Obama takes ‘a sledgehammer’ to Cuba embargo

September 24, 2015

WASHINGTON – What’s commonly known as the trade embargo on Cuba is still on the books, as it has been for some five decades.

But for businesses from around the United States — whether a cruise linein Miami or rice producers from Arkansas — the barriers to trade with the untapped market 90 miles from Florida are getting lower and lower.

The Obama administration on Friday announced it was moving to further change U.S.-Cuba trade rules, ushering in what experts called a major development that would significantly open the door to expanded business on the island.

It’s a continuation of the actions President Barack Obama and his administration have taken since December, when he announced a major thaw in the decades-long freeze with Cuba. But for American companies and the trade experts who work with them, the announced moves are a big boost in their hopes to — someday — have full and free trade with Cuba.

“There remains much of the embargo to be dismantled,” said John S. Kavulich, president of the U.S.-Cuba Trade and Economic Council, who estimated that maybe 40 percent of the embargo has been disrupted by the president’s regulatory actions.

Obama did not merely chip away at the embargo, Kavulich added. “He used a sledgehammer,” he said.

Kavulich considers the changes announced Friday to be “the most comprehensive trade and investment changes to the United States relationship with the Republic of Cuba in decades.”

The rules will be formally published and take effect Monday. Treasury Secretary Jacob J. Lew said they underscore “the administration’s commitment to promote constructive change for the Cuban people.”

“A stronger, more open U.S.-Cuba relationship has the potential to create economic opportunities for both Americans and Cubans alike,” he added in a statement. “By further easing these sanctions, the United States is helping to support the Cuban people in their effort to achieve the political and economic freedom necessary to build a democratic, prosperous and stable Cuba.”

The rules were greeted warmly by many business interests, who see greater leeway to boost sales and travel to Cuba. But they were instantly lambasted by some lawmakers, particularly those in South Florida who both represent and come from the Cuban-American community.

Rep. Ileana Ros-Lehtinen, a Republican from Miami who also sits on the House Foreign Affairs Committee, said in a statement that the rule changes announced Friday “naively fuel expectations of a non-existent new Cuba.”

“These new regulations are another desperate attempt to ignore the iron grip that the Castro regime maintains on the island’s economy and will only serve to benefit the coffers of the regime,” she added. “By repeating the lie that Cuba has a private sector, the administration is using U.S. regulations to advance the regime’s political agenda in the United States.”

Added Sen. Marco Rubio, a Republican from West Miami who sits on the Senate Foreign Relations Committee and is also a 2016 presidential candidate: “President Obama’s eagerness to please the Castro regime knows no bounds, as he keeps offering one-sided concessions that will strengthen the brutal dictatorship at the expense of the Cuban people. … Not only do these measures harm the cause of a free Cuba, they also raise serious questions about the legality of the Obama administration’s regulations.”

In addition to the new trade rules announced Friday, Obama also spoke by phone with Cuban leader Raúl Castro to discuss the process of normalization. According to the White House, the two presidents commended the role Pope Francis has played advancing relations between the two nations; the pope lands in Cuba on Saturday at the start of a visit to both countries. The Cuban Foreign Ministry said in a statement that Castro stressed the need to expand the measures and to eliminate the embargo.

While experts on both sides of the issue say the embargo as now on the books is politically safe in the short term, there are administrative actions the president can — and has — taken to further his goals.

Among the most significant of Friday’s changes, as announced by the Treasury and Commerce departments, are those involving personal travel, personal remittances and business activity.

The Associated Press reported that authorized American citizens now will be able to travel by cruise ship or ferry to Cuba without seeking specific authorization from the U.S. government, though a U.S. official told the AP earlier this week that a direct maritime route probably won’t be established until next year.

Miami-based cruise companies were poring over the latest government news but had no announcements of their own as a result.

“We’re studying it closely, but we’re not ready to offer comment yet,” a spokesman at Royal Caribbean Cruises said.

Norwegian Cruise Line Holdings also had nothing to say Friday, but CEO Frank Del Rio said during an earnings call last month that the company had applied for approval from the U.S. and Cuban governments to sail to Cuba.

Carnival Corp., the world’s largest cruise ship company, has already announced plans to operate sailings to Cuba through its social impact brand Fathom. While the U.S. government has granted approval, the company is still awaiting permission from Cuba.

“We are in active discussions with Cuban officials and we remain very optimistic that we will receive approval in the short term for Fathom to begin sailing to Cuba starting in May 2016,” spokesman Roger Frizzell said in a statement.

On Friday, the company reiterated its interest in visiting the island with its nine other cruise brands.

On travel: Earlier changes had permitted official government business and some educational and other activities. Now, a close relative also will be allowed to visit or accompany authorized travelers for additional educational activities, journalistic activity, professional research, religious activities and humanitarian projects.

On remittances to Cubans: Current rules say they can be no more than $2,000 per quarter. That limit will be removed entirely.

Easing restrictions on business activity by U.S. firms is among the most significant changes.

“The rules in January were important — they established the precedent,” said Robert L. Muse, a Washington-based lawyer and expert on Cuba trade. “But it was more of a beachhead, and it was a bit murky. Now they are engaging the business community in a way that’s going to be interesting and important to them. It begins to give them some real commercial traction.”

Muse said that companies engaged in exporting authorized items to Cuba will be able to establish, maintain and operate physical premises in Cuba.

“Maintaining a presence is brand new — that’s the big further step they have taken here,” Muse said. “The intention is to bring American businesses to the island.”

An example, he said, would be an agricultural company allowed to export to Cuba that would now be able to establish a sales office on the island.