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Cuba Changes, United States Policy Stagnates

Wayne Smith and Jennifer Schuett, Americas Program, Center for International Policy, December 27, 2007

After the Democrats gained control of both houses of Congress, many expected rapid progress toward a new Cuba policy. (Photo: Adalberto Roque / AFP-Getty Images)

Change and continuity are the two words that best describe Cuba and its relations with the United States.

After nearly 50 years of the predictable leadership of Fidel Castro, presidential power has transferred to his brother Raul. But this is not the topic of discussion; rather it is the official recognition of longstanding problems, the easing of restrictions on private businesses, and the official encouragement of public discussion that has everyone talking about change in Cuba.

Cuban-American community politics in Miami are also evolving. "The Miami of 10 years ago is not the Miami of today," notes Alfredo Duran of the Cuban Committee for Democracy. Miami's Cuban-American community, which was once known for its hard-line positions against the Castro regime, has grown disenchanted with the United States' foreign policy of isolation and embargos. Community leaders are now talking about the need for a foreign policy of dialogue and engagement.

But continuity, not change, reigns in Washington. The Bush administration is sitting on the sidelines, failing to take advantage of the new opportunities for meaningful engagement. Unfortunately, this continuity in Cuba policy is expected to persist until after the presidential elections.

A Call for Debate

In his last major policy speech in November 2005 Fidel Castro warned that Cuban socialism might be destroyed from within. He cited a rampant black market—from pilfered goods to illicit businesses—as the main culprit, and he called for increased state controls and the end of private restaurants and taxis.

But Raul Castro recently said the black market exists as a result of low wages. To remedy this, Raul Castro ordered that the government pay farmers what it owed them, and he tripled the official price paid for beef and milk. What's more, private restaurants and taxis have not been shut down.

In his first major policy speech this past July 26, Raul Castro ridiculed the bureaucracy and the dysfunctional agricultural system. He called for structural changes and a debate as to how best to bring about these changes.

Will the United States be in a position to take advantage of the changing situation in Cuba? According to Col. Larry Wilkerson of the College of William and Mary, "The United States hasn't been capable of anything resembling diplomacy since Sept. 11, 2001. Its whole foreign policy is broken and in many situations it is being written off as irrelevant." Calling the United States' Cuba policy "the dumbest policy on the face of the earth," Wilkerson says that he can't think of a better way to signal that the United States government is once again capable of diplomacy and a sensible foreign policy than by having it announce in January 2009, following the inauguration, that we are moving to engage with Cuba and to lift travel controls. Once the travel controls are removed, the entire Cuba policy will begin to unravel, predicts Wilkerson. But he asks, "Will the winning Democratic candidate be prepared to make such an announcement?"

After the Democrats gained control of both houses of Congress, many expected rapid progress toward a new Cuba policy. But the prospects for reform of the failed Cuba policy have suffered from the failure of the presidential candidates to criticize current policy. The presence of a strong lobby in favor of the present policy has also obstructed change.

Shamefully, the Democrats have failed to push forward new legislation that would lift travel restrictions—even though preventing Americans from traveling violates their rights and is entirely counterproductive to foreign policy goals.

Worse than the congressional standstill on the travel ban was the defeat in August 2007 of an amendment introduced by Rep. Charles Rangel, Democrat of New York, to simplify the complicated process under which Cuba pays for agricultural produce exported by the United States. According to the United States International Trade Commission, this legislation would have spurred a $92-$195 million increase in sales annually for American farmers. Sixty-six Democrats—most of whom were encouraged by donations from a conservative Cuban-American political action committee—joined with the Republican majority to defeat the bill.

But there is good reason to remain optimistic about the prospects for policy reform after the presidential elections. The Cuban-American community, which until recently has been against any change in policy, is coming around to a more constructive position.

New Thinking in Miami

Miami has long been known as home to the Cuban-American community. For years it served as the base for hard-liners pushing for a punitive embargo against Cuba. The concentration of citizens with emotional and historical connections to Cuba makes this community a passionate advocacy group and at times the only constituency with a voice in the matter of United States foreign policy toward the island. Led by the powerful Cuban American National Foundation (C.A.N.F.), along with a Bay-of-Pigs veterans' organization, Cuban-Americans have historically demanded a tight embargo and many continue to prepare for a post-Castro government in Cuba.

After the collapse of the Soviet Union in 1992, the community held emergency meetings to decide the fate of the island, drafted two constitutions and a peace accord, and prepared reconstruction plans. However, all of these proved to be futile and ineffective attempts to shape Cuban domestic affairs.

"Miami has its own foreign policy," explains former C.A.N.F. member and Bay-of-Pigs' veteran Tony Zamora, who recalls that as the "foreign minister" of Miami he would "encourage foreign diplomats to take a hard-line against Cuba."

"The Miami of 10 years ago is not the Miami of today," says Duran. Like other former C.A.N.F. members, he and Zamora are now calling for engagement, not confrontation.

One indication of the change underway in Miami is voter-registration patterns. Increasingly Cuban Americans are turning away from the Republican Party. Today, 25 percent of Hispanic voters in Miami are registered Democrats, but political observers say that percentage of voters who identify with the Democratic Party is much higher. The reason for the discrepancy, as Duran observes, is that the "Grandmother Factor" comes into play since many younger Cuban-Americans don't want to reveal to their grandmothers that they are Democrats.

Especially in the 21st and 25th congressional districts, represented by Lincoln Diaz-Balart and Mario Diaz-Balart respectively, polls indicate that a majority of Cuban Americans does not agree with current United States policy.

Change But Opportunities Still Limited

Despite the gradual changes in Cuba and changes in the Cuban-American community, Washington hasn't budged. According to Dan O'Flaherty of the National Foreign Trade Council, "Until the current law is changed, there will be no broad opportunities for trade." In fact, trade with Cuba has decreased in the past two years as a result of the highly restrictive Trade Sanctions Reform and Export Enhancement Act.

The Cuban economy, however, has been growing at annual rates of 11 percent on the average. The relative stability of the Cuban economy is due in large part to high nickel prices, Venezuelan oil subsidies, and doubled trade with China. The discovery of five potentially high-quality oil reserves in the Florida Straits has also boosted economic prospects, as bidding for drilling rights comes from Malaysia, China, and Canada, among others.

Timothy Deal of the United States International Business Council says that it is "hard to be optimistic" about the prospects for United States investment in Cuba. Before 1958, 90 percent of all foreign direct investment in Cuba was American. But today there are numerous obstacles constructed by the governments of both the United States and Cuba. The embargo, the Cuban American Democracy Act, and the Helms Burton Act effectively block American investment. On top of this, Robert Muse of Muse & Associates notes that there are more than 5,900 certified property claims totaling $1.9 billion that need to be resolved. From the Cuban side, Law 52 (passed in 1982) limits foreign partners to 49 percent ownership. Likewise, Law 77 (passed in 1995) restricts the types of business ventures that foreign investors may undertake.

"Cuba seeks limited foreign investment on limited terms," explained Deal. The Cubans do not want McDonald's or Wal-Mart. Though the number of foreign firms in Cuba has dropped in recent years, foreign currency reserves have increased due to the increased involvement of Venezuela and China.

In addition to the legal barriers, American investors regard Cuba as a relatively small market with high risks, and are thus less inclined to push for a change in United States foreign policy. However, Deal believes that a bilateral investment treaty could reduce some risk, creating greater interest in investment in the growing Cuban economy.

Former Senator George McGovern, who visited Cuba in October 2007, notes that conditions in Cuba for dramatically increased United States agricultural sales to the island are excellent. McGovern says that the United States government, rather than addressing economic underdevelopment and social injustice in the hemisphere, is absorbed by its fear of Fidel Castro. He added that not much had changed in that respect since 1963 when he gave his first speech before the United States Senate, entitled "Our Castro Fixation vs. the Alliance for Progress."

Although the Cuban economy is growing, agricultural production remains weak. Cuba has launched efforts to increase production, but it will need to import much of its foodstuffs for years to come. Meanwhile, farmers in the United States have a marked advantage in that they are the closest major producers, allowing for lower cost and faster deliveries.

American farmers began selling agricultural products to Cuba in 2001 under the Trade Sanctions Reform and Export Enhancement Act of 2000. By 2006 Cuban agricultural purchases had reached $600 million. "They could have gone much higher," explains McGovern, "but the Bush administration imposed a cumbersome system of payments through international banks." If Cuba were to pay for products as other countries do, United States agricultural exports to Cuba could climb to at least $1.5 billion annually.

Cusp of Change

Cuba is on the cusp of change. By contrast, there has been little change in Washington. United States policy toward Cuba remains as ill conceived and counterproductive as ever.

There is hope, however, that the changing political equation in Miami, pressure from economic interest groups interested in trade and investment, and support by the majority of Americans for normalization of relations with Cuba will lead to long overdue policy change after the 2008 elections.

From the Americas Program of the Center for International Policy.

Wayne Smith, a former head of the United States Interests Section in Havana, is a C.I.P. senior analyst, and Jennifer Schuett is a program associate with C.I.P.'s Cuba Program, providing analysis for the Americas Program at www.americaspolicy.org.

This article draws on comments by participants at the Imperatives for a New Cuba Policy conference sponsored by the Center for International Policy in October 2007.

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