.S. high technology companies cannot be surprising.
 
Telecommunications is an investment; it involves money out, compared to tourism, which is money in.  Cuba’s government, as we previously reported, is forecasting slower growth in 2016, dragged down by falling commodity prices, especially when the price fetched by its ally Venezuela’s crude oil has fallen below the cost of production. Tourism cannot offset those losses or others like the future decline in cigar sales if the most recent tobacco crop is has been hit as hard as reports say.
 
But, really, the problem is confidence.  Yes, U.S. companies want signs from Cuba that their investments will be welcomed and the normal rules of doing business overseas will apply to them on the island.  However, in ways that don’t trouble the Cubans about tourism, the issue that is probably slowing down progress on telecommunications is trust on the Cuban side.
 
Although Cuba’s Vice President, Jose Ramon Machado Ventura, is on Facebook (we know someone who friended him and got friended back), he’s been quoted by Cuba’s media saying that it is the intent of “imperialists” to use the Internet as a way to destroy the Revolution.
 
It’s not hard to imagine the reaction when Ambassador Sepulveda offers solid advice about how  the Internet will speed Cuba’s economic modernization, that his counterparts hear the traditional American swagger at the heart of “democracy assistance,” that we have the answers to Cuba’s problems, which gives them pause.
 
On the other hand, we love the fact that the grim days of squeezing Cuba through sanctions and isolation are in the rear view mirror, and that diplomacy and reform – at least until January 20, 2017 – are the order of the day.   Of course, time is of the essence, but we really need to get this right.

Our Recommendations
 
Obama Administration Further Relaxes Sanctions in Support of Cuba Policy,Akin-Gump
In this helpful trade alert Akin Gump breaks down the regulations released by Commerce and Treasury earlier this week. The alert points to three big changes important to all interested in doing business with Cuba. These include opportunities for credit, additional licensing for new types of exports, and expanded travel related authorizations; however, the embargo remains intact.
 
New Cuba regulations provide more “wiggle room” for US businesses, Mimi Whitefield, Miami Herald  
The release of new regulations from Commerce and Treasury this week translates into more opportunities for travel, financing for trade, and greater cultural exchange.
 
Surge of Americans tests limits of Cuba’s tourism industry, Jamie Hamre, Reuters
Cuba received a record 3.52 million visitors last year, up 17.4 percent from 2014. Hamre reports that American visits rose 77 percent to 161,000.
 
Five Tips for Travelers to Cuba, Ellen Gamerman, The Wall Street Journal
For those interested in booking travel to Cuba, Gamerman lists out her top five tips including understanding that American tourism to Cuba is illegal, getting a visa, booking a charter flight, bringing cash, and saving all the paperwork.
 
Petty Vengeance is no way to run U.S. foreign policy, Christopher Sabatini, Latin America Goes Global
This piece by Sabatini berates the “narrow, petty policy preferences” holding up the confirmation of U.S. Assistant Secretary of State Roberta Jacobson for U.S. Ambassador to Mexico. Sabatini argues that Jacobson’s stalled nomination comes from misdirected disapproval of Jacobson’s role in the normalization of relations with Cuba. Assistant Secretary Roberta Jacobson is a qualified candidate capable of fulfilling a critical need in our relations with Mexico and the region. Sabatini’s essay echoes our own when we argued it was time to Free Roberta!
 
President Obama praises Cuba for holding peace talks, CubaSi
Over the weekend, President Obama gave an interview to Colombia’s El Tiempo. In it, he praised the Cuban government for its role in facilitating peace. The ongoing conflict between the FARC and the Colombian government is the longest running conflict in Latin America. For the original Spanish piece from El Tiempo, click here.
 
UN Security Council approves mission to monitor peace deal between Colombia and FARC, UN News Centre
Monday, the UN Security Council approved a team of international observers to monitor a peace agreement between the government of Colombia and the FARC when such agreement is reached. Both the FARC and the government requested UN observers “to monitor and verify the definitive bilateral ceasefire and cessation of hostilities, and the laying down of arms.” President Juan Manuel Santos expects that a Final Peace Agreement between the two parties will be signed by March 23. Colombia’s government and the FARC began peace talks in Havana starting in 2012.

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