With the proposed re-establishment of normal diplomatic relations and the potential easing of economic sanctions between the United States and Cuba, trade relations between the two nations have begun to thaw. Cuba offers a new market of avid consumers, and an economy that could potentially be a key contributor to the Caribbean region. Even though the embargo may potentially be lifted, there are several challenges that remain to be overcome for Cuba and U.S. to be successful as trade partners.
The trade aspect of the deal expands the trade abilities between Cuba and the U.S., where American businesses are able to sell more products to Cuba and Cuban entrepreneurs can export their products into American markets. This would allow for Cuban companies to expand into other markets and bolster economic growth. It is estimated that Cuba has lost an estimated $100 Billion in revenue over the last five years due to the absence of trade with the United States.
The financial services and telecommunication industries are vital for the sustained growth of the Cuban economy. For successful trade transactions to occur, American business have to establish corresponding bank accounts in Cuba to facilitate the transactions that occur due to trade. Financial institutions are hesitant as American financial regulators have cracked down on financial institutions that have customers who could potentially be involved in narco-trafficking, money laundering, terrorism, and other high-risk areas. For the telecommunications industry to expand into Cuba, Cuban officials would likely request reassurance that the telecomm equipment they receive hasn’t been tampered with, or request access from the “backdoor” to monitor the Internet.
There are several restrictions that prevent free trade between Cuba and the U.S. other than the lack of the diplomatic relations and sanctions. A major setback that prevents trade from occurring is that Cuba is on U.S. State Department's list of State Sponsors of Terrorism, which severely limits the ability of American companies to conduct business in Cuba. A further complication is that Cuba does not have an independent judicial system that corporations can call on to settle disputes, which can be a concern for American Companies as the Cuban government has a history of seizing foreign property.
Only time will tell if Cuba and the U.S. fully establish diplomatic relations, but though there are several benefits, there are complications that need to be addressed to ensure the full success of trade. Let us know what you think about the thawing of relations between Cuba and the U.S. in the comments section below!