Donald Trump has a choice to make on Cuba

Donald Trump has a choice to make on Cuba
Ted A. Henken, author of "Entrepreneurial Cuba: The Changing Policy
Landscape"
Tuesday, 15 Nov 2016 | 9:17 AM ET
CNBC.com

One example of freer markets in Cuba is the Paladar La Cocina de Lilliam
(Lilliam's Kitchen), a home-based restaurant garden where President
Jimmy Carter ate on his first visit to Cuba in 2002.
While Americans have been reeling over the shocking outcome of our
presidential election, Cubans are experiencing perhaps even greater
vertigo as a result of the surprise victory of Donald Trump.
As the saying goes, "When the U.S. sneezes, the rest of the world gets a
cold." Or perhaps the old Mexican adage is more appropriate to the
situation Cubans find themselves in: "Poor Mexico! So far from God, but
so close to the United States!"
Tune in to CNBC on Tuesday, Nov. 15 at 10pm ET/PT for "The Profit in
Cuba." Host Marcus Lemonis travels to Cuba at a time of historic change
and profiles a new breed of business owners determined to succeed under
one of the most oppressive regimes in the world.

Cubans went from a largely acrimonious relationship with the U.S. prior
to December 2014, to one of unprecedented "hope and change" during the
past 22 months under bilateral efforts to achieve diplomatic
normalization between the erstwhile adversaries, to one of great
trepidation and uncertainty over the past week given the
president-elect's campaign promise to "cancel Obama's one-sided Cuban
deal." President Raúl Castro perfectly captured the moment's ambivalence
for Cuba by quickly sending the president-elect a brief note of
congratulations while simultaneously ordering a five-day military
mobilization.

In my more than half-dozen trips to the island over the past year, I
have noted a palpable, ebullient expectation among Cubans for a better,
more prosperous future under Obama's "new rules" of engagement. This was
especially pronounced among Cuba's emergent entrepreneurial class, which
includes old school cabbies in their even older school American cars,
hip app designers in Cuba's surprising tech start-up scene, and some of
the many restaurateurs behind the island's surging circle of "paladares"
(private, home-based restaurants) which now number more than 1,800.

This hard-won hope was also born of Cuba's own "new rules" introduced in
late 2010 under President Raúl Castro aimed at expanding the island's
long-suppressed private sector. However, I also found that most
entrepreneurs were under no illusions that the Cuban government would be
fully lifting its own counter-productive "auto-bloqueo" or internal
embargo against grass-roots entrepreneurial innovation and inventiveness
any time soon.
This sense of rising hope inside Cuba reached its climax in Obama's
brilliant deployment of soft power during his historic state visit to
the island in March 2016. Many Cubans identified with this youthful,
optimistic, and eloquent African-American family man endowed with both a
sense of history and of humor much more than with their own waxworks of
old white ideologues.
However, Cuba's old guard realized that Obama's charm offensive had
begun to fatally undermine their own authority and undercut their
long-effective use of the U.S. boogeyman as a scapegoat for their own
economic failures and as a justification for their continued political
authoritarianism. In response, the Cuban leadership has spent the past
eight months constantly reminding Cuban citizens of the continued U.S.
existential threat to Cuban sovereignty under the Revolution and
simultaneously dashing their hopes for a better, more open and
prosperous future by stepping up detentions of peaceful political
opponents and independent journalists and slowing economic reforms to a
manageable trickle.
The clearest example of the Cuban government's efforts to lower
expectations has come on the economic front. First, April's Seventh
Party Congress included no new resolutions about deepening or expanding
much needed market-oriented reforms apart from a vague reference to
studying the possibility of granting status as legal businesses to a
portion of the half-a-million strong micro-enterprise sector. Nothing
has come of this idea in the intervening seven months.
Second, price controls have been reimposed in the private agriculture
and transportation sectors, reducing incentives for greater production.
Third, this past summer saw the government scale back economic growth
estimates for 2016 to under 1 percent and impose severe energy saving
and cost-cutting measures across the state sector due to a liquidity
crisis and the Venezuelan debacle.

Finally, the issuing of new licenses for Havana's surging private,
home-based restaurant sector were suspended for six weeks in the fall in
order to root out legal violations such as providing bar services and
live entertainment without permission, obtaining supplies from
black-market sources, staying open past the state-imposed 3 a.m. closing
time, and tax evasion. Some have even been accused of doubling as sites
of prostitution and drug trafficking and shut down.

However, the government has so far not delivered on its promise to
provide affordable access to wholesale markets for these restaurateurs
nor has it allowed them to legally import supplies from abroad or expand
beyond the arbitrary limit of 50 place settings. Moreover, the tax
system for the private sector provokes "creative bookkeeping" by
imposing a rigid 40-percent deduction limit for business often burdened
by much higher supply costs due to Cuba's environment of chronic
scarcity. It also imposes a labor tax on any more than five employees
disincentivizing legal hiring.

To add insult to this injury, the moribund network of their state-run
competitor restaurants do enjoy access to wholesale markets and suffer
no seating or size restrictions or employment taxes. Especially
frustrating for Cuban entrepreneurs is the fact that this emphasis on
law and order comes in the context of shrinking output in the state
enterprise sector, a looming emigration crisis with record numbers of
new Cuban arrivals in the U.S., and in the midst of a tourism boom that
the state hospitality sector has proven unable to absorb.

As Cubans like to say: "¡No es fácil!" (It ain't easy!)

President-elect Donald Trump could follow the recommendation of some
Congressional Republicans by adding his own isolationist wind to the
already full sails of the Cuban government's rigid control that attempts
to keep Cuban entrepreneurs in their frustrated and impoverished places.
Or he could send Cuba's business pioneers a message of support and
solidarity as they attempt to build a more prosperous future by
continuing America's historic opening to Cuba that aims to empower the
island's mergent capitalists through engagement, investment, and trade.

For someone who campaigned as a anti-politician who would bring a
hard-nosed business sense to Washington, Cuba presents Trump with a
golden opportunity to place economic pragmatism and the tangible
benefits it would bring to citizens of both countries over the out-dated
and counterproductive Cold War ideology that undergirds the embargo.

Commentary by Ted A. Henken, an associate professor of Sociology and
Latin American Studies at Baruch College, City University of New York
and co-author of the book "Entrepreneurial Cuba: The Changing Policy
Landscape." He is a past president of the Association for the Study of
the Cuban Economy (2012-2014). Read his blog and follow him on Twitter
@ElYuma.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

Source: Donald Trump has a choice to make on Cuba—commentary -
http://www.cnbc.com/2016/11/15/donald-trump-has-a-choice-to-make-on-cuba-commentary.html