Sun | Dec 17, 2017

David Jessop | The surprising beneficiaries of the new US Cuba regulations

Published:Sunday | November 19, 2017 | 12:00 AM
In this May 2017 file photo, people look at luxury storefronts at the Manzana de Gomez Kempinski five-star hotel in Havana, Cuba.

Just over a week ago, the United States administration published new regulations governing travel and trade between the US and Cuba. Their effect is to partially reverse elements of the more liberal policy towards Cuba adopted by President Obama and to set back relations.

They turn into law a range of the policies that President Trump announced earlier this year, banning all US citizens from engaging in direct financial transactions with more than 180 entities and sub-entities identified on a 'Cuba Restricted List'. This includes companies, manufacturers, the port of Mariel and its associated development zone, and over 80 hotels, travel agencies, and shops - all facilities the US administration believes are benefitting the Cuban military, its security services, or their personnel.

They also end individual people-to-people travel, allowing only carefully controlled group travel in ways Washington believes will improve its long-standing statutory ban on US tourism to Cuba.

In future, all such 'educational travel' to be conducted by an organisation is subject to US jurisdiction, with each traveller engaging in a full-time schedule of activities that results in meaningful interaction with individuals in Cuba. They also say that such visits must enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people's independence from the Cuban authorities.

There are exceptions, but for the average US traveller or business, the approach seems designed to create enormous uncertainty about what is and is not allowed; about where to visit; what to say to whom; and where to eat, drink and sleep.

This is because the listings of hotels and products and the instructions on people-to-people contact appear idiosyncratic, and in some respects almost impossible to interpret responsibly. They infer that for US citizens, the safest future mode of travel to Cuba not subject to undue scrutiny through the US Treasury's Office of Foreign Assets Control (OFAC) will be by US cruise ships, with onshore visits guided by and accounted for to the OFAC to the authorities in Washington by US citizens.

It, of course, remains to be seen how closely the OFAC will enforce the new regulations on US visitors and companies, but the most likely outcome will be to curtail US visitor arrivals and the hope that US companies had for new business, unless they can prove they already have contractual arrangements in place, or find alternative Cuban entities with which to partner.

What, however, is different now is that the US accepts that it almost stands alone in its desire to isolate Cuba. In confirmation of this, Nikki Haley, the US ambassador to the UN, in a strongly worded address to the United Nations General Assembly before the annual vote condemning the US embargo on Cuba, made this clear.

 

NEW REGULATIONS

 

What the new regulations do is create sometimes surprising new winners and losers.

First, when it comes to travel, the clear beneficiaries will be the US cruise lines able to reposition vessels to reap the rewards from those US travellers who still want to visit Cuba, as it were, safely cocooned in a US environment. Others likely to benefit will be specialised US-based US-run tour operators able to package visits that are prepaid though counterpart Cuban state enterprises not proscribed by US regulations.

The losers and those most likely to suffer in the short term are the Cuban non-state taxi drivers, the self-employed small-property or restaurant owners, and their self-employed private suppliers, whose growing economic strength had begun to pose significant challenges to conservative thinkers within the Cuban political system. In addition, others that will lose out are individual US travellers, constrained from travelling independently by their own government, and the scheduled airlines that carried them.

Second, and paradoxically, the US's allies may benefit the most.

During the Obama Administration, countries from Japan to Germany were able to normalise their relations with Cuba and are translating this into new investments in productive enterprises and tourism.

The clearest example is in the now much-changed relationship with the European Union through its Political Dialogue and Cooperation Agreement with Cuba. Agreed during the period of detente; this formalises political dialogue, strengthens cooperation in trade, development, and culture; and enables the discussion of human rights.

Speaking recently to Cuba's state media about this, the EU Ambassador in Havana, Alberto Navarro, said that he expects the relationship to become "more serious and mature" and bilateral ties to take on a new momentum. "The European Union believes in building bridges, not in building walls," he pointedly told journalists.

Third, among the nations that may also benefit are some that most in the US do not regard as friends. Russia, China, and countries that have a very different worldview and values to the US have been steadily strengthening relations with Cuba and other like-minded nations in the hemisphere.

 

SHORT-TERM US VISITORS

 

And finally, while the rest of the Caribbean, in the short-term is likely to receive US visitors displaced from Cuba, it is probable that in the medium term, some regional destinations will see cruise ship arrivals out of south Florida cut to incorporate overnight or longer port calls in and around Cuba for the many US citizens who still want to visit.

As for the Cuban Government, it sees the reversal of US policy as a "serious setback" in bilateral relations, according to Josefina Vidal, the director general of the US Division of the Cuban Foreign Ministry.

Despite this, it is worth noting that separately, the country's Ministry of Tourism has just said that it still anticipates a record 4.7 million visitors by the year's end, and that its Ministry of Foreign Trade and Investment recently announced that overseas investment commitments so far this year stand at a record US$2 billion.

- David Jessop is a consultant to the Caribbean Council and can be contacted at david.jessop@caribbean-council.org