Making Cuba Safe for Capitalism
3 JAN 21, 2015 8:00 AM EST
By The Editors
A U.S. delegation heads to Havana today to start negotiations on the
normalization of ties with Cuba. Don’t expect immediate progress.
Despite President Barack Obama’s bold shift in U.S. policy, the earliest
President Raul Castro is likely to embrace democracy or capitalism is in
Still, the give and take of diplomacy offers a chance for U.S. officials
to start pushing Cuba for meaningful changes to the thicket of socialist
regulations that have held back its economy and its people for the last
For a nation of only 11.2 million people, Cuba is an extraordinarily
appealing market. Compared with its neighbors, Cuba has high life
expectancy and per capita income, and its people are well educated, with
nearly 100 percent literacy and a high proportion of the college-age
population in college or graduate school. Its plentiful doctors and
scientists could make it a hub for medical tourism and pharmaceutical
development. If the U.S. embargo were lifted, U.S. sales to Cuba could
rise more than tenfold, to as much as $6 billion a year.
Moreover, it’s possible that Cuba’s offshore waters hold up to 4.6
billion barrels of oil and nearly 10 trillion feet of natural gas. And
as the ex-leader in global sugar exports, Cuba could also be an
important provider of biofuels.
Right now, though, the Castros still have the economy under lock and
key. Halfhearted economic reforms have slowed Cuba’s growth. Farmers
have been granted the right to cultivate land for 10 years, for
instance, but the government can then reclaim it. Foreign investors can
have operational control of 50-50 joint ventures, but they must hire and
pay workers through the state. Investments in tourism remain tangled in
red tape, too. Canadian investors aiming to build a $4 million golf
course (after the Cuban government lifted its ban on the bourgeois
sport) needed eight years to get their project off the drawing board.
The Obama administration can move to widen these and other fissures in
Cuba’s cracking socialist edifice. For starters, the U.S. should go
ahead and take Cuba off its list of state sponsors of terrorism, not
merely review its status. It hasn’t belonged there for a long time, and
the accompanying sanctions needlessly hinder foreign trade and investment.
The U.S. also has a strong interest in quickly settling the trademark
disputes and 6,000 expropriation cases dating back to the 1960s, because
these need to be resolved before the embargo can be lifted. People
deserve to be compensated, of course, but companies should recognize
that their interests are better served by getting access to Cuba’s market.
The Obama administration can also start talks with Cuba on a trade and
investment framework agreement that would help secure protections for
U.S. investors, settle regulatory issues, and promote intellectual
property rights and technology standards.
The Castros’ most die-hard opponents in Congress will resist such
initiatives, let alone an end to the embargo. And it’s true that Cuban
socialism and its repressive apparatus remain largely intact. But isn’t
it time for those who believe in the transformative power of capitalism
to demonstrate the courage of their convictions?
Source: Making Cuba Safe for Capitalism – Bloomberg View –