Beginning with a trickle and then growing rapidly, a steady flow of money into Cuba will be the first tangible effect of normalized US-Cuban relations. With more cash reaching the island’s impoverished citizens comes hope for a better life, something all Cubans desperately want.
Cubans typically earn only $20 per month so that tips from visitors rank just below remittances as a financial lifeline.
Like the communists in China, the overriding objective of Cuba’s communist party is retaining power. But unlike the Chinese who have concluded that higher living standards derived from economic freedom is the recipe for preserving one party rule, Cuba’s leaders haven’t made that determination.
“Cuba’s communists are going through an identity crisis, not knowing what they want,” says John Kavulich of the US-Cuba Trade and Economic Council. He says the ruling party views itself as still under US attack and fears the income inequality that would result from a freer market.
Kavulich says it was economic desperation that led Raul Castro to agree to the normalization with the US that was announced in mid-December. Cuba, he says, is essentially bankrupt with huge debts that it can’t pay. With the collapse of oil prices, Venezuela has cut back on transfers, aggravating Cuba’s financial distress.
While US companies can now sell to Cuba, the ban on financing for Cuban importers remains. Most business transactions will be cash only, a significant impediment particularly to US food and agricultural firms eager to expand in the Cuban market.
Trade lawyer Robert Muse doubts that congress will repeal the 55-year-old trade embargo this year. He concedes that President Obama has wide authority to use executive action to resume trade and travel but says the ban on financing is a huge constraint.
Kavulich, a frequent visitor to Havana, believes “Cuba will allow in only what it thinks it can control.” Permitting travel and lifting of the ban on credit card use are positive moves but the island is not being thrown open to US trade and investment. US Visitors still have to obtain visas to enter Cuba and normal tourism is still banned under terms of the embargo that only congress can lift. Havana has a limited tourist infrastructure with few restaurants and hotels that meet western standards.
Before there can be widespread investment American firms have $5 billion of outstanding claims that have to be resolved.
Since Raul Castro succeeded his brother Fidel as president in 2008 Cuba has initiated modest economic reforms. Cubans can now buy and sell their cars, homes and apartments. During a visit to Havana this month I was surprised to see occasional “for sale” and “for rent” signs. Small-scale entrepreneurship is beginning to take hold.
Rental apartments in Old Town Havana
While the charm of once grand but decaying buildings, 1950’s automobiles, the absence of advertising and US-style fast food may be compelling, prospective visitors should scale back their expectations. Internet service is spotty. English-language newspapers aren’t available. Those vintage cars can’t be exported.
What visitors will find is a vibrant Cuban culture, great music, friendly people and a receptivity to Americans.
Marco Rubio, the Cuban-American senator from Florida, believes the loosening of US travel and trade restrictions creates “a windfall for the Castro regime that will be used to fund its repression against Cubans.” Short-term there may be truth in his assertion but long-term Rubio is certainly wrong.
Like people everywhere Cubans crave freedom and that quest will not endear them to the Cuban communist party. Equally Cubans value their independence and are proud of their revolution’s accomplishments.
But the risks of normalization rest primarily with Cuba’s rulers. Their country is changing and the lifting of US trade restrictions deprives the communists of a powerful weapon, that the embargo is the cause of all of Cuba’s problems.