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New U.S. Cuba Sanctions Regulations May Be Issued This Week

Last week we penned a brief note on the potential for an easing of U.S. travel restrictions to Cuba.  The change in a policy may arise in response to symbolic release by Cuba recently of a handful of political prisoners.  In response to that piece, I was contacted by numerous readers about additional regulatory changes that, if true, would mark a significant shift in recent U.S.-Cuba policy.

In addition to numerous travel provisions, the specific sections of concern of the Cuban Assets Control Regulations (CACR) cited to me include §§ 515.533 and 515.559.  With the former, there is the question whether the Obama Administration will allow extending credit to Cuba to purchase U.S. goods; while the other section primarily deals with the ban foreign subsidiaries of U.S. companies from doing business with Cuba (for Cuba watchers we’re talking about the “Mack Amendment” to the Cuban Democracy Act of 1992).

Taking U.S.-Cuba policy back to the Carter, and later Clinton, years makes no sense.   Engaging the regime did not work then, and it will not work now.  Easing travel restrictions and facilitating trade by foreign subsidiaries of U.S. companies helps the Cuban regime and hurts the Cuban people – exactly the opposite of what U.S. law requires the Executive Branch to be doing when it comes to Cuba.

These back to the future changes to U.S. law are supposed to be announced Thursday ; however, maybe common sense will prevail and folks will reconsider such a reckless use of executive authority.  The Cuban Communist Party has done nothing to warrant such a generous quid pro quo from the Obama Administration.  And so long as the Castro brother remain in power, it never will.

U.S. companies should think long and hard before engaging with the Cuban government.  Not only is the country a poor credit risk, but the conditions placed on contracting activities make little economic sense in the near or long term.  Cuba is also a high risk region that will expose U.S. companies to Foreign Corrupt Practices Act (FCPA) issues.

A short-term gain by U.S. companies will be a long-term loss.  The future leaders of Cuba are taking stock of who has helped this regime stay in power and who as not.  The latter will likely be rewarded for their patience, the latter, well, good luck.

P.S.,  And for those arguing that Cuba’s token release of political prisoners is a positive sign, recall that this is not the first time that the Cuban government has used political prisoners as bargaining chips; moreover, for every few they release, more are rounded up.  By way of recent example, see the Babalu Blog.

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