U.S.-Cuba relations - Plenty to work on in 2016

U.S.-Cuba relations: Plenty to work on in 2016

Business activity between two countries expected to intensify
Embargo remains a barrier to improved relations
Will progress be made on difficult issues from migration to human rights?
BY MIMI WHITEFIELD
mwhitefield@miamiherald.com

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.

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.

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.

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.

Changes in Politburo?

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.

Oil uncertainties

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 Nicolás 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 Raúl
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, migration

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.

Obama trip to Cuba?

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 told reporters during his Cuban trip.

In an interview with Yahoo News in December, the president said that he
"very much" wants to visits Cuba.

"If I go on a visit, then part of the deal is that I get to talk to
everybody," said Obama, adding that he and his aides hope the
relationship progresses to a point where there is agreement that "now
would be a good time to shine a light on progress that's been made, but
also maybe [go] there to nudge the Cuban government in a new direction."

Critics of the rapprochement say there needs to be significant
improvement in Cuba's human rights record before the president should
even consider such a trip.

In the second half of this year, the pace of political detentions has
increased — although most of those arrested are held for only a few
hours or days. In December, the Cuban Commission for Human Rights and
National Reconciliation reported 930 "politically motivated" temporary
detentions or arrests, compared to 489 the previous December. The
commission said there were 8,616 such cases in 2015, compared to 8,899
in 2014.

"A visit to Cuba to cozy up to Fidel and Raúl Castro will not help the
Cuban people achieve their desire for freedom and democracy. President
Obama cannot in good conscience state that his Cuba policy has improved
human rights conditions on the island," said South Florida Republican
Rep. Ileana Ros-Lehtinen.

In 2016, Ros-Lehtinen said she plans to continue to work on supporting
pro-democracy leaders in Cuba and try to "amplify their calls for
freedom" in the U.S. Congress. "The president's legacy on Cuba is
unfortunately clear as one of appeasement to dictators, indifference to
human rights, and no accountability for rogue regimes," she said.

Kavulich said it appears that the United States is holding Cuba to a
minimum of standards in the two countries' evolving relationship. He
believes Obama is so intent on visiting Cuba that "the Cuban Foreign
Ministry would have to work day and night to create a scenario so the
president wouldn't go.

"I think this will be a year of calculations with both sides engaged in
trying to figure out the maximums and minimums required for responses,"
he said.

'We're all over the place'

Gomez said 2016 also could be a year of definition for the
Cuban-American community.

Old guard Cuban Americans have expressed dismay that they weren't
consulted when the Obama administration was formulating its new Cuba
policy, and when a group of influential Cuban-American business
executives recently published an "Open Letter to Our Fellow
Cuban-Americans" that hailed progress in the relationship and urged
further engagement with the Cuban people, it opened a rift with some
exiles who said the letter writers ignored their pain and Cuban reality.

"Where is my community going to land on all of this?" asked Gomez.
"We're all over the place [on rapprochement]. The question in 2016 is
how much can the Cuban-American community recapture some of the agenda
between the United States and Cuba and what role, if any, can we play in
this?"

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