The Cuban embargo is known to be one of the longest sanctions imposed on Cuba by the United States and is still in effect. Many commercial operations have been impacted by Cuba’s failure to profit from economic and financial assistance from the United States. The embargo on Cuba has been enacted and abolished in several forms, based on the actions of the Presidents of the United States when they take office. This has resulted in differences in the effects of the embargo. However, Cuba has put in motion steps to reduce the effect of the embargo on its economies in different ways. A number of companies have been shut down while the ability of Cuba to increase its involvement in international trade or seek financial assistance from international financial organizations has been affected negatively.
An embargo is a process where a government cuts off finances and economic cooperation with another country in order to encourage a change in policies or express its displeasure. An embargo is enacted in order to force the partner government to make changes to its policies in accordance with the interests of the sanctioning nation. While the United States_x0092_ embargo against Cuba is regarded as the most significant, it has not resulted into major economic ramifications on the latter nation. It has acted mainly like a sieve by cutting only a section of funds while a significant amount of such funds is accessible to Cuba (Ribas, 2010). The major sectors of the economy that are affected by an embargo include; trade, foreign aid, and regional economic activities. The impacts of embargoes by the US on Cuba have been felt in the health of the population due to the economic consequences. Generally, most morbidity and mortality changes due to embargoes have been caused by wars and social disruptions with which they are associated (Williams III, 2002). This paper examines the history of the Cuban Embargo, different types of policies and Acts by the United States to restrict economic relationship with Cuba, and measures used by Cuba to overcome the impacts of the embargo.
The Cuban embargo was characterized by a number of sanctions against Cuba by the United States. These sanctions affected its ability to get products and expertise from countries such as Russia, International Monetary Fund (IMF) and restricted the movements of people of Cuba into the United States. As a result, Fidel Castro devised mechanisms of achieving economic stability without the need to seek the support of the United States, but the impact of the embargo still had a major impact on the economy of Cuba.
Origins of the Embargo
The first embargo against Cuba was enacted during the presidency of Dwight D. Eisenhower which was contributed by the Cuban Revolution. Due to increased rhetoric of Fidel Castro against America and nationalization of the US companies, it was perceived that Castro_x0092_s regime would not cooperate with the US. The Central Intelligence Agency (CIA) began cooperating with those who opposed Castro_x0092_s regime, and in March 1959, Eisenhower approved a program of indirect action against Castro_x0092_s regime (Drain & Barry, 2010). Due to the concern that the negative relations between the US and Cuba would result into the relations with South American countries, the sanctions against Castro_x0092_s regime were secretive. The US took advantage of Cuba_x0092_s dependence on aid to impose a number of sanctions such as cutting Cuba_x0092_s sugar quota. There was restriction on the amount of sugar that Cuba could sell to the United States as well as a change in price by setting the sales price at a slightly higher than the global market prices (Nayeri & López-Pardo, 2005). Sugar was a major export of Cuba to the United States and enacting a quota on its exportation was a threat to the economy. Some State department officials opposed the idea because they believed that it would affect the economy of Cuba and will also not enable removal of Castro from power. These perceptions were believed to be likely to occur provided the embargo against Cuba was on the basis of diplomatic propriety. But since there was a deterioration of the relations, the call for restraint did not seem feasible. It was believed that if Eisenhower_x0092_s administration lodged out Castro out of power, it was possible to lift the economic sanctions against Cuba. According to a letter written by Eisenhower, it was silly to continue to provide Cuba a favorable treatment when it was not willing to comply with most regulations of international relations (De Vos, 2005). The _x0091_casus belli_x0092_ which contributed to the economic war between Cuba and the United States was the Soviet oil and not the Cuban Sugar. The Soviet signed a trade agreement with Cuba in which they exchanged oil for Sugar. When the first tanker of oil from Soviet was sent to the refineries in Cuba, the companies refused to refine them. Castro received an advice from the Treasury Secretary that the companies should be nationalized, which he did. The seizure of the refineries forced Eisenhower to cut the sugar quota on July 6, 1960. Castro also nationalized a number of businesses owned by the US. Washington responded two months later by enacting the Export Control Act that prohibited all exports to Cuba with the exception of food supplies and medicine, resulting into the beginning of economic embargo. Castro responded to this decision by expropriating all the remaining property that belonged to the United States. The Soviet believed that it was able to attract Cuba into its socialist block due to the embargo enacted against it by the United States. Following these incidents, a number of other sanctions were enacted against Cuba. The major forms of embargo on Cuba occurred between 1959 and 1962 as illustrated in Figure 1.
Figure 1. Timeline of the Relations between the US and Cuba
Source: HistoryExpert 006, (2014)
Different Forms of Sanctions during the Embargo
Trading With the Enemy Act of 1917
A major act that had an impact on the economy of Cuba is the Trading with the Enemy Act (TWEA) which empowered the President of the United States to impose economic sanctions in the forms of limited trade, financial transactions, and international cooperation with other countries which had opposite interests (Cooper, Kennelly & Ordunez-Garcia, 2006). This act was amended in 1933 and empowered the president to enact embargoes against other countries in case of wars or when a state of national emergency was declared by the president. On the basis of this Act, President Eisenhower declared the trade with Cuba as being suspended after diplomatic relations was broken. Due to this Act, there were no economic transactions between the US and Cuba, while hostilities between them increased significantly. Due to prohibitions of TWEA such as travel bans, transportation bans, and reduced cooperation between Cuba and the US, commercial activities between the two countries were greatly affected. Amendments were made in the TWEA by imposing sanctions on the Act in case of war (Peksen, 2009). Since 1978, memorandums have been issued by Presidents of the US in which they extend the sanctions against Cuba for the purpose of protecting the national interests of the US. Under the provisions of TWEA, Cuba is the only country on which these provisions have been implemented.
Foreign Assistance Act of 1961, Section 20(A)
This Act was approved by the US Congress in 1961 as a measure of forbidding assistance to communities or countries that provided assistance to Cuba. It also empowered the President of the United States to impose a total embargo on trading activities between it and Cuba. For instance, President J.F. Kennedy suspended trading activities with Cuba in 1962 in his presidential proclamation 3447 which prohibited trading activities such as the imposition of a ban on importation of goods from Cuba or exportation of goods from the US into Cuba (Copeland & Thompson, 2010). The US Secretary of Treasury was directed by President Kennedy to implement a ban on imports from Cuba while the Secretary of Commerce was instructed to impose a ban on exportation of products from the US into Cuba. The directives were not limited to a particular duration of time or conditions for lifting the bans and are still applicable, despite the fact that the embargo has been written into law since it was applied and legislations have been expanded to make it more effective.
Cuban Assets Controls Regulation
This regulation was issued by the Cuban Assets Control Regulations (CACR) and provided an objective of the sanctions as being to isolate the government of Cuba from that of the United States and deprive it of the US dollars. As a result of the implementation of the sanctions, all assets belonging to Cuban government in the United States were frozen and the US Treasury department was mandated to regulate commercial activities with Cuba, such as the authority of the US nationals to travel to Cuba (Copeland, Jolly & Thompson, 2011). While the regulations have no impact on trade itself, it has affected freedom of movement between the two countries since transactions associated with the travel had been prohibited. Activities that could not take place between the US and Cuba included; exchange of accommodation, food, transportation, items of use by travellers, and the sale of plane tickets for flights to Cuba (Jolly & Thompson, 2008). Many amendments have been made in the CACR since its enactment to exclude travel restrictions that were introduced under President Jimmy Carter and intensified under President Gorge W. Bush. In addition, CACR required that there should be no direct or indirect exportation of products and services from the US into Cuba. However, the Department of Assets Control has been involved in the implementation of the provisions of the embargo by applying assets regulations policies. Criminal penalties are also applied in case of violation of these sanctions. These include 10 years of imprisonment or a fine of $1 million or individual fines of up to $250,000.
Cuban Democracy Act of 1992 (Torricelli Act)
A new legislation was passed in 1996 by the US Congress that aimed at strengthening the severity of the embargo against Cuba. The Cuban Liberty and Democratic Solidarity Act was signed by President Bill Clinton for the purpose of enhancing the sanctions against Cuba. Specifically, it aimed at intensifying the international sanctions against Cuba while facilitating a transition of power to democratic government (Messina Jr, Brown, Ross & Alvarez, 2007). This act is composed of four titles. In Title I, it aimed at strengthening the sanctions against the Castro government, reducing trading relationships of Cuba with other countries, opposing the membership of Cuba in other global financial organizations by using the US executives in the institutions to oppose Cuba_x0092_s membership. Presently, Cuba is not a member of the International Monetary Fund (IMF) among other international financial institutions. If a loan or assistance is provided by these organizations to the Cuban government, it may be withheld by the US Secretary of Treasury and it may not be paid by the institution (Copeland, Jolly & Thompson, 2011). Title II of the Act describes the procedures through which assistance to Cuba may be terminated such as clause 620 (a) of the Foreign Assistance Act of 1961 that restricts trade with Cuba. Other sections of the law that define the US embargo can be amended when a democratically elected government exists in Cuba. This title also requires states that if there is a transition government in Cuba, the US government will play a role in providing foods, supplies, and medical services to the government (Hufbauer & Kotschwar, 2013). Title III of this act requires that companies that had gained from unjust acquisition of property from US citizens during the breakdown of economic ties between Cuba and the US should be sued to compensate the affected people. This section aims at prohibiting investments by foreigners in Cuba. Title IV of the Act requires that any property that has been seized from Cuba should not be traded in and a US official who takes part in such an activity is subject to suspension.
Figure 3. Debates among the Congress members whether or not to end the Embargo
Source: Benenson Strategy Group (2017)
Impacts of the Embargo and the Response of Cuba and Castro_x0092_s response
The US embargo on Cuba resulted into significant economic consequences such as the collapse of the sugar processing companies and the inability of Cuba to refine its oil products due the failure of the US companies to process the Soviet petroleum. The impacts of the embargo in the 1970s and 1980s were more of an inconvenience rather than a threat to the economy of Cuba since they benefited from support from the Soviet Union (LeoGrande, 2015). Cuba further encountered an economic challenge when the Soviet Union collapsed, but Fidel Castro believed that it was contributed by lack of effective leadership and not communism. The depression that occurred in 1990s left Cuba at an inconvenient state since the Soviet stopped purchasing its sugar. The implementation of the Cuban Democracy Act resulted into inability of Cuba to ship foods at a low cost and the government experienced shortage of currency. However, Fidel Castro implemented various changes in policies that enabled the survival of the Cuban economy. For instance, he introduced a policy of use of currency which enabled its citizens to use international currencies to carry out transactions (Pérez, 2014). This policy majorly benefited those who had relatives abroad whose families could send money to them. They represented a major component of source of revenues for small businesses, farmers, and cooperatives. The Cuban government also encouraged investments by foreigners in joint ventures with the state. This led to the development of an effective tourism industry that boosted the country_x0092_s foreign exchange earning capability. Increased foreign direct investments also resulted into an improvement of gas and energy production industries. In addition, the government of Cuba set out on reviving agriculture by providing incentives to farmers by the use of strategies such as: land redistribution and opening up farmer_x0092_s markets (Ribas, 2010). While success has been achieved in this initiative, improvement still needs to be made in the agricultural sector. Another item of economic recovery in Cuba was the cost-reduction in the state-run enterprises. In order to achieve success in enterprises run by the state, it was necessary to introduce an incentive based pay system. Presently, 73% of workforce in agricultural sector gets incentive payments as method of motivating them to increase agricultural production. However, there has been a lift in many of sanctions against Cuba since 2011 and the US exports such as grain exports have been increasingly available to Cubans as illustrated in Figure 2.
Figure 2. Exports of Grains from the US to Cuba between 2011 and 2017
Source: Mitchell (2017)
The embargoes that were enforced by the US on Cuba has greatly affected its ability to develop and integrate international support in achieving its economic objectives. The government of Cuba has been of the objective that it does not need to be accountable to the economic interests of the United States since it is a sovereign state. Nevertheless, the Cuban government relies on the US in a number of ways such as access to technologies for operating factories and the dependence on expertise and skills in trade and financial services. The ability of Cuba to overcome economic difficulties in the future will be subject to its ability to follow the internationally accepted codes of international relations with other countries in general and the US in particular.
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