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On April 10 and 11, 2015, the Seventh Summit of the Americas will bring together the heads of state and government of every country in the Western Hemisphere for the first time. Recent efforts by the United States to reform immigration policy, re-establish diplomatic relations with Cuba, and reform our approach to drug policies at home and abroad have generated greater optimism about the future of inter-American relations. This Summit provides an opportunity to spark greater collaboration on development, social inclusion, democracy, education, and energy security.

However, this Summit of the Americas is also convening at a time when the hemisphere is characterized by competing visions for economic development, democracy and human rights, and regional cooperation through various institutions such as the Organization of American States, the Union of South American Nations, and the Community of Latin American and Caribbean States.

On Friday, April 3, the Latin America Initiative at Brookings hosted Assistant Secretary of State Roberta S. Jacobson for a discussion on the Seventh Summit of the Americas and what it portends for the future of hemispheric relations.

Join the conversation on Twitter using #VIISummit

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• The Summit of the Americas and prospects for inter-American relations

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• Uncorrected Transcript (.pdf)

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• 20150403_summit_americas_jacobson_transcript

Last week’s Seventh Summit of the Americas in Panama will be remembered for the historic handshakes and broad smiles shared by Presidents Barack Obama and Raúl Castro—the first sit-down meeting of leaders from the two nations since Fidel Castro marched triumphantly into Havana in early 1959. But this memorable encounter was merely the most visible piece of a much broader Cuban strategy at the Panama Summit.

The large Cuban delegation took full advantage of the several forums that comprise the complex Summit process. These periodic inter-American conclaves feature meetings among heads of state and foreign ministers, a CEO Summit for corporate executives, and a Civil Society Forum for representatives of nongovernmental organizations (NGOs). The Cubans seized all three opportunities and fielded strong teams to advance their interests: to engage with the multi-level inter-American system, and to send clear signals back home of where government policy is headed.

Face-to-face diplomacy

In addition to the Obama-Castro encounter, foreign ministers John Kerry and Bruno Rodriguez held a lengthy bilateral. Since Obama and Castro publicly announced their intention to renew relations on December 17 of last year, negotiations have dragged on. Cuba is reluctant to grant American diplomats unrestricted travel throughout the island to engage with Cuban citizens, including political dissidents. This is the norm in international diplomacy, the United States argues, whereas the Cubans remain fearful that U.S. diplomats will provide encouragement and assistance to activists advocating for political pluralism. The Cubans want to be removed from the U.S. list of state sponsors of terrorism, a designation which automatically invokes economic sanctions. The White House is withholding that relief as a bargaining chip in the negotiations.

In his opening plenary remarks, President Castro spoke passionately and at length, impressing the audience with his heartfelt remarks even as he came across as an elder statesman indulging in the memories and glories of his youth. Yet, Castro was also sending signals to the stalwarts in the Communist Party back home that he had not forgotten their sacrifices and was not abandoning their values. His engagement with the United States would not be allowed to endanger their tight control of Cuban society. Still, most significantly, Castro kept the door open to engagement with the United States by dramatically addressing President Obama, tossing him compliments: “President Obama is an honest man…I have read his two memoirs and I believe he is a man who has remained faithful to his humble origins.”

By lauding Obama, holding a private bilateral, and appearing with a broad smile at a press opportunity, Castro reaffirmed his commitment to improving relations with the United States. He also may have been nudging his negotiators to wrap up the talks to allow the mutual re-opening of embassies. The Cubans are aware that not all of Washington favors improved relations, and that they must consolidate the process of diplomatic normalization while Obama commands the White House.

The CEO and Civil Society Forums

Presumably, the main Cuban motivation for engaging the United States is economic: to attract more tourists, financial remittances, and eventually productive investments from the United States and the rest of the world, and to extract a relaxation of sanctions, particularly those impeding international financial transactions. Cuban Minister of Trade and Investment Rodrigo Malmierca led a commercial delegation that included top executives from state-owned enterprises, as well as leadership from the new Mariel Development Zone. At the CEO Summit, Malmierca was granted one of the few time slots for a keynote address. But rather than take advantage of this unique opportunity, the Cuban minister rushed through an uninspired text, offering nothing that could not be found in previous government press releases and official documents. More than two years after the passage of a much-heralded foreign investment law and over a year after the official opening of the Mariel Development Zone, very few new investments have earned official authorization.  

While potentially interested in Cuban markets, executives I spoke with remain cautious, skeptical that the government has yet created a sufficiently business-friendly environment to warrant the risk. They speculate as to why so few new foreign ventures are underway: is it opposition from well-placed hard-liners, bureaucratic inertia, or lack of financing or other necessary business inputs? In private conversations, Malmierca hinted at a political obstacle: many Cubans identify the revolution with nationalizations of private property, so it will be difficult to explain to them why foreign investment is now so welcome.

The Cubans also fielded a significant presence at the Civil Society Forum. The dominant group represented government-affiliated “non-governmental” organizations (GONGOS) such as the official trade union or Confederation of Cuban Women, while opposition NGOs marshalled about a dozen persons. At a pre-Summit speech in Caracas, Castro had ominously labelled these opposition NGOs “mercenaries” in the pay of foreign intelligence services. Following that lead, the government-affiliated group staged aggressive, noisy demonstrations denouncing the opposition representatives and accusing them of harboring infamous terrorists. The GONGOS threatened to boycott the Forum (although some did eventually participate), and disrupted the Forum’s working group on democratic governance. Here again, the message being telegraphed back home was clear: the Cuban government does not consider these opposition voices to be legitimate actors and loyal Cuban citizens should not associate with them.

Discernable signals

Altogether, at the three forums the Cubans demonstrated their strong interest in participating actively in hemispheric affairs and institutions. The Cubans are capable of fielding smart, disciplined delegations with well-scripted strategies and messages. Once again, the high-quality Cuban diplomacy demonstrated that it has few peers in Latin America and the Caribbean.

The messages transmitted at the Panama Summit were subtle but decodable. In the diplomatic sphere, Castro wants to move forward, to take advantage of Obama’s tenure to relax U.S.-Cuban tensions and gain some economic advantages. In the business sphere, Malmierca reaffirmed Castro’s oft-repeated admonitions that economic change on the island will be very gradual and socialist planning will not be discarded under his watch. In the political sphere, the Cuban Communist Party intends to maintain its absolute hegemony—political pluralism outside the Party is definitely not yet on the policy agenda.

Read more about the Summit with Richard Feinberg's post on how the United States came out of the Panama Summit of the Americas.

At the previous Summit of the Americas in Cartagena, Colombia in April 2012, President Barack Obama was badly roughed up by his Latin American counterparts (and embarrassed by his Secret Service for entertaining sex workers). Happily, the president and his entourage did much better at last week’s Summit in Panama, but the United States still has a way to go before the Summits once again become the productive vehicle for U.S. foreign policy that they once were, at their founding in Miami in 1994.

In Cartagena, leader after leader criticized the United States for allegedly heavy-handed counter-narcotics policies; oppressive treatment of immigrants; a weak response to crime and poverty in Central America; and monetary policies that supposedly harmed their economies. Most pointedly, speakers denounced the decades-old economic sanctions against Cuba. But given the upcoming Congressional elections, Obama and his Secretary of State Hillary Clinton did not want to do anything to endanger their Democratic Party’s chances. Obama was reduced to affirming, uncharacteristically, “I am here to listen, but our policies will not change.”

Once the November 2012 mid-term elections were over, policies did, in fact, change as the United States took a more relaxed approach to counternarcotics; the administration announced immigration policy reforms, including negotiating agreements with Central American nations to reduce the outflow of children and promote economic growth and jobs at home; and Vice President Joseph Biden met repeatedly with Central American leaders, and offered $1 billion in economic and security assistance.

In Cartagena, the Latin Americans threatened to boycott the Panama Summit if Cuba was not invited. But last December 17, President Obama and Cuban President Raúl Castro announced their agreement to negotiate the normalization of diplomatic relations, and in one blow, the United States transformed a thorn in relations with Latin America into a triumph of inter-American diplomacy that significantly enhanced U.S. prestige in the region.

So in Panama, most of the Latin American and Caribbean leaders, rather than berate the U.S. president, praised him for his courage and generally treated him with courtesy and respect. The three leaders of Central America’s Northern Tier (Guatemala, Honduras, and El Salvador—whose president is a former guerrilla commander) were effusive in their praise. The president of Brazil, Dilma Rousseff, who in Cartagena had sharply criticized U.S. monetary policies and had cancelled a visit to the White House to protest NSA spying, was pleased to announce that her visit had been rescheduled for this June. 

Obama’s own performance was more spirited than it had been in Cartagena. In response to a harsh polemic by Ecuadorean President Rafael Correa, Obama shot back: “The U.S. may be a handy excuse for diverting attention from domestic political problems, but it won’t solve those problems.” After listening politely through Raúl Castro’s extended remarks—during which Castro praised him as a man of honesty and authenticity—Obama departed to avoid having to sit through the predictable harangues of Argentine President Cristina Kirchner and Bolivian leader Evo Morales. Few could blame him.

At the parallel CEO Summit of business executives, Obama delivered thoughtful responses to questions posed by several entrepreneurs including Facebook founder Mark Zuckerberg, distinguishing himself from the facile rhetorical answers of the other presidents on the panel. At a Civil Society Forum where delegates affiliated with Cuban government organizations engaged in disruptive tactics, Obama lectured firmly on the virtues of civility and tolerance. Together with two other presidents (Tabaré Vasquez of Uruguay and Guillermo Solis of Costa Rica), Obama met privately with a dozen leaders of nongovernmental organizations, took notes, and incorporated at least one of their suggestions into his later public remarks.

But Obama’s Panama experience was marred by an inexplicable misstep by his White House aides a month earlier—the very public sanctioning of seven Venezuelan officials for alleged human rights violation and corruption, and the declaration that Venezuela was a “threat to U.S. national security.” To Latin American ears, that language recalled Cold War-era justifications for CIA plots and military coups. The State Department claims it warned the White House against Latin American blowback, but perhaps not forcefully enough. Once Latin American anger become apparent, the White House tried to walk the “national security” language back, saying it was just a formality required by U.S. legislation, but the damage was done. Speaker after speaker condemned the “unilateral sanctions” and called for their repeal.

The ill-timed sanctions announcement provided Venezuelan President Nicolás Maduro and his populist allies with a ready stick to beat the United States. For whileObama’s diplomacy had managed to peel off most of the Central Americans and win over or at least diminish the antagonism of other leaders, it had not found a way to tranquilize the rejectionist states (Ecuador, Bolivia, Nicaragua, Argentina) tied to Venezuela in an “anti-imperialist” alliance. Although a relatively small minority, these spoilers seriously disrupt plenary meetings with long and vituperative monologues, and small minorities of “veto” players can block the signing of otherwise consensus documents such that in Panama, as in Cartagena, no consensus declaration was issued; rather the host leader signed brief “mandates for action” that lacked full legitimacy.

The problem of the rejectionist minority will be partially alleviated when Kirchner is shortly replaced, likely by a more moderate government in Argentina, and political turnover will eventually come in Venezuela, but the hemisphere needs new rules that protect majority rights to get things done. Some simple procedural innovations, such as a more forceful chair, or even the simple system of red-yellow-green lights that alert speakers to their time limits, would help.

Notwithstanding the misstep on Venezuela sanctions and the disruptive tactics of the rejectionist minority, the overall mood in Panama was upbeat, even celebratory. Leaders made reference to the xenophobic violence and religious intolerance plaguing other continents, and remarked with some pride that, in comparison, Latin America was a zone of peace that was also making progress, however inadequate, on human rights, poverty alleviation, and clean energy. With some procedural fixes, favorable political winds, and continued progress on concrete issues of mutual interest, inter-American relations could well continue their upward trajectory.

Read more about the Summit with Richard Feinberg's post on Cuba's multi-level strategy at the Seventh Summit of the Americas.

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On December 17, 2014, President Barack Obama and President Raúl Castro announced that the United States and Cuba would seek to reestablish diplomatic relations. Since then, the two countries have engaged in bilateral negotiations in Havana and Washington, the United States has made several unilateral policy changes to facilitate greater trade and travel between the two countries, and bipartisan legislation has been introduced in the U.S. Congress to lift the travel ban. Meanwhile, conversations are ongoing about ending the 50-plus-year embargo and Cuba has continued the process of updating its economic system, including establishing new rules for foreign investment and the emerging private sector.

In light of the significant shifts underway in the U.S.-Cuba relationship, new questions arise about Cuba’s development model, and its economic relations with the region and the world. On Tuesday, June 2, the Latin America Initiative at Brookings hosted a series of panel discussions with various experts including economists, lawyers, academics, and practitioners to examine opportunities and challenges facing Cuba in this new context. Panels examined macroeconomic changes underway in Cuba, how to finance Cuba’s growth, the emerging private sector, and themes related to much-needed foreign investment.

Join the conversation on Twitter using #CubaGrowth

Video

• Panel 1: Trends in the Cuban economy in light of the new U.S.-Cuba context
• Panel 2: Financing Cuba’s growth, development, and trade
• Panel 3: Next steps for Cuba’s emerging private Sector–Cuentapropistas and cooperatives
• Panel 4: A New stage in foreign direct investment

Audio

• Rethinking Cuba: New opportunities for development - Part 1 (English)
• Rethinking Cuba: New opportunities for development - Part 2 (English)
• Rethinking Cuba: New opportunities for development - Part 1 (español)
• Rethinking Cuba: New opportunities for development - Part 2 (español)

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• Uncorrected Transcript (.pdf)

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• 20150602_rethinking_cuba_transcript

Today’s announcement of the restoration of diplomatic relations between Washington and Havana replaces over five decades of mutual hostility and aggressive name-calling with a new atmosphere of diplomatic civility. The re-opening of embassies in both capitals establishes platforms upon which to build more normal working relations. Now, the hard work begins, as the two nations gradually dismantle the comprehensive wall of restrictions separating them for two generations.

Expectations are running high, especially in Cuba, that diplomatic engagement will catalyze economic betterment on the island. To stimulate more travel and trade, the U.S. government needs to clarify rules for engaging with the emerging Cuban private sector, and make it clear to U.S. banks that they are permitted to support the use of credit cards by U.S. visitors in Cuba. The administration should also begin to consider another round of liberalizing initiatives, some under consideration in the U.S. Congress, to further relax travel restrictions, and to enable more U.S. firms—beyond agriculture and medicines—to assist the Cuban people.

For its part, the Cuban government should open efficient channels to facilitate the commercial exchanges now authorized by the Obama administration. Cuban entrepreneurs should be permitted ready access to U.S. firms wishing to sell building equipment for construction cooperatives, restaurant supplies for private-owned restaurants, and automotive spare parts for private taxis. Micro-enterprise lending should be authorized to support these emerging non-state enterprises.

If both nations build upon today’s welcome announcement by further opening these channels to travel and commerce, Presidents Barack Obama and Raúl Castro can help to safeguard their joint legacy. By fortifying and expanding constituencies on both sides of the Florida Straits, immersed in daily exchanges to mutual benefit, the two governments can render their diplomatic accomplishment politically irreversible in both capitals.

As the United States and Cuba rebuild formal relations, certain challenging topics remain to be addressed. Among these are outstanding U.S. property claims in Cuba. In this report, Richard E. Feinberg argues that it is in both countries’ interests to tackle this thorny issue expeditiously, and that the trauma of property seizures in the twentieth century could be transformed into an economic opportunity now.

The report looks closely at the nearly 6,000 certified U.S. claims, disaggregating them by corporate and individual, large and small. To settle the U.S. claims, Feinberg suggests a hybrid formula, whereby smaller claimants receive financial compensation while larger corporate claimants can select an “opt-out” option whereby they pursue their claims directly with Cuban authorities, perhaps facilitated by an umbrella bilateral claims resolution committee. In this scenario, the larger corporate claimants (which account for nearly $1.7 billion of the $1.9 billion in total U.S. claims, excluding interest) could select from a menu of business development rights, including vouchers applicable to tax liabilities or equity investments, and preferred acquisition rights. Participating U.S. firms could also agree to inject additional capital and modern technology, to ensure benefits to the Cuban economy.

Though it is often argued that Cuba is too poor to pay some $2 billion of claims, the paper finds that Cuba can in fact manage payments if they are stretched out over a reasonable period of time and exclude interest. The paper also suggests a number of mechanisms whereby the Cuban government could secure funds to pay compensation, including revenues on normalization-related activities.

The Cuban government does not dispute the principle of compensation for properties nationalized in the public interest; the two governments agree on this. Cuba also asserts a set of counter-claim that allege damages from the embargo and other punitive actions against it. But a grand bargain with claims settlement as the centerpiece would require important changes in U.S. sanctions laws and regulations that restrict U.S. investments in Cuba. The United States could also offer to work with Cuba and other creditors to renegotiate Cuba’s outstanding official and commercial debts, taking into account Cuba’s capacity to pay, and allow Cuba to enter the international financial institutions.

Feinberg ultimately argues that both nations should make claims resolution the centerpiece of a grand bargain that would advance the resolution of a number of other remaining points of tension between the two nations. This paves the way for Cuba to embrace an ambitious-forward-looking development strategy and for real, notable progress in normalizing relations with the United States.

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Change is a complicated thing in Cuba. On the one hand, many Cubans remain frustrated with limits on economic and political opportunity, and millennials are emigrating in ever rising numbers. On the other, there is more space for entrepreneurship, and Havana is full of energy and promise today.

The island’s emerging private sector is growing—and along with it, start-up investment costs. Three years ago, Yamina Vicente opened her events planning firm, Decorazón, with a mere $500 in cash. Today she estimates she would need $5,000 to compete. New upscale restaurants are opening: Mery Cabrera returned from Ecuador to invest her savings in Café Presidente, a sleek bistro located on the busy Avenue of the Presidents. And lively bars at establishments like 304 O’Reilly feature bright mixologists doing brisk business.

Photo credit: Richard Feinberg.

Havana’s hotels are fully booked through the current high season. The overflow of tourists is welcome news for the thousands of bed-and-breakfasts flowering throughout the city (many of which are now networked through AirBnB). While most bed-and-breakfasts used to be one or two rooms rented out of people’s homes, Cubans today are renovating entire buildings to rent out. These are the green shoots of what will become boutique hotels, and Cubans are quitting their low-paying jobs in the public sector to become managers of their family’s rental offerings.

Another new sign: real estate agencies! Most Cubans own their own homes—really own them, mortgage-free. But only recently did President Raúl Castro authorize the sales of homes, suddenly giving Cubans a valuable financial asset. Many sell them to get cash to open a new business. Others, to immigrate to Miami.

WiFi hot spots are also growing in number. Rejecting an offer from Google to provide Internet access to the entire island, the Cuban government instead set up some 700 public access locations. This includes 65 WiFi hot spots in parks, hotels, or major thoroughfares, where mostly young Cubans gather to message friends or chat with relatives overseas.

Economic swings

2015 was a good year for the Cuban economy, relatively speaking. Growth rose from the disappointing 2 percent in recent years to (by official measures) 4 percent. The Brazilian joint venture cigarette company, Brascuba, reported a 17 percent jump in sales, and announced a new $120 million investment in the Mariel Economic Development Zone. Shoppers crowded state-run malls over the holiday season, too. 

Photo credit: Richard Feinberg.

Consumers still report chronic shortages in many commodities, ranging from beer to soap, and complain of inflation in food prices. Alarmed by the chronic crisis of low productivity in agriculture, the government announced tax breaks for farmers in 2016. The government is already forecasting a slower growth rate for 2016, attributed to lower commodity prices and a faltering Venezuelan economy. It’s likely to fall back to the average 2 percent rate that has characterized the past decade.

Pick up the pace

Cuban officials are looking forward to the 7th Conference of the Cuban Communist Party (CCP) in mid-April. There is little public discussion of the agenda, however. Potential initiatives include a new electoral law permitting direct election of members of the national assembly (who are currently chosen indirectly by regional assemblies or by CCP-related mass organizations); a timetable for unification of the currency (Cubans today must deal with two forms of money); some measures to empower provincial governments; and the development of a more coherent, forward-looking economic development strategy.

[T]here are now two brain drains: an internal brain drain, as government officials abandon the public sector for higher incomes in the growing private sector; and emigration overseas.

But for many younger Cubans, the pace of change is way too slow. The talk of the town remains the exit option. Converse with any well-educated millennial and they’ll tell you that half or more of their classmates are now living abroad. Indeed, there are now two brain drains: an internal brain drain, as government officials abandon the public sector for higher incomes in the growing private sector; and emigration overseas to the United States, but also to Spain, Canada, Mexico.

The challenge for the governing CCP is to give young people hope in the future. The White House has signaled that President Obama may visit Cuba this year. Such a visit by Obama—who is immensely popular on the island—could help. But the main task is essentially a Cuban one.

Richard Feinberg’s forthcoming book, “Open for Business: Building the New Cuban Economy,” will be published by Brookings Press later this year.

The global consumer products company Unilever Plc announced on Monday a $35 million investment in Cuba’s Special Development Zone at Mariel. Late last year, Brascuba, a joint venture with a Brazilian firm, Souza Cruz, owned by the mega-conglomerate British American Tobacco (BAT), confirmed it would built a $120 million facility in the same location.

So far, these are the two biggest investments in the much-trumpeted Cuban effort to attract foreign investment, outside of traditional tourism. Yet, neither investment is really new. Unilever had been operating in Cuba since the mid-1990s, only to exit a few years ago in a contract dispute with the Cuban authorities. Brascuba will be moving its operations from an existing factory to the ZED Mariel site.

What is new is the willingness of Cuban authorities to accede to the corporate requirements of foreign investors. Finally, the Cubans appear to grasp that Cuba is a price-taker, and that it must fit into the global strategies of their international business partners. Certainly, Cuban negotiators can strike smart deals, but they cannot dictate the over-arching rules of the game.

Cuba still has a long way to go before it reaches the officially proclaimed goal of $2.5 billion in foreign investment inflows per year. Total approvals last year for ZED Mariel reached only some $200 million, and this year are officially projected to reach about $400 million. For many potential investors, the business climate remains too uncertain, and the project approval process too opaque and cumbersome. But the Brascuba and Unilever projects are definitely movements in the right direction.

But Unilever feared that granting its Cuban partner 51% would yield too much management control and could jeopardize brand quality. Unilever also balked at exporting products made in Cuba, where product costs were as much as one-third higher than in bigger Unilever plants in other Latin American countries.

The 2012 collapse of the Unilever contract renewal negotiations adversely affected investor perceptions of the business climate. If the Cuban government could not sustain a good working relationship with Unilever—a highly regarded, marquée multinational corporation with a global footprint—what international investor (at least one operating in the domestic consumer goods markets) could be confident of its ability to sustain a profitable long-term operation in Cuba?

In the design of the new joint venture, Cuba has allowed Unilever a majority 60% stake. Furthermore, in the old joint venture, Unilever executives complained that low salaries, as set by the government, contributed to low labor productivity. In ZED Mariel, worker salaries will be significantly higher: firms like Unilever will continue to pay the same wages to the government employment entity, but the entity’s tax will be significantly smaller, leaving a higher take-home pay for the workers. Hiring and firing will remain the domain of the official entity, however, not the joint venture.

Unilever is also looking forward to currency unification, widely anticipated for 2016. Previously, Unilever had enjoyed comfortable market shares in the hard-currency Cuban convertible currency (CUC) market, but had been largely excluded from the national currency markets, which state-owned firms had reserved for themselves. With currency unification, Unilever will be able to compete head-to-head with state-owned enterprises in a single national market.

Similarly, Brascuba will benefit from the new wage regime at Mariel and, as a consumer products firm, from currency unification. At its old location, Brascuba considered motivating and retaining talent to be among the firm’s key challenges; the higher wages in ZED Mariel will help to attract and retain high-quality labor.

Brascuba believes this is a good time for expansion. Better-paid workers at Mariel will be well motivated, and the expansion of the private sector is putting more money into consumer pockets. The joint venture will close its old facility in downtown Havana, in favor of the new facility at Mariel, sharply expanding production for both the domestic and international markets (primarily, Brazil).

A further incentive for investment today is the prospect of the lifting of U.S. economic sanctions, even if the precise timing is impossible to predict. Brascuba estimated that U.S. economic sanctions have raised its costs of doing business by some 20%. Inputs such as cigarette filters, manufacturing equipment and spare parts, and infrastructure such as information technology, must be sourced from more distant and often less cost-efficient sources.

Another sign of enhanced Cuban flexibility: neither investment is in a high technology sector, the loudly touted goal of ZED Mariel. A manufacturer of personal hygiene and home care product lines, Unilever will churn out toothpaste and soap, among other items. Brascuba will produce cigarettes. Cuban authorities now seem to accept that basic consumer products remain the bread-and-butter of any modern economy. An added benefit: international visitors will find a more ready supply of shampoo!

The Unilever and Brascuba renewals suggest a new realism in the Cuban camp. At ZED Mariel, Cuba is allowing their foreign partners to exert management control, to hire a higher-paid, better motivated workforce, and it is anticipated, to compete in a single currency market. And thanks to the forward-looking diplomacy of Raúl Castro and Barack Obama, international investors are also looking forward to the eventual lifting of U.S. economic sanctions.

This piece was originally published in Cuba Standard.

In advance of President Obama’s historic trip to Cuba and Argentina, three Brookings scholars participated in a media roundtable to offer context and outline their expectations for the outcomes of the trip. Richard Feinberg and Ted Piccone discussed Cuba–including developments in the U.S.-Cuba relationship, the Cuban economy, and human rights on the island–and Harold Trinkunas offered insight on Argentina, inter-American relations, and the timing of the visit.

Read the transcript (PDF) »

Richard Feinberg:

The idea is to promote a gradual incremental transition to a more open, pluralistic and prosperous Cuba integrated into global markets of goods, capital, and ideas. It is a long-term strategy. It cannot be measured by quarterly reports.

Ted Piccone:

...the key [is] to unlock a whole set of future changes that I think will be net positive for the United States, but it is going to take time, and it is not going to happen overnight.

Harold Trinkunas:

Cuba is really about moving, among other things, a stumbling block to better relations with Latin America, and Argentina is about restoring a positive relationship with a key swing state in the region that was once one of our most important allies in the region.

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Editors’ Note: The odds of wringing short-term concessions from Cuba's proud and nationalist leaders are stacked against Obama, Richard Feinberg and Ted Piccone believe. They argue the trip should be judged by its ability to expand constituencies in both countries who want a more open and prosperous Cuba. This post originally appeared on Huffington Post.

President Obama's decision to make a historic visit to Cuba later this month is about more than U.S. politics or business opportunities on the island. It's a bold bet that

presidential diplomacy can secure a new normal in U.S.-Cuba relations after over five decades of hostilities, embargoes and gridlock.

Based on our years of analysis and policymaking in and out of government, we believe the odds of wringing short-term concessions from Cuba's proud and nationalist leaders are stacked against Obama. We also believe, however, that that is the wrong metric. Rather, this trip should be judged by its ability to expand constituencies in both countries who want a more open and prosperous Cuba.

To that end, Obama should draw on his extraordinary rhetorical skills to paint a vision for both Cubans and Americans of a future attractive enough to persuade the island's citizens, especially its ambitious and talented millennials to remain on the island and for the resourceful Cuban American diaspora to invest in that vision. This promise of a Cuban renaissance should include one where citizens freely exercise their chosen professions, engage directly with a transparent and accountable government, have access to the global internet, and travel abroad routinely for family and business purposes.

To help shape such a future, the U.S. delegation should engage not only with Cuba's historic revolutionaries but also with its next generations of public and private leaders from across Cuban society. The White House can also use the visit to leverage Obama's immense popularity on the island to speak directly to the Cuban people about their aspirations for a brighter future.

Given the longstanding feuds between our two countries, however, it will take longer than a year or two to unwind the accumulated distrust and build support for this new normalcy. On the U.S. side, major sectors have swung clearly in favor of normalization - business and agricultural interests, human rights and religious groups, and the broad swath of U.S. citizens keen to know Cuba after decades of isolation. Even majorities of Cuban-Americans and Hispanic voters favor engagement over the embargo.

These constituencies, however, are not yet strong enough to persuade Congress to lift the embargo. And Havana has done little so far to address the major sticking points in Washington's list of legitimate grievances, particularly in the key areas of human rights and economic reforms.

On the Cuban side, Raúl Castro recognizes that Cuba's ability to protect the social gains of the revolution depends on normalizing its participation in the global economy. Its economy badly needs the injection of U.S. commerce, professional exchanges and tourism that would flow readily once the embargo is lifted. Family-run businesses, farmers, young people and professionals in sectors like software and biotechnology also stand to gain from these changes.

Notably, many of those fighting for a more pluralistic Cuba applaud Obama's decision to declaw the embargo as a political shield for government hard-liners; it helps their cause for a more honest debate at home about how to reform Cuba's outdated model of state-centric development and to make government more accountable to its citizens.

The visit offers both presidents a rare opportunity to demonstrate to these various stakeholders that change is not one-sided but a mutual accommodation. There is nothing like a presidential visit to move bureaucracies and catalyze action.

For example, the visit could accelerate progress toward easing the embargo. Already, new rules encourage trade with the emerging private sector and with some state-owned enterprises. Cuba should now take steps to facilitate such commerce and stop insisting that all sanctions be lifted first.

As important, the two sides should expedite resolution of outstanding U.S. property claims dating back to the early 1960s, a key congressional condition for lifting sanctions. Prompt resolution of these cases would automatically create powerful constituencies in the United States for repealing the embargo and signal to foreign investors that Cuba is prepared to respect property rights and the rule of law. They could also demonstrate a willingness to resolve longstanding claims for compensation for citizens killed in hostilities during the Cold War.

In anticipation of next month's Cuban Communist Party Congress, President Castro can detail his plans to decentralize power, empower the legislature and reform the electoral system.

The precise timing of Obama's visit - just one month before the Party Congress - may signal that Raúl Castro and his pragmatic followers welcome a friendly nudge to recharge the reform process they launched in 2008. It also underscores how little time remains before Americans elect a new president who could reverse steps taken so far with the stroke of a pen. That is the kind of marriage of short and long-term interests that allow wise presidents to make history, and the ultimate test for assessing whether the Obamas' trip is serious business, or just family fun.

Editors' Note: Brookings Nonresident Senior Fellow Richard Feinberg reports from Havana on President Obama's historic visit to the island. 

Havana is abuzz at the sheer weight of the president of the United States arriving in Cuba. In the hours before President Obama’s arrival, astonished Cubans told tales of planeloads of black limousines and massive Suburbans, of heavily armed security personnel, of sunglass-sporting secret service officers arriving at the airport and making their way through the city.

Cubans have anticipated the arrival of the Obama family with considerable joyfulness, but the festive mood is colored by a certain reticence, a deep-seated fear of, once again, being overwhelmed by the Colossus from the North. 

The government has bargained hard with Obama’s advance team to hem him in, to limit his direct contact with the Cuban people. There will be no large outdoor speech—rather on Tuesday morning Obama will address a hand-picked audience in the newly renovated Grand Theatre with its limited seating capacity—although the Cuban government agreed to live television coverage. The U.S. president will also meet with local entrepreneurs, but in a constricted venue, and ditto for his meeting with independent civil society and political dissidents.

On Tuesday afternoon the president will be the guest of honor at an exhibition game between the visiting Tampa Bay Rays (their chance selection was by lottery) and the Cuban national team. The White House has hinted that he will throw out the first ball, but this could not be confirmed. On a prior occasion, Jimmy Carter did indeed throw out the first ball, but that was during a visit long after his presidency.

Putting the lanky, athletic Obama on the mound would run a certain risk for the Cubans. Suppose the excited crowd begins to cheer, “Obama, Obama…” Even more dangerous, imagine if the exuberant Cubans follow with, “USA, USA, USA…”

Back home, critics of the Obama administration say he’s made too many concessions to the Cuban government without reciprocity. Cuba is no closer to a liberal democracy, they argue, than it was on December 17, 2014, when Barack Obama and Raúl Castro announced their decision to normalize diplomatic relations. But these skeptics miss this vital point: By befriending the president of the United States, the president of Cuba and first secretary of the Cuban Communist Party (PCC) has exploded his regime’s long-standing national security paradigm organized around the imminent danger posed by a hostile empire. The rationale for the state-of-siege mentality, the explanation for the poor economic performance, no longer resonates. The ruling political bureau of the PCC stands exposed before the Cuban people.

Hence, the government is working hard to persuade the people that it has not forsaken its nationalist credentials: the PCC’s daily newspaper, Gramna, ran a fierce editorial warning for Obama not to try to step on their little island, not to intervene in its internal affairs; rather, he must arrive as a classic Greek suitor bearing gifts. But no Trojan horses, the Cubans are too wary to be fooled so easily.

Venezuelan President Nicolás Maduro, passing through Havana this week, pointedly remarked: “The hearts of the Cuban and Venezuelan people are warm and true. Not like others who come with smiles but hide a clenched fist.”

In truth, most Cubans very much want the trip to succeed. They want more tourists, more remittances from Cuban-Americans living in Florida and New Jersey. They would welcome more trade, more access to famous U.S. consumer brands. Many would even welcome U.S. investment—with the promise of good jobs and better wages. All would love to be able to travel freely between their island and the outside world, especially to the nearby United States. In short, they yearn for normality.

And savvy Cubans sense the link between the more relaxed diplomatic atmosphere and the gradual opening of political space so evident on the island. While not yet living in a fully open society, Cubans are now more willing to express their views openly, to foreigners and among themselves. Some are even forming proto-civil society groupings, to advance gender equality, environmental stewardship, religious freedom, and human rights.

Bathing in these new liberties, Cubans worry that something, anything, could go wrong during the visit. In such a highly scrutinized setting, one misstep, one awkward phrase, one misinterpretation of Cuban history, would give ammunition to hardliners to set the clock back and to restore the old national security paradigm.

Raúl Castro has pinned his own legacy too closely to the young U.S. president to allow any stumbles during this historic visit, to stand idly by while the visit was twisted by his internal opponents. And Raúl and his confidants retain control over the mass media in Cuba, and the PCC will loyally pass along the party line, as set by the political bureau and echoed all along the chain of command, down to the district and village level.

So the visit will be declared a success. Most likely, it will truly be a marvelous moment, because Obama is just the right person to stretch out the U.S. hand to the long-aggrieved Cuban people. The very traits for which Obama is so often criticized at home will serve him well in Cuba: his humility, his respectfulness, his sense of irony—these are just what Cubans have been harking for from the United States for so many decades.

The Cubans will also love Michelle Obama and the two teenage Obama daughters, especially if Sasha and Malia are freed to wander forth and meet their contemporaries at one of Havana’s clubs where young people gather—the Cuban media and public will bask in the respect being paid to Cuban music and dance, to “Cubanismo.”

Obama and Castro share some goals, and conflict on others. Both wish for a peaceful transition to a more prosperous Cuba, more open to the world and to global commerce. But they differ on the endgame: Obama would like to see a more liberal, pluralistic polity, while Castro presumably wants to see his Communist Party retain its grip on power. But that chess match will be waged later, by their successors. 

For Barack Obama and Raúl Castro, today their interests are convergent. Hence, we can predict that, most likely, the visit will be a great success, a historic legacy for which both statesmen will be justly proud.

Editors' Note: Brookings Nonresident Senior Fellow Richard Feinberg reports from Havana on President Obama's historic visit to the island.

Walking the streets of Havana during Obama’s two full-day visit here, the face of every Cuban I spoke with lit up brightly upon the mere mention of Obama’s name. “Brilliant,” “well-spoken,” “well-prepared,” “humanitarian,” “a true friend of Cuba,” were common refrains.

These Cubans did not need to add that their own aging, distant leaders compare unfavorably to the elegant, accessible Obama. And the U.S. president’s mixed ethnicity is a powerful visual that does not need to be verbally underscored to a multi-racial Cuban population. But this skeptical question remained: “Would the visit make a lasting difference?” Would the government of Cuba permit some of the changes that Obama was so forcefully advocating?

In his joint press conference with President Raúl Castro, and in his speech in a concert hall that was televised live to an intensely interested Cuban public, Obama spoke with remarkable directness about human rights and democratic freedoms, sparking more than one overhead conversation among Cubans about their own lack thereof.

With eloquent dexterity, Obama delivered his subversive message carefully wrapped in assurances about his respect for Cuba’s national sovereignty. “Cubans will make their own destiny,” he reassured a proudly nationalist audience.

“The President of the world”—as average Cubans are wont to refer to the U.S. president—emphasized that just as the United States no longer perceives Cuba as a threat, neither should Cuba fear the United States. Offering an outstretched hand, Obama sought to deprive the Cuban authorities of the external threat that they have used so effectively to justify their authoritarian rule and to excuse their poor economic performance.

On Cuban state television, commentators were clearly thrown on the defensive, seeking to return the conversation to the remaining economic sanctions—“the blockade”—to the U.S. occupation of the Guantanamo Naval Base and to past U.S. aggressions. Their national security paradigm requires such an external imminent danger.

Obama sought to strengthen the favorable trends on the island, by meeting with independent civil society leaders and young private entrepreneurs. One owner of an event planning business confided to me, “I cried during our meeting with Obama—and I rarely cry—because here was the leader of the most powerful nation on earth meeting with us, and listening to us with sophisticated understanding, when our own leaders never ever do.”

Obama assured the Cubans he would continue to ask Congress to lift the remaining economic sanctions—but he added that the Cuban government could help. It could allow U.S. firms to trade with the Cuban private sector and cooperatives, and now with some state-owned enterprises “if such exchanges would benefit the Cuban people.” So far, the government has permitted very few such transactions—ironically, an auto-embargo. And the Cuban government could engage the United States in an effective human rights dialogue and prioritize settlement of outstanding claims.

Certainly, the administration needs Cuba’s help in broadening constituencies in the United States for its policy of positive engagement with Cuba. Some U.S. firms—Verizon; AT&T; AirBnB; now Starwood Hotels and Resorts; shortly, various U.S. commercial airlines and ferry services—are signing deals. And the surge of U.S. travelers visiting the island typically return home as advocates for deepening normalization. Obama’s entourage included nearly 40 members of the Congress, the largest of his presidency, he said.

But Obama still does not have the votes to lift the embargo. He told the Cubans he has “aggressively” used executive authority to carve out exceptions to the embargo, such that the list of things he can do administratively is growing shorter. In effect, he tossed the ball into the Cuban government’s court. Only if Cuba opens to U.S. commerce, only if it shows a disposition to improve its human rights practices, might the U.S. Congress be moved to fully normalize economic relations.

If Cubans were so impressed by Obama, why do I only reward him a triple? Fundamentally, because his White House staff failed to secure a schedule that would have exposed him more directly to the welcoming Cuban people. There were rumors he was to throw out the first pitch at an exhibition game between the Tampa Bay Rays and the Cuban national team (won 4-1 by the U.S. squad), but that opportunity was denied. Nor was he permitted to make his main speech before an outdoor Cuban public. As he walked around Havana’s colonial center, the authorities allowed only small crowds. Michelle and accompanying daughters, Malia and Sasha—potentially powerful symbols in a family-oriented country—kept subdued schedules. Overall, the Cubans managed to hem Obama in, and to hand-select most of the audiences from among their loyal followers, audiences that were predictably polite but restrained. Fortunately, the meeting with opposition activists went forward as planned.

Further, while Obama’s remarks were well received, his texts were not as well woven together by coherent narratives as they might have been. And many Cubans would have liked to hear more about specific measures to build a more prosperous economy.

When asked whether Castro and Obama had “chemistry” by a reporter, a senior Cuban diplomat preferred to refer to “mutual respect.” But the two leaders did seem to develop a real rapport. During the baseball game, they spent a full hour sitting next to each other, seemingly in relaxed conversation. And during a brief question-and-answer period at the end of their joint press conference, when a U.S. reporter peppered Castro with hostile questions, Obama jumped in to fill time while Castro—not at all accustomed to press conferences—struggled to compose his response.

Cubans will long remember this visit by the sort of charismatic leader that they once had, in a youthful Fidel Castro, and that they would long to find once again. In the meantime, the Obama administration will do what it can to reintroduce Cuba to U.S. goods and services, U.S. citizen-diplomats, musical concerts, sports stars—Shaquille O’Neal, among others—and other cultural, educational, and scientific exchanges. And it will also spread ideas, about how to improve the sluggish Cuban economy and gradually integrate it into global commerce, and in the longer run, to help give average Cubans a greater voice in determining their own national destiny.

Richard Feinberg, a nonresident senior fellow in the Latin America Initiative and author of the forthcoming book, “Open for Business: Building a New Cuban Economy” (Brookings, 2016), discusses current U.S. and Cuba relations after President Obama's visit and looks ahead to Cuba's increasing engagement with the global economy.

“The younger generation does have a respect for Fidel Castro and what the older generation accomplished,” Feinberg says. “They want to see a fresh generation of leadership, they want to see a more relaxed political atmosphere, they want more opportunities economically to exercise their own profession and exercise their own talents. They want and fully expect normal relations between Cuba and the United States.”  In this podcast, Feinberg explains how Cuba can reintegrate itself into global economy while encouraging a gradual opening of economic relations with the U.S.

Also in this podcast, meet new scholar Susan Hennessey, fellow in National Security in Governance Studies; and stay tuned for our presidential election update with John Hudak.

Show Notes

Open for Business: Building the New Cuban Economy

Obama scores a triple in Havana

In Cuba, Obama looks to the post-Castro era

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Thanks to audio engineer and producer Zack Kulzer, with editing help from Mark Hoelscher, plus thanks to Carissa Nietsche, Bill Finan, Jessica Pavone, Eric Abalahin, Rebecca Viser, and our intern Sarah AbdelRahim.