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    What Cuba-U.S. Relations Means For U.S. Industry

    What Cuba-U.S. Relations Means For U.S. Industry
    By Alison L. Deutsch | January 30, 2015 AAA |

    President Barack Obama announced the restoration of diplomatic relations
    with Cuba in December after 54 years of isolation. Ties with the
    island-nation were severed in January of 1961, one year after the first
    trade embargo was imposed by President Dwight D. Eisenhower.

    The historic announcement with Cuban President Raúl Castro was
    established amid a prisoner exchange brokering the release of dissidents
    detained on espionage charges. Obama has agreed to release three Cuban
    agents held in the U.S. for the last 15 years in exchange for Rolando
    Sarraff Trujillo, a Cuban national who operated as an intelligence agent
    for U.S. Cuba also agreed to release 53 political prisoners.

    The discussions prompted the immediate release of Alan P. Gross, an
    American government aid contractor held for five years in Havana. Gross
    was sentenced to 15 years by the Cuban government on espionage charges
    but was released on humanitarian grounds.

    As part of the diplomatic normalization process, the U.S. will reinstate
    its embassy in Havana. High-level exchanges between the two governments
    have already begun. The U.S. will address matters of Cuban domestic
    policy such as improvements in human rights conditions and advancing
    democratic reforms. (For more, see: How To Invest In Cuba.)

    WHY NOW?
    Cuba is motivated to thaw relations with the U.S. as instability in
    Venezuela mounts and a looming credit default threatens the Venezuelan
    economy. Venezuela serves as one of Cuba’s main economic supports
    through its subsidized oil supplies. To preserve its economic integrity,
    Cuba is setting its sights on outside economies.

    The decades-long American policy of isolationism has failed both
    economically and politically. Normalization of relations – and an
    eventual lifting of the embargo – will allow the U.S. to enter a nearby,
    untapped market of 11 million people, and U.S. travel, agriculture, and
    financial services sectors are looking to gain. (For more, see: The
    Economic Impact of Better US-Cuba Relations.)

    Travel restrictions have kept American tourists out of Cuba for decades.
    The new White House policy will relax travel constraints, granting
    access to a wide range of travelers in the process. The reopening of
    America’s embassy in Havana will also facilitate travel for Americans
    seeking to travel to Cuba.

    Included among the authorized types of travel are visits to family,
    business trips, and visits for educational or religious purposes.
    However, despite a dozen authroized travel types, tourism is still banned.

    The U.S. travel industry sees a breadth of business possibilities for
    the sector as a number of American tourists inevitably take advantage of
    this new travel destination.

    Carnival (CCL), the U.S. cruise liner, has already showed interest in
    bringing tourists to Cuba’s nearby ports. Among a handful of other
    airlines, United Airlines (UAL) has announced plans to serve direct
    flights to Cuba once kinks in government regulations are sorted out.
    Additional opportunities could exist for American hotels as Cuba
    currently houses a dearth of tourist accommodations.

    The policy shift could prove lucrative for American food companies who
    will no longer face burdensome restrictions on exports. Though exempted
    from the trade embargo, agriculture companies have encountered
    regulatory barriers and have been required to finance through third parties.

    Cuba is the largest importer of wheat in the Caribbean and has not
    imported the grain from the U.S. since 2011. The freer trade guidelines
    could potentially raise the U.S. share of wheat imports from zero to
    90%, creating a $150 million business in the process. There is also
    greater room in the marketplace for soy products and corn, the latter of
    which hasn’t been traded since 2008.

    The uptick in American goods will also benefit Cuba by boosting Cuban
    food security. The country currently imports about 80% of its food

    American banks will finally be able to conduct business in Cuba for the
    first time since the trade embargo barred U.S. banks from doing business
    there. American financial institutions will now also be able to open
    correspondent accounts at Cuban financial institutions to process direct
    transactions, eliminating the need to search for a banking intermediary
    in Cuba to sell products or process trade.

    Individuals will also feel the effects of relaxed financial
    restrictions. Remittance levels to Cuban nationals will be raised,
    allowing Americans to send more money to Cuba. Remittances pertaining to
    humanitarian projects and the promotion of private businesses will be
    authorized without limitation.

    Americans traveling in Cuba will no longer be limited to cash
    transactions and will be able to use their credit and debit cards on the
    island. American Express (AXP) is the latest American credit card issuer
    to announce its plans to conduct business in Cuba. MasterCard (MA) also
    recently announced it would stop blocking Cuban transactions.

    Congressional approval is needed to lift the current economic embargo.
    Without full legislative access to Cuba, any significant American
    economic gain would not materialize. However, the swift progress of
    Cuban-American diplomatic relations suggests an eventual—and perhaps,
    forthcoming—embargo lift which in turn, would bring considerable success
    to the travel, agriculture, and financial services sectors.

    Source: What Cuba-U.S. Relations Means For U.S. Industry
    (CCL,UAL,AXP,MA) –