The US-Cuba agreement in five major economic issues

Following the recent news on the decision of the Cuban and American governments to restore relations, quite a few officials have commented that of the US ¨blockade only the shell is left¨

Those sanctions, that started 53 years ago, are closer to their end. Obama promised he would urge Congress to start a debate on the issue since, he as a president, cannot individually decide on lifting the embargo, however he is advancing in several aspects by decree.

The potential end of the blockade has many people pending on the Cuban economy from Cuban-Americans who want to send remittances to their relatives to great businesses considering investments.

In that regards, OnCuba suggests ¨The 5 great economic effects of the US-Cuba¨ and article by Kim Gittleson, BBC business correspondent:

Remittances

Nowadays remittances from the US are estimated at 2 billion dollars a year, according to the US Treasury Department. Now Obama´s measure actually multiplies by four the authorized amount up to 2000 dollars every three months, mainly from Cuban-Americans to their relatives in the island. This could be a great boost for Cuban economy

More important, it has the potential to change the nature of foreign investment in the island as well as its recipients. Essentially, the usual flow to Cuban state sector will turn into persons in the private sector.

¨this measure in particular is a sign to promote the sending of money and other forms of support to the emerging Cuban private sector¨ Jorge Duany, researcher of the University of Florida, told BBC. The scholar, head of the Research Institute of Cuba in that university, points out that private sector already has half a million Cubans.

The increase of remittances could solve a problem of Cuban economy, whose growth almost stopped this year, due to a variety of factors, including the problems its main commercial partner, Venezuela, is facing due to the collapse of oil prices in the world market.

Cuban government says it needs at least 2.5 billion dollars of DFI a year to be able to keep growing rates constant, therefore remittances could help growth.

Agroindustry

An important winner in this situation can be the US agroindustry.

Under the easiness of restrictions authorized by then president bill Clinton in 2000, US agribusinesses were granted permits to export food and other products to Cuba.

Such exports were for about 5 billion dollars in the 2000 to 2013 period. In 2014 Cuba imported 300 million dollars’ worth of food from the US. ¨ Currently Cuba imports some 60, 65 percent of the food it needs, which is too much for a country with the agricultural potential Cuba has¨ said professor William Messina, from Florida University

But American agribusiness has lost ground against nations like Brazil, then they could profit from new easiness of restrictions.

¨To us, there might be modest profits, but for the American agricultural community it offers the opportunity to compete with nations like Brazil and Argentina¨ Devry Boughner Vorwerk, director of international relations of Cargill, told BBC

It could also help boost the Cuban agroindustry, mainly if the prohibition to sell machinery and pesticides is lifted. ¨They have a great agricultural potential and the capacity to import machinery would be beneficial¨ Professor Messina added

Tourism

One of the main reforms is easiness in the travel to Cuba restrictions as well as a new measure to allow American citizens to use debit and credit cards. Close to 170 thousand licensed Americans visited Cuba in 2014, reported US officials. The new measures will reiterate some restrictions in the 12 categories, including family, professional and educational visits.

Though regular tourism is still forbidden, Cuban economy can yet benefit from the influx of new visitors

¨the tourism services and related sectors that involved State enterprises,and mixed public and private foreign capital and in a growing number of Little cuban private enterprises could benefit¨ Eric Hershberg from American University, said.

Telecommunications

Cuba has one of the lowest internet penetration rates in the world, estimated by the White House in a 5 percent.

¨Cuban economy suffers of a poor and obsolete infrastructure including communications, and all kind of technological advances, including internet and phone services¨ said Duany.

Part of Obama´s reforms will allow US telecommunications firms to start working with Cuba to expand its communications infrastructure, which will help Cuban economy and will set the basis for financial transactions more sophisticated in the future.

Cigars

Finally, in a measure that may not have a great impact on Cuban economy but it will please many, taking the famous Cuban cigars to the US will be allowed, to some extent. US travelers will be able to carry up to 100 dollars ‘worth of tobacco related products.

Marcus Daniel, president of the cigar firm under the same name in Florida says this could potentially affect Habanos firms like his own. ¨What makes it complicated now is that Americans can go and bring Cuban cigars legally, but I make a living selling cigars, and I cannot legally by Cuban cigars and sell them in my store, he said.

But, he adds, he is optimistic that new reforms will come and anyway, American consumers will be more familiar with cigars and that can prove positive for him.

¨Most of Habanos smokers in the US were carving for this in a long time¨ I will send a cigar box to Obama and Raul to congratulate them for a well-done job.

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