Obama Wagers on More Cigars to Win Over Congress on Cuba Embargo

President Barack Obama billed opening Cuba
as a chance for trade to promote political change, and he’s
sending Commerce Secretary Penny Pritzker on a trade mission
there soon.

He’s also wagering that more trade will change the
political dynamic in the U.S. Congress.

Winning over members of Congress is key, since they’re the
only ones who can lift the five-decade-old economic embargo on
Cuba or end the broad travel ban.

“I believe greater engagement will help more and more
Americans understand the economic potential of Cuba and the
incredible entrepreneurial capacity of their people,” Pritzker
said in an e-mail. “We will do all we can under these actions
to unleash that potential.”

The approach isn’t unprecedented for the U.S. — it’s the
basis of U.S.-China relations. Still, on Cuba, the U.S. has
always insisted political change had to come first, and
opponents of the move in Congress, led by Senator Marco Rubio, a
Florida Republican whose parents left Cuba in 1956, said they’d
do all they could to thwart the move.

While Americans won’t be able to visit as tourists, there
will be more exceptions to the travel ban. When they get there,
they’ll be able to use credit and debit cards, and bring home as
much as $100 worth of previously illegal Cuban cigars. U.S.
companies will be allowed to export agricultural commodities,
construction supplies and telecommunications equipment, and
financial institutions can open accounts at local banks. Exports
will be limited mainly to Cuba’s emerging private sector.

‘Political Space’

Julia Sweig, director of Latin America Studies at the
Council on Foreign Relations, said business, tourism and opening
an embassy in Havana can “create the political space for
further actions” that can only be taken by Congress.

“But I think we’re a while away from that,” Sweig said.

The embargo has been in place by presidential order since
President John F. Kennedy’s administration, and was codified
into law in 1996. The underlying U.S. travel ban is also an act
of Congress.

Calling on Congress to act, White House spokesman Josh Earnest said Obama has done what he can. “He’s used all the
authority he can to take away these restrictions,” Earnest said
on Dec. 17. “Some of them remain in place.”

Expropriation Claims

Winning over Congress will mean dealing with other
impediments to normal U.S.-Cuban relations, such as the U.S.
Foreign Claims Settlement Commission.

The group has certified $1.9 billion in claims against Cuba
for expropriations of U.S. citizens’ and companies’ property
made after 1967. Starwood Hotels Resorts Worldwide Inc. (HOT), for
example, lodged a complaint for $50.7 million against Cuba, the
result of property lost in 1968 worth $425,000, plus decades of
interest.

U.S.-Cuba trade could eventually reach $12.6 billion in
goods and services, up from $300 million to $500 million
annually since 2008, according to a May study by Gary Hufbauer
and Barbara Kotschwar at the Peterson Institute for
International Economics in Washington.

Orbitz Worldwide Inc. (OWW) collected more than 100,000
signatures on a 2009 petition calling for travel freedom to
Cuba. The Chicago-based online booking company embraced the
business as soon as Obama announced the changes, which include
more visas for U.S. visitors.

Money Transfers

“We look forward to the day — hopefully soon — when all
Americans have the opportunity to travel to Cuba,” Orbitz Chief
Executive Officer Barney Harford said when the move was
announced.

Companies such as Western Union Co. (WU) and MoneyGram
International Inc. (MGI)
already let Americans send limited amounts of
money to Cuba. More firms will join as Obama’s move quadrupled
how much money Cuban-Americans will be able to send to relatives
still on the island, and eased the risks of running afoul of
U.S. sanctions.

“It will increase competition in the corridor as companies
get off the sidelines,” said Paul Dwyer, chief executive of
Bethesda, Maryland-based Viamericas Corp., a money-transfer
firm. “We are looking forward to that.”

Financing of trade with Cuba will also be easier, an angle
that could benefit agricultural exports. While a 2000 law
allowed U.S. exporters to sell to Cuba, President George W. Bush’s administration issued a legal interpretation that
complicated financing.

Together, these measures could create a profitable if
modest amount of trade between the U.S. and Cuba. And if it
eases political tensions, lifting the embargo could be next.

“Congress now has a decision to make,” said Jake Colvin,
vice president for global trade at the National Foreign Trade
Council
, an industry group in Washington. “It can either show
that politics stops at the water’s edge, or insist that the
walls of the Cold War still exist.”

To contact the reporter on this story:
Carter Dougherty in Washington at
[email protected]

To contact the editors responsible for this story:
Jesse Westbrook at
[email protected]
Heather Smith, Bernard Kohn

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