Within hours on Tuesday after the Obama administration announced new Cuban regulations that allow financing of authorized exports to the island and more exceptions to the embargo, Miami lawyer Andy Fernandez began fielding calls from clients interested in dusting off their Cuba plans.
Some of them had been sitting on the fence as they learned of the challenges in trying to do business in Cuba, said Fernandez, who has been helping banks and companies with development of Cuba strategies in the year since the U.S. and Cuba began normalizing relations. “On the export side, the financing restriction was a big challenge for my clients,” he said.
Previous cash-in-advance requirements had been an issue for those interested in selling to Cuba’s fledgling private sector. “This will likely assist in opening up commerce,” said Fernandez, the leader of Holland & Knight’s Cuba Action Team. “Folks are a little more encouraged now that there are fewer bumps in the road from our side. It’s fair to say this now puts the ball in Cuba’s court.”
The new regulations, which went into effect Wednesday, not only allow financing of authorized exports but also expand the types of exports that will generally be approved as well as those that may be sent to the island on a case-by-case basis if Treasury’s Office of Foreign Assets Control determines such products meet “the needs of the Cuban people.”
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Goods in that latter category may be exported to state-owned enterprises and agencies if the ultimate user of the goods and services is the Cuban people. However, U.S. officials said enterprises that primarily generate revenue for the state, and products destined for the Cuban military, police or intelligence and security services would be denied.
In its reporting on the new regulations, Granma, the paper of Cuba’s Communist Party, noted that even though it was a partial recognition and conditional, it was “the first time that the participation of the Cuban state has been accepted in this type of negotiations.”
Business adviser Saul Cimbler, who has been exploring opportunities for deploying LED, solar and other energy-efficient technologies in Cuba, said the new regulations will give him and his partners “more legal authority to go in.” Before, they had been contemplating trying to come in under the umbrella of construction materials, which are allowed to be exported to Cuba under a rule change from last year as long as they are used for private construction.
But the new rules specifically allow U.S. companies to sell energy production exports to state-owned companies as long as they “provide goods and services to the Cuban people.” That rule change, said Cimbler “makes it much easier.”
The new rules also allow case-by-case licensing of trade to support education, food processing, disaster preparedness, public health, sanitation, agricultural production, residential construction, public transportation, wholesale and retail distribution for consumption by the Cuban people and to treat public water supplies. Companies interested in those areas will have to apply for an OFAC license.
“This really escalates the ability of American companies to look at more possibilities in Cuba,” said Cimbler. “There are some real bells and whistles in this.”
The new regulations also could be a boon to Cuba’s growing number of paladares, or private restaurants, that could receive everything from meat slicers, coffee machines and cooking utensils under the food processing provision.
Even though previous sets of rule changes allow authorized American businesses to open and maintain bank accounts in Cuba and U.S. financial institutions to open correspondent accounts at Cuban banks to handle processing of authorized transactions, nearly all U.S. banks have remained on the sidelines.
And despite this week’s changes, U.S. banks may continue to sit it out for the most part, said David Schwartz, chief executive of the Florida International Bankers Association.
“The administration is looking at anything it can do within the scope of its authority that won’t contravene the embargo,” he said. “What we have [with the new regulations] is some wiggle room for authorized exports. But we come back to the same issue of the embargo.”
There’s no urgency “for banks to rush in because this is still limited in scope,” Schwartz said. When there’s no longer an embargo, “that’s when you will see banks get excited.”
Unless there’s a sufficient volume of exports going to Cuba, he said, “banks aren’t going to step in. This is customer driven.”
Still, Fernandez said, “banks may be more interested in getting involved now.”
Other changes also will make it easier for Americans to film movies and television shows in Cuba and organize sports competitions and live concerts and other performances.
Sarah Stephens, executive director of the Center for Democracy in the Americas, pointed out that a decade ago, the U.S. government banned the entry of some Cuban artists on the grounds they were security risks.
In contrast, she said, “the Obama administration has not only welcomed more Cuban artists into the U.S. but with the new regulations is now ensuring that the cultural bridge that artists build works in both directions. This means that U.S. musicians, writers, actors and movie makers will have a much easier time working and performing in Cuba and engaging with Cubans in the process of creating art.”
To that end, Musicabana, the first international music festival produced by American and Cuban partners in more than 30 years, will take place in Havana May 5-8. Some 25 bands, artists and global DJs are expected to take part. The festival will be free for Cubans, and Americans will be able to attend as long as they fall within the 12 categories of travelers that the United States allows to visit Cuba.