For over 50 years, US policy toward Cuba has had the single aim of isolating Cuba from the outside world and forcing the collapse of the island nation’s economy in hopes of bringing about regime change. Other than a small, vocal group in Miami and Washington, the rest of the world now acknowledges the obvious truth that US policy has been a categorical failure. It is less often recognized, however, that US policy may actually have made change on the island less likely. An amendment last week proposed by Florida Rep. Mario Diaz-Balart, a longtime defender of the status quo in US policy toward Cuba, is the most recent evidence of this fact.

Last week, Rep. Diaz-Balart introduced an amendment to the FY2012 appropriations bill, which, if signed into law, would roll back the positive steps taken by President Obama to allow Cuban-Americans to travel and send money to their families in Cuba. “The changes [implemented by the Obama Administration] have been the largest source of revenue of [Castro’s] dictatorship,” stated Rep. Diaz-Balart. Rep. Diaz-Balart’s statement to the Miami Herald reflects a profound disconnect with the realities on the ground inside Cuba as well as human disconnect regarding the impact of these policies on Cuban families both on the island and in the diaspora.

According to recent reports, over 350,000 Cuban Americans traveled to the island in 2010, most of whom are constituents of Rep. Diaz-Balart. Estimates suggest that remittances and goods sent to Cuba in 2010 by Cuban Americans under the regulations implemented by President Obama (which allowed unlimited family travel and remittances) totaled approximately one billion US dollars. Putting aside for a moment the moral and ethical arguments (as well as the Universal Declaration of Human Rights) in favor of allowing family members to visit and support each other, there are very good arguments as to how these activities can help ordinary Cubans take greater control of their lives through economic empowerment.

At the time President Obama announced these new regulations in April 2009, Cuba’s new president, Raul Castro, had begun a national dialogue about the need for “structural changes” to Cuba’s economic model in response to the severe crisis created by the government’s failed socialist model. Since then, Cuba has undergone its most profound economic reforms in 50 years including authorizing over 150 categories of self-employment. In the months since the announcement, Cuba reports it has issued over 200,000 licenses to entrepreneurs. While these new entrepreneurs face a number of obstacles created by Cuba’s bureaucracy including high taxes, the lack of wholesale markets, limitations on the authorized categories of self-employment and many others, Cuba’s cities are now blossoming with private businesses including restaurants, bed and breakfasts and all kinds of new and used consumer goods kiosks. Given the severe lack of capital and credit in Cuba, most of these businesses depend on family remittances and travel by family members to stock shelves, acquire the necessary equipment and capitalize themselves.

Rep. Diaz-Balart’s amendment comes at a time when Cuba’s civil society is uniquely positioned for the first time in 50 years to reduce its dependence on the Cuban government and to empower itself through entrepreneurship. Microfinance institutions work tirelessly to raise capital and deploy national networks to offer credit to entrepreneurs throughout Latin America, and in Africa, India, China and nearly every country of the world. While the Cuba Study Group has long championed the concept of microfinance in Cuba (a concept we introduced in a 2006 white paper), we recognize that the power of family remittances and travel are a powerful, direct and cost-effective way to spark entrepreneurship in Cuba in the short term. The small businesses that have been born out of these family links hold the promise of a better future for many Cubans. While we acknowledge that remittances and small business growth alone cannot resolve Cuba’s many economic and political problems, it is clear that they represent hope for thousands of Cuban families.

In order to encourage the promising transformation now underway, US policymakers must acknowledge not just the failures of maintaining the status quo in US policy toward Cuba, but also the important role that economic empowerment can play in fundamentally transforming Cuba’s civil society. Travel by Cuban Americans to visit and assist family has contributed to empowering Cuba’s civil society and has enabled ordinary Cubans to create independent businesses. Congress would do well to look beyond Cuba to the worldwide experience of microfinance, for example, for answers on how to bring about real change on the island.

Image credit: US Federal Government

Have you read?

Cuba White Paper Makes Headlines

Cuba White Paper Suggests Steps to Boost Micro and Small Businesses

Cuba Remittances + Microenterprise = Booming Business?

Cuba & Remittances: Can the ‘Money in the Mail’ Drive Reform?

National and international media outlets highlighted the Cuba Study Group‘s April 7 release of a white paper in collaboration with Americas Society/Council of the Americas and the Center for Financial Inclusion at ACCION International.

The white paper,  “Supporting Small Business in Cuba: Recommendations for Private and Public Sector Leaders,” was released just before the Communist Party of Cuba’s sixth congress.

The paper outlines specific steps the Cuban government, the US government and private sector, NGO and foundation leaders can take to support micro and small businesses in Cuba.

Media coverage in English extended to several articles:

“Experts Seek to Help Cuban Entrepreneurs” – AP, Laura Wides-Muñoz, 7/4/2011

“Cuban Business Group Calls for Easing US Sanctions” - Miami Herald,  Juan O. Tamayo, 7/4/2011

“US Urged to Support Cuba’s Nascent Private Sector” – EFE, April 7/4/2011

A version of the AP story also appeared in Spanish:

“Expertos de EEUU Quieren Ayudar a Empresarios Cubanos” – AP, Laura Wides-Muñoz, 7/4/2011

To read the press release about the white paper, click here.

FOR IMMEDIATE RELEASE
Thursday, April 7, 2011

Contact: Tomas Bilbao
(202) 714-1153

IN ANTICIPATION OF THE COMMUNIST PARTY CONGRESS IN CUBA, REPORT OFFERS RECOMMENDATIONS FOR HOW CUBA AND U.S. REGULATIONS CAN BETTER SUPPORT INDEPENDENT SMALL AND MICRO ENTERPRISE IN THE ISLAND

Washington, DC — The Cuba Study Group today released a white paper in collaboration with Americas Society/Council of the Americas and the Center for Financial Inclusion at ACCION International entitled: “Supporting Small Business in Cuba: Recommendations for Private and Public Sector Leaders.” The report is being released just days before the Communist Party of Cuba celebrates its sixth congress — its first in 13 years — and outlines specific steps the Cuban government, the U.S. government and private sector, NGO and foundation leaders can take to support micro and small businesses in Cuba.

“Cuban leaders have taken positive initial steps to expand independent micro and small businesses on the island, but if this nascent sector is going to play an important role in Cuba’s economic recovery, then Cuban leaders must take additional substantive steps to create a regulatory environment where they can succeed,” said Carlos Saladrigas, co-chairman of the Cuba Study Group.

Among the recommendations outlined in the report are specific short and medium-term private initiatives to provide micro and small businesses in Cuba with the resources and information needed to succeed. Such recommendations include: delivering business training to Cuban entrepreneurs, establishing partnerships between Cuban universities and international NGOs, conducting market research of the environment in which these businesses operate, creating a targeted remittance to entrepreneur program, deploying microfinance funds and establishing an enterprise fund.

“There is a widespread recognition by the Cuban leadership that economic reform is the only way out of the decades long malaise they find themselves in.  Now with the laying off of up to one million state employees, the rapid development of a vigorous micro and small business sector offers a promising alternative to another decade of stagnation and decay,” said Josh Goldstein, Principal Director, Center for Financial Inclusion at ACCION International.

The white paper also lists specific steps that the U.S. President and Congress can take to ensure that U.S. sanctions do not hinder small business development in Cuba. Among the steps the President could take are: modifying remittance and export limitations, authorizing travel by general license for NGO’s, establishing new licenses for the provision of services to entrepreneurs and authorizing imports of certain goods and services from independent entrepreneurs. In addition, the U.S. Congress could: authorize bilateral banking, facilitate Cuba’s entry into discussions with multilateral financial organizations and modifying the Trade Sanctions and Export Enhancement Act to expand the list of items that can legally be exported to Cuba.

“On the eve of a Communist Congress that appears committed to addressing the country’s economic hardships, it is important that international groups offer their expertise and have opportunities to assist in these important reforms.  This report offers insights and recommendations based on experience and the unique Cuban context and U.S. policy framework to help smooth that process,” said Christopher Sabatini, Senior Director of Policy of the Americas Society/Council of the Americas.

###

The Center for Financial Inclusion (CFI), in conjunction with the Cuba Study Group, in January sponsored the “Cuba Small Business Summit.”

Participants in the event, which was hosted by the Council of the Americas in New York, examined questions that included: “Could remittances from the US play a key role in providing finance to Cuban new start-up enterprises, in the absence of private or public banks in a position to lend?”

The Miami Herald this week published an op-ed by Sergio Bendixen and Donald Terry that fleshes out the answer to that question.

Bendixen is a founding partner of Bendixen and Amandi International; Terry is former general manager at the InterAmerican Development Bank and current lecturer at Boston University Law School and consultant with the World Bank in Africa. Terry is also a member of CFI’s advisory and faculty councils.

Highlights of the piece, “Remittances and Cuba,” include:

“A commitment from the Cuban government to allow all remittances to enter the Cuban economy freely, unburdened by taxes or other cumbersome regulations, could result in remittances reaching $2 billion to Cuba in the coming years.”

“Limited research has shown that more than a third of Cuban recipients would like to invest a portion of their remittances in some form of business enterprise. Remittances to Cuba are already providing important support to the incipient growth of the micro and small enterprise sector, the most likely source of employment for a growing number of Cubans.”

“Next month’s Cuban Communist Party Congress provides a historic opportunity for the Castro government to acknowledge the new US remittance policy, and match it with a gesture of its own, to the benefit of the Cuban remittance recipients.”

Image credit: US Federal Government