Michael Corleone had his future planned out. Leaving his half-brother Tom Hagen in charge of the illegitimate “family business,” Corleone flew to Cuba in 1958 with the intention of buying a hotel from business partner Hyman Roth. Corleone believes he is on the verge of being a legitimate business executive who owns hotels in Las Vegas and Cuba.
In Cuba, though, Corleone saw a guerrilla who was part of rebel leader Fidel Castro’s military force intentionally kill himself and a government official who worked for Fulgencio Batista, the dictatorial leader of Cuba, with a grenade. Concerned that Castro will overthrow Batista, a business-friendly ally of the United States, Corleone reneged on his deal and returned to his family business. On Jan. 1, 1959, Castro replaced Batista as Cuba’s leader by military force.
Corleone, of course, is a fictional character in the movie “The Godfather, Part II,” but Castro and Batista were real-life people – and the film’s depiction of Castro’s takeover was accurate.
Nearly 60 years later, starting a business in Cuba is still a risky proposition. As the nation’s Communist and anti-American leader, Fidel Castro created an anti-business culture. He also ruled the nation as a dictator with an iron fist from 1959 through 2006 before he became too ill to govern. He died 10 years later. His replacement, younger brother Raul Castro, has ruled Cuba since 2006. Cuba is still a dictatorship.
Currently, the younger Castro favors more business ties between his nation and the USA, but can American business executives have more confidence in Cuba’s long-term economic stability than Michael Corleone given the nation’s long history of economic struggles and lack of economic freedom?
In 2014, President Barack Obama essentially said “yes” by announcing that the two nations would have diplomatic relations in 2015 for the first time since 1961, and the USA would loosen the trade embargo it has imposed on Cuba since 1960. In the past two years, American companies have concluded 26 business deals with Castro’s Cuba, ABC News reported this June.
In addition, “dozens of major American companies” have started or expanded their businesses since Obama’s decision, and the number of Americans visiting Cuba was 180 percent higher in the first half of 2016 than the first half of 2015, USA Today reported.
The economic progress seems impressive, but political repression has actually increased since Obama’s 2014 announcement. The latest figures compiled by the Cuban Commission of Human Rights and National Reconciliation show that Cuba arrested 9,125 dissidents and political activists in the first 10 months of 2016. This was more than were arrested in all of 2014. In 2010, there were only 2,074 political arrests – Cuba is becoming MUCH more repressive.
GOP Concerned About Freedom
Conservatives knew for decades, of course, that U.S. investment in Cuba could increase if the economic sanctions were weakened, but a large percentage of them opposed such a move — and Obama’s 2014 decisions — unless and until Cuba became freer politically and economically.
On the other hand, many “Chamber of Commerce conservatives” supported more trade between American companies and Cuban companies as well as trade and tourism pacts between the two nations. These conservatives argued that trade would open up Cuba and make it more economically and politically free naturally over the course of time. That has not happened.
Last September, Donald Trump reversed his 2015 support of Obama’s Cuba policy, and said he would prioritize the fight against Cuba’s Communist oppression. He emphasized this political position when he announced on June 16 that “effective immediately, I am canceling the last administration’s completely one-sided deal with Cuba.”
Under Trump’s orders, the federal government adopted the following positions:
* Business transactions with Cuba’s military would be banned.
* Americans would not be allowed to stay in hotels owned by the military.
* Travel by individual Americans would become more limited. Basically the pre-Obama policy of permitting group travel for specific reasons such as conferences, and closely monitoring individuals would be reinstated.
However, a very significant part of Obama policy will be retained. The USA and Cuba still have diplomatic relations, American airlines and cruise ships can still travel to the island 93 miles south of Florida, business transactions that don’t involve the military are still permitted, American credit cards can still be used in Cuba, and and the repeal of the decades-old policy that expedited the U.S. citizenship process for immigrants is still in effect.
Will Trump’s decision affect the growing economic ties between the USA and Cuba? Will it impact any of the agreements consummated since Obama changed the decades-old policy?
It’s certainly difficult to quantify the impact, but Benjamin Rhodes, a high-level official in the Obama Administration who helped devise the change in policy toward Cuba, told the Washington Post that Trump’s decision could hurt Cuba economically and compel it to deepen its economic ties with China and Russia.
Engage Cuba, which describes itself as a “national coalition” of companies, organizations, and local leaders that support lifting the embargo to “empower the Cuban people and open opportunities for U.S. businesses,” has analyzed the impact of undoing all of Obama’s policy changes. It concluded in this report that such changes “could cost U.S. businesses and taxpayers $6.6 billion over the course of the President’s first term and affect 12,295 jobs across the country.” However, it has not analyzed the impact of Trump’s decision to undo some of Obama’s policy changes.
The bottom line is that politics can affect the bottom line. Trump and the Republican Congress could respond to Cuba’s growing repression by signing more stringent anti-Cuban executive orders and enacting more stringent anti-Cuban laws. Or they could respond to lobbying by the business community by doing the opposite. And the leadership of Cuba could either compel the United States to change its policy via its oppression, or change its policy on economic relations with America on its own.
Regards,
Ethan Warrick
Editor
Wealth Authority
