How Big Business Can Help ‘Normalize’ Cuban-American Relations
President Obama’s trip to Cuba, a communist nation, included a healthy dose of American capitalism. He brought along a cabal of U.S. business leaders, including the CEOs of Xerox, PayPal, Starwood, Marriott, and hip-hop clothier Fubu, and touted how entrepreneurship leads to a strong economy. Obama and his team want the U.S.’s trade embargo with Cuba to end, not just because it’s good for U.S. companies and better for Cuba, but because it will help repair political relationships.
“For decades the embargo has been used as a rationale, an excuse for a source of legitimacy in maintaining a type of closed system,” said White House staffer Ben Rhodes said during a briefing with media. “What we are doing is eliminating that rationale that the U.S. is to blame for the circumstances of the Cuban people.”
In other words, don’t blame us for your economic problems.
Carlos Gutierrez, the Cuba-American former U.S. Commerce Secretary and onetime CEO of Kellogg, said at a press briefing that he did not always believe the U.S. should end its embargo. But over time his mind has changed. “I believe the time is right,” he said. “I feel a bit liberated that I can say that, because in my gut, it’s harder and harder to use talking points. Those talking points are just a little bit stale and too old.”
A robust list of U.S.-Cuba announcements emerged from President Obama’s visit. Obama said Cisco (CSCO) is opening an IT academy in Cuba while General Electric (GE) and Google (GOOG) are working on deals with the government. Caterpillar (CAT) signed a deal to distribute equipment in the country. Carnival Cruises (CCL), Stripe, PayPal (PYPL), Starwood (HOT) and Marriott (MAR) all announced plans to expand there as well. Airbnb, which has been operating in Cuba for almost a near, expanded its home stay platform to include non-American guests in Cuba.
One stale talking point that Obama did not address, and that has become fresh again in recent years, is the fact that Cuba owes American businesses an estimated $7 billion in property claims. Cuban leader Fidel Castro nationalized the Cuban economy after taking power in 1959, and that meant seizing all manner of private property, sugar factories, mines, oil refineries. Plenty of it was owned by American corporations. There are 6,000 active property claims from American companies like The Coca-Cola Company (KO), Exxon (XOM), and the First National Bank of Boston, according to the Boston Globe.
Across numerous speeches and comments during his visit, President Obama expressed his hopes to “normalize” the U.S.’s relationship with Cuba after nearly 60 years of a very abnormal embargo and complete lack of engagement. Since December 17, 2014, when the U.S. announced it would restore diplomatic relations with Cuba, the relationship between the two countries has been moving to the “normal” sort of relationship America has with the rest of the world.
It’s still not there yet, or anywhere close. Despite looser restrictions, the U.S. trade embargo still forbids American companies from fully operating in the country, and Cuba remains the only country where U.S. citizens cannot travel as a tourist. Cuba’s troubling human rights problems were on full display during Obama’s visit, when at least 50 human rights protesters were arrested hours before Obama arrived. Later, Cuban President Raul Castro denied that Cuba is currently detaining any American political prisoners. (Media estimates of American prisoners range from 17 to 100.)
Many of the American businesses announcing plans to operate in Cuba cater to American travelers. (The number of American travelers in Cuba increased by 77% last year, after travel with a “person-to-person” educational visa became legal. Experts expect a similar increase this year.) More American travelers means more money going directly to Cubans, Rhodes said, be it through restaurants owned by Cuban entrepreneurs or various other tourism-related services.
But a diversity of businesses from a variety of countries is important, according to Rhodes, and the U.S. government has been “mindful” to engage with business leaders from multiple sectors. As Cuba increases the public’s access to the Internet, the government is likely to be cautious about any one company dominating its telecommunications systems. “They would, I think, want to have a diversity of foreign investors and developers,” Rhodes said.
While American companies have shown eagerness to engage in Cuba, the Cuban government has so far been slow to address business issues like the ability of American corporations to directly hire Cubans, and ending its unusual dual-currency system. (They use pesos and “convertible pesos,” or CUCs, which are used in tourism.)
“We’re trying to accelerate those processes by having this dialogue and having the business sector engage them and explain why these would be positive changes for their economy,” Rhodes said.