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Cuba: The Emerging Regulatory Framework

By Ashley Chappo

Since President Obama announced a shift in U.S. policy toward Cuba in December 2014, there has been a wave of historic diplomatic initiatives, including the reopening of the U.S. embassy in Havana, bilateral peace talks between the nations, a landmark meeting between Obama and Raúl Castro in Panama, and the removal of Cuba’s status as a state sponsor of terrorism. 

Yet, despite the hopeful nature of this progress, challenges remain, with diplomatic gains hanging in the balance as the United States prepares for a leadership change in 2016. As fears of a setback between the two nations loom, the conversation surrounding regulatory frameworks remains more vital than ever, with a renewed focus on the policy opportunities and obstacles facing restored U.S.-Cuban relations.

Last Thursday, carving out a place at the forefront of these important conversations, the World Policy Institute held its inaugural Cuban Reset Roundtable, part of a yearlong discussion series featuring preeminent figures in law, finance, and governance. The roundtable dialogues, organized in part by the World Economic Roundtable, aim to assess the state of play in U.S.-Cuban reconciliation and facilitate partnerships between political and economic actors in the United States, Cuba, and beyond. 

Pedro Freyre, a lecturer of law at Columbia University School of Law and chair of international practice at leading corporate law firm Akerman, kicked off the series with a talk entitled "Cuba and the U.S.: The Emerging Regulatory Framework." Jorge González, first secretary of Cuba’s Permanent Mission to the United Nations, was also in attendance at the event, as were individuals with diverse knowledge and perspectives on Cuba, including potential corporate investors and prominent scholars. 

“When you look at the U.S. regulatory framework, which is extremely complex, and the Cuban regulatory framework, which is extremely tight, it is a recipe for a stalemate,” said Freyre to the crowded room at Akerman’s offices. “It is very, very difficult to get an alignment of the two sets of regulations so that there is a free flow of travel, information, finance, and commerce. We have to work hard on common sense objectives.”

The talk began with a primer on the current state of diplomatic relations a year after the restoration of diplomatic ties. 

“I have never seen more U.S. flags on the streets of Havana. There is an underlying wealth of goodwill,” said Freyre, describing the past few months as the most exciting time in U.S.-Cuban relations in decades.

“After 55 years of acrimony, confrontation, debate, even coming at times to actual shooting incidents and the threat of a nuclear war, we now have a conversation going as to how far we have come, what has been accomplished, what yet needs to be done, and what we see before us.”

Moving forward, Freyre pointed to the fact that Cuba offers the “most economic potential of all Caribbean nations,” with a GDP of $68.2 billion and active tourism, agriculture, mineral, and health sectors. In fact, once trade relations become normalized, Freyre believes Cuba may provide an attractive base to serve the Gulf of Mexico, the Caribbean, and the United States.

However, despite these prospects, Cuba remains dependent on imports for food and energy. Freyre recognizes this as a barrier, but he also sees promise in other indicators, such as the natural assets of the Caribbean island and the country’s human capital. For example, Cuba’s adult literacy rate of 99.8 percent is better than the adult literacy rate of Florida, signaling a promising future for Cuba’s people.

Comparing the political landscape to a Cuban sandwich, Freyre highlighted the multiple layers of Cuban politics in the United States. “There are a bunch of issues that need to be addressed in the political arena,” he said. Among the issues are travel, trade, telecoms, pharma, finance, and immigration. Therefore, the main U.S. policy objectives should include charting a new course for relations with Cuba, engaging with the Cuban people, facilitating travel and financial interactions, and improving telecom access.

Yet, even as the foundation for great progress exists, the actual opening of regulations has been slow. Chiefly, the U.S. embargo remains in place, prohibiting most transactions as enforced by the Office of Foreign Assets Control. Both Cuba and the United States need to work on the agility of their bureaucratic processes in an effort to break down these barriers, according to Freyre. Cuba’s primary policy objectives need to include lifting the U.S. embargo, facilitating U.S. tourism, and boosting foreign investment and collaboration in key sectors, such as clean energy, biotech, agriculture, and tourism.

So far, a key regulatory change that is having immediate effect it the opening of travel restrictions, with general licenses now being issued for 12 travel categories, including family visits and journalistic, professional, educational, and religious activities, among others. Furthermore, U.S. credit cards may now be used in Cuba, licensed U.S. companies may now have warehousing presence on the island, and the sale of certain U.S. products may now be financed.

These regulatory changes have had a significant impact on the ground, including increased U.S. business interest, a 40 percent increase in U.S. travel to Cuba, a shift in Cuban-American attitudes, and a general uptick in the Cuban economy.

“I have to say about Cuba, tranquilo! Things take time. Eventually things will happen, but they take time,” said Freyre. But, of course, there is increasing pressure to open up regulations faster, which Freyre acknowledged.

He concluded his talk with a nod to the 2016 presidential election, noting the importance of quick regulatory advancements due to the inevitable changes bound to take place once a new leader enters the budding diplomatic relationship.

“The presidential election creates a potential issue with Cuban policy,” said Freyre. “What happens in November? How are these different candidates going to deal with Cuba?”

When it comes to his personal views on the presidential race, Freyre sees political allies to the Cuba cause in Hillary Clinton, Bernie Sanders, and even Donald Trump, candidates he expects will for the most part continue Obama’s legacy on Cuba. On the other hand, Republican candidates Ted Cruz, Marco Rubio, and Jeb Bush are all self-declared hardliners on Cuba policy. Other Republicans like John Kasich remain a mystery. In advance of the upcoming leadership change in the United States, Freyre called for expedient actions on the part of both nations to accelerate progress in aligning their regulatory frameworks.

“We are at a moment,” said Freyre. “This is the moment to get things done. This is the moment to cement relationships. The more progress we make, the tougher it will be for anybody to unwind what has been done over the last year.”

*****

*****

Ashley Chappo is an editorial assistant at World Policy Journal

[Photo courtesy of mystuart]

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