1

Why is the US embargo such a problem for Cuba?

Honestly, the USA is not the only country in the world. Cuba need not buy or sell things to the USA. Cuba could trade with others nations such as EU, China, Russia + everybody in Middle/South America.

Yes, the USA is a big market and that is closed to Cuba. Particularly exporting Cuba's cheap workforce (or products requiring a large mass of cheap work force) could be very fruitful. What Cuba needs and they could buy from the USA, they could also buy from others (China, EU).

6
  • 1
    Downrating for incoherence.
    – ohwilleke
    Aug 17 at 22:53
  • 2
    No, there is some validity to this question, even if the phrasing isn't the best. Cuba's government states, again and again, that it dislikes the US. OK, fine. So why also make so much fuss about the fact that they can't trade with them? Not saying that there aren't valid reasons, but the question is not unreasonable at face value. Aug 18 at 0:39
  • 5
    Because its wide ranging in nature - a $20,000 transaction between a Danish buyer and a German seller of Cuban cigars ended with the money being seized by US authorities because the transaction uses the SWIFT network to move the money, which falls under US authority. cphpost.dk/?p=12167 When so much of the worlds infrastructure is US-controlled (banking systems, internet fundamentals etc), any action by the US is essentially a global action.
    – user16741
    Aug 18 at 1:34
  • 3
    @Moo why not put that as an answer? US sanctions on Iran have made many readers here somewhat familiar with the mechanisms available for affecting "extraterritorial $ transactions" not involving the US. I assume this has happened more than once. Aug 18 at 5:33
  • 1
    As a frame challenge, has it been such a big problem? Most of the higher serious estimates of lost potential GDP from the US embargo come to under 1% of Cuba's GDP per year. The US has been fairly unsuccessful at stopping even its allies from doing business with Cuba (e.g., Spain is still one of its primary trading partners). I would suggest that, in reality, perhaps the Cuban government dislikes it so much because it feels that the embargo is fundamentally unjust (less cynically) or because it provides a good platform to criticize a country that it does not much like (more cynically).
    – Obie 2.0
    Aug 18 at 7:06
2

A US embargo is close to a worldwide embargo because the US assert their power all over the world and claims that any foreign business having at least one branch or office in the US is subject to US laws. For example they fined for dozen of Billions all the major European banks for violating US sanctions with Iran. [1]

Thus not only few businesses dare to trade with Cuba, but Cuba is almost excluded from the international banking network to the point that to trade with other countries they have to resort to bartering. E.g. Although the oil for doctors deal [2] in western media was described as politically motivated it was just a trade agreement working around US sanctions.

Furthermore:

  • the American authorities for year threatened foreign Telecom companies willing to invest in Cuba so much that until recently they had only a small bandwith connection to the internet for the entire country. This was partially solved by laying a cable to Venezuela [3], that was the most expensive solution, but the only available since the Caribbean Islands and Mexico didn't dare to challenge the US.

  • many neighbouring countries are strongly tied to the US Economy or, as former British colonies or British Overseas Territories [4], are still part of that economic sphere, thus worsening Cuba's isolation.

References:

[1]
https://www.reuters.com/article/us-bnp-paribas-settlement-idUSKBN0F52HA20140701

https://www.americanbanker.com/slideshow/the-seven-largest-sanctions-related-fines-against-banks

https://www.bbc.com/news/business-25341882

https://en.wikipedia.org/wiki/United_States_sanctions_against_Iran#Sanctions_against_third_parties

[2]
https://www.qwant.com/?q=cuba+venezuela+oil+for+doctors&t=web

[3]
https://en.wikipedia.org/wiki/ALBA-1

[4]
https://en.wikipedia.org/wiki/British_Overseas_Territories

1

While the cuban economy has its greatest enemy on its government, the US embargo is in practice, a global embargo. The responsible of that is the Helms-Burton law, which declares:

International Sanctions against the Cuban Government. Economic embargo, any non-U.S. company that deals economically with Cuba can be subjected to legal action and that company's leadership can be barred from entry into the United States. Sanctions may be applied to non-U.S. companies trading with Cuba. This means that internationally operating companies have to choose between Cuba and the U.S., which is a much larger market.

The UN, the EU, Canada, Mexico and virtually everyone else protested at the enactment of this law, which basically intends to make US law into World law. Several measures were installed in different countries (Canada, Mexico, the EU) to compensate the extraterritorial measures of the law, but just as the sanctions against Iran, most companies were too afraid of the possible actions taken against them by the US to risk doing bussiness in any of those countries.

In particular, the sanctions make impossible to do any kind of bank operations on cuban assets, so any company who does bussiness with banks - so is, 100% of them - don't want to risk doing bussiness with Cuba. That's true even for companies of the EU, which managed to reach an agreement with the US to be exempted from the sanctions of the Helms-Burton law. In practice, most companies investing in Cuba are companies who do not have (much) bussiness in the USA, like several spanish hotel companies. If you have any kind of significant bussiness with the USA, specially if there are assets physically located there, you stay away from Cuba.

4
  • 1
    I agree, extra-territoriality, not to fight terrorism, but to buy expat votes in Miami shouldn't be the world's problem. But Cuba does manage to get some investment nevertheless. For example Canada - Cuba Relations "Cuba is Canada’s 2nd largest market in the Caribbean/Central American sub-region. Bilateral merchandise trade between the two countries is nearly one billion dollars annually. Canadian companies have significant investments in mining, power, oil and gas, agri-food and tourism." Aug 18 at 16:46
  • The next time somebody tells me how horrible multi-nationals are for various poor countries...
    – puppetsock
    Aug 18 at 20:08
  • Question: If some owner of a "large block of cash" wanted to do business in Cuba, is it difficult to make a shell corp and set it up outside the USA? I know there are Cuban products in Canada, some anyway, mostly cigars is what I'm aware of. I think some rum.
    – puppetsock
    Aug 18 at 20:10
  • @ItalianPhilosophers4Monica Yes, well, this is very similar to media creators complaining about piracy making them lose a lot of profit. How much, though? As you say, Canada-Cuba is nearly $1bn, but the cuban government argues it should be at least 5 times bigger without the embargo. You are free to disagree with those estimations - I am: investment in the island is restricted to those few areas where a profit may be made in Cuba, such as tourism or mining, and lifting the embargo wouldn't change that.
    – Rekesoft
    Aug 19 at 6:33

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .