Mark Feierstein and Karen Poreh on new Cuba regulations

November 10, 2017

The new regulations governing travel to and business with Cuba issued by the Trump administration pose limited restraints on the ability of U.S. companies to pursue commercial opportunities on the island but create additional barriers to Americans who wish to travel there.

The two most significant changes in the regulations, which will come into effect on Thursday, are the prohibition on U.S. citizens from engaging in financial transactions with a list of entities affiliated with Cuban security agencies and the ending of the Obama administration’s policy allowing Americans to travel to Cuba independently rather than as part of an organized tour group.

The U.S. State Department’s list of prohibited entities includes hotels, merchants, travel companies, and financial service firms. Notably, however, entities affiliated with Cuba’s Ministry of Tourism are not listed, enabling most travel companies to continue doing business in Cuba. The sector that will be most damaged from these regulations is the hotel industry, as some Cuban establishments will be unable to partner with American companies. But other sectors, like the cruise industry, should continue to flourish, as travelers will be able to overnight on ships and visit the island during the day on group tours without having to worry about running amiss of U.S. law.

The biggest victims of these new rules will be Cuban entrepreneurs – precisely the constituency the Trump administration’s approach is ostensibly designed to support. Travel from the United States to Cuba has tripled in the last year, with more than 285,000 travelers visiting the island already this year. According to a March 2017 survey by Public Opinion Strategies for Cuba Educational Travel, three-quarters of U.S. travelers stay in private bed and breakfasts and most dine at privately owned restaurants, ride in privately owned taxis, and purchase goods from independent artists. These travelers, who typically go on self-designed trips, will now have to travel with a more-expensive authorized group unless their itinerary is fully dedicated to activities that support civil society in Cuba. They will also have to carefully monitor where they purchase goods. These restrictions – combined with the recent State Department travel warnings following illnesses afflicting more than two dozen U.S. diplomats – could lead to a slowing of American travel to Cuba and less revenue for Cuban entrepreneurs who have opened their homes to foreign visitors and started businesses catering to them.

These changes come amid a diplomatic fallout over those illnesses. In October, the U.S. State Department attributed diplomats’ symptoms, which included hearing loss, headaches, and cognitive problems, to a series of sonic incidents in Havana it labeled “attacks.” It then withdrew 60 percent of its staff from an already understaffed embassy in Havana, and expelled an equal percentage of Cuban diplomats from Washington. On Nov. 1, the administration also voted against a U.N. resolution condemning the U.S. economic embargo, reversing the Obama administration’s decision to abstain for the first-time last year.

In the midst of these setbacks, it is important not to lose sight of the irreversible progress that has been made in U.S.-Cuban relations. Most of the changes the Obama administration introduced remain intact. The countries maintain diplomatic relations; Cuba is off the State Department list of state sponsors of terrorism; official cooperation on issues of mutual interest, such as law enforcement, continues; the “wet foot, dry foot” migration policy favoring Cubans over migrants from other countries is gone; there are no caps on the level of remittances that Americans can send to Cubans; Americans do not need a license to travel to Cuba; and existing business agreements, such as for commercial airlines or telecommunication companies, will not be cancelled.

Cuban officials also continue to signal their openness to U.S. businesses and American travelers. U.S. companies are still inking agreements with Cuban counterparts, business delegations to Cuba continue, and the Cuban government published a new set of foreign investment opportunities last week, indicating its ongoing interests in engaging with foreign partners.

For the time being, the Trump administration is not expected to take additional steps to restrict engagement with Cuba. American companies can and should seek commercial opportunities which will not only generate profits but support American workers and the Cuban people. Despite the challenges of doing business in Cuba, the country continues to offer valuable commercial opportunities to companies that know how to navigate U.S. policy, the Cuban bureaucracy, and the island’s internal politics.

Mark Feierstein is a senior advisor at Albright Stonebridge Group, was special assistant to President Obama and senior director for Western Hemisphere Affairs on the National Security Council. Karen Poreh is a director at Albright Stonebridge Group.