Could relations between Cuba and the US be thawing at last?

There are signs of a thawing of relations between the US and Cuba as the Castro government looks to attract overseas investors to boost the economy.

Christopher Michel [CC-BY-2.0 (], via Wikimedia Commons

There are signs of a thawing of relations between the US and Cuba as the Castro government looks to attract overseas investors to boost the economy. On 28 May a delegation from the American Chamber of Commerce made its first visit to Cuba for 15 years and was welcomed in Havana by Cuba’s Foreign Minister Bruno Rodriguez and Trade Minister Rodrigo Malmierca.American Chamber of Commerce president Thomas Donohue said he was in Cuba to assess the economic changes taking place under President Raul Castro.Just over 50 years ago, when the communists triumphed, the US imposed an embargo on the island, but since President Raul Castro took over from his brother Fidel in 2006, Cuba's communist government has introduced a number of economic reforms and in December, the President called for "civilised relations" with the United States, saying that he thought the two countries should respect their differences.The island was opened to foreign capital in 1995, but in recent years, there has been a fall in foreign investment and only moderate economic growth. In 2013 the economy grew by 2.7 per cent, falling far short of the government's seven per cent target. Cuba's economy is still highly centralised but nearly 500,000 Cubans now have licences to operate private (though small) businesses.In March, Cuba’s National Assembly unanimously approved a bill aimed at making the Communist island more attractive to foreign investors with taxes on profits cut from 30 to 15 per cent, and with new investors being offered eight years of exemption from paying taxes.The government in Havana may now be looking for foreign investment as it nervously eyes developments in nearby Venezuela where there has been unexpectedly strong public opposition to Nicolas Maduro’s socialist government.If the Venezuelan government were to be overthrown it would have serious implications for both the politicians and people of Cuba as its economy is heavily dependent on Venezuelan oil which is currently supplied at the rate of about 80,000 barrels a day. Cuba has an arrangement with Venezuela whereby the oil is  "paid" for not in cash, but by the supply of thousands of Cuban doctors and nurses.When the Soviet Union fell apart in 1991 and the eastern bloc subsequently collapsed, Cuba’s dependence on these countries was such that its GDP dropped by around a third and there were reported (though officially denied) food shortages.The dual currency system of Cuban pesos (used in the official economy) and their convertible equivalent, pegged to the dollar, (and used in the quasi-capitalist economy) makes things more complicated for foreign companies looking to invest in the country and foreigners are not officially allowed to spend the convertible peso in the country.The Associated Press reports that Hillary Clinton, former Secretary of State says in her forthcoming book, Hard Choices that “Since 1960, the United States had maintained an embargo against the island in hopes of squeezing Castro from power, but it only succeeded in giving him a foil to blame for Cuba's economic woes.”Mrs Clinton says that despite opposition from some members of Congress and members of the Cuban community in the US, she urged President Obama to lift or ease the U.S. embargo because it was no longer useful to either country.The recent Cuban law on foreign investments will seek to reduce the constraints on potential investors and may encourage further dialogue with the US. All sectors of the Cuban economy will soon be open to foreign capital, apart from the military, healthcare and education, but though overseas companies may find doing business in Cuba a little easier and will pay less tax – they will not yet be able to choose their workforce – that will continue to be supplied by the state.

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