Relations between the United States and Cuba have been tense for a while. It’s a miracle they have a relationship at all; between 1961 and 2015, these two countries weren’t even talking to each other. Things are still frosty enough that the U.S. won’t allow its corporations to do any business with Cuba.
Or at least that was the case until Tuesday, May 28, when the U.S. Treasury Department decided to let Cuban “entrepreneurs” open American bank accounts, and access those accounts from Cuba – something they haven’t been able to do since their 1952-59 revolution.
There are many political reasons for the U.S. to do this, and the benefits to Cuba are self-evident. But what about the private sector in America – the one that generates most of the business odds people are the world are betting on? Let’s see what impacts this landmark decision might have stateside.
What is the US Embargo Against Cuba?
This dates back to 1958, when the U.S. stopped selling arms to Cuba during the Fulgencio Batista regime. That embargo was expanded in 1960 to cover all exports except food and medicine, not long after Fidel Castro seized power; by 1962, pretty much all business between the two nations was cut off.
The specific piece of legislation the U.S. Treasury is amending is the Cuban Assets Control Regulations (CACR), which President John F. Kennedy enacted in 1963. This act enforces a “complete prohibition against transfers and transactions of any kind,” unless authorized by the Treasury.
The CACR has been amended regularly since the Clinton Administration, reflecting the gradually warming ties between the two countries – until Donald Trump was elected, and started cutting off business again. Under Joe Biden, the CACR was amended on May 16 to start opening things up, allowing for more “educational” travel and higher family remittance payments.
What Changes Were Made to the US Embargo?
Last Tuesday’s amendments are ostensibly designed to put money in the hands of the nascent Cuban private sector, which the current Communist Party under Miguel Diaz-Canel opened up to smaller businesses starting in 2021. Some 11,000 companies have formed since then, representing about one-third of Cuba’s economy according to that government’s data.
The big takeaway is at the bank. Not only will Cubans be allowed to open U.S. accounts, the Treasury is also reversing Trump’s previous edict against “U-Turn” transactions; this means Cubans will be allowed to transfer money with third-party countries through the U.S. banking system.
Also on the docket: expanding internet-based services. Cubans will now be allowed to use American social media platforms and online payment sites, and developers can upload their software to the Apple and Google app stores.
How Will This Help the US Economy?
That remains to be seen, but if you’re going to bet on business, expect at least some minor improvements going forward. The embargo against Cuba may still be largely in place, and there will obviously be an outflow of cash to Cuba and other countries thanks to these amendments; in return, American financial service providers will be in even greater demand than they already are.
There’s also the hope that Cuban goods will once again be available on American shores. The island nation had been struggling to produce much of anything before legalizing small- and medium-sized enterprises (SMEs) in 2021; only $5.6 million of goods was exported from Cuba to the U.S. in 2022, almost entirely consisting of paintings and antiques. But that was a drop in the bucket compared to the $1.9 billion in exports Cuba shipped worldwide, with almost one-fourth of that going to Canada.
Naturally, there are plenty of Americans who would love to get their hands on some Cuban cigars. If you’re one of these people, you can go to Cuba and bring back up to 100 of them for your own personal use – but that’s it. Imagine how big business would be should last week’s amendments lead to further opening down the road.
For now, it’s the financial sector that’s going to reap the benefits. It may be a relatively small surge of business – one that will no doubt be cut off again should Trump regain the presidency – but every dollar counts, whether you’re in the banking industry or betting on it at any top-rated sportsbook.
