Obama’s Move on Cuba

In February, shortly after the White House announced U.S. President Barack Obama’s historic visit to Cuba on March 21-22—the first of any sitting U.S. president in 88 years—a meme began circulating on Cubans’ Facebook feeds. In it, Obama confidently throws down the winning piece in a dominoes game against the leading Republican presidential candidates at the time, Donald Trump, Ted Cruz, and Marco Rubio. The caption reads, “Se pegó,” which translates roughly to “Gotcha” or “Checkmate.”

Critics who decry Obama’s visit to Cuba, including Cruz and Rubio, might be in the minority, since opinion polls reveal that the U.S. public is largely supportive of the move. But this image of the president confidently scoring geostrategic points contradicts a more complex reality on the ground. In some respects, the U.S.-Cuban rapprochement is still tenuous, and Obama’s visit is necessary to give a boost to a process plagued by fits and starts.

Many Cuba watchers I know did not expect the president to travel to the island so soon. In December, Obama told Yahoo! News in an exclusive interview that he would go “if the circumstances were right . . . if in fact I can with confidence say we’re seeing some progress in the liberty, freedom, and possibilities for ordinary Cubans. . . . I’m not just interested in validating the status quo.” Certainly, Cuba has become a more dynamic place with the influx of Americans and other visitors since last year. But much of the country’s economic and political architecture has remained unchanged since the Sixth Congress of the Communist Party of Cuba in 2011. At that time, President Raúl Castro’s government solidified its commitment to slowly decentralize the country’s Soviet-style economy by loosening some restrictions on private business. Additional advances, however—such as an end to the island’s dual currency system—have been promised but have not yet materialized. (New migration and foreign investment laws, approved in 2013 and 2014, respectively, are important exceptions.)

A more cautious approach, therefore, might have been to delay a presidential visit until after the Seventh Congress of the Communist Party of Cuba in April. At that time, Cuban authorities are most likely to detail any short-term plans for further reform. But with just ten months left for Obama, it does seem better for both sides to consolidate gains sooner rather than later. As the president stressed in the December interview, his administration believes U.S. soft power, rather than the carrot-and-stick method, will lead to change. “We’re going to be far better off if the habits of mind, the culture, and the attitudes of the American people and American businesses are there for Cubans to see and interact with on a day-to-day basis,” he told Yahoo! News. With reason, island officials and even ordinary Cubans may bristle at these paternalistic assumptions. All the same, they appear ready to cash in on the financial rewards.

Increased contact between Americans and Cubans over the last year has indeed provided considerable opportunities for U.S. citizens to (purportedly) spread their values and for enterprising Cubans to make a buck. In 2015, the number of U.S. travelers to the island—161,000 in total, not including the roughly 400,00 Cuban American and Cuban diaspora travelers visiting family—increased over 77 percent compared with the year before. The arrival of so many visitors, in turn, represented a boon for all manner of Cuban-owned small businesses in the island’s services-focused cuentapropista (or self-employment) sector. Increasing numbers of U.S. television, film, and music stars—including the DJ Diplo, who just performed a show in front of 400,000 screaming Cuban fans—have walked Havana’s streets. Obama even announced this week that he has lifted virtually all remaining limits on individual travel to Cuba. The rush of U.S. tourists and dollars is on.

On the international business front, meanwhile, some U.S. companies, such as the apartment-sharing service Airbnb, are now operating on the island; many more are looking for opportunities or are in talks with Cuban officials. Recently, Washington and Havana signed a landmark commercial aviation deal to secure regular direct flights between the two countries. Already, U.S. airlines are jockeying to snatch one of the 30 daily routes to the island, as ferry services and cruise lines wait in the wings.

But there is still much more that needs to be done.

Take, for instance, the White House’s efforts to use executive authority to carve out exceptions to the trade embargo. Initial rule changes in early 2015 authorized select types of exports, such as construction materials, telecommunications devices, and agricultural equipment, to end users in Cuba’s incipient private sector. It was initially unclear, however, whether the regulations would permit processing those exports through Cuban state import agencies, which is the only option under the island’s socialist system. The confusion led to more dialogue and rule changes, and these in theory have given U.S. dollars and goods more legal room to flow. But officials continue to speak past one another. U.S. Secretary of Commerce Penny Pritzker recently suggested that although the United States had authorized a record number of business deals—490 in 2015 alone, amounting to $4.3 billion in deals—Cuba had not done enough to bring those deals to the finish line. Cuba’s own minister of foreign investment insisted that it was the other way around. Backlogged paperwork in Washington, he said U.S. investors told him, was the prime obstacle holding many businesses back.

As a result of these regulatory and communication lags, real commercial ties have been slower to develop than the White House had hoped. This is partly because the bulk of the trade embargo remains in place (even with a slew of new exceptions written into its terms). But Cuban officials have also appeared unable to process the number of investor requests they have received. More recent U.S. regulatory changes in January, and just this week, open the door for trade wider than ever before. U.S. banks, for example, can now process Cuban government transactions, and there is now wide latitude for exporting products to state enterprises that “meet the needs of the Cuban people.” Still, the island’s own economic reforms, which might facilitate the entrance of more U.S. goods and capital, continue to move at a snail’s pace. Unless those transformations pick up speed, the Cuban people’s ability to take advantage of a postembargo windfall, if and when it comes, will remain constrained.

Meanwhile, mounting inequalities and limited growth in real incomes in Cuba are contributing to a larger, albeit slow-motion, problem that neither government seems particularly inclined to address head-on. In short, the rise in tourism has affected local prices. In a country where agricultural production remains sluggish and wholesale markets are still getting on their feet, demand from restaurateurs has substantially raised food costs for the average citizen. According to the latest available Cuban government statistics, the price of food consumed by the average Cuban family increased 24 percent in 2014. The figure is no doubt higher for last year. For Cubans earning meager state wages in devaluated pesos without a foot in the hard-currency economy in which Cuban tourism moves, mounting expenses risk putting some goods out of reach.

Consequently, Cubans may be voting with their feet. In 2015, 70,000-plus islanders immigrated to the United States (often via South and Central America), the highest number in 35 years. Of course, much of this involves a fear that their unique immigration privileges in the United States will disappear—namely, the “wet foot/dry foot” policy dating to the 1990s and the 1966 Cuban Adjustment Act that allows Cubans who make it onto U.S. shores to pursue residency after a year. But even if this pull factor has stimulated a quiet exodus, the precarious purchasing power of state sector incomes, combined with an understandable impatience for better times, is no doubt pushing many Cubans to depart. Nationally, wages grew by just 14 percent in 2014, from an already anemic average of what would be the equivalent of $30 a month. In conversations with Cuban friends, this link between low salaries and the desire to immigrate always emerges as a central concern.

Given all these issues, what, then, can Obama hope to accomplish in a two-day trip to the island?

A sit-down with Raúl Castro is of course on the agenda. So, too, is a private meeting with political dissidents whom Cuban officials consider to be beholden to Washington. Meanwhile, rumors are flying that AT&T, Marriott, and the Starwood hotel chains will christen additional business deals midway through the visit. But if Obama focuses too much on corporate signing ceremonies rather than Cubans’ desires for greater political and economic openness domestically, he will also be seen as having let the island’s authorities off the hook.

Even so, the United States can only encourage and incentivize the shape of Cuban reform. It cannot control its course. In that regard, one hopes that the president will also listen to representatives of a dynamic gray zone in Cuban society—those who identify not only as loyalists or dissidents but as constructive critics, intellectuals, anti-imperialists, democratic socialists, or simply small-business owners operating under intense obstacles. One of the most important gestures Obama can make is to acknowledge that Cuban society is complex and that its problems do not lend themselves to quick, imported fixes. A recent poll shows that average Cubans overwhelmingly favor the opening of their country to the United States. But in talking to family members and colleagues in Havana this December, I also know many islanders feel intense trepidation about their ability to maintain social protections and develop their country equitably from the ground up. Whether it’s writing from within academia or in the comment boards on blogs, others have expressed concern with the Cuban military’s large share in the economy already or with the new free trade zone at Mariel Harbor. They see them as cruel signs of state capitalism on the march, not socialism’s last line of defense.

Working to Obama’s advantage is his extraordinary popularity on the island, and in a televised speech at Havana’s Grand Theater, he will have an unprecedented opportunity to send an often skeptical population a needed message of hope. But just as commercial engagement from the north won’t automatically lead to a more open society, buying U.S. products in a postembargo world does not equal a sustainable development strategy for an unproductive economy saddled by a bloated import bill. Cubans themselves, ultimately, and only Cubans themselves, must be the principal agents of their economic and political futures.