If 2015 was a watershed year in U.S.-Cuba relations with the resumption of diplomatic ties and the opening of embassies, then 2016 is expected to be a year of definition as the two former adversaries move past ceremony and tackle the hard issues that still separate them.
Among the most pressing problems that will shape the relationship this year are migration, with thousands of Cubans intent on reaching the United States stranded in Central America, and Cuba’s economic future, now that its preferential oil deal with Venezuela appears to be in jeopardy after the country’s opposition won control of congress.
Business interests are hopeful that there could be a breakthrough and that major deals resulting from the United States’ commercial opening toward Cuba might come to fruition. For the Cubans, the most important thing is getting the embargo lifted – a difficult proposition in an election year – and they don’t hesitate to preface most talks with U.S. executives and politicians about the need to get rid of it.
The year started with Virginia Democratic Gov. Terry McAuliffe prospecting in Cuba for business opportunities for his state. He came away with an agreement between the Port of Virginia, a deepwater port in Norfolk, and Mariel, Cuba’s container port west of Havana, to explore ways to work together. He also announced an academic exchange and research understanding between the University of Havana and Virginia Commonwealth University.
But the Cubans also got what they were interested in: McAuliffe said that it was time to put an end to the “foolish policy” of the embargo and that he would be meeting with members of Congress and administration officials to drive home the message that “2016 needs to be the year that we move our relationship forward, that we end this embargo and we do the right thing for the citizens of the United States of America and the citizens of Cuba.”
Pedro Freyre, an attorney who heads the international practice at Akerman, said 2015 was the year when the foundations of the new relationship were laid down, setting up a basis for what may come in 2016.
I think the Cubans understand they have a limited window of opportunity and after the end of Obama’s term, things are up for grabs.
Pedro Freyre, attorney who heads an international practice
He expects the administration will announce another set of regulations soon that will give U.S. businesses more confidence to engage with Cuba and that there will be a flurry of activity during the first quarter of 2016.
“The administration has already decided to make another set of changes,” said John Kavulich, president of the U.S.-Cuba Trade and Economic Council. He expects they will focus on diminishing restrictions on the use of U.S. dollars in international transactions dealing with Cuba. “That would certainly benefit the Cubans anywhere they do business, but this has also been an impediment for U.S. companies that want to do business with Cuba,” he said.
Limited window for changes
Under the Obama administration’s commercial opening toward Cuba, products such as Internet and telecom equipment that increase connectivity for the Cuban people, agricultural and construction equipment destined for private entrepreneurs, and many other products that will help Cuba’s growing entrepreneurial sector run its businesses may be sent to Cuba. U.S. companies also are allowed to buy some products made by private Cuban businesses.
Kavulich said he also expects regulations will be issued outlining the terms of payments for such transactions, which are exceptions to the embargo, and that the process by which American travelers certify that they fall within the 12 categories authorized to visit Cuba will be streamlined.
“The clock is ticking for the Obama administration,” Freyre said. “I think the Cubans understand they have a limited window of opportunity and after the end of Obama’s term, things are up for grabs.”
A few other commercial milestones also are expected to be achieved this year: the first scheduled commercial flights between the United States and Cuba in five decades and perhaps the resumption of U.S.-based cruise ships calling in Cuba.
In mid-December, U.S. air carriers said they’d reached an agreement in principle with the Cuban government to allow scheduled flights to Cuba, but provided few details.
Several cruise lines are advertising Cuban itineraries that depart from U.S. ports this year, but so far Cuba hasn’t given the green light to any of the cruise lines.
Still, Freyre, who represents corporate clients who have struck deals with the Cubans or hope to, said he’s “guardedly optimistic” that the cruise lines are making progress in winning approvals. “We’re on track,” he said.
I’d be surprised if he didn’t visit. This is a major legacy item for President Obama.
Virginia Democratic Gov. Terry McAuliffe
Other analysts expect a slower pace in the rapprochement and say the Cuban government has been very cautious about selecting U.S. business partners or changing Cuban laws or procedures to facilitate the U.S. overtures.
Among the reasons for the slow uptake, said Freyre: The sheer number of overtures by U.S. businesses has caught the Cubans by surprise; dealing with U.S. executives is relatively new territory for them; and the nature of Cuban bureaucracy, which requires many interagency consultations.
“They’re going about this with a whole lot of thought; they don’t want to make decisions that will lead to risk,” he said.
Cuba political changes possible
When the Communist Party of Cuba holds its Seventh Congress in April, there also may be clues about the political future of the country that could be relevant to the evolving relationship with the United States.
“It will be very telling if there are major changes to the Politburo,” said Andy Gomez, a Cuba scholar and retired dean of international studies at the University of Miami. As the revolutionary old guard retires and dies off, Cuba is undergoing a generational power shift.
If there are changes in the Politburo, Gomez said, new members may bring different views on U.S.-Cuba relations.
Also key to Cuba’s economic future and how willing it may be to cut deals with American businesses is the fate of its preferential oil deal with Venezuela, which itself is struggling economically but provides deeply subsidized oil to Cuba in exchange for Cuban medical personnel. Last month the Venezuelan opposition won a super majority in the National Assembly and the new congress, which was seated last week, isn’t expected to be as friendly to Cuba as the island’s ideological soul mate President Nicolas Maduro.
The opposition bloc announced that one of its goals was to develop a strategy to constitutionally change the government within six months.
In his Dec. 29 speech to Cuba’s National Assembly, Cuban leader Raul Castro said that economic growth was expected to fall from 4 percent in 2015 to 2 percent this year. He mentioned not only the drop in the prices of traditional Cuban exports such as nickel but also oil uncertainties.
While Castro said lower oil prices could lower the costs of some imports, he also said Cuba’s “mutually advantageous” cooperation agreements were being affected and he specifically mentioned Venezuela, which he said was “being subjected to an economic war to reverse popular support for the revolution.”
Castro said the Cuban government is convinced that such efforts will be resisted. But in light of the uncertainties, he said Cuba needed to be as efficient as possible, reduce costs, concentrate its resources on activities that will generate export earnings and emphasize import substitutes, and increase investment in infrastructure and production.
If the Venezuelan oil spigot begins to dry up, “that impacts Cuba’s cash flow – both money coming in and money going out,” said Kavulich.
But Freyre said the Cuban government has had time to prepare for a possible diminished economic relationship with Venezuela. “They haven’t been in power for 54 years by making it up as they go along,” he said.
Human rights divide
The United States and Cuba also remain far apart on issues such as human rights and migration. An estimated 8,000 Cubans have been stuck at the Costa Rica border after Nicaragua refused to allow them to cross into its territory to continue their journey to the United States. Here they plan to take advantage of the Cuban Adjustment Act, which allows them to become permanent residents after spending a year in the United States.
While a pilot program that will start bringing some of the Cubans to El Salvador, where they can continue their route north, is expected to begin Tuesday, it doesn’t address the more basic differences between the two countries.
Cuba opposes the adjustment act, the U.S. wet foot/dry foot policy and a special parole program for Cuban medical professionals because it says they encourage people smuggling and motivate Cubans to abandon their medical posts abroad. Even though the two countries now have diplomatic relations, the United States has said it has no plans to change its special treatment for Cubans.
This also may be the year President Barack Obama visits Cuba. Ben Rhodes, deputy national security adviser, said that a decision will be made on a presidential trip in the next few months but that the president wants to see an advance in his priorities, such as improvement in Cuba’s human rights record, more access to information and the Internet on the island, and a greater role for private enterprise in Cuba.
“I’d be surprised if he didn’t visit. This is a major legacy item for President Obama,” McAuliffe said during his Cuban trip.
In an interview with Yahoo News in December, the president said that he “very much” wants to visits Cuba.