The Trouble With Trump's Cuba Plan

SMITH BRAIN TRUST – When President Donald Trump slapped new restrictions on travel and trade with Cuba, he didn't exactly bar U.S. citizens from traveling to Cuba, but he did make it clear that their journeys cannot support the Cuban government, particularly its military.

That may be easier said than done, says Rebecca Bellinger, managing director of the University of Maryland's Robert H. Smith School of Business Office of Global Initiatives and Center for International Business Education and Research (CIBER).

Central to Trump's plan to reverse components of what he called a "terrible and misguided deal" with Cuba is a restriction that forbids U.S. companies and citizens from doing business with any Cuban entity that's controlled by the Cuban military or its intelligence services.

And in Cuba, Bellinger says, that's a lot of entities.

The military, through its Armed Forces Business Enterprise Group (GAESA), holds shares in the state-owned telecom company, so all phone and internet services, she explains, would be off limits. Much of the hospitality industry, too, including the majority of the hotels, restaurants and tourist attractions across the island are also controlled by GAESA.

Even El Floridita, the fish and cocktail restaurant famously frequented by Ernest Hemingway in Old Havana, is owned by the military through Gaviota, one of the companies that makes up GAESA.

"Old Havana is where most people want to go when they come to Cuba," says Bellinger, who recently returned from Cuba, where she co-led a Faculty Development in International Business program. Old Havana, she explains, is the historical and cultural core of the Cuba that visitors come to see.

"It's where cruise ships are docking. And it pulls on the heartstrings of what most visitors expect from Cuba in terms of what it looks like, in terms of its architecture, its history, its beauty," she says. "It is almost 100 percent owned by Gaviota."

For educational groups, which would still be allowed to travel to Cuba under Trump's policy, the new restrictions pose a quandary. Where could a large group stay, if the hotels are off limits?

"For a group of 20 people or more, finding enough Airbnb rooms in one area is not really feasible," she says. "Is there going to be a regulation that even tour groups, people-to-people groups or educational programming cannot stay in military controlled hotels?"

That question may be answered by the Department of Treasury's Office of Foreign Assets Control, or OFAC, which has 30 days to draft revised regulations based on the White House directive. "For the next month, we can only speculate on what the new regulations will allow," Bellinger says.

Cuba's military became increasingly central to much of its economy beginning in the 1980s, Bellinger says, in what was an effort to bring a modern management style to a civilian sector that was badly outdated. Its economic role has grown dramatically in the past decade under Raul Castro. According to estimates, about 40 to 60 percent of Cuba's earnings from foreign exchange is controlled by the military. "That is really pretty significant," Bellinger says.

Cubans generally view their military as something other than a war-waging battle force. "There is that piece," she says. "But the military is also seen as the protector of the revolution, the protector of the socialist ideology."

The six-page directive signed by Trump last week stops short of reversing the entirety of the Cuban reforms adopted by President Barack Obama. Diplomatic relations, restored in 2015, continue under Trump's plan, and embassies in Havana and Washington, D.C., are to remain open.

But Cuban foreign minister Bruno Rodriguez this week called Trump's new policy a "grotesque spectacle" and said Havana would not negotiate "under pressure or under threat."

Under Trump's directive, U.S. airlines would continue to be allowed to fly and land in Cuba, because the military does not control airports. U.S. cruise liners could continue their travel to the island nation, as well, because the military doesn't control the port used by cruise liners. But Bellinger says the demand for flights and cruises is likely to shrink amid heightened restrictions for Americans traveling in Cuba.

"We have already this year seen a decline in the number of airlines carrying passengers to Cuba due to lower-than-expected demand," she says. "If individual travel becomes restricted, are airlines going to be able to maintain the over one million seats on an annual basis to Cuba that they are operating now? Probably not."

It's everyday Cubans that have the most to lose from Trump's directive, Bellinger says. About 500,000 Cubans are self-employed, and many of them operate within the hospitality sector and are reliant on income generated from foreign travelers. Cubans who work in the state hospitality sector are also at risk, as they rely on tips from travelers to supplement their low government salaries. Some 285,000 Americans visited Cuba in 2016, up 42 percent from the year before.

"Americans are the fastest-growing group of travelers to Cuba," Bellinger says, though they continue to be strongly outnumbered by Canadians.