CUBA’S ONGOING TRANSITION

 

CubaCara

President Barack Obama issued an executive order to chart a new course for relations with Cuba almost two years ago. Since then, both countries have re-opened embassies after more than 50 years. With the death Nov. 25 of Fidel Castro, the spotlight is back on Cuba and there has been increasing speculation on what kind of business policies President-elect Donald Trump would pursue toward the Caribbean nation. 

The trade embargo with Cuba remains in place and most transactions between the U.S. and Cuba are prohibited. Many companies continue to steer clear of Cuba because of a number of business difficulties. For example, foreign companies must employ labor through state-run companies, paying pre-determined wages in convertible currency, which is directly equivalent to the U.S. dollar. This is despite the fact that employees receive salaries in Cuban pesos. What happens to the difference? The government pockets it. 

To reform markets in Cuba, officials there have discussed abolishing a dual-currency system in favor of keeping the peso. This would be a welcome development for companies and investors who find it difficult to estimate the cost of doing business there and paying employees. While there has been discussion around this possible change, little official communication has been released by the Cuban government.

Another barrier to business is that companies, with few exceptions, must employ Cuban citizens and residents for all positions. The exceptions include members of a management board or administration, and employers usually are unable to select their own employees.

However, U.S. companies looking to invest in Cuba have some good news. Travel to Cuba now is easier for Americans than it has been for the past 50 years, despite restrictions and the trade embargo. Tourism is booming and companies like American Airlines, Starwood Hotels & Resorts Worldwide and Airbnb are reaping the benefits. Starwood’s Four Points Havana opened in July and caters to American tourists. 

Cuba also has been gradually loosening restrictions on private enterprise, with Cubans starting to open private small businesses like restaurants and salons. These are signs that the country is changing. 

There has been speculation on whether Trump would continue the course in breaking down barriers with Cuba or repeal Obama’s executive order. While Trump has made statements that he might reverse direction, he ran his campaign on a pro-business platform. For this reason, the president-elect may choose to focus on tourist travel restrictions while quietly letting businesses seek economic opportunities.

As for Fidel Castro, his death was unlikely to have any effect on the U.S.-Cuba employment relationship. A once-impossible Cuban market remains difficult to penetrate. U.S. companies eager to enter Cuba still would need to play by old rules, work through government partnerships and wait to see what changes may unfold in the next few years.

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