In Havana and Washington, D.C., the respective ministers of foreign affairs will soon raise their national flags over their embassies — for the first time since the abrupt severing of diplomatic relations in January, 1961. Much has transpired since presidents Raúl Castro and Barack Obama dramatically announced their decision to normalize diplomatic relations between the two adversarial nations.
In the past six months, have developments met expectations? And what more might we anticipate during the remaining 18 months of the Obama presidency?
The Dec. 17 announcements dramatically raised expectations among Cubans for better times ahead. Already, there is noticeably more dynamism in the emerging private sector of small-scale enterprise. And some government restaurants and beauty salons are being transformed into private cooperatives where members can decide on prices and share profits among themselves.
In January, the United States issued more liberal travel regulations. U.S. citizens must still fit within 12 official categories, but the new rules have resulted in a surge of U.S. travelers descending on Havana. Tourist agencies report fully booked hotels and rising prices in the tourism sector.
Airbnb, the Internet-based accommodations service, was surprised to learn a thriving industry of private bed-and-breakfasts already existed on the island. But these pre-existing activities have generally relied on informal word of mouth. Now, Airbnb — licensed to operate by the U.S. Treasury — is improving the information flow to the benefit of Cuban renters and U.S. travelers looking for less expensive lodging and personal contact with Cuban families.
U.S. travelers not only rent rooms, but dine at private restaurants and purchase paintings and CD recordings by Cuban artists, adding dynamism to the burgeoning private sector in Cuba.
But the lion’s share of the Cuban economy remains in the hands of the state. There are few signs of enhanced dynamism among state-owned enterprises, despite promises of more decentralized decision-making.
More than a year ago, the Cuban government announced, to great fanfare, a new economic development center at Mariel, just west of Havana. But very few new foreign investments have been approved, and there are no visible groundbreakings. New investments require multiple approvals by Cuban bureaucrats who seem unsure of their authority or just what the new investment rules should be.
Yet broad-based growth in Cuba will be possible only if low levels of domestic savings and investment are supplemented with significant inflows of foreign capital and technologies.
Similarly, the Obama administration offered to permit U.S. firms to buy and sell with the growing Cuban private sector. But the Cuban government has not yet put in place the distribution channels to make that promising new commerce a reality.
On the U.S. side, some firms complain the new U.S. regulations lack sufficient clarity to satisfy their legal counsels. Another missing piece: Can U.S. banks provide the trade credits that routinely grease international commerce?
Will the Cuban and U.S. governments seek to give a renewed impetus to commerce across the Florida Straits? Or will they be satisfied with what they have already accomplished?
In both Havana and Washington, some will argue that restoring diplomatic relations, after more than five decades of antagonism, is sufficiently daring and groundbreaking for the time being.
Yet in both capitals, there is unease the gains to date could be largely reversed, particularly if Republicans regain the White House. Are the pro-change constituencies strong enough in both countries to ensure the sustainability of the liberalization path?
The outcomes of these debates in Washington and Havana will decide whether the two governments believe they need to undertake a second round of measures to facilitate travel and commerce, or whether they or can rest comfortably on their laurels.
Richard E. Feinberg is a professor at the University of California, San Diego, and a non-resident senior fellow at the Brookings Institution.
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