The Real Deal Miami

Will Trump reverse thawing US business relations with Cuba?

U.S. companies interested in Cuba have until Jan. 20 to seek regulatory changes and individual licenses

November 11, 2016 03:00PM
By Doreen Hemlock

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The Four Points by Sheraton in Havana and Donald Trump

UPDATED Nov. 12, 10:40 a.m.: President Barack Obama’s two-year push to thaw relations with Cuba has spurred interest in U.S. real estate deals on the island and even the launch of a Four Points by Sheraton hotel in Havana this June.

But Tuesday’s victory by President-elect Donald Trump could throw a chill on budding ties with the communist-led nation, analysts warn.

During the campaign, Trump pledged to reverse Obama’s executive orders that warmed relations unless Cuba agrees to “restore” political freedoms on the island – a move considered unlikely by Raul Castro’s administration.

Yet many executives active in U.S.-Cuba business see room for a President Trump to moderate his stance for two key reasons: The billionaire real estate developer had earlier backed détente with the island, and closer ties help U.S. business and jobs.

What’s more, those Cuban-American hardliners pushing to reverse Obama’s thaw did not bring out the Cuban-American electorate for Trump in Florida. Hillary Clinton won much of that vote.

“There is strong, and growing, support across the American public and the American business community to strengthen relations with Cuba,” James Williams, president of nonprofit Engage Cuba, said in a statement. “We remain hopeful that Mr. Trump, who has previously supported engagement with Cuba as a businessman and a politician, will continue to normalize relations that will benefit both the American and Cuban people.”

Many U.S. companies with new business in Cuba want to defend their stake.

Hotel giant Marriott, whose Sheraton brand already runs one Havana hotel and which has approvals to manage two more, now sees “protecting our ability to do business in Cuba” among “our policy priorities,” said spokesman Jeff Flaherty in an email. “Given our roots in the Washington, D.C. region, Marriott has a long history of engaging with policymakers from both political parties, and we’ll continue that important dialogue.”

Obama said he turned to executive action on Cuba because Congress would not act on a failed U.S. policy, including a nearly 60-year-old embargo aimed to spur regime change on the island. His action allowed U.S. airlines and cruise lines to start their first commercial service to Cuba in half-a-century, creating business this year for American, Delta, Southwest, JetBlue and Carnival’s fathom line, among others.

Obama’s push required the writing of detailed new regulations on business with Cuba from U.S. Treasury and Commerce departments. Rolling back those complex regulations won’t be simple, said corporate attorney Pedro Freyre, a veteran in Cuba business and chairman of the international practice at Akerman law firm in Miami. Plus, Trump will have other policy considerations to weigh on Cuba, including growing cooperation with Havana on drug-smuggling, oil spills and immigration.

“It’s not black and white,” said Freyre, analyzing what Trump might do on Cuba.

“You’re going to have in the White House a real estate developer,” he told The Real Deal. “I bet you dollars to doughnuts, he’s going to be thinking about that [business], because that’s who he is and what he does.”

Trump’s real estate group reportedly scouted for business in Cuba in the 1990s, according to Newsweek and Bloomberg.

While a full reversal of Cuba regulations seems “unlikely,” Trump may well “increase conditionality” on U.S.-Cuba business — at least until Feb. 2018, when Cuba’s Raul Castro has said he’ll step down, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council.

The Cuban government could be “defiant” toward Trump’s conditions, Kavulich said. Indeed, Cuba announced Wednesday that its five days of military exercises scheduled on the island will prepare “for a range of enemy actions.”

That leaves U.S. companies interested in Cuba a tight window until Trump takes office Jan. 20 to “seek as many regulatory changes and as many individual licenses as possible” from the Obama administration, said Kavulich. He would like to see new regulations allow all transactions with Cuban government companies and all trade under general license, rather than specific licenses for each activity.

Because of the embargo, U.S. companies can’t own real estate in Cuba. Some now rent space on the island for their businesses. Lifting the embargo so far has proved impossible. Yet Engage Cuba’s Williams said his group and allies will keep pushing to end the Cold War policy, heartened by this week’s election of “even more pro-engagement Republican and Democratic members of Congress.”

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