The big news for the past few days has been the normalization of US-Cuba relations, the easing of travel restrictions and the resumption of diplomatic ties between the two countries.The embargo has stood since October 19, 1960, long before most of us — or even many of our parents or our current president — were born.
There are a lot of factors involved in the whole “US is kind of being friendly with Cuba again” thing and we’re not even going to attempt to cover them all. Here are a few key points so you can at least pretend to know what you’re talking about when the topic of international politics comes up at the dinner table:
Spring Break in Havana is still a no-go.
President Obama issued an executive order (we’ve been hearing a lot about those lately thanks to his action on immigration a few weeks ago) that “restores full diplomatic relations, takes steps to remove Cuba from the State Department list of countries that sponsor terrorism and rolls back restrictions on travel and trade.”
American citizens have been traveling to Cuba for years, either illegally (through Canada or Latin American countries) or through specially licensed programs, such as educational exchanges (Jay-Z and Beyonce completed one such trip earlier this year). The latest order opens things up a bit more.
That means that journalists, diplomats, humanitarians, researchers, performers and athletes can all now receive official licenses to head south. Furthermore, the relaxed laws also mean that “Americans can organize conferences in Cuba of any kind,” according to John McAuliff, executive director of the Fund for Reconciliation and Development. In fact, even “an auto dealer association can organize conferences to Cuba.”
Cuba’s regular allies aren’t in great shape.
Back in 1990 when the Soviet Union fell, Cuba paid the price for putting all of its major ally eggs in one basket. It’s likely that the country saw a similar slide happening in Venezulea, who has been a staunch supporter of Cuba since the 1990s, when former president Hugo Chavez rose to power.
Recent estimates put Venezuela’s influence on the Cuban economy at between $5 to $15 billion per year, which would account for roughly 15% of Cuba’s entire GDP. A huge part of that assistance comes in the form of oil: Venezuela provides over 100,000 barrels per day of petroleum products to the island on preferential terms.
Unfortunately for Cuba, Venezuela’s economy isn’t doing so well at the moment thanks to the plummeting price of oil, which is one reason for the country’s currency falling 30% over the past month. In the middle of this turmoil, it’s pretty feasible that Venezuela is considering cutting off preferential exports to Cuba instead of raising taxes or energy prices on citizens at home.
Making things worse for Cuba, the island nation’s other major benefactor and creditor, Russia, has seen its economy start to crumble thanks to falling oil prices coupled with its aggressive invasion of Ukraine and subsequent Western sanctions.
You still can’t buy Cuban cigars stateside.
Just because travel restrictions have been eased doesn’t mean that you can buy Cuban goods stateside just yet. For that to happen, we’ll need Congress to reverse the embargo.
However, if you have friends who are traveling to Cuba in the near future, they’re now allowed to actually bring cigars back with them. The new provisions state that “licensed travelers” can bring back up to $400 worth of goods from Cuba. Of that, up to $100 can be cigars and rum for personal use. That means you’ll still have to ration your Cohibas: according to Stephen Pulvirent over at Bloomberg, that $100 will only cover about a dozen high-end cigars.
This is a huge deal economically…
The potential for a normal economic relationship between the US and Cuba is huge news for Cubans who have long suffered a lack of basic supplies that Americans take for granted, such as beds, telephones or new automobiles.
Roger Noriega, a visiting fellow at the American Enterprise Institute and former assistant secretary of state, puts it simply: “The [Cuban] economy is a basket case.” To break it down by numbers, the size of Cuba’s GDP (approximately $71 billion) places it between 65th and 70th in the rankings of the world’s wealthiest countries, or behind Iraq, Puerto Rico and Angola. Today, the country’s standard of living remains at a lower level than it was at before the collapse of the Soviet Union in 1990.
That’s not to say that the Cuban economy isn’t growing on its own. Despite the Communist party’s desire to hold on to control, the government passed a reform plan in 2011 that has allowed Cubans to buy electronic appliances and cell phones, stay in hotels and buy and sell used cars, leading to limited economic growth.
More importantly, the 2011 reforms opened up the possibility of retail entrepreneurship; a huge step for the staunchly Communist country. The White House’s official fact sheet released yesterday on “Chartering a New Course on Cuba” will likely help entrepreneurs even more:
The policy changes make it easier for Americans to provide business training for private Cuban businesses and small farmers and provide other support for the growth of Cuba’s nascent private sector. Additional options for promoting the growth of entrepreneurship and the private sector in Cuba will be explored.
An amiable relationship between the US and Cuba could “put Cuba on a path to strong growth over time.” Potential industries for expansion include tourism, offshore oil and agriculture. Renewed relations with the US may also open up World Bank and International Monetary Fund loans and expert financial advice.
It’s impossible to estimate the long-term political implications of normalized US-Cuba relations for the Cuban government and its citizens. However, it’s widely accepted that the US embargo has allowed the Castro regime to use the United States as a scapegoat for the economic repercussions of close-fisted Communist rule.
With an increased focus on free market policies and a renewed interest in entrepreneurship and trade with the US, it’s possible that Cuba will follow in the footsteps of Vietnam or China, who have migrated from Communism to a hybrid system that practices free-market capitalism and allows them to compete in a global marketplace. Another potential model for economic change can be found in the Eastern European countries who migrated to a democratic system of government with more clearly free market principles following the fall of the Soviet Union.
Regardless of the long-term implications of President Obama’s most recent declaration, the road to Cuban economic freedom will likely be long and complicated. However, the possibility of opening up Cuba to increased internet access, basic goods and services, US financial services, professional training and diplomacy will likely have a tremendous impact on the lives of everyday citizens.