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7/31/2015 Cuba's Problems Beyond the Embargo | Stratfor https://www.stratfor.com/geopoliticaldiary/cubasproblemsbeyondembargo 1/3 What is a Geopolitical Diary? Tweet 0 0 Cuba's Problems Beyond the Embargo Geopolitical Diary JULY 28, 2015 | 22:49 GMT Text Size Print On Tuesday, Republican U.S. Representative Tom Emmer introduced the Cuba Trade Act of 2015, a bill intended to lift the United States' 54year trade embargo on Cuba. The bill is one of several legislative efforts introduced over the past year to end the trade ban. Lifting the embargo is the next logical step in the United States' eight month outreach to Cuba. U.S. President Barack Obama has already issued directives to expand financial interaction with Cuba and make it easier for U.S. citizens to travel to the island country, but presidential power only goes so far. According to U.S. law, much of the authority to amend or annul the provisions of the embargo depends on Congress' determination that a transitional government is in place in Havana. Consequently, the law must be changed if the United States is to proceed with lifting the embargo anytime soon. With Cuban President Raul Castro stepping down in 2018, the United States could wait until then to see if Cuba meets the legislative criteria to lift the embargo. A second option, which Emmer and others are promoting, is for Congress to amend the law underpinning the embargo, thereby removing the legal rationale for maintaining the ban. Both options would eventually require negotiations within the Republicancontrolled Congress and perhaps with Cuba. However, if resistance within Congress wears down, the second option could result in the embargo being lifted before Cuba's transition of power in 2018. For Cuba — a capitalpoor island only 90 miles from the world's largest economy — lifting the embargo would bring significant economic benefits. The Cuban government is eager to shift away from its stateled economic model toward a more sustainable system that allows Cuba to generate 22 Like

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  • 7/31/2015 Cuba'sProblemsBeyondtheEmbargo|Stratfor

    https://www.stratfor.com/geopoliticaldiary/cubasproblemsbeyondembargo 1/3

    WhatisaGeopoliticalDiary?

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    Cuba's Problems Beyond the EmbargoGeopoliticalDiary JULY28,2015|22:49GMT TextSize Print

    OnTuesday,RepublicanU.S.RepresentativeTomEmmerintroducedtheCubaTradeActof2015,abillintendedtolifttheUnitedStates'54yeartradeembargoonCuba.Thebillisoneofseverallegislativeeffortsintroducedoverthepastyeartoendthetradeban.LiftingtheembargoisthenextlogicalstepintheUnitedStates'eightmonthoutreachtoCuba.U.S.PresidentBarackObamahasalreadyissueddirectivestoexpandfinancialinteractionwithCubaandmakeiteasierforU.S.citizenstotraveltotheislandcountry,butpresidentialpoweronlygoessofar.AccordingtoU.S.law,muchoftheauthoritytoamendorannulthe

    provisionsoftheembargodependsonCongress'determinationthatatransitionalgovernmentisinplaceinHavana.Consequently,thelawmustbechangediftheUnitedStatesistoproceedwithliftingtheembargoanytimesoon.

    WithCubanPresidentRaulCastrosteppingdownin2018,theUnitedStatescouldwaituntilthentoseeifCubameetsthelegislativecriteriatolifttheembargo.Asecondoption,whichEmmerandothersarepromoting,isforCongresstoamendthelawunderpinningtheembargo,therebyremovingthelegalrationaleformaintainingtheban.BothoptionswouldeventuallyrequirenegotiationswithintheRepublicancontrolledCongressandperhapswithCuba.However,ifresistancewithinCongresswearsdown,thesecondoptioncouldresultintheembargobeingliftedbeforeCuba'stransitionofpowerin2018.

    ForCubaacapitalpoorislandonly90milesfromtheworld'slargesteconomyliftingtheembargowouldbringsignificanteconomicbenefits.TheCubangovernmentiseagertoshiftawayfromitsstateledeconomicmodeltowardamoresustainablesystemthatallowsCubatogenerate

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    morewealthdomesticallyandreduceitsdependenceonexternalpatrons.ButevenwithWashington'sgrowingwilltolifttheembargo,HavanawillnotbeinapositiontoreceivethefullbenefitsofeconomictradewiththeUnitedStatesforseveralyears.

    EvenifCongressbeginsseriousdeliberationsonliftingtheembargoafteritsAugustrecess,themainimpedimentstoCubaexpandingtradetieswiththeUnitedStatesaremostlyinternaleconomicconsiderations.DespiteHavana'sgreaterattemptstospurthenationaleconomy,startingwiththelegalizationofCuba'sinformalbusinessactivityin2010,theimbalancescreatedbyfivedecadesofeconomicisolationwillremaintheprincipalconstraintsonCuba'seconomicgrowth.TheCubangovernmentisbyfarthelargestemployerontheisland,andstateownedexportingbusinesses(aswellaslimitedjointventureswithforeignfirms)arehighlyinefficientcomparedtoforeigncompetitors.Cuba'stwotieredcurrencyexchangeratealsocreatessignificantdistortionsanddissuadesforeigninvestment.Moreover,thecountry'srestrictiveforeigninvestmentlaw,whichtaxesforeignownedfirmsheavilyandlimitsinternationalarbitrationtosettledisputes,isamajordragonforeigninvestment.IfCongressliftstheembargoandtravelbaninthenearterm,Cuba'seliteswillstillbenefitfromincreasedtourism(alreadyamultibilliondollarindustrycontrolledbyCubanmilitaryfirms),althoughtheylikelywillcontinuemissingoutonpotentiallyhighervalueeconomicactivityforyears.

    Overthenextfewyears,theCubanswilllikelyturntheirattentiontoaddressingtheseissues,andtheendoftheembargowouldaddtothesenseofurgencysurroundingeconomicreform.TheCubangovernmentalreadyplanstohavealegaldraftinplacefortheunificationofthedualcurrencyratesbysometimein2016.ButthepaceofCuba'sopeningtoforeigncapitalwillultimatelydependonwhethertheU.S.proposalstoendtheCubanembargocometofruitioninthenextfewyears.

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