Cuba Practice - Consulting and Advisory Services
William Ross Newland III, is Managing Director of The Delian Group,
and manages the Cuba Practice. Mr. Newland was stationed in
Havana, Cuba, and as such he is one of few Americans with first-hand
experience dealing with the issues surrounding U.S. - Cuban relations.
and manages the Cuba Practice. Mr. Newland was stationed in
Havana, Cuba, and as such he is one of few Americans with first-hand
experience dealing with the issues surrounding U.S. - Cuban relations.
To find the amendments to the Cuban Assets Control Regulations (CACR) please click the button below:
Frequently Asked Questions Related to Cuba
Published by the US Treasury and US Commerce Department
January 15, 2015
I. Embargo
1. Where can I find the amendments to the Cuban Assets Control Regulations (CACR)?
Please see the Federal Register.
2. When is the amendment to the CACR effective?
The amendment will be effective when published in the Federal Register on January 16, 2015.
3. Are sanctions on Cuba still in place following the President’s announcement on December 17, 2014?
Yes, the Cuba embargo remains in place. Most transactions between the United States, or persons subject to U.S. jurisdiction, and Cuba continue to be prohibited, and OFAC continues to enforce the prohibitions of the CACR. These changes are targeted to further engage and empower the Cuban people by facilitating authorized travel to Cuba by U.S. persons, certain authorized commerce, and the flow of information to, from, and within Cuba.
4. Is the Department of Commerce also amending its rules?
Yes. The Department of Commerce is amending its rules which will, among other things, authorize the export of certain items to the Cuban private sector and to improve the free flow of information to, from, and among the Cuban people. For additional information, please see the Bureau of Industry and Security website at: http://www.bis.doc.gov.
II. Travel
5. What are the travel changes to the Cuba program?
OFAC has issued general licenses within the 12 categories of authorized travel for many travel-related transactions to, from, or within Cuba that previously required a specific license (i.e., an application and a case-by-case determination).
Travel-related transactions are permitted by general license for certain travel related to the following activities, subject to criteria and conditions in each general license: family visits; official business of the U.S. government, foreign governments, and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and certain authorized export transactions.
6. Do travelers who fall within the scope of a general license need to submit a written request to OFAC for permission to travel or conduct transactions?
No. No further permission from OFAC is required to engage in transactions by a person who meets all criteria in a general license. Individuals wishing to engage in activities that may fall within the scope of a general license should review the relevant general licenses contained in the CACR to determine whether their travel-related transactions are covered by such general licenses. Persons subject to U.S. jurisdiction who wish to engage in any travel within the 12 categories of activities specified in the CACR that does not meet the requirements of a general license will need to apply for a specific license from OFAC.
7. Is travel to Cuba for tourist activities permitted?
No. Consistent with the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), travel-related transactions involving Cuba are only permitted for the 12 categories of activities identified in the CACR. Travel-related transactions for other purposes remain prohibited.
8. What constitutes “a close relative” for generally authorized family travel?
OFAC regulations generally authorize U.S. persons and those sharing a dwelling with them as a family to visit a close relative in Cuba, including a close relative who is a Cuban national or ordinarily resident there, who is a U.S. Government official on official government business, or who is a student or faculty member engaging in authorized educational activities in Cuba with a duration of over 60 days. A close relative is defined as any individual related to a person “by blood, marriage, or adoption who is no more than three generations removed from that person or from a common ancestor with that person.” For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.339 and § 515.561.
9. Who is generally authorized to engage in travel and travel-related transactions for “journalistic activity”?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to journalistic activities in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, full-time journalists, supporting broadcast or technical personnel, and freelance journalists to travel to Cuba. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule. An entire group does not qualify for the general license merely because some members of the group qualify individually. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.563.
10. What constitutes generally authorized travel-related transactions for “professional research” and “professional meetings” in Cuba?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to professional research in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, professional research in Cuba relating to a traveler’s profession, professional background, or area of expertise. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule. An entire group does not qualify for the general license merely because some members of the group qualify individually. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.564.
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to professional meetings in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, professional meetings or conferences in Cuba relating to a traveler’s profession, professional background, or area of expertise, provided that the purpose of the meeting or conference is not the promotion of tourism in Cuba. Travel in this category is generally licensed provided that the traveler’s schedule of activities does not include free time or recreation in excess of that consistent with a full-time schedule. An entire group does not qualify for the general license merely because some members of the group qualify individually. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.564.
11. What constitutes “educational activities” for generally authorized travel?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to certain educational activities in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, faculty, staff, and students at U.S. academic institutions and secondary schools to engage in certain educational activities in Cuba, Cuban scholars to engage in certain educational activities in the United States, certain activities to facilitate licensed educational programs, and certain people-to-people travel. An entire group does not qualify for the general license merely because some members of the group qualify individually. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.565.
12. Are secondary schools and secondary school students permitted to engage in travel- related transactions under the general license for “educational activities”?
Yes. Educational exchanges sponsored by Cuban or U.S. secondary schools involving secondary school students’ participation in a formal course of study or in a structured educational program offered by a secondary school or other academic institution, and led by a teacher or other secondary school official, are authorized under this general license. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.565 (a)(6). This provision allows for participation of a reasonable number of adult chaperones to accompany the secondary school student(s) to Cuba.
13. What constitutes “people-to-people travel” for generally authorized travel?
OFAC has issued a general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to people-to-people educational activities in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, persons subject to U.S. jurisdiction to engage in certain educational exchanges in Cuba under the auspices of an organization that is a person subject to U.S. jurisdiction and sponsors such exchanges to promote people-to-people contact. Additionally, an employee, paid consultant, or agent of the sponsoring organization must accompany each group traveling to Cuba to ensure the full-time schedule of educational exchange activities, and the predominant portion of the activities must not be with individuals or entities acting for or on behalf of a prohibited official of the Government of Cuba, as defined in 31 CFR § 515.337, or a prohibited member of the Cuban Communist Party, as defined in 31 CFR § 515.338. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.565(b).
14. Who is generally authorized to engage in travel-related transactions for “religious activities”?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to religious activities in Cuba. All persons subject to U.S. jurisdiction, including religious organizations located in the United States and members and staff of such organizations, are generally authorized to engage in travel-related transactions that are directly incident to engaging in religious activities in Cuba provided, among other things, that the travel must be for the purpose of engaging in a program of religious activities. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.566.
15. What constitutes “public performances, clinics, workshops, athletic and other competitions, and exhibitions” for generally authorized travel?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to participation in amateur and semi- professional international sports federation competitions as well as other athletic and other competitions and public performances, clinics, workshops, and exhibitions in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.567.
16. What constitutes “support for the Cuban people” for generally authorized travel and other transactions?
OFAC has issued a general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are intended to provide support for the Cuban people, which include activities of recognized human rights organizations; independent organizations designed to promote a rapid, peaceful transition to democracy; and individuals and non- governmental organizations that promote independent activity intended to strengthen civil society in Cuba. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.574.
17. What constitutes “humanitarian projects” for generally authorized travel and other transactions?
OFAC has issued a general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are related to humanitarian projects in or related to Cuba. These authorized humanitarian projects include medical and health-related projects; construction projects intended to benefit legitimately independent civil society groups; environmental projects; projects involving formal or non-formal educational training, within Cuba or off-island, on the following topics: entrepreneurship and business, civil education, journalism, advocacy and organizing, adult literacy, or vocational skills; community-based grassroots projects; projects suitable to the development of small-scale private enterprise; projects that are related to agricultural and rural development that promote independent activity; microfinancing projects, except for loans, extensions of credit, or other financing prohibited by 31 C.F.R. § 515.208; and projects to meet basic human needs. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.575.
18. What constitutes “activities of private foundations or research or educational institutes” for generally authorized travel?
OFAC has issued a general license that incorporates previous specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to activities by private foundations or research or educational institutes with an established interest in international relations to collect information related to Cuba for noncommercial purposes, among other things. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.576.
19. What constitutes “exportation, importation or transmission of information or informational materials” for generally authorized travel?
OFAC has issued a general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to the exportation, importation, or transmission of information or informational materials in Cuba. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.545. The definition of “information and informational materials” may be found at 31 CFR § 515.332.
20. Can I purchase a ticket to Cuba directly from an airline based or operating out of the United States?
If you are traveling to Cuba pursuant to a general or specific license issued by the Treasury Department’s Office of Foreign Assets Control (OFAC) then, as had been the case under the previous regulations for purchasing charter air transportation, you would purchase your air travel through a tour operator. At this time, only charter service is available. While the new OFAC regulations will no longer preclude scheduled operations, the U.S. Department of Transportation will establish procedures for restoration of scheduled service. Once scheduled service is restored, passengers purchasing a ticket for scheduled service to Cuba will be able to purchase their ticket directly from the airline offering the service. Airlines and travelers are responsible for maintaining records of their Cuba-related transactions for at least five years
21. Are there any spending limits for authorized U.S. travelers while in Cuba?
The per diem rate previously imposed no longer applies, and there is no specific dollar limit on authorized expenses. Authorized travelers may engage in transactions ordinarily incident to travel within Cuba, including payment of living expenses and the acquisition in Cuba of goods for personal consumption there; other expenditures, other than those directly incident to the traveler’s authorized activities in Cuba, are not authorized. In addition, travelers are authorized to acquire in Cuba and import as accompanied baggage into the United States merchandise with a value not to exceed $400 per person, provided that no more than $100 of the merchandise consists of alcohol or tobacco products and the merchandise is imported for personal use only.
22. Are there any restrictions on what foreign persons entering the United States from travel that included Cuba may bring in their accompanied baggage?
A non-U.S. person (i.e. not a U.S. citizen or resident) arriving in the United States is authorized to import Cuban-origin merchandise, other than tobacco and alcohol, as accompanied baggage provided the merchandise is not in commercial quantities and not imported for resale. See 31 CFR § 515.569. If the non-U.S. person is on a trip that included travel to Cuba, the person also is authorized to import as accompanied baggage alcohol or tobacco products purchased or otherwise acquired in Cuba with a value not to exceed $100 for personal use only. See 31 CFR § 515.560(c)(3).
23. Can I purchase Cuban-origin cigars and/or Cuban-origin rum or other alcohol while traveling in Cuba?
Persons authorized to travel to Cuba may purchase alcohol and tobacco products while in Cuba for personal consumption while there. Authorized travelers may return to the United States with up to $100 worth of alcohol and/or tobacco products acquired in Cuba in accompanied baggage, for personal use only.
24. Can I purchase Cuban-origin cigars and/or Cuban-origin rum or other Cuban- origin alcohol over the internet or while in a third country (i.e., not Cuba)?
No. These transactions remain prohibited, and OFAC has not issued any general license that would authorize them
III. Travel Services
25. Do air carriers need to obtain specific licenses from OFAC to provide services?
No. A new general license authorizes persons subject to U.S. jurisdiction to provide air carrier services to, from, or within Cuba, in connection with authorized travel, without the need for a specific license from OFAC. However, while no additional license is required from OFAC, air carriers wishing to provide service will still need to secure regulatory approvals from other concerned U.S. Government agencies, including the Department of Transportation (Office of the Secretary and the Federal Aviation Administration) and the Department of Homeland Security. For a complete description of what the OFAC general license authorizes and the restrictions that apply, please see 31 CFR § 515.572(a)(2).
26. Do travel service providers (such as travel agents and tour group operators) need to obtain specific licenses from OFAC to provide services for travel to Cuba?
No. A new general license authorizes persons subject to U.S. jurisdiction, including travel agents and tour group operators, to provide travel services in connection with authorized travel without the need for specific licenses from OFAC. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.572(a)(1). The provision of services related to travel for tourist or other unauthorized travel to Cuba remains prohibited.
27. Are airlines and travel service providers required to verify that an individual traveler is authorized to travel to Cuba?
Persons subject to U.S. jurisdiction providing authorized carrier or travel services must retain for at least five years from the date of the transaction a certification from each customer indicating the provision of the CACR that authorizes the person to travel to Cuba. In the case of a customer traveling under a specific license, a copy of the license must be maintained on file. The names and addresses of individual travelers must also be maintained on file for at least five years. See 31 CFR § 515.572(b).
IV. Remittances
28. What changes have been made with respect to authorized remittances by U.S. persons to Cuba?
The limits on generally licensed periodic remittances that may be sent to a Cuban national, other than a prohibited official of the Government of Cuba or a prohibited member of the Cuban Communist Party, have been raised from $500 per quarter to $2,000 per quarter. For a complete description of what the OFAC general license authorizes and the restrictions that apply, please see 31 CFR § 515.570(b).
Certain remittances to Cuban nationals for humanitarian projects, support for the Cuban people, or development of private business are now generally authorized. For a complete description of what the OFAC general license authorizes and the restrictions that apply, please see 31 CFR § 515.570(g).
The amount of authorized remittances travelers to Cuba may carry has been increased to $10,000 per authorized trip. For a complete description of this authorization and the restrictions that apply, please see 31 CFR § 515.560(c)(4).
29. Is a bank, credit union, or money service business (MSB) such as a money remitter permitted to process my authorized remittances to Cuba?
Yes. Under the new general licenses, banking institutions, as defined in 31 CFR § 515.314, U.S.-registered brokers or dealers in securities, and U.S.-registered money transmitters are permitted to process authorized remittances to Cuba without having to obtain a specific license, subject to the recordkeeping and reporting requirements set forth therein. For a complete description of what the OFAC general license authorizes and the restrictions that apply, please see 31 CFR § 515.572(a)(3).
V . Banking
30. Are authorized travelers in Cuba permitted to use credit or debit cards issued by a U.S. financial institution?
Yes. Travelers are advised to check with their financial institution before traveling to Cuba to determine whether the institution has established the necessary mechanisms for its credit or debit cards to be used in Cuba. See 31 CFR § 515.560(c)(5) and 515.584(c).
31. Can my bank refuse to allow me to use my credit or debit card in Cuba?
OFAC regulations do not require financial institutions or credit card companies to accept, maintain, or facilitate authorized financial relationships or transactions.
32. Are financial institutions other than banks permitted to open correspondent accounts in Cuba?
Depository institutions, as defined in 31 CFR § 515.533, which include certain financial institutions other than banks, are permitted to open correspondent accounts at banks in Cuba. See 31 CFR § 515.584(a).
33. Are Cuban banks permitted to open correspondent accounts at U.S. banks?
No. U.S. depository institutions are permitted to open correspondent accounts at Cuban banks located in Cuba and in third countries, and at foreign banks located in Cuba, but Cuban banks are not generally licensed to open such accounts at U.S. banks. See note to 31 CFR § 515.584(a).
34. In what ways can Cuban nationals lawfully present in the United States participate in the U.S. financial system?
Certain Cuban nationals who have taken up residence in the United States on a permanent basis and who meet the requirements set forth in 31 CFR § 515.505 are licensed as unblocked nationals, and may participate fully in the U.S. financial system. See 31 CFR § 515.505(a)(1); (d).
Pursuant to 31 CFR § 515.571, Cuban nationals who are present in the United States in a non-immigrant status or pursuant to other non-immigrant travel authorization issued by the U.S. government, such as a non-immigrant visa, may open and maintain bank accounts for the duration of their stay in the United States in such status. Accounts that are not closed prior to the departure of Cuban nationals from the United States must be blocked and reported as such. Section 515.571 also authorizes such Cuban nationals to engage in normal banking transactions involving foreign currency drafts, travelers’ checks, or other instruments negotiated incident to travel in the United States.
35. If a Cuban national resident in the United States has applied to become a lawful permanent resident alien of the United States, does that individual have to apply to OFAC to be treated as an unblocked national?
No. If a Cuban national has taken up residence in the United States and has applied to become a lawful permanent resident alien of the U.S. and has an adjustment of status application pending, then the Cuban national is considered unblocked and does not need to apply to OFAC to be treated as an unblocked national, provided that he or she is not a prohibited official of the Government of Cuba or a prohibited member of the Cuban Communist party. See 31 CFR § 515.505(a)(1).
36. What new transactions involving wire transfers to Cuba are authorized?
OFAC has issued a new general license that authorizes U.S. depository institutions to reject funds transfers originating and terminating outside the United States where neither the originator nor the beneficiary is a person subject to U.S. jurisdiction and provided that certain prohibited individuals do not have an interest in the transfer. U.S. depository institutions are authorized to process such funds transfers where they would be authorized pursuant to the CACR if the originator or beneficiary were a person subject to U.S. jurisdiction. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.584(d).
VI. Trade/Business
37. Is Cuba open for U.S. business and investment?
Persons subject to U.S. jurisdiction are prohibited from doing business or investing in Cuba unless licensed by OFAC. An OFAC general license authorizes the exportation from the United States, and the reexportation of 100% U.S.-origin items from third- countries, to Cuba only in those cases where the exportation or reexportation is licensed or otherwise authorized by the Commerce Department. The Commerce Department currently authorizes limited categories of items to be exported or reexported to Cuba.
38. Can U.S. trade delegations travel to Cuba?
Trade delegations are authorized to travel to Cuba only if each member of the delegation meets the criteria of an applicable general license authorizing travel to Cuba or has obtained a specific license from OFAC.
39. Are insurers allowed to provide travel insurance for authorized travel to Cuba?
Yes. See 31 CFR § 515.560.
40. What types of Cuban-origin goods are authorized for importation into the United States?
Persons subject to U.S. jurisdiction authorized to travel to Cuba may import into the United States as accompanied baggage merchandise acquired in Cuba with a value not to exceed $400 per person, including no more than $100 in alcohol and tobacco products.
Persons subject to U.S. jurisdiction are also authorized to import certain goods produced by independent Cuban entrepreneurs as determined by the State Department, to be set forth in the State Department’s Section 515.582 list, www.state.gov/e/eb/tfs/spi/. (As of the date of the issuance of these FAQs, the State Department had not yet published its list.)
The importation into the United States from Cuba of information and informational materials is exempt from the prohibitions of the Cuban Assets Control Regulations. The definition of “information and informational materials” may be found at 31 CFR
§ 515.332.
VII. T elecommunications
41. What types of telecommunications and internet-based services are authorized under general license?
OFAC has issued an expanded general license which, subject to appropriate conditions, generally authorizes transactions that establish mechanisms to provide commercial telecommunications services in Cuba or linking third countries and Cuba. OFAC has also updated the general licenses authorizing telecommunications-related transactions, including payment related to the provision of telecommunications involving Cuba or provided to Cuban individuals. Pursuant to this provision, U.S. persons may, for example, purchase calling cards for people to use in Cuba and/or may pay the bills of such people directly to a telecommunications operator located in Cuba, such as ETECSA. These steps to facilitate improved access to telecommunications services for Cubans and increased international connections are intended to increase the ability of the Cuban people to communicate freely and to better provide for efficient and adequate telecommunications services between the United States and Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.542.
Persons subject to U.S. jurisdiction may provide additional services incident to internet- based communications and related to certain authorized exportations and reexportations of communications items. The range of such services has been expanded to coincide with changes to Commerce Department regulations, and such services can now be provided for a fee to certain end users. For example, transactions incident to providing fee-based internet communications services such as e-mail or other messaging platforms, social networking, VOIP, web-hosting, or domain-name registration are now authorized in most circumstances. Services related to many kinds of software (including applications) used on personal computers, cell phones, and other personal communications devices are also authorized, along with other services related to the use of such devices. Finally, services such as cloud storage, software design, business consulting, and the provision of IT management and support related to use of hardware and software exported or reexported to Cuba pursuant to the Commerce Department’s Consumer Communications Device authorization is permitted. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.578.
VIII. Third-Country Effects
42. Are Cuban nationals located outside of Cuba still considered blocked?
Yes, but any individual Cuban national who can establish that he or she has taken up permanent residence outside of Cuba and otherwise meets the requirements set forth in 31 CFR § 515.505 is generally licensed as an unblocked national.
43. Can U.S.-owned or -controlled entities in third countries engage in trade/commerce with Cuban nationals located outside of Cuba?
U.S.-owned or -controlled entities in third countries may provide goods and services to a Cuban national who is an individual located outside of Cuba, provided that the transaction does not involve a commercial exportation, directly or indirectly, of goods or services to or from Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.585.
44. Are U.S.-owned or -controlled entities in third countries authorized to provide financial services to Cuban nationals located outside of Cuba?
U.S.-owned or -controlled entities in third countries may provide financial services to a Cuban national who is an individual located outside of Cuba, provided that the transaction does not involve a commercial exportation, directly or indirectly, of goods or services to or from Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.585.
IX. Miscellaneous
45. What change has been made to the regulatory interpretation of “cash in advance”?
The regulatory interpretation of “cash in advance” has been changed from “cash before shipment” to “cash before transfer of title and control” to allow expanded financing options for authorized exports to Cuba. For the full text, see 31 CFR § 515.533.
Published by the US Treasury and US Commerce Department
January 15, 2015
I. Embargo
1. Where can I find the amendments to the Cuban Assets Control Regulations (CACR)?
Please see the Federal Register.
2. When is the amendment to the CACR effective?
The amendment will be effective when published in the Federal Register on January 16, 2015.
3. Are sanctions on Cuba still in place following the President’s announcement on December 17, 2014?
Yes, the Cuba embargo remains in place. Most transactions between the United States, or persons subject to U.S. jurisdiction, and Cuba continue to be prohibited, and OFAC continues to enforce the prohibitions of the CACR. These changes are targeted to further engage and empower the Cuban people by facilitating authorized travel to Cuba by U.S. persons, certain authorized commerce, and the flow of information to, from, and within Cuba.
4. Is the Department of Commerce also amending its rules?
Yes. The Department of Commerce is amending its rules which will, among other things, authorize the export of certain items to the Cuban private sector and to improve the free flow of information to, from, and among the Cuban people. For additional information, please see the Bureau of Industry and Security website at: http://www.bis.doc.gov.
II. Travel
5. What are the travel changes to the Cuba program?
OFAC has issued general licenses within the 12 categories of authorized travel for many travel-related transactions to, from, or within Cuba that previously required a specific license (i.e., an application and a case-by-case determination).
Travel-related transactions are permitted by general license for certain travel related to the following activities, subject to criteria and conditions in each general license: family visits; official business of the U.S. government, foreign governments, and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and certain authorized export transactions.
6. Do travelers who fall within the scope of a general license need to submit a written request to OFAC for permission to travel or conduct transactions?
No. No further permission from OFAC is required to engage in transactions by a person who meets all criteria in a general license. Individuals wishing to engage in activities that may fall within the scope of a general license should review the relevant general licenses contained in the CACR to determine whether their travel-related transactions are covered by such general licenses. Persons subject to U.S. jurisdiction who wish to engage in any travel within the 12 categories of activities specified in the CACR that does not meet the requirements of a general license will need to apply for a specific license from OFAC.
7. Is travel to Cuba for tourist activities permitted?
No. Consistent with the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), travel-related transactions involving Cuba are only permitted for the 12 categories of activities identified in the CACR. Travel-related transactions for other purposes remain prohibited.
8. What constitutes “a close relative” for generally authorized family travel?
OFAC regulations generally authorize U.S. persons and those sharing a dwelling with them as a family to visit a close relative in Cuba, including a close relative who is a Cuban national or ordinarily resident there, who is a U.S. Government official on official government business, or who is a student or faculty member engaging in authorized educational activities in Cuba with a duration of over 60 days. A close relative is defined as any individual related to a person “by blood, marriage, or adoption who is no more than three generations removed from that person or from a common ancestor with that person.” For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.339 and § 515.561.
9. Who is generally authorized to engage in travel and travel-related transactions for “journalistic activity”?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to journalistic activities in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, full-time journalists, supporting broadcast or technical personnel, and freelance journalists to travel to Cuba. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule. An entire group does not qualify for the general license merely because some members of the group qualify individually. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.563.
10. What constitutes generally authorized travel-related transactions for “professional research” and “professional meetings” in Cuba?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to professional research in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, professional research in Cuba relating to a traveler’s profession, professional background, or area of expertise. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule. An entire group does not qualify for the general license merely because some members of the group qualify individually. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.564.
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to professional meetings in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, professional meetings or conferences in Cuba relating to a traveler’s profession, professional background, or area of expertise, provided that the purpose of the meeting or conference is not the promotion of tourism in Cuba. Travel in this category is generally licensed provided that the traveler’s schedule of activities does not include free time or recreation in excess of that consistent with a full-time schedule. An entire group does not qualify for the general license merely because some members of the group qualify individually. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.564.
11. What constitutes “educational activities” for generally authorized travel?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to certain educational activities in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, faculty, staff, and students at U.S. academic institutions and secondary schools to engage in certain educational activities in Cuba, Cuban scholars to engage in certain educational activities in the United States, certain activities to facilitate licensed educational programs, and certain people-to-people travel. An entire group does not qualify for the general license merely because some members of the group qualify individually. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.565.
12. Are secondary schools and secondary school students permitted to engage in travel- related transactions under the general license for “educational activities”?
Yes. Educational exchanges sponsored by Cuban or U.S. secondary schools involving secondary school students’ participation in a formal course of study or in a structured educational program offered by a secondary school or other academic institution, and led by a teacher or other secondary school official, are authorized under this general license. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.565 (a)(6). This provision allows for participation of a reasonable number of adult chaperones to accompany the secondary school student(s) to Cuba.
13. What constitutes “people-to-people travel” for generally authorized travel?
OFAC has issued a general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to people-to-people educational activities in Cuba. Among other things, this general license authorizes, subject to appropriate conditions, persons subject to U.S. jurisdiction to engage in certain educational exchanges in Cuba under the auspices of an organization that is a person subject to U.S. jurisdiction and sponsors such exchanges to promote people-to-people contact. Additionally, an employee, paid consultant, or agent of the sponsoring organization must accompany each group traveling to Cuba to ensure the full-time schedule of educational exchange activities, and the predominant portion of the activities must not be with individuals or entities acting for or on behalf of a prohibited official of the Government of Cuba, as defined in 31 CFR § 515.337, or a prohibited member of the Cuban Communist Party, as defined in 31 CFR § 515.338. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.565(b).
14. Who is generally authorized to engage in travel-related transactions for “religious activities”?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to religious activities in Cuba. All persons subject to U.S. jurisdiction, including religious organizations located in the United States and members and staff of such organizations, are generally authorized to engage in travel-related transactions that are directly incident to engaging in religious activities in Cuba provided, among other things, that the travel must be for the purpose of engaging in a program of religious activities. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.566.
15. What constitutes “public performances, clinics, workshops, athletic and other competitions, and exhibitions” for generally authorized travel?
OFAC has issued an expanded general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to participation in amateur and semi- professional international sports federation competitions as well as other athletic and other competitions and public performances, clinics, workshops, and exhibitions in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.567.
16. What constitutes “support for the Cuban people” for generally authorized travel and other transactions?
OFAC has issued a general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are intended to provide support for the Cuban people, which include activities of recognized human rights organizations; independent organizations designed to promote a rapid, peaceful transition to democracy; and individuals and non- governmental organizations that promote independent activity intended to strengthen civil society in Cuba. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.574.
17. What constitutes “humanitarian projects” for generally authorized travel and other transactions?
OFAC has issued a general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are related to humanitarian projects in or related to Cuba. These authorized humanitarian projects include medical and health-related projects; construction projects intended to benefit legitimately independent civil society groups; environmental projects; projects involving formal or non-formal educational training, within Cuba or off-island, on the following topics: entrepreneurship and business, civil education, journalism, advocacy and organizing, adult literacy, or vocational skills; community-based grassroots projects; projects suitable to the development of small-scale private enterprise; projects that are related to agricultural and rural development that promote independent activity; microfinancing projects, except for loans, extensions of credit, or other financing prohibited by 31 C.F.R. § 515.208; and projects to meet basic human needs. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.575.
18. What constitutes “activities of private foundations or research or educational institutes” for generally authorized travel?
OFAC has issued a general license that incorporates previous specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to activities by private foundations or research or educational institutes with an established interest in international relations to collect information related to Cuba for noncommercial purposes, among other things. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.576.
19. What constitutes “exportation, importation or transmission of information or informational materials” for generally authorized travel?
OFAC has issued a general license that incorporates prior specific licensing policy and authorizes, subject to appropriate conditions, travel-related transactions and other transactions that are directly incident to the exportation, importation, or transmission of information or informational materials in Cuba. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.545. The definition of “information and informational materials” may be found at 31 CFR § 515.332.
20. Can I purchase a ticket to Cuba directly from an airline based or operating out of the United States?
If you are traveling to Cuba pursuant to a general or specific license issued by the Treasury Department’s Office of Foreign Assets Control (OFAC) then, as had been the case under the previous regulations for purchasing charter air transportation, you would purchase your air travel through a tour operator. At this time, only charter service is available. While the new OFAC regulations will no longer preclude scheduled operations, the U.S. Department of Transportation will establish procedures for restoration of scheduled service. Once scheduled service is restored, passengers purchasing a ticket for scheduled service to Cuba will be able to purchase their ticket directly from the airline offering the service. Airlines and travelers are responsible for maintaining records of their Cuba-related transactions for at least five years
21. Are there any spending limits for authorized U.S. travelers while in Cuba?
The per diem rate previously imposed no longer applies, and there is no specific dollar limit on authorized expenses. Authorized travelers may engage in transactions ordinarily incident to travel within Cuba, including payment of living expenses and the acquisition in Cuba of goods for personal consumption there; other expenditures, other than those directly incident to the traveler’s authorized activities in Cuba, are not authorized. In addition, travelers are authorized to acquire in Cuba and import as accompanied baggage into the United States merchandise with a value not to exceed $400 per person, provided that no more than $100 of the merchandise consists of alcohol or tobacco products and the merchandise is imported for personal use only.
22. Are there any restrictions on what foreign persons entering the United States from travel that included Cuba may bring in their accompanied baggage?
A non-U.S. person (i.e. not a U.S. citizen or resident) arriving in the United States is authorized to import Cuban-origin merchandise, other than tobacco and alcohol, as accompanied baggage provided the merchandise is not in commercial quantities and not imported for resale. See 31 CFR § 515.569. If the non-U.S. person is on a trip that included travel to Cuba, the person also is authorized to import as accompanied baggage alcohol or tobacco products purchased or otherwise acquired in Cuba with a value not to exceed $100 for personal use only. See 31 CFR § 515.560(c)(3).
23. Can I purchase Cuban-origin cigars and/or Cuban-origin rum or other alcohol while traveling in Cuba?
Persons authorized to travel to Cuba may purchase alcohol and tobacco products while in Cuba for personal consumption while there. Authorized travelers may return to the United States with up to $100 worth of alcohol and/or tobacco products acquired in Cuba in accompanied baggage, for personal use only.
24. Can I purchase Cuban-origin cigars and/or Cuban-origin rum or other Cuban- origin alcohol over the internet or while in a third country (i.e., not Cuba)?
No. These transactions remain prohibited, and OFAC has not issued any general license that would authorize them
III. Travel Services
25. Do air carriers need to obtain specific licenses from OFAC to provide services?
No. A new general license authorizes persons subject to U.S. jurisdiction to provide air carrier services to, from, or within Cuba, in connection with authorized travel, without the need for a specific license from OFAC. However, while no additional license is required from OFAC, air carriers wishing to provide service will still need to secure regulatory approvals from other concerned U.S. Government agencies, including the Department of Transportation (Office of the Secretary and the Federal Aviation Administration) and the Department of Homeland Security. For a complete description of what the OFAC general license authorizes and the restrictions that apply, please see 31 CFR § 515.572(a)(2).
26. Do travel service providers (such as travel agents and tour group operators) need to obtain specific licenses from OFAC to provide services for travel to Cuba?
No. A new general license authorizes persons subject to U.S. jurisdiction, including travel agents and tour group operators, to provide travel services in connection with authorized travel without the need for specific licenses from OFAC. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.572(a)(1). The provision of services related to travel for tourist or other unauthorized travel to Cuba remains prohibited.
27. Are airlines and travel service providers required to verify that an individual traveler is authorized to travel to Cuba?
Persons subject to U.S. jurisdiction providing authorized carrier or travel services must retain for at least five years from the date of the transaction a certification from each customer indicating the provision of the CACR that authorizes the person to travel to Cuba. In the case of a customer traveling under a specific license, a copy of the license must be maintained on file. The names and addresses of individual travelers must also be maintained on file for at least five years. See 31 CFR § 515.572(b).
IV. Remittances
28. What changes have been made with respect to authorized remittances by U.S. persons to Cuba?
The limits on generally licensed periodic remittances that may be sent to a Cuban national, other than a prohibited official of the Government of Cuba or a prohibited member of the Cuban Communist Party, have been raised from $500 per quarter to $2,000 per quarter. For a complete description of what the OFAC general license authorizes and the restrictions that apply, please see 31 CFR § 515.570(b).
Certain remittances to Cuban nationals for humanitarian projects, support for the Cuban people, or development of private business are now generally authorized. For a complete description of what the OFAC general license authorizes and the restrictions that apply, please see 31 CFR § 515.570(g).
The amount of authorized remittances travelers to Cuba may carry has been increased to $10,000 per authorized trip. For a complete description of this authorization and the restrictions that apply, please see 31 CFR § 515.560(c)(4).
29. Is a bank, credit union, or money service business (MSB) such as a money remitter permitted to process my authorized remittances to Cuba?
Yes. Under the new general licenses, banking institutions, as defined in 31 CFR § 515.314, U.S.-registered brokers or dealers in securities, and U.S.-registered money transmitters are permitted to process authorized remittances to Cuba without having to obtain a specific license, subject to the recordkeeping and reporting requirements set forth therein. For a complete description of what the OFAC general license authorizes and the restrictions that apply, please see 31 CFR § 515.572(a)(3).
V . Banking
30. Are authorized travelers in Cuba permitted to use credit or debit cards issued by a U.S. financial institution?
Yes. Travelers are advised to check with their financial institution before traveling to Cuba to determine whether the institution has established the necessary mechanisms for its credit or debit cards to be used in Cuba. See 31 CFR § 515.560(c)(5) and 515.584(c).
31. Can my bank refuse to allow me to use my credit or debit card in Cuba?
OFAC regulations do not require financial institutions or credit card companies to accept, maintain, or facilitate authorized financial relationships or transactions.
32. Are financial institutions other than banks permitted to open correspondent accounts in Cuba?
Depository institutions, as defined in 31 CFR § 515.533, which include certain financial institutions other than banks, are permitted to open correspondent accounts at banks in Cuba. See 31 CFR § 515.584(a).
33. Are Cuban banks permitted to open correspondent accounts at U.S. banks?
No. U.S. depository institutions are permitted to open correspondent accounts at Cuban banks located in Cuba and in third countries, and at foreign banks located in Cuba, but Cuban banks are not generally licensed to open such accounts at U.S. banks. See note to 31 CFR § 515.584(a).
34. In what ways can Cuban nationals lawfully present in the United States participate in the U.S. financial system?
Certain Cuban nationals who have taken up residence in the United States on a permanent basis and who meet the requirements set forth in 31 CFR § 515.505 are licensed as unblocked nationals, and may participate fully in the U.S. financial system. See 31 CFR § 515.505(a)(1); (d).
Pursuant to 31 CFR § 515.571, Cuban nationals who are present in the United States in a non-immigrant status or pursuant to other non-immigrant travel authorization issued by the U.S. government, such as a non-immigrant visa, may open and maintain bank accounts for the duration of their stay in the United States in such status. Accounts that are not closed prior to the departure of Cuban nationals from the United States must be blocked and reported as such. Section 515.571 also authorizes such Cuban nationals to engage in normal banking transactions involving foreign currency drafts, travelers’ checks, or other instruments negotiated incident to travel in the United States.
35. If a Cuban national resident in the United States has applied to become a lawful permanent resident alien of the United States, does that individual have to apply to OFAC to be treated as an unblocked national?
No. If a Cuban national has taken up residence in the United States and has applied to become a lawful permanent resident alien of the U.S. and has an adjustment of status application pending, then the Cuban national is considered unblocked and does not need to apply to OFAC to be treated as an unblocked national, provided that he or she is not a prohibited official of the Government of Cuba or a prohibited member of the Cuban Communist party. See 31 CFR § 515.505(a)(1).
36. What new transactions involving wire transfers to Cuba are authorized?
OFAC has issued a new general license that authorizes U.S. depository institutions to reject funds transfers originating and terminating outside the United States where neither the originator nor the beneficiary is a person subject to U.S. jurisdiction and provided that certain prohibited individuals do not have an interest in the transfer. U.S. depository institutions are authorized to process such funds transfers where they would be authorized pursuant to the CACR if the originator or beneficiary were a person subject to U.S. jurisdiction. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.584(d).
VI. Trade/Business
37. Is Cuba open for U.S. business and investment?
Persons subject to U.S. jurisdiction are prohibited from doing business or investing in Cuba unless licensed by OFAC. An OFAC general license authorizes the exportation from the United States, and the reexportation of 100% U.S.-origin items from third- countries, to Cuba only in those cases where the exportation or reexportation is licensed or otherwise authorized by the Commerce Department. The Commerce Department currently authorizes limited categories of items to be exported or reexported to Cuba.
38. Can U.S. trade delegations travel to Cuba?
Trade delegations are authorized to travel to Cuba only if each member of the delegation meets the criteria of an applicable general license authorizing travel to Cuba or has obtained a specific license from OFAC.
39. Are insurers allowed to provide travel insurance for authorized travel to Cuba?
Yes. See 31 CFR § 515.560.
40. What types of Cuban-origin goods are authorized for importation into the United States?
Persons subject to U.S. jurisdiction authorized to travel to Cuba may import into the United States as accompanied baggage merchandise acquired in Cuba with a value not to exceed $400 per person, including no more than $100 in alcohol and tobacco products.
Persons subject to U.S. jurisdiction are also authorized to import certain goods produced by independent Cuban entrepreneurs as determined by the State Department, to be set forth in the State Department’s Section 515.582 list, www.state.gov/e/eb/tfs/spi/. (As of the date of the issuance of these FAQs, the State Department had not yet published its list.)
The importation into the United States from Cuba of information and informational materials is exempt from the prohibitions of the Cuban Assets Control Regulations. The definition of “information and informational materials” may be found at 31 CFR
§ 515.332.
VII. T elecommunications
41. What types of telecommunications and internet-based services are authorized under general license?
OFAC has issued an expanded general license which, subject to appropriate conditions, generally authorizes transactions that establish mechanisms to provide commercial telecommunications services in Cuba or linking third countries and Cuba. OFAC has also updated the general licenses authorizing telecommunications-related transactions, including payment related to the provision of telecommunications involving Cuba or provided to Cuban individuals. Pursuant to this provision, U.S. persons may, for example, purchase calling cards for people to use in Cuba and/or may pay the bills of such people directly to a telecommunications operator located in Cuba, such as ETECSA. These steps to facilitate improved access to telecommunications services for Cubans and increased international connections are intended to increase the ability of the Cuban people to communicate freely and to better provide for efficient and adequate telecommunications services between the United States and Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.542.
Persons subject to U.S. jurisdiction may provide additional services incident to internet- based communications and related to certain authorized exportations and reexportations of communications items. The range of such services has been expanded to coincide with changes to Commerce Department regulations, and such services can now be provided for a fee to certain end users. For example, transactions incident to providing fee-based internet communications services such as e-mail or other messaging platforms, social networking, VOIP, web-hosting, or domain-name registration are now authorized in most circumstances. Services related to many kinds of software (including applications) used on personal computers, cell phones, and other personal communications devices are also authorized, along with other services related to the use of such devices. Finally, services such as cloud storage, software design, business consulting, and the provision of IT management and support related to use of hardware and software exported or reexported to Cuba pursuant to the Commerce Department’s Consumer Communications Device authorization is permitted. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.578.
VIII. Third-Country Effects
42. Are Cuban nationals located outside of Cuba still considered blocked?
Yes, but any individual Cuban national who can establish that he or she has taken up permanent residence outside of Cuba and otherwise meets the requirements set forth in 31 CFR § 515.505 is generally licensed as an unblocked national.
43. Can U.S.-owned or -controlled entities in third countries engage in trade/commerce with Cuban nationals located outside of Cuba?
U.S.-owned or -controlled entities in third countries may provide goods and services to a Cuban national who is an individual located outside of Cuba, provided that the transaction does not involve a commercial exportation, directly or indirectly, of goods or services to or from Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.585.
44. Are U.S.-owned or -controlled entities in third countries authorized to provide financial services to Cuban nationals located outside of Cuba?
U.S.-owned or -controlled entities in third countries may provide financial services to a Cuban national who is an individual located outside of Cuba, provided that the transaction does not involve a commercial exportation, directly or indirectly, of goods or services to or from Cuba. For a complete description of what this general license authorizes and the restrictions that apply, please see 31 CFR § 515.585.
IX. Miscellaneous
45. What change has been made to the regulatory interpretation of “cash in advance”?
The regulatory interpretation of “cash in advance” has been changed from “cash before shipment” to “cash before transfer of title and control” to allow expanded financing options for authorized exports to Cuba. For the full text, see 31 CFR § 515.533.
How To Do Business With Cuba: The Complete GuideJan 12, 2015 by Patricia Maroday
www.mercatrade.com
Cuba’s Economy - GDP Figures
2.3 - Trade and Economic ChallengesPolitical instability and communism have always been the primary reasons many countries chose to refrain from trade with Cuba. While the US eliminating many trade and travel restrictions is certain to have a positive impact on the economy as a whole, much uncertainty remains as to the fate of communism and exactly how the existing partnerships with countries such as Russia and Venezuela will be left. Given that Cubans will now have greater Internet freedoms, many experts are predicting that democracy is not far behind; however, it is the relationships that have carried Cuba through the years that may directly impact the exact direction the country takes in the coming years. Uncertainty is the operative word for Cuba at the moment.
Trading With Cuba
3.1 - Trading PartnersDue to the decades of sanctions placed on Cuba by the US, their trading partnerships have been quite limited. At this time, Venezuela continues to be the largest trading partner proving the island nation with petrol and petroleum based products.
China and Canada are also a large trading partners. With the ease of US embargoes, these partnerships could look quite differently in the matter of a year.
Largest Export Partners (2012)
AirportsJose Marti International Airport (Havana - HAV)Located in the town of Boyeros, the Havana airport is the largest, busiest, and most modern of the Cuban airports. You will find Internet, shopping, dining options, cash points, a children’s play area, and even medical facilities and a pharmacy.
Juan Gualberto Gomez Airport (Varadero - VRA)This second busiest airport in Cuba is typically the airport of choice for people visiting the beach resort town of Varadero. You will find basic amenities throughout the airport such as food stands, currency exchange, and a small children’s play area.
PortsIt is essential to keep in mind that selecting the correct port for your needs will depend upon many aspects such as the type of container you are shipping, the commodity, your final destination, and much more. Ports are unique and each has its own set of limitations and advantages. Some are owned and operated privately; whereas, other ports are owned and operated by state governments. Keep in mind that very few ports in Latin America are able to receive the large Panamax ocean vessels at this time. The following are the primary ports of Cuba:
Port of HavanaThe port of Havana is the busiest port in Cuba located on the Northwestern side of the island. This harbor combines port activities and industrial activities such as an oil refinery and a wheat mill. The port accepts cargo of all kinds from dry bulk to container loads. Unfortunately, all of this activity has carried on without environmental concerns and now the pollution from the port and the industrial activity is threatening the fishing industry which is essential to the livelihood of Cubans.
Santiago de CubaThe port of Santiago de Cuba is the secondary port in Cuba located on the Southeastern coast connected to the Caribbean Sea. The port accepts dry bulk, general bulk cargo, various liquids, petroleum, and towage shipments. This port is also strategically located near an airport and primary roadways.
3.4 - Time and Cost to Import into CubaThe time and cost to import into Cuba will vary greatly. If the exporting country is part of a free trade agreement with Cuba and the imported good is subject to the benefits of the agreement, it is likely minimal to no import tariffs or customs fees will applied. If the exporting country is not a member of any bilateral agreement or trade bloc with Cuba, goods will be subject to import duties and extensive excise taxes. If the goods are shipped into a free trade zone, they can be accepted, repackaged, and exported without having to pay import fees. Do not forget to consider Incoterms before you sign any sales contracts. The transit time to Cuba will vary from a few days for ocean vessels from Miami to less than a month for shipments originating in Asia.
3.5 - Tax Free ZonesEconomic Development Zone - Port of MarielThis special tax free zone is the first of its kind in Cuba and it is being, in part, paid for with USD $640 million by Brazil. The remainder $260 million is paid for by Cuba. The port of Mariel, located 45 km outside Havana, is also undergoing major expansion to make this region the most appealing trade zone of the country. The zone will act much like other free trade zones in that businesses will not pay tax on any import that will be stored and re-exported. If the products enter into Cuba for domestic use, the shipment will be subject to tax. Also, the zone is for both national and foreign businesses to utilize all available services. It is the hope that foreign businesses will ship raw materials to the zone to be manufactured by Cubans and exported to other nations with great savings and significant job creation in Cuba.
3.6 - Cuba Free Trade AgreementsCARICOM - Cuba Trade and Economic AgreementCountries included in the agreement are Cuba, Barbados, Guyana, Jamaica, Suriname, Trinidad and Tobago, Antigua and Barbuda, Belize, Dominica, Grenada, Montserrat, St. Kitts and Nevis, Saint Lucia, and St. Vincent and the Grenadines. The basis for the agreement is to foster positive relations and to encourage growth in all member nations in both goods and services. The agreement also works to encourage investment, joint ventures, and an exchange of information pertaining to economic and social matters. throughout the region.
4- Cuba’s Business Opportunities4.1 - Investment GradeThe investment grade in Cuba is among the worst in the world, for the time being. In fact, only Moodys has provided a credit rating for Cuba which is Caa1. Few investors would see this as an appealing rating by which to gauge a positive return; however, as has been mentioned numerous times, the shape of the nation could look quite differently in one year’s time.
One way Cuba is working to improve their rating is simply by permitting outside investment. Until late 2014, Cuba has not been favorable nation in which to invest by foreigners. With a new law passed in 2014, investment opportunities and incentives are enticing new investors to the island. The law reduces profit taxes by 50 percent and will delay payment of such taxes by up to 8 years if the company is linked to a Cuban company rather than being 100 percent foreign owned. In fact, a number of stipulations exist for 100 percent foreign-owned companies to encourage business deals to include local businesses.
While this new law is appealing, many investors remain cautionary based on the previous actions of the government such as by placing foreign executives in jail and attempting to take control of various foreign businesses. It seems that while a law stating it will protect foreign investment is a step in the right direction, the actions of the government will most likely have the most impact on investor confidence to help shape the future of the economy in Cuba.
Investment opportunities are beginning to surface in a number of areas particularly in agriculture, renewable energy, mining, tourism, and oil. As of November 2014, the government was seeking $8 billion by foreign investors upon passing the new investment law to be spread across roughly 250 projects. While many projects exist in which to invest, a number of clauses and stipulations are in place that may still deter foreign investment.
4.2 - Significant Projects
As previously mentioned, Cuba is seeking billions of dollars in foreign investment in a number of sectors to help create a stable and sustainable economy. Investment opportunities exist in nearly all sectors, however certain areas are seeking more investment than others. The following are a few examples of some of the more significant projects in development:
AgricultureCuba would like to be a sustainable country with little dependence upon imports, particularly in the agricultural industry. As of November 2014, Cuba was seeking a joint venture partnership with a foreign investor willing to contribute $10.3 million to further develop shrimp farming, citrus growth, peanut planting, and poultry, pork, and cattle production. The country is also seeking $40 million to restore various sugar mills in hopes of revitalizing their sugar industry.
Port of MarielThe country has high hopes tied to the expansion of the port of Mariel. It is expected to become the primary port as it will be the deepest in the country and possess the ability to accept Post-Panamax vessels. A new container terminal is under construction alongside significant expansion and upgrades to the existing port structure. The port is also expected to provide a number of services include equipment rental and logistics services.
Renewable EnergyCuba has become somewhat of a leader in the green movement. Renewable energy initiatives may have started due to lack of resources and financing to be able to afford traditional energy sources, however the country has learned the long-term sustainability and savings affects directly resulting from renewable energy and they have implemented a number of protocols and launched a number of project initiatives to launch sustainability to an even higher level. The government is seeking $485 million in just two of such projects. Opportunities exist in wind farms, solar, biomass, and hydroelectricity. And, as an exception, the Cuban government will permit 100 percent foreign ownership on wind farms.
4.3 - Infrastructure - just talk about the state of the infrastructure in general. Do not list all infrastructure projectsThe general transportation infrastructure of Cuba has the potential to provide smooth logistical services, however because the country is often rationing resources, service interruptions are frequent whether it be on the overnight train from Havana to Santiago de Cuba or domestic flights. While primary roads make transportation safe and efficient, the vast majority of roads in Cuba are secondary roads that are quite hazardous at times due to their poor maintenance. The fresh water supply infrastructure is highly mismanaged and in need of upgrades so that the country stops purging their fresh water supplies to ensure long-term sustainability.
Considering the challenges the country has faced, their infrastructure should probably be in a far worse state. During the past year, the government has launched a number of initiatives to improve infrastructure throughout the country in all areas such as housing, land assignation, urban planning, and much more.
4.4 - Largest Employers
While the vast majority of businesses in Cuba are state-owned making the government the largest employer, a number of private businesses have managed to protect their ownership levels from the government and employ a large number of Cubans. Some of the larger privately owned businesses, or at least joint partnerships with the state, and employers are as follows:
4.5 - General Business Taxes
The general business tax for foreign-owned businesses could be as much as 50 percent or as little as 15 percent depending upon the industry and whether or not the business is a joint venture with a Cuban business. Foreign investors and business owners will receive the greatest tax breaks as long as they partner with a Cuban company. Those who remain 100 percent foreign owned will faces the highest taxes.
5 – Cuba’s Key Industries
5.1 - Largest IndustriesThe largest industries in Cuba, at this time, are sugar-milling, fishing, mining, oil refineries, and manufacturing. As anticipated investment grows and trade restrictions lessen, it is possible a dynamic shift in industry size could take place in the coming years. The government is hoping to vastly revitalize the sugar-milling industry to become, once again, the largest exporter of sugar worldwide. It is expected that mining and renewable energy will also continue to grow over the next few years. Also, medical tourism is becoming big business in Cuba and with the ease of restrictions by the US and the overwhelming number of highly qualified doctors in Cuba, it is likely this industry will grow at an exorbitant rate if trade and travel relations continue on a positive path between Cuba and the US.
5.2 – Cuba’s Technology and Connectivity
Cuba has a poor connectivity ratio, however it is not the worst in Latin America. Their penetration rate is at 25.7 percent and 2,840,248 Internet users. Those who do have Internet are mostly dissatisfied. The information is controlled by the government, although with the new US deal more outside information is to be allowed to Cubans, and the connection is slow and expensive. The government announced that 2015 would bring greater access to Internet for more Cubans. At this time, if a Cuban illegally accesses the Internet, they could face five years in prison.
It is important to note that cable and satellite television are prohibited in private homes and that not even one fifth of the population own a mobile phone. With that being said, a large percentage of Cubans are connected through an illegal system they refer to as “The Package.” This system allows Cubans to share illegal downloads of anything and everything such as music, film, and even software. The government has declared mobile devices will soon have access to the Internet and wifi will be available in certain public places, however it is likely only to have access to the Cuban Intranet rather than the public Internet.
5.3 - E-Commerce and Startups
With the introduction of new investment laws, entrepreneurship in Cuba is no longer an oxymoron. The most appealing incentives and tax breaks for foreign investors exist exclusively with a joint venture paired with a Cuban company. The time for entrepreneurship in Cuba has begun. Just as Cuba is providing leniencies on private businesses, the US has permitted exports in a number of industries specifically for private companies and entrepreneurs. This new partnership between former trade foes is certain to begin a startup revolution in Cuba. A practical and viable e-commerce industry may be several years away, however it is now an actual possibility in the near future.
6 – Visiting Cuba6.1 - Business and Cultural EtiquetteDressing professional casual will get you further in Cuba rather than dressing like a backpacker. People who dress non-traditionally are often stopped by the police and searched thoroughly at customs. Many men wear long-sleeve dress shirts and trousers, however you will not be expected to wear a tie or jacket. You should not wear shorts to any formal business event including meetings. Women should dress conservatively and trousers are perfectly fine. Avoid anything too revealing or form fitting to keep the point on business. Cubans respect punctuality, however due to the challenges of public transportation and communication connectivity, people are often late or do not show at all. You should be on time, however the host may be up to an hour late as it simply is standard practice. Greet men with a handshake and women with a cheek kiss and always remain calm in meetings.
You should also expect to have drinks if you participate in a working lunch and be mindful that the morning is the best time to conduct business. Also, it is considered rude and disrespectful to criticize the government in public or in private. You may hear Cubans do so on occasion, however you should never join in on the criticism. Make eye contact when you speak and do not be offended if you are interrupted. Also, do not blow your nose in public and always ask permission before taking a photo.
Tipping is becoming common in various sectors throughout Cuba primarily in the hospitality business as it is the primary source of their income. Generally speaking, it is standard practice to tip however you feel appropriate. Here is a breakdown of standard tipping practices:
Expect to pay with cash for nearly everything in Cuba. Keep in mind that Cuba has dual currencies. Basically The Cuban peso, which is also referred to as the moneda nacional (MN), is for Cubans only and the Cuban convertible peso (CUC) which is the currency with which tourists need to be concerned. The best currencies to convert are Canadian dollars, euros, and British pound sterling. Major hotels will accept credit cards, however little else can be paid with credit cards.
Keep in mind that in the past, any debit or credit card from a bank owned or associated with a US company could not be used in Cuba. Due to recent eases to the embargo, you should check with your local bank and credit card company to ensure you will not have a problem if your bank is US linked. You can use travelers checks to get cash, even from US companies. If you do bring cash, be sure they are new notes as you may have difficulty exchanging older notes.
6.2 - Primary Tourist Attractions
Old Havana
Old Havana is a UNESCO World Heritage Site. The 200-year old region has been greatly restored allowing you to be transported back in time as you casually stroll along the cobblestone streets taking in the history. As you admire the stunning architecture you will also be walking amongst the locals as Plaza Vieja is still one of the most popular spots for people to gather in Havana today.
Varadero
Varadero is quite possibly the most popular seaside resort town in Cuba. It is here where you will find some of the most beautiful beaches in the world. The town is actually connected to the mainland by a drawbridge providing the beach town with an exclusive and remote feeling. You will be able to explore a national park, flower gardens, shipwrecks, caves, and much more.
Trinidad
Trinidad is yet another UNESCO World Heritage Site in Cuba. This charming town will transport you back to the 17th Century. The architecture is some of the most well-preserved in Cuba, and it is a favorite amongst tourists. Here you will find cathedrals, museums, and monuments to explore during your stay.
Guardalavaca
Many people prefer the beaches of Guardalavaca to Varadero as the town is less busy and more tranquil. You can enjoy snorkeling and diving around coral reefs and you will be able to take a number of day trips from here to Santiago de Cuba and a number of small islands.
Parque Nacional Vinales
Cuba is not all quaint towns and stunning beaches. Here in the Parque Nacional Vinales, which is an UNESCO World Heritage Site, you will be able to explore the lush interior in any number of ways. You might hike through the region as you explore produce and tobacco fields or you can even do so by horseback. Either way, you will see a new side to Cuba.
6.3 - Safety
As always, exercise good judgement when you travel, particularly in tourist areas and if you are lost. It is also important to be mindful of your country’s travel warnings pertaining to whichever country you visit and at this particular time in Cuba, your primary concerns will be non-violent petty crime. As with anywhere in the world, pick pocketing and bag snatching is rampant in tourist areas and on public transportation. Muggings do occur, so be vigilant at all times and take a taxi at night. If you have hired a car and you find a puncture in your tire, drive to safety and then phone for help as criminals have been known to use this as a scam to mug tourists.
The airport is also a place you should be mindful not only from scam artists, but from baggage handlers. If you plan to arrive or depart with valuables and you must check them in your luggage, use locks on your suitcases and have them shrinkwrapped if possible. Also, if you are planning to take a taxi from the airport, be certain it is with a registered taxi or make arrangements with your tour operator if you are part of a group. Also, you will be required to pay a departure tax before you leave Cuba, so be prepared for that.
It is not recommended to drink tap or well water in Cuba. Many Cubans boil their tap water prior to drinking it and you should do the same if you are unable to find any purified water. Also, be mindful of mixed drinks. Most restaurants and bars popular with tourists used purified water to mix their drinks and to make ice cubes, however it has been said that some claim to do so when in fact they use plain tap water. If you are overly concerned, skip the ice or order a beer or wine.
6.4 - Public National Holidays
The following is a list of all national holidays, however some towns have their own celebrations, festivities, and events throughout the year which may not coincide with national holidays:
6.5 - Fun and Interesting FactsDid you know…
6.6 - The Foodie Scene
Cuba does not have much of a foodie scene in the traditional sense, compared to most Latin American countries, however it is not lacking for lesser-explored cuisines and cultural treasures. Cubans are known for their sweet coffee the Cubita and cafe con leche, which is coffee with milk. Cuba claims to have originated the mojito and Bacardi was actually founded in Cuba; therefore, you will not be lacking for delicious rum drinks to try from Cuba Libre to Daiquiris.
The food in Cuba seems to have received poor reviews by many in the past, however it is a country filled with fresh seafood and fresh produce if you are not overly interested in their often meat-centric traditional cuisine. Many people claim that going to a paladar, which is a restaurant inside the home of someone, rather than a proper restaurant is by far the best dining option. The foodie scene is beginning in Cuba and with the government permitting more private businesses, it is likely that more and more spectacular paladars will be opening soon for a whole new world of possibilities to explore.
6.7 – The MediaNews Sites
Fire - Tel: 105
Ambulance - Tel: 104
6.9 - Primary Hospitals and Medical Facilities In Case of EmergencyHealth insurance is required by all tourists visiting Cuba and you will be expected to present proof of insurance upon arrival. Also, all hotels have doctors on staff or on call at all times. Each resort will actually have an actual medical clinic for international guests in case of more serious conditions.
Havana:Cira Garcia Clinic - Tel: 204 2811 (+ Ext 445 to request an ambulance) Address: Calle 20 No 4101 y Avenida 41
Santiago de Cuba:Clinica Santiago de Cuba - Tel: +53 22 642 589, Address: Av Pujol esq calle 10
Hospital General Saturnino Lora - Tel: +53 22 626 571, Address: Carretera Central
www.mercatrade.com
- Population: 11,047,251 (estimate July 2014)
- GDP 2012: USD $121 billion (The World Factbook)
- Unemployment Rate 2013: 3.3% (July 2014 Trading Economics)
- Inflation: 5.5% (January 2015)
- Currency: Cuban Peso and Cuban Convertible Peso
- Time Zone: UTC-5 (EST), note that the dates of daylight savings time has been known to change without much notice to conserve electricity.
- Telephone Code: +53
- Internet Domain: .cu
- Electricity Voltage: 110v, most modern hotels have both 110 and 220
Cuba’s Economy - GDP Figures
- GDP: $121 billion
- GDP growth rate: 3.1%
- GDP per capita: $10,200 (estimate 2010)
- GDP Composition by sector: Agriculture (3.8%), Industry (22.3%), Services (73.9%) - estimate 2013
2.3 - Trade and Economic ChallengesPolitical instability and communism have always been the primary reasons many countries chose to refrain from trade with Cuba. While the US eliminating many trade and travel restrictions is certain to have a positive impact on the economy as a whole, much uncertainty remains as to the fate of communism and exactly how the existing partnerships with countries such as Russia and Venezuela will be left. Given that Cubans will now have greater Internet freedoms, many experts are predicting that democracy is not far behind; however, it is the relationships that have carried Cuba through the years that may directly impact the exact direction the country takes in the coming years. Uncertainty is the operative word for Cuba at the moment.
Trading With Cuba
3.1 - Trading PartnersDue to the decades of sanctions placed on Cuba by the US, their trading partnerships have been quite limited. At this time, Venezuela continues to be the largest trading partner proving the island nation with petrol and petroleum based products.
China and Canada are also a large trading partners. With the ease of US embargoes, these partnerships could look quite differently in the matter of a year.
Largest Export Partners (2012)
- Canada (17.7%)
- China (16.9%)
- Venezuela (12.5%)
- Netherlands (9%)
- Spain (5.9%)
- Raw Sugar (25%)
- Refined Petroleum (15%)
- Nickel Mattes (14%)
- Rolled Tobacco (14%)
- Hard Liquor (6.7%)
- Refined Petroleum (6.1%)
- Wheat (3.9%)
- Corn (3.8%)
- Poultry Meat (3.3%)
- Concentrated Milk (2.4%)
AirportsJose Marti International Airport (Havana - HAV)Located in the town of Boyeros, the Havana airport is the largest, busiest, and most modern of the Cuban airports. You will find Internet, shopping, dining options, cash points, a children’s play area, and even medical facilities and a pharmacy.
Juan Gualberto Gomez Airport (Varadero - VRA)This second busiest airport in Cuba is typically the airport of choice for people visiting the beach resort town of Varadero. You will find basic amenities throughout the airport such as food stands, currency exchange, and a small children’s play area.
PortsIt is essential to keep in mind that selecting the correct port for your needs will depend upon many aspects such as the type of container you are shipping, the commodity, your final destination, and much more. Ports are unique and each has its own set of limitations and advantages. Some are owned and operated privately; whereas, other ports are owned and operated by state governments. Keep in mind that very few ports in Latin America are able to receive the large Panamax ocean vessels at this time. The following are the primary ports of Cuba:
Port of HavanaThe port of Havana is the busiest port in Cuba located on the Northwestern side of the island. This harbor combines port activities and industrial activities such as an oil refinery and a wheat mill. The port accepts cargo of all kinds from dry bulk to container loads. Unfortunately, all of this activity has carried on without environmental concerns and now the pollution from the port and the industrial activity is threatening the fishing industry which is essential to the livelihood of Cubans.
Santiago de CubaThe port of Santiago de Cuba is the secondary port in Cuba located on the Southeastern coast connected to the Caribbean Sea. The port accepts dry bulk, general bulk cargo, various liquids, petroleum, and towage shipments. This port is also strategically located near an airport and primary roadways.
3.4 - Time and Cost to Import into CubaThe time and cost to import into Cuba will vary greatly. If the exporting country is part of a free trade agreement with Cuba and the imported good is subject to the benefits of the agreement, it is likely minimal to no import tariffs or customs fees will applied. If the exporting country is not a member of any bilateral agreement or trade bloc with Cuba, goods will be subject to import duties and extensive excise taxes. If the goods are shipped into a free trade zone, they can be accepted, repackaged, and exported without having to pay import fees. Do not forget to consider Incoterms before you sign any sales contracts. The transit time to Cuba will vary from a few days for ocean vessels from Miami to less than a month for shipments originating in Asia.
3.5 - Tax Free ZonesEconomic Development Zone - Port of MarielThis special tax free zone is the first of its kind in Cuba and it is being, in part, paid for with USD $640 million by Brazil. The remainder $260 million is paid for by Cuba. The port of Mariel, located 45 km outside Havana, is also undergoing major expansion to make this region the most appealing trade zone of the country. The zone will act much like other free trade zones in that businesses will not pay tax on any import that will be stored and re-exported. If the products enter into Cuba for domestic use, the shipment will be subject to tax. Also, the zone is for both national and foreign businesses to utilize all available services. It is the hope that foreign businesses will ship raw materials to the zone to be manufactured by Cubans and exported to other nations with great savings and significant job creation in Cuba.
3.6 - Cuba Free Trade AgreementsCARICOM - Cuba Trade and Economic AgreementCountries included in the agreement are Cuba, Barbados, Guyana, Jamaica, Suriname, Trinidad and Tobago, Antigua and Barbuda, Belize, Dominica, Grenada, Montserrat, St. Kitts and Nevis, Saint Lucia, and St. Vincent and the Grenadines. The basis for the agreement is to foster positive relations and to encourage growth in all member nations in both goods and services. The agreement also works to encourage investment, joint ventures, and an exchange of information pertaining to economic and social matters. throughout the region.
4- Cuba’s Business Opportunities4.1 - Investment GradeThe investment grade in Cuba is among the worst in the world, for the time being. In fact, only Moodys has provided a credit rating for Cuba which is Caa1. Few investors would see this as an appealing rating by which to gauge a positive return; however, as has been mentioned numerous times, the shape of the nation could look quite differently in one year’s time.
One way Cuba is working to improve their rating is simply by permitting outside investment. Until late 2014, Cuba has not been favorable nation in which to invest by foreigners. With a new law passed in 2014, investment opportunities and incentives are enticing new investors to the island. The law reduces profit taxes by 50 percent and will delay payment of such taxes by up to 8 years if the company is linked to a Cuban company rather than being 100 percent foreign owned. In fact, a number of stipulations exist for 100 percent foreign-owned companies to encourage business deals to include local businesses.
While this new law is appealing, many investors remain cautionary based on the previous actions of the government such as by placing foreign executives in jail and attempting to take control of various foreign businesses. It seems that while a law stating it will protect foreign investment is a step in the right direction, the actions of the government will most likely have the most impact on investor confidence to help shape the future of the economy in Cuba.
Investment opportunities are beginning to surface in a number of areas particularly in agriculture, renewable energy, mining, tourism, and oil. As of November 2014, the government was seeking $8 billion by foreign investors upon passing the new investment law to be spread across roughly 250 projects. While many projects exist in which to invest, a number of clauses and stipulations are in place that may still deter foreign investment.
4.2 - Significant Projects
As previously mentioned, Cuba is seeking billions of dollars in foreign investment in a number of sectors to help create a stable and sustainable economy. Investment opportunities exist in nearly all sectors, however certain areas are seeking more investment than others. The following are a few examples of some of the more significant projects in development:
AgricultureCuba would like to be a sustainable country with little dependence upon imports, particularly in the agricultural industry. As of November 2014, Cuba was seeking a joint venture partnership with a foreign investor willing to contribute $10.3 million to further develop shrimp farming, citrus growth, peanut planting, and poultry, pork, and cattle production. The country is also seeking $40 million to restore various sugar mills in hopes of revitalizing their sugar industry.
Port of MarielThe country has high hopes tied to the expansion of the port of Mariel. It is expected to become the primary port as it will be the deepest in the country and possess the ability to accept Post-Panamax vessels. A new container terminal is under construction alongside significant expansion and upgrades to the existing port structure. The port is also expected to provide a number of services include equipment rental and logistics services.
Renewable EnergyCuba has become somewhat of a leader in the green movement. Renewable energy initiatives may have started due to lack of resources and financing to be able to afford traditional energy sources, however the country has learned the long-term sustainability and savings affects directly resulting from renewable energy and they have implemented a number of protocols and launched a number of project initiatives to launch sustainability to an even higher level. The government is seeking $485 million in just two of such projects. Opportunities exist in wind farms, solar, biomass, and hydroelectricity. And, as an exception, the Cuban government will permit 100 percent foreign ownership on wind farms.
4.3 - Infrastructure - just talk about the state of the infrastructure in general. Do not list all infrastructure projectsThe general transportation infrastructure of Cuba has the potential to provide smooth logistical services, however because the country is often rationing resources, service interruptions are frequent whether it be on the overnight train from Havana to Santiago de Cuba or domestic flights. While primary roads make transportation safe and efficient, the vast majority of roads in Cuba are secondary roads that are quite hazardous at times due to their poor maintenance. The fresh water supply infrastructure is highly mismanaged and in need of upgrades so that the country stops purging their fresh water supplies to ensure long-term sustainability.
Considering the challenges the country has faced, their infrastructure should probably be in a far worse state. During the past year, the government has launched a number of initiatives to improve infrastructure throughout the country in all areas such as housing, land assignation, urban planning, and much more.
4.4 - Largest Employers
While the vast majority of businesses in Cuba are state-owned making the government the largest employer, a number of private businesses have managed to protect their ownership levels from the government and employ a large number of Cubans. Some of the larger privately owned businesses, or at least joint partnerships with the state, and employers are as follows:
- Habanos S.A.
- Havana Club
- Modelo Brewery
- Havana Shipyards
- Agriculture (19.7%)
- Industry (17.1%)
- Services (63.2%)
4.5 - General Business Taxes
The general business tax for foreign-owned businesses could be as much as 50 percent or as little as 15 percent depending upon the industry and whether or not the business is a joint venture with a Cuban business. Foreign investors and business owners will receive the greatest tax breaks as long as they partner with a Cuban company. Those who remain 100 percent foreign owned will faces the highest taxes.
5 – Cuba’s Key Industries
5.1 - Largest IndustriesThe largest industries in Cuba, at this time, are sugar-milling, fishing, mining, oil refineries, and manufacturing. As anticipated investment grows and trade restrictions lessen, it is possible a dynamic shift in industry size could take place in the coming years. The government is hoping to vastly revitalize the sugar-milling industry to become, once again, the largest exporter of sugar worldwide. It is expected that mining and renewable energy will also continue to grow over the next few years. Also, medical tourism is becoming big business in Cuba and with the ease of restrictions by the US and the overwhelming number of highly qualified doctors in Cuba, it is likely this industry will grow at an exorbitant rate if trade and travel relations continue on a positive path between Cuba and the US.
5.2 – Cuba’s Technology and Connectivity
Cuba has a poor connectivity ratio, however it is not the worst in Latin America. Their penetration rate is at 25.7 percent and 2,840,248 Internet users. Those who do have Internet are mostly dissatisfied. The information is controlled by the government, although with the new US deal more outside information is to be allowed to Cubans, and the connection is slow and expensive. The government announced that 2015 would bring greater access to Internet for more Cubans. At this time, if a Cuban illegally accesses the Internet, they could face five years in prison.
It is important to note that cable and satellite television are prohibited in private homes and that not even one fifth of the population own a mobile phone. With that being said, a large percentage of Cubans are connected through an illegal system they refer to as “The Package.” This system allows Cubans to share illegal downloads of anything and everything such as music, film, and even software. The government has declared mobile devices will soon have access to the Internet and wifi will be available in certain public places, however it is likely only to have access to the Cuban Intranet rather than the public Internet.
5.3 - E-Commerce and Startups
With the introduction of new investment laws, entrepreneurship in Cuba is no longer an oxymoron. The most appealing incentives and tax breaks for foreign investors exist exclusively with a joint venture paired with a Cuban company. The time for entrepreneurship in Cuba has begun. Just as Cuba is providing leniencies on private businesses, the US has permitted exports in a number of industries specifically for private companies and entrepreneurs. This new partnership between former trade foes is certain to begin a startup revolution in Cuba. A practical and viable e-commerce industry may be several years away, however it is now an actual possibility in the near future.
6 – Visiting Cuba6.1 - Business and Cultural EtiquetteDressing professional casual will get you further in Cuba rather than dressing like a backpacker. People who dress non-traditionally are often stopped by the police and searched thoroughly at customs. Many men wear long-sleeve dress shirts and trousers, however you will not be expected to wear a tie or jacket. You should not wear shorts to any formal business event including meetings. Women should dress conservatively and trousers are perfectly fine. Avoid anything too revealing or form fitting to keep the point on business. Cubans respect punctuality, however due to the challenges of public transportation and communication connectivity, people are often late or do not show at all. You should be on time, however the host may be up to an hour late as it simply is standard practice. Greet men with a handshake and women with a cheek kiss and always remain calm in meetings.
You should also expect to have drinks if you participate in a working lunch and be mindful that the morning is the best time to conduct business. Also, it is considered rude and disrespectful to criticize the government in public or in private. You may hear Cubans do so on occasion, however you should never join in on the criticism. Make eye contact when you speak and do not be offended if you are interrupted. Also, do not blow your nose in public and always ask permission before taking a photo.
Tipping is becoming common in various sectors throughout Cuba primarily in the hospitality business as it is the primary source of their income. Generally speaking, it is standard practice to tip however you feel appropriate. Here is a breakdown of standard tipping practices:
- State-owned restaurants & posh paladars - 10-12% now being added to the bill, however it is often seen as proper etiquette to tip the server on top of this amount.
- Non-state-owned restaurants & small paladars - Tip as you feel the service was worth.
- Resorts - All staff will expect to be tipped at some point during your stay from the porters to the gardeners. Again, tip as you feel appropriate.
- Maids - Rather than tipping maids, it is common practice to leave behind your personal shampoos and hygiene products as these are considered luxury items to maids who make such low wages and could never afford such nice products.
- State-owned taxis - Tip as you feel appropriate.
- Privately operated taxis - If you negotiated a price, you should not feel obligated to tip unless the driver gave you any sort of advice and then you should tip.
Expect to pay with cash for nearly everything in Cuba. Keep in mind that Cuba has dual currencies. Basically The Cuban peso, which is also referred to as the moneda nacional (MN), is for Cubans only and the Cuban convertible peso (CUC) which is the currency with which tourists need to be concerned. The best currencies to convert are Canadian dollars, euros, and British pound sterling. Major hotels will accept credit cards, however little else can be paid with credit cards.
Keep in mind that in the past, any debit or credit card from a bank owned or associated with a US company could not be used in Cuba. Due to recent eases to the embargo, you should check with your local bank and credit card company to ensure you will not have a problem if your bank is US linked. You can use travelers checks to get cash, even from US companies. If you do bring cash, be sure they are new notes as you may have difficulty exchanging older notes.
6.2 - Primary Tourist Attractions
Old Havana
Old Havana is a UNESCO World Heritage Site. The 200-year old region has been greatly restored allowing you to be transported back in time as you casually stroll along the cobblestone streets taking in the history. As you admire the stunning architecture you will also be walking amongst the locals as Plaza Vieja is still one of the most popular spots for people to gather in Havana today.
Varadero
Varadero is quite possibly the most popular seaside resort town in Cuba. It is here where you will find some of the most beautiful beaches in the world. The town is actually connected to the mainland by a drawbridge providing the beach town with an exclusive and remote feeling. You will be able to explore a national park, flower gardens, shipwrecks, caves, and much more.
Trinidad
Trinidad is yet another UNESCO World Heritage Site in Cuba. This charming town will transport you back to the 17th Century. The architecture is some of the most well-preserved in Cuba, and it is a favorite amongst tourists. Here you will find cathedrals, museums, and monuments to explore during your stay.
Guardalavaca
Many people prefer the beaches of Guardalavaca to Varadero as the town is less busy and more tranquil. You can enjoy snorkeling and diving around coral reefs and you will be able to take a number of day trips from here to Santiago de Cuba and a number of small islands.
Parque Nacional Vinales
Cuba is not all quaint towns and stunning beaches. Here in the Parque Nacional Vinales, which is an UNESCO World Heritage Site, you will be able to explore the lush interior in any number of ways. You might hike through the region as you explore produce and tobacco fields or you can even do so by horseback. Either way, you will see a new side to Cuba.
6.3 - Safety
As always, exercise good judgement when you travel, particularly in tourist areas and if you are lost. It is also important to be mindful of your country’s travel warnings pertaining to whichever country you visit and at this particular time in Cuba, your primary concerns will be non-violent petty crime. As with anywhere in the world, pick pocketing and bag snatching is rampant in tourist areas and on public transportation. Muggings do occur, so be vigilant at all times and take a taxi at night. If you have hired a car and you find a puncture in your tire, drive to safety and then phone for help as criminals have been known to use this as a scam to mug tourists.
The airport is also a place you should be mindful not only from scam artists, but from baggage handlers. If you plan to arrive or depart with valuables and you must check them in your luggage, use locks on your suitcases and have them shrinkwrapped if possible. Also, if you are planning to take a taxi from the airport, be certain it is with a registered taxi or make arrangements with your tour operator if you are part of a group. Also, you will be required to pay a departure tax before you leave Cuba, so be prepared for that.
It is not recommended to drink tap or well water in Cuba. Many Cubans boil their tap water prior to drinking it and you should do the same if you are unable to find any purified water. Also, be mindful of mixed drinks. Most restaurants and bars popular with tourists used purified water to mix their drinks and to make ice cubes, however it has been said that some claim to do so when in fact they use plain tap water. If you are overly concerned, skip the ice or order a beer or wine.
6.4 - Public National Holidays
The following is a list of all national holidays, however some towns have their own celebrations, festivities, and events throughout the year which may not coincide with national holidays:
- 1 January - Liberation Day
- 2 January - New Year Day
- 3 April - Good Friday
- 1 May - Labor / May Day
- 25 July - Revolution Anniversary
- 26 July - Day of the Rebellion
- 27 July - Revolution Anniversary Celebration
- 10 October - Beginning of the War of Independence
- 25 December - Christmas Day
- 31 December - New Year’s Eve
6.5 - Fun and Interesting FactsDid you know…
- Manjuarí is a fish native only to Cuban rivers and swamps.
- Baseball, not soccer, is the favorite sport of the nation.
- Roughly 22 percent of the land is protected.
- Because of the large surplus of well-educated doctors in Cuba, doctors are often sent to other countries to provide aid and in the past, many have even been traded for goods such as oil under outreach programs.
- Ernest Hemingway wrote both “The Old Man and the Sea” and “For Whom the Bells Toll” whilst residing in Cuba.
6.6 - The Foodie Scene
Cuba does not have much of a foodie scene in the traditional sense, compared to most Latin American countries, however it is not lacking for lesser-explored cuisines and cultural treasures. Cubans are known for their sweet coffee the Cubita and cafe con leche, which is coffee with milk. Cuba claims to have originated the mojito and Bacardi was actually founded in Cuba; therefore, you will not be lacking for delicious rum drinks to try from Cuba Libre to Daiquiris.
The food in Cuba seems to have received poor reviews by many in the past, however it is a country filled with fresh seafood and fresh produce if you are not overly interested in their often meat-centric traditional cuisine. Many people claim that going to a paladar, which is a restaurant inside the home of someone, rather than a proper restaurant is by far the best dining option. The foodie scene is beginning in Cuba and with the government permitting more private businesses, it is likely that more and more spectacular paladars will be opening soon for a whole new world of possibilities to explore.
6.7 – The MediaNews Sites
- Granma - Communist Party newspaper, website in five languages including English
- Juventud Rebelde - Union of Young Communists newspaper, web pages in English
- Cuban News Agency (ACN) - state-run
- Prensa Latina - state-run
- Cubavision - state-run
- Portal de la TV Cubana - state TV portal
- Radio Rebelde - news, music, sport
- Radio Reloj - news
- Radio Habana Cuba - external, languages include Spanish, English, French, Portuguese
- Radio Progreso - entertainment
Fire - Tel: 105
Ambulance - Tel: 104
6.9 - Primary Hospitals and Medical Facilities In Case of EmergencyHealth insurance is required by all tourists visiting Cuba and you will be expected to present proof of insurance upon arrival. Also, all hotels have doctors on staff or on call at all times. Each resort will actually have an actual medical clinic for international guests in case of more serious conditions.
Havana:Cira Garcia Clinic - Tel: 204 2811 (+ Ext 445 to request an ambulance) Address: Calle 20 No 4101 y Avenida 41
Santiago de Cuba:Clinica Santiago de Cuba - Tel: +53 22 642 589, Address: Av Pujol esq calle 10
Hospital General Saturnino Lora - Tel: +53 22 626 571, Address: Carretera Central
Cuba: What the Changes Mean
Today the US Government announced big changes as a result of the White House’s decision to reestablish diplomatic relations with Cuba. The changes include new rules for U.S. travelers visiting Cuba and new trade rules for Americans who want to do business with Cuba.
The newly amended rules specify products which can now be sold to the Cuban people in the categories of improving living conditions in Cuba, improving the private sector economy in Cuba, and increasing the free flow of information in and to Cuba.
Dealing with Cuba is complicated. Understanding the regulations is one part. Another part is the politics in the halls of the U.S. Capitol. A third and vital part of dealing with Cuba is an understanding of Cuba and its interests.
To get a perspective on the changes, I spoke to William Ross Newland III, Managing Partner of The Delian Group. Newland lived in Havana, Cuba as the CIA's Chief of Station for two years and since then has followed developments in Cuba closely. Newland advises U.S. companies who are thinking about doing business with Cuba. Because he is one of very few Americans who has lived and worked in Cuba, he understands better than most, the reality of working there.
Q: The new rules, in general, make it easier to obtain Treasury Licenses. How will this affect Americans traveling to and doing business with Cuba?
A: The new rules will facilitate travel to Cuba, sending remittances to Cuba, and setting up basic financial transactions including use of credit cards. At the same time the new rules will support the Cuban people by allowing the increased sale and exportation of agricultural tools and equipment, building tools and equipment, and telecommunications equipment, including hardware and software, for the establishment and upgrade of communications-related systems. The intent of the new rules is clear – the liberalized regulations are designed to help encourage private sector activity in Cuba, in other words to help the Cuban people while making them less dependent on the state.
Q: How do the new rules affect microfinancing for Cuban entrepreneurs?
A: Based on what I have read, under the new rules, remittances from Americans can be increased up to $8,000 a year to Cubans from $2,000 per year allowed in the past. In certain categories, including private businesses, remittances no longer have a limit. The rules are vague, so anyone interested in microfinancing Cuban private businesses should do their homework and consult business advisors and legal advisors who have a Cuba Practice or Cuba expertise.
Q: What are some of the changes for American travelers who want to visit Cuba?
A: The new rules increase the number of categories of legal U.S. travelers to twelve, and at the same time liberalize transactions via travel agents and financial institutions. There is no tourist travel to Cuba or any spontaneous individual travel. The intent is not to provide a subsidy to the Cuban Government but rather to enable private Cubans to be less dependent on the state.
Q: What do these changes mean for American business with Cuba?
A: The new rules will stimulate interest in doing business with Cuba, but there are two major factors to concider. On the one hand, the U.S. embargo is codified into law and is conditioned on specific change in Cuba including elections, human rights, and the transition to a democratic government. My feeling is that Cuba will not accept any rule, regulation, or condition that is not in its interest. They also will not accept any technology or change that they cannot control. It’s simply not in their interest to do so.
Q: What are the short term areas where we can expect to see increased trade between our two countries?
A: Short term, I think there will be increased U.S. food exports into Cuba, including agricultural equipment and know-how, and building supplies. I believe the hospitality industry will look for ways to increase its presence, in terms of tourism, hotel management, aviation, and cruise lines.
Q: The new rules also provide an opening for increased sales of technology and telecommunications equipment.
A: That is correct. Under the new rules, U.S. firms can export or sell technology infrastructure and facilities in Cuba and in third countries that link to Cuba. They can also provide consumer communications devices – everything from personal computers to mobile phones, hardware as well as software. The intent of the liberalization of these rules is to foster increased communications between the U.S. and Cuba and among Cubans.
Q: What is the potential downside to this increased cooperation?
A: Cuba’s geography and its proximity to the world’s largest market means that is will be a target for cartels and organized crime. In my opinion cooperation with U.S. authorities in counternarcotics and criminal activity in general (i.e. DEA and FBI) should also be on the short term ‘to do list.’
Q: What should companies do now if they are interested in doing business in Cuba?
A: American companies thinking of doing business in Cuba must do their homework and be properly advised by experts in the region in order to gauge risk. Finding the right law firm and business advisory firm that understand all that is involved is the key. Nobody should rush into doing business in Cuba until the proper legal and financial safeguards are in place. My company, The Delian Group, is one example, and I’m sure there are others who have the legal, political, or as in our case, the personal experience living in Cuba. The free exchange of goods and services will not happen without major political and economic changes in Cuba. Those changes are for the Cubans to make. Anybody doing business in Cuba should do so with their eyes open.
To read the new rules regarding Cuba, please see the complete document here: Federal Register
By Margaretta Colangelo, CEO, The Delian Group. The Delian Group provides public and private sector clients with business intelligence and risk assessment for strategic planning in Cuba and throughout Latin America. Please contact The Delian Group for additional information on speaking engagments and advisory services.
Today the US Government announced big changes as a result of the White House’s decision to reestablish diplomatic relations with Cuba. The changes include new rules for U.S. travelers visiting Cuba and new trade rules for Americans who want to do business with Cuba.
The newly amended rules specify products which can now be sold to the Cuban people in the categories of improving living conditions in Cuba, improving the private sector economy in Cuba, and increasing the free flow of information in and to Cuba.
Dealing with Cuba is complicated. Understanding the regulations is one part. Another part is the politics in the halls of the U.S. Capitol. A third and vital part of dealing with Cuba is an understanding of Cuba and its interests.
To get a perspective on the changes, I spoke to William Ross Newland III, Managing Partner of The Delian Group. Newland lived in Havana, Cuba as the CIA's Chief of Station for two years and since then has followed developments in Cuba closely. Newland advises U.S. companies who are thinking about doing business with Cuba. Because he is one of very few Americans who has lived and worked in Cuba, he understands better than most, the reality of working there.
Q: The new rules, in general, make it easier to obtain Treasury Licenses. How will this affect Americans traveling to and doing business with Cuba?
A: The new rules will facilitate travel to Cuba, sending remittances to Cuba, and setting up basic financial transactions including use of credit cards. At the same time the new rules will support the Cuban people by allowing the increased sale and exportation of agricultural tools and equipment, building tools and equipment, and telecommunications equipment, including hardware and software, for the establishment and upgrade of communications-related systems. The intent of the new rules is clear – the liberalized regulations are designed to help encourage private sector activity in Cuba, in other words to help the Cuban people while making them less dependent on the state.
Q: How do the new rules affect microfinancing for Cuban entrepreneurs?
A: Based on what I have read, under the new rules, remittances from Americans can be increased up to $8,000 a year to Cubans from $2,000 per year allowed in the past. In certain categories, including private businesses, remittances no longer have a limit. The rules are vague, so anyone interested in microfinancing Cuban private businesses should do their homework and consult business advisors and legal advisors who have a Cuba Practice or Cuba expertise.
Q: What are some of the changes for American travelers who want to visit Cuba?
A: The new rules increase the number of categories of legal U.S. travelers to twelve, and at the same time liberalize transactions via travel agents and financial institutions. There is no tourist travel to Cuba or any spontaneous individual travel. The intent is not to provide a subsidy to the Cuban Government but rather to enable private Cubans to be less dependent on the state.
Q: What do these changes mean for American business with Cuba?
A: The new rules will stimulate interest in doing business with Cuba, but there are two major factors to concider. On the one hand, the U.S. embargo is codified into law and is conditioned on specific change in Cuba including elections, human rights, and the transition to a democratic government. My feeling is that Cuba will not accept any rule, regulation, or condition that is not in its interest. They also will not accept any technology or change that they cannot control. It’s simply not in their interest to do so.
Q: What are the short term areas where we can expect to see increased trade between our two countries?
A: Short term, I think there will be increased U.S. food exports into Cuba, including agricultural equipment and know-how, and building supplies. I believe the hospitality industry will look for ways to increase its presence, in terms of tourism, hotel management, aviation, and cruise lines.
Q: The new rules also provide an opening for increased sales of technology and telecommunications equipment.
A: That is correct. Under the new rules, U.S. firms can export or sell technology infrastructure and facilities in Cuba and in third countries that link to Cuba. They can also provide consumer communications devices – everything from personal computers to mobile phones, hardware as well as software. The intent of the liberalization of these rules is to foster increased communications between the U.S. and Cuba and among Cubans.
Q: What is the potential downside to this increased cooperation?
A: Cuba’s geography and its proximity to the world’s largest market means that is will be a target for cartels and organized crime. In my opinion cooperation with U.S. authorities in counternarcotics and criminal activity in general (i.e. DEA and FBI) should also be on the short term ‘to do list.’
Q: What should companies do now if they are interested in doing business in Cuba?
A: American companies thinking of doing business in Cuba must do their homework and be properly advised by experts in the region in order to gauge risk. Finding the right law firm and business advisory firm that understand all that is involved is the key. Nobody should rush into doing business in Cuba until the proper legal and financial safeguards are in place. My company, The Delian Group, is one example, and I’m sure there are others who have the legal, political, or as in our case, the personal experience living in Cuba. The free exchange of goods and services will not happen without major political and economic changes in Cuba. Those changes are for the Cubans to make. Anybody doing business in Cuba should do so with their eyes open.
To read the new rules regarding Cuba, please see the complete document here: Federal Register
By Margaretta Colangelo, CEO, The Delian Group. The Delian Group provides public and private sector clients with business intelligence and risk assessment for strategic planning in Cuba and throughout Latin America. Please contact The Delian Group for additional information on speaking engagments and advisory services.
CIA Insider: The Facts on Cuba
I was based in Havana, Cuba as the CIA's Chief of Station from 1994-1996, and since then I have followed developments in Cuba closely. This is the second of a series of articles I am writing on Cuba. Amidst the hyperbole surrounding the recent Obama-Castro telephone call it is important to keep a realistic perspective on what happened: No agreement was reached on ending the embargo. And since many of its provisions are codified in law, and in fact require specific democratic reforms as a condition of their removal, the announcement of a normalization of relations merely opens the door to a lengthy and highly political process in the U.S. Congress. There are emotional politics on both sides of the Cuba issue, both within the U.S. and inside Cuba.
The Cuban leadership has always used the embargo to rationalize the economic failures of their revolution. Blaming anything and everything on the gringos is easy. Cuba has long had an interest in maintaining the embargo and freezing in time the relations with the U.S.
The Cuba-U.S. negotiations to gradually lift the embargo will be like two scorpions in a bottle. Cuba is under serious economic pressure to reform. Politically the Cubans have never shown a willingness to respond to reform proposals or olive branches extended by U.S. Presidents. Both Presidents Carter and Clinton tried to engage with Havana and were rewarded by a hardening of the Cuban dictatorship. Economically, however, the Cubans have now lost their economic lifeline – the daily support from Venezuela. Unable to function on their own, the Cuban leadership formerly depended on the Soviet Union, and when that country imploded in 1991 the Cubans went through a difficult ‘special period’ of austerity. Venezuela took over that role during the past decade, supplying two-thirds of Cuba’s oil at subsidized process, aid worth a total of about $6 billion per year. Venezuela is on the verge of defaulting on its loans, however, and cannot sustain this largesse. When Venezuela’s economy fails, Cuba will need help, and one possible solution would be to improve relations with the U.S.
What has changed since the Carter and Clinton overtures is that the Castro brothers are much older, in their last days. Moreover, the lower price of oil internationally has hurt Venezuela and compounded its already-serious economic problems.
The Cuban regime will not negotiate away their hold on power. Neither will they agree to economic reforms that prejudice their control over the economy. The Cubans will not agree to anything that is not in their interest.
A realistic appraisal of the Cuban economy does not justify much interest in foreign investment. The total economy is estimated to be about $4.3 billion, which is smaller than that of most individual U.S. states. In addition, Cubans have no purchasing power: estimates vary, but Cubans do not make more than about $50 per month. Cuba does have oil offshore in expensive deep water wells that so far are not yielding much. It is not at all obvious that Cuba would invite U.S. firms to drill there. What is more likely is that Cuba might allow U.S. technology to improve the refining capability in Cuba.
In the same manner, U.S. firms will not be building a new infrastructure in Cuba no matter how badly it is needed. However, some personal construction firms might do well selling products that allow Cubans to renovate their homes for rental to foreigners. U.S. firms might help finance farm machinery and could sell some consumer goods, but the market will not be the Cubans but rather the increasing number of Americans who will start visiting the island looking for business opportunities. In the same manner, U.S. hospitality firms may be allowed a management contract at a Cuban hotel, but the Cubans are unlikely to relinquish their ownership of the properties. They will, however, have to improve their customer service if increasing numbers of Americans are booking rooms and looking for restaurants. Tourism and hospitality may grow as markets for American companies, but selling to other foreigners, not to Cubans.
Other Caribbean nations will no doubt lobby Washington to slow down the already glacial change going on in U.S.-Cuban relations. These island nations, despite rhetoric to the contrary, have no interest in seeing Cuba’s beaches taking U.S. tourism and investment dollars that would otherwise go to Cayman, Jamaica, Dominican Republic, and others.
One highly visible change could be negotiated fairly easily: allowing Cuban baseball players to emigrate and try out for Major League teams. There are currently 19 Cubans playing in the Major Leagues, among hundreds of Latin Americans. This number could easily double or triple, and would be popular on both sides of the Florida Straits.
Using sports as a vehicle for change is relatively simple. But any real change in the nature of Cuban-U.S. relations will take a long time to detect, since the Castros will not negotiate their own demise. No significant change will occur in Cuba-U.S. relations until there is a regime change in Havana.
By William Ross Newland III
I was based in Havana, Cuba as the CIA's Chief of Station from 1994-1996, and since then I have followed developments in Cuba closely. This is the second of a series of articles I am writing on Cuba. Amidst the hyperbole surrounding the recent Obama-Castro telephone call it is important to keep a realistic perspective on what happened: No agreement was reached on ending the embargo. And since many of its provisions are codified in law, and in fact require specific democratic reforms as a condition of their removal, the announcement of a normalization of relations merely opens the door to a lengthy and highly political process in the U.S. Congress. There are emotional politics on both sides of the Cuba issue, both within the U.S. and inside Cuba.
The Cuban leadership has always used the embargo to rationalize the economic failures of their revolution. Blaming anything and everything on the gringos is easy. Cuba has long had an interest in maintaining the embargo and freezing in time the relations with the U.S.
The Cuba-U.S. negotiations to gradually lift the embargo will be like two scorpions in a bottle. Cuba is under serious economic pressure to reform. Politically the Cubans have never shown a willingness to respond to reform proposals or olive branches extended by U.S. Presidents. Both Presidents Carter and Clinton tried to engage with Havana and were rewarded by a hardening of the Cuban dictatorship. Economically, however, the Cubans have now lost their economic lifeline – the daily support from Venezuela. Unable to function on their own, the Cuban leadership formerly depended on the Soviet Union, and when that country imploded in 1991 the Cubans went through a difficult ‘special period’ of austerity. Venezuela took over that role during the past decade, supplying two-thirds of Cuba’s oil at subsidized process, aid worth a total of about $6 billion per year. Venezuela is on the verge of defaulting on its loans, however, and cannot sustain this largesse. When Venezuela’s economy fails, Cuba will need help, and one possible solution would be to improve relations with the U.S.
What has changed since the Carter and Clinton overtures is that the Castro brothers are much older, in their last days. Moreover, the lower price of oil internationally has hurt Venezuela and compounded its already-serious economic problems.
The Cuban regime will not negotiate away their hold on power. Neither will they agree to economic reforms that prejudice their control over the economy. The Cubans will not agree to anything that is not in their interest.
A realistic appraisal of the Cuban economy does not justify much interest in foreign investment. The total economy is estimated to be about $4.3 billion, which is smaller than that of most individual U.S. states. In addition, Cubans have no purchasing power: estimates vary, but Cubans do not make more than about $50 per month. Cuba does have oil offshore in expensive deep water wells that so far are not yielding much. It is not at all obvious that Cuba would invite U.S. firms to drill there. What is more likely is that Cuba might allow U.S. technology to improve the refining capability in Cuba.
In the same manner, U.S. firms will not be building a new infrastructure in Cuba no matter how badly it is needed. However, some personal construction firms might do well selling products that allow Cubans to renovate their homes for rental to foreigners. U.S. firms might help finance farm machinery and could sell some consumer goods, but the market will not be the Cubans but rather the increasing number of Americans who will start visiting the island looking for business opportunities. In the same manner, U.S. hospitality firms may be allowed a management contract at a Cuban hotel, but the Cubans are unlikely to relinquish their ownership of the properties. They will, however, have to improve their customer service if increasing numbers of Americans are booking rooms and looking for restaurants. Tourism and hospitality may grow as markets for American companies, but selling to other foreigners, not to Cubans.
Other Caribbean nations will no doubt lobby Washington to slow down the already glacial change going on in U.S.-Cuban relations. These island nations, despite rhetoric to the contrary, have no interest in seeing Cuba’s beaches taking U.S. tourism and investment dollars that would otherwise go to Cayman, Jamaica, Dominican Republic, and others.
One highly visible change could be negotiated fairly easily: allowing Cuban baseball players to emigrate and try out for Major League teams. There are currently 19 Cubans playing in the Major Leagues, among hundreds of Latin Americans. This number could easily double or triple, and would be popular on both sides of the Florida Straits.
Using sports as a vehicle for change is relatively simple. But any real change in the nature of Cuban-U.S. relations will take a long time to detect, since the Castros will not negotiate their own demise. No significant change will occur in Cuba-U.S. relations until there is a regime change in Havana.
By William Ross Newland III
A CIA Insider on Cuba
I was based in Havana, Cuba as the CIA's Chief of Station from 1994-1996, and since then I have followed developments in Cuba closely. Cuba 'gets under your skin' and you cannot leave the place without taking an interest in Cuba's future. Over the years U.S. efforts at rapprochement were often rebuffed, and Cuban efforts at reform were too modest and usually abandoned.
The simultaneous announcements by President Obama and Cuban President Raul Castro that the U.S. and Cuba would normalize relations presents the best opportunity in many years for the U.S. to improve relations in the hemisphere. For too long U.S. involvement in the region has been characterized by admonishments and criticism related to narcotics trafficking, human rights, and immigration. Positive engagement with a more diverse and mature Latin American hemisphere will enable the U.S. to advance its interests and limit Russian, Chinese and Iranian influence in the area.
The 17 December announcement will undoubtedly be well-received around the world, and especially in the region. But the announcement really only kicks off a process that, if managed well, will lead to a lifting of U.S. sanctions in exchange for some democratic reforms in Cuba. The U.S. cannot improve relations unilaterally: the Cuba Democracy and Freedom Act of 1996 (aka Helms-Burton) conditions improved relations on democratic reform. With the Summit of the Americas scheduled for April 2015 in Panama, the goal should be to lift elements of the embargo in return for reform, for example commitment to democratic elections, freeing all political prisoners, and allowing international human rights officials and Red Cross officials access to the Cuban penal system. We should also engage our regional allies to press for the same reforms since it is in everyone’s interest to have a constructive political and economic partner in Havana.
A Cuba committed to democratic reform could be a good trading partner to the U.S. The new port at Mariel is a logical stop for shipping that goes through the Panama Canal to/from the U.S. Cuba should be able to eventually offer promising investments in petroleum exploration, tourism, and agriculture (not to mention the export of baseball players!). Perhaps eventually Cuba could even be brought into the FTA process as part of the Caribbean negotiations.
Politically, Cuba could be an important interlocutor for the U.S. in dealing with regional issues, many of which have polarized Latin American nations. Cuba could play a positive role helping negotiate peace with the FARC in Colombia, and in blocking the efforts by Russia, China, and Iran to gain footholds in the Western Hemisphere. Venezuela might be driven to take some democratic steps if their puppet master Cuba is seen negotiating productively with the U.S.
With Cuba negotiating to improve relations with the U.S., the Organization of American States (OAS) would assume its former prominence as the regional anti-American fora are dismantled, among them the Bolivarian Alliance (ALBA) and the Community of Latin American and Caribbean States (CELAC), both of which were promoted by Hugo Chavez with the support of Fidel Castro, Evo Morales, Rafael Correa, and the Kirchners.
The 17 December announcement of a normalization of relations begins a complex process which, if handled well, will help restore and advance U.S. political and trade interests in the Hemisphere on a positive, modern footing.
By William Ross Newland III.
I was based in Havana, Cuba as the CIA's Chief of Station from 1994-1996, and since then I have followed developments in Cuba closely. Cuba 'gets under your skin' and you cannot leave the place without taking an interest in Cuba's future. Over the years U.S. efforts at rapprochement were often rebuffed, and Cuban efforts at reform were too modest and usually abandoned.
The simultaneous announcements by President Obama and Cuban President Raul Castro that the U.S. and Cuba would normalize relations presents the best opportunity in many years for the U.S. to improve relations in the hemisphere. For too long U.S. involvement in the region has been characterized by admonishments and criticism related to narcotics trafficking, human rights, and immigration. Positive engagement with a more diverse and mature Latin American hemisphere will enable the U.S. to advance its interests and limit Russian, Chinese and Iranian influence in the area.
The 17 December announcement will undoubtedly be well-received around the world, and especially in the region. But the announcement really only kicks off a process that, if managed well, will lead to a lifting of U.S. sanctions in exchange for some democratic reforms in Cuba. The U.S. cannot improve relations unilaterally: the Cuba Democracy and Freedom Act of 1996 (aka Helms-Burton) conditions improved relations on democratic reform. With the Summit of the Americas scheduled for April 2015 in Panama, the goal should be to lift elements of the embargo in return for reform, for example commitment to democratic elections, freeing all political prisoners, and allowing international human rights officials and Red Cross officials access to the Cuban penal system. We should also engage our regional allies to press for the same reforms since it is in everyone’s interest to have a constructive political and economic partner in Havana.
A Cuba committed to democratic reform could be a good trading partner to the U.S. The new port at Mariel is a logical stop for shipping that goes through the Panama Canal to/from the U.S. Cuba should be able to eventually offer promising investments in petroleum exploration, tourism, and agriculture (not to mention the export of baseball players!). Perhaps eventually Cuba could even be brought into the FTA process as part of the Caribbean negotiations.
Politically, Cuba could be an important interlocutor for the U.S. in dealing with regional issues, many of which have polarized Latin American nations. Cuba could play a positive role helping negotiate peace with the FARC in Colombia, and in blocking the efforts by Russia, China, and Iran to gain footholds in the Western Hemisphere. Venezuela might be driven to take some democratic steps if their puppet master Cuba is seen negotiating productively with the U.S.
With Cuba negotiating to improve relations with the U.S., the Organization of American States (OAS) would assume its former prominence as the regional anti-American fora are dismantled, among them the Bolivarian Alliance (ALBA) and the Community of Latin American and Caribbean States (CELAC), both of which were promoted by Hugo Chavez with the support of Fidel Castro, Evo Morales, Rafael Correa, and the Kirchners.
The 17 December announcement of a normalization of relations begins a complex process which, if handled well, will help restore and advance U.S. political and trade interests in the Hemisphere on a positive, modern footing.
By William Ross Newland III.