17 December 2017
POTUS: “Hopefully everything will normalize with Cuba, but right now, they are not doing the right thing. And when they don’t do the right thing, we’re not going to do the right thing. That’s all there is to it. We have to be strong with Cuba. The Cuban people are incredible people. They support me very strongly. But we’ll get Cuba straightened out.”
President Trump Deserves Opportunity To Right An Obama Administration Wrong
Support SFTCP With DCB
A Syringe That Six Members Of Congress Should Prefer
OFAC And Banks Would Benefit
With the publication of regulations on 8 November 2017, the Trump Administration removed, revised, reversed and left undisturbed Republic of Cuba-related initiatives.
For United States companies, and for individuals subject to United States jurisdiction seeking commercial connectivity with entities (government and non-government) in the Republic of Cuba, the Trump Administration has expanded one crucial, but often neglected and underappreciated component of engagement established during the Clinton Administration and continued through the Bush Administration and Obama Administration…. Support for the Cuban People (SFTCP).
The government of the Republic of Cuba detests this component as its primary objective, cloaked in a non-too-obvious manner by the government of the United States, is disruption, dismantling and destruction of existing commercial, economic and political (infra)structure of the Republic of Cuba.
However, the government of the Republic of Cuba, when discerning opportunity and leverage, accepts SFTCP when perceiving that SFTCP serves value; this does not indicate that the government of the Republic of Cuba is correct in their assumption, it’s their perception…. and that matters.
For example, introducing private ownership of paladars (restaurants), self-employed categories (extremely limited to date), roles for shareholder-owned cooperatives, services provided using platforms created by San Francisco, California-based Airbnb, expanding availability of wireless technologies (and access to social media platforms) each has connectivity to elements of goals for SFTCP. Note: Last week, Republic of Cuba government-operated ETECSA announced that international texting has become operational at US$.60 per message.
No rational individual should be offering a high-five to the government of the Republic of Cuba for these decisions, but there need be an acknowledgement of their significance and usefulness- although there will be debate as to the reasons for the actions.
For the six (6) Members of the United States Congress who are of Cuban descent, three in the United States Senate and three in the United States House of Representatives, SFTCP, while not ideal in terms of desired goals achieving desired objectives in a timely manner, is the most visible and probative syringe by which to penetrate the Republic of Cuba.
SFTCP doesn’t work singularly; it’s designed to impact the governmental immune system over time- puncture by puncture.
Which brings about the necessity for a change in regulation (actually adding the 50% that the Obama Administration failed to include) relating to sending/receiving funds which will positively impact SFTCP and, with added benefit to the Trump Administration, is a regulation the Obama Administration failed to grasp and then change (factually, they permitted 50%, but without the other 50% their action amounted to 100% of nothing)- to the determent of providing opportunities for the 11.3 million residents (or hostages as some Members of Congress would define them) of the Republic of Cuba.
The government of the Republic of Cuba permits, on a selective basis (meaning there is opportunity for expansion), individuals and entities to have accounts at Republic of Cuba government-operated financial institutions.
Through these accounts, individuals and entities can be permitted to send and receive funds relating to their operations.
The owner of a paladar (restaurant), owner of an Airbnb property, an artist/musician, a cooperative (coffee/charcoal, etc.), should have the means to send funds securely, efficiently and transparently directly from Havana to the United States for purchases of items necessary for their businesses; and the importation of agricultural commodities, food products and healthcare products from the United States would also be advantaged.
One slight imperfection to this calculus: The Obama Administration, without explanation, did permit United States-based financial institutions to have accounts at Republic of Cuba government-operated financial institutions.
However, the Obama Administration did not permit Republic of Cuba government-operated financial institutions to have accounts with United States-based financial institutions. Thus, no applicable direct correspondent banking (DCB).
Without an addition to this regulation, the payment process for funds from the United States to the Republic of Cuba and from the Republic of Cuba to the United States remains triangular rather than a straight line- which would be more efficient, more timely (same day versus two or more days), and less costly.
In 2015, the Obama Administration authorized Pompano Beach, Florida-based Stonegate Bank (2017 assets approximately US$2.5 billion) to have an account with Republic of Cuba government-operated Banco Internacional de Comercio SA (BICSA). There is also Republic of Cuba government-operated Banco Financiero Internacional SA (BFI) which handles international payments. Unfortunately, because BICSA (and BFI) are not permitted to have an account with Stonegate Bank, funds have been sent and received through Panama City, Panama-based Multibank, which has extensive dealings with the Republic of Cuba.
Since December 2001, the Republic of Cuba has transferred US$5.4 billion to United States-based companies for the purchase of agricultural commodities, food products and healthcare products; approximately US$180 million went to third-country financial institutions (primarily on the European Continent) to process those payments.
Additional effort. Additional time. Additional expense. And, additional reasons for the government of the Republic of Cuba to avoid United States-based companies.
What the Obama Administration asked: Applaud us for authorizing funds to be sent to the Republic of Cuba… never mind that we won’t authorize those funds to arrive to the Republic of Cuba. But, please remember to applaud us for our legacy-building efforts. That was commercial malpractice.
Officials of the Obama Administration often spoke of “planting seeds” which is political code for absolving them of accountability within their term in office.
By permitting direct correspondent banking and thus completing the commercially critical pathway that the Obama Administration was incapable of comprehending, the Trump Administration would be creating additional pressures upon the government of the Republic of Cuba by encouraging the transformation of the self-employed from optically beneficial to materially impactful, and thus furthering the disruption of the status quo in the Republic of Cuba. Another puncture, but perhaps larger in diameter.
Direct correspondent banking is not a provision of credit, of payment terms. Rather, it reduces the time between when the sender sends and the receiver receives.
Not permitting direct correspondent banking was just one of too many areas of neglect (certified claimants, only coffee (Nespresso) and charcoal (Fogo), continued restrictions upon international financial transactions, etc.) by the Obama Administration relating to the implementation of rules, regulations and policies that would have provided additional means for United States companies engage with the Republic of Cuba and to specifically use SFTCP as a means for that engagement.
Direct correspondent banking will also permit authorized purchasers in the Republic of Cuba to transmit payments directly to United States companies for the products (including high-priced durable equipment) and services they provide by statute and by executive branch decision. A piece of farm equipment awaiting export has languished in Alabama since 2016.
That means more revenues for individuals and companies in the United States- and hopefully additional employment opportunities throughout the United States for those exporters. Thus, the cost to import and the cost to export will be reduced; and this will benefit importer and exporter. The Trump Administration appreciates the necessary arithmetic.
The government of the Republic of Cuba may not happily digest the merits of direct correspondent banking and its relativeness to SFTCP; that doesn’t matter. If accepted terrific. If not, one less impediment to the bilateral relationship will be functional for future use.
For Members of Congress seeking more, they need be practical rather than aspirational, or delusional; there will be no expansionary legislation becoming law without substantive commercial, economic and political changes to the Republic of Cuba. The focus should be upon making existing regulations workable.
Direct correspondent banking strengthens SFTCP opportunities by ensuring accountability, transparency, flexibility, and recourse that third-party, often cash transactions, lack.
These benefits are what financial institution executives seek as do attorneys and policy makers at the United States Department of the Treasury, United States Department of Commerce, United States Department of State, United States Department of Defense, Federal Reserve and Securities and Exchange Commission (SEC).
8 December 2017
Mr. Brian Hedberg
Director, Office of International Aviation Department of Transportation
1200 New Jersey Avenue SE Washington, D.C. 20590
Re: 2016 U.S.-Cuba Frequency Allocation Proceeding (Docket DOT-OST-2016-0021)
Dear Mr. Hedberg:
In the Department’s 2016 Allocation Proceeding, Delta Air Lines, Inc. (“Delta”) was awarded frequencies to operate daily service from New York to Havana (JFK-HAV), along with service to Havana from Miami (MIA) and Atlanta (ATL). (DOT Order 2016-8-38). Delta has invested significant resources to establish and support its new service to Havana and appreciates the time and effort the Department put into this proceeding. However, recent regulatory changes have resulted in lower demand for travel to Cuba from areas outside of South Florida. In particular, traffic on Delta’s service to Havana from JFK has diminished substantially.
Effective February 1, 2018, Delta will terminate service on Sunday to Friday and return those frequencies to the Department. Delta will continue to maintain and operate once-weekly, Saturday round-trip service between JFK-HAV.
In light of the Department’s ongoing 2017 Allocation Proceeding, Delta wished to notify the Department and other interested parties of its plans. For the sake of administrative efficiency and to maximize the utilization of these assets for the traveling public, Delta would have no objection if the Department reallocates the six once-a-day frequencies being returned as part of its current Proceeding. If awarded, Delta also remains excited about starting a second daily flight from Miami to bring additional service to this important gateway.
Respectfully submitted,
Alexander Krulic
Associate General Counsel Regulatory & International Affairs
DELTA AIR LINES, INC.
Supplemental Filing Seeking One MIA-HAV Route
Media Note
Office of the Spokesperson
Washington, DC
December 11, 2017
The United States and Cuba held the 31st biannual Migration Talks in Washington, DC on Monday, December 11. Deputy Assistant Secretary of State for Western Hemisphere Affairs John Creamer and Deputy Assistant Secretary of State for Consular Affairs Ed Ramotowski led the U.S. delegation. The Cuban delegation was led by Josefina Vidal, the Foreign Ministry’s Director General for U.S. Affairs.
The delegations discussed the significant reduction in irregular migration from Cuba to the United States since the implementation of the January 2017 Joint Statement. Apprehensions of Cuban migrants at U.S. ports of entry decreased by 64 percent from fiscal year 2016 to 2017, and maritime interdictions of Cuban migrants decreased by 71 percent. The United States confirmed it met its annual commitment in fiscal year 2017 to facilitate legal migration by issuing a minimum of 20,000 documents under the Migration Accords to Cubans to immigrate to the United States. The U.S. delegation also raised the need for increased Cuban cooperation in the return of Cubans with final orders of removal from the United States.
A strong migration policy is vital to the United States’ national security. The Migration Talks, which began in 1995, provide a forum for the United States and Cuba to review and coordinate efforts to ensure safe, legal, and orderly migration between Cuba and the United States. The talks were last held in April 2017.
From The Ministry of Foreign Affairs of the Republic of Cuba
Washington, December 11, 2017.- A new round of migration talks was held between Cuban and US delegations, presided over respectively by Josefina Vidal Ferreiro, Director-General of the US Division at the Ministry of Foreign Affairs; and John Creamer, Deputy Assistant Secretary of State for Western Hemisphere Affairs.
The Cuban delegation expressed deep concern over the negative impact that the unilateral, unfounded and politically motivated decisions adopted by the US Government in September and October of 2017 have on migration relations between both countries.
The Cuban delegation once again warned about the negative effect resulting from the suspension of the granting of visas by the US Consulate in Havana. The decision to discontinue the processing of visas applied for by Cubans willing to visit or migrate to that country is seriously hampering family relations and all kinds of exchanges between both peoples.
Likewise, the Cuban delegation reiterated its rejection of the arbitrary expulsion of a considerable group of officials from the Cuban embassy in Washington, which has seriously affected the functioning of the diplomatic mission, particularly the Consulate and the services it offers to Cubans residing in the United States, as well as US citizens who continue to be interested in traveling to our country.
It also noted the counterproductive effect that the decision to cancel the visits of official delegations from the United States to Cuba is having on cooperation in the field of migration, which has led to the postponement of several mutually beneficial exchanges that had been previously scheduled. Should the current situation persist, exchanges in this and other areas will be even more affected.
Regarding the implementation of the migration accords in force, the Cuban representatives urged the US Government to comply with its obligation to grant no less than 20 000 travel documents every year for Cuban citizens willing to migrate to that country. Likewise, the Cuban delegation once again expressed its concern over the enforcement of the Cuban Adjustment Act, which continues to encourage irregular migration and whose abrogation will be crucial to the establishment of normal migration relations between the two countries.
Both delegations agreed to recognize the positive impact that the Joint Statement signed on January 12, 2017 has had, particularly the elimination of the “wet foot/dry foot” policy and the “Cuban Medical Professional Parole Program”, in reducing irregular migration from Cuba to the United States. Likewise, both delegations agreed on the usefulness of the exchange between the Cuban Border Guard and the U.S. Coast Guard Service held in July and the technical meeting on trafficking in persons and migration fraud held in September, which will be followed up on December 12, 2017.
The Cuban delegation reiterated its willingness to continue holding new rounds of migration talks. (Cubaminrex)
ECONOMIC EYE ON CUBA©
December 2017
October 2017 Food/Ag Exports To Cuba Decreased 3%- 1
Healthcare Product Exports US$319,637.00- 2
Humanitarian Donations US$639,222.00- 2
Obama Administration Initiatives Exports Continue To Increase For Airlines/Hotel- 3
U.S. Port Export Data- 14
OCTOBER 2017 FOOD/AG EXPORTS TO CUBA DECREASED 3%- Exports of food products & agricultural commodities from the United States to the Republic of Cuba in October 2017 were US$21,436,667.00 compared to US$21,994,945.00 in October 2016 and US$13,407,640.00 in October 2015.
Rating Action: Moody's changes Cuba's outlook to stable from positive; Caa2 rating affirmed
Global Credit Research - 08 Nov 2017
New York, November 08, 2017 -- Moody's Investors Service has today affirmed Government of Cuba's Caa2 foreign currency issuer rating, assigned a Caa2 local currency issuer rating, and changed the rating outlook to stable from positive.
The key drivers of the change of outlook are:
1) The rapprochement process with the United States has stalled resulting in a reversal of measures to ease the economic embargo, and in recent months US-Cuba relations have deteriorated
2) Moody's expectations of continued reform momentum and favorable macroeconomic performance have not materialized due to a series of climate shocks, strained relations with the US and the upcoming domestic political transition
Cuba's Caa2 sovereign rating reflects credit weaknesses that include limited access to external financing, structural inefficiencies, political transition risk, and importantly, limited data transparency. The rating also incorporates the economic impact of the growing tourism sector, nickel-related mining activities, and the potential for future economic diversification.
Cuba's long-term local-currency country risk ceilings and the foreign currency bond ceiling remain unchanged at Caa2. The foreign-currency bank deposit ceilings is also unchanged at Caa3. The short-term foreign currency bond and deposit ceilings remain at NP (Not Prime).
RATINGS RATIONALE
RATIONALE FOR THE OUTLOOK CHANGE TO STABLE
The positive outlook on Cuba's Caa2 rating was based on increased prospects for rapprochment with the US as well as for domestic economic reforms. The principal drivers of Moody's decision to change the outlook to stable from positive are the stalled process of rapprochement with the US, and the dimmer prospects for further economic reform on the island.
Restrictions on travel to Cuba, which the previous US administration had loosened, have been tightened. Regulations effective 9 November rescind the travel authorization for individual "people-to-people" exchanges, a broad category increasingly used by Americans under the previous administration to conduct legally authorized travel to the island without the need to participate in organized group exchanges. The tightened controls also include a provision applicable to persons that are otherwise authorized to engage in Cuban travel or other Cuba-related activity, prohibiting them from engaging in most direct financial transactions with 180 entities linked to the Cuban military, which controls a broad swath of the tourist economy.
While the tightened travel authorizations only reinforce the longstanding statutory tourism ban on Cuba, these changes and new sanctions targeting the Cuban military highlight a reversal of the previous rapprochement efforts undertaken by Cuba and the previous US administration. Although a number of relevant measures taken by the previous US administration remain in place, Moody's believes that the changes to be adopted on 9 November will curtail the flow of American visitors to Cuba and diminish impetus for investment into the country, primarily into tourism projects, but also into other sectors that were expecting a further opening up of the Cuban economy.
More recently, diplomatic relations between the US and Cuba have become strained by alleged sonic attacks on US embassy and government personnel in Havana, resulting in the US recalling the majority of the staff from its embassy in Cuba and expelling Cuban diplomats from Washington. These developments will likely constrain further economic or diplomatic openness between the two nations.
Despite recent growth in the tourism sector, Cuba's economic outlook remains challenging following climate and commodity price shocks, and negative spillovers from the economic crisis in Venezuela. The country has been hit by two major hurricanes since late-2016. This caused widespread destruction and affected economic activity. Agriculture, food production, construction and healthcare likely posted a significant contraction owing to the various shocks faced by the economy. Key export prices for nickel have recovered but remain short of the highs achieved in 2008 and 2011, and sugar prices remain near 2015 lows.
Moody's estimates that the Cuban economy contracted 0.9% in 2016 despite a 13.3% increase in visitor arrivals. Moody's forecasts that the economy will contract once again in 2017 by 0.5% before returning to moderate growth of 1.1% in 2018. Nevertheless, prospects for recovery remain fragile and the upcoming political transition will limit the pace of reforms that could support economic recovery.
President Raul Castro will step down at the end of his second five year term in February 2018. This will be the first time since 1959 that a member of the Castro family will not rule Cuba, potentially posing risks to political stability and increasing uncertainty over economic policy and prospects. Moody's believes that risks to economic liberalization are substantial given the state's wavering commitment to private enterprise and Cuba's lack of experience with implementation of market policies.
WHAT COULD MOVE THE RATING UP/DOWN
There could be upward pressure on Cuba's rating if there is a further easing of US economic sanctions or domestic reforms that have a material impact on Cuba's economic prospects. More clarity over the political transition at the end of President Raul Castro's current term would ease concerns over political and social instability. Enhanced data timeliness and transparency would also be credit positive.
Conversely, evidence of increased stress on Cuba's external finances along with deteriorating economic prospects due to external shocks or reform reversal would result in downward pressure on Cuba's rating.
GDP per capita (PPP basis, US$): $7,700 (2016 Actual) (also known as Per Capita Income)
Real GDP growth (% change): -0.9% (2016 Actual) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 3.1% (2016 Actual)
Gen. Gov. Financial Balance/GDP: -6.8% (2016 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: 0.7% (2016 Actual) (also known as External Balance)
External debt/GDP: 23.4% (2016 Actual)
Level of economic development: Low level of economic resilience
Default history: No default events (on bonds or loans) have been recorded since 1983.
Note: Numbers have been updated to 2016 (from 2014), which is what was used for committee purposes.
On 06 November 2017, a rating committee was called to discuss the rating of the Cuba, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have materially decreased. The issuer's institutional strength/ framework, have not materially changed. The issuer's governance and/or management, have not materially changed.
The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Jaime Reusche
VP - Senior Credit Officer
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Atsi Sheth
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Cuba Becoming A Billion Dollar Travel Marketplace For The U.S.
U.S. Cruise Lines Add Capacity, Revenue From Cuba, Revenue To Cuba
U.S. Airlines Gain From Cruise Passengers
As of 4 December 2017, with an additional 115,474 potential passengers (43,384 from changes to vessels and 72,090 from forty-five (45) new itineraries that include the Republic of Cuba) by Miami, Florida-based Royal Caribbean Cruises Ltd, cruise lines operating from the United States could for the cumulative period 2017/2018/2019:
Deliver 570,000+ Passengers To Cuba
335+ Sailings To Cuba
US$761+ Million In Gross Revenues To The Companies
US$80+ Million Spent In Cuba By Passengers
US$21+ Million In Port Fees To Cuba
US$228+ Million To U.S. Airlines
US$105+ Million Hotels/Restaurants/Ground Transportation In Florida
Transporting, housing, and feeding these 570,000+ travelers could result in an additional US$228+ Million to United States airlines transporting passengers to South Florida port gateways and US$105+ million to hotels, restaurants and ground transportation services located in South Florida.
The three (3) largest cruise lines (through their multiple brands Oceana Cruises, Azamara Club Cruises, Regent Seven Seas Cruises, and Holland America Line among others) and smaller cruise lines (through their multiple brands) have approximately 335 itineraries which include the Republic of Cuba for the cumulative 2017, 2018 and 2019 sailing seasons. Additional itineraries are expected. The largest three:
Miami, Florida-based Norwegian Cruise Line Holdings Ltd
Miami, Florida-based Carnival Corporation & plc
Miami, Florida-based Royal Caribbean Cruises Ltd
NOTE: In 2016, the three-largest cruise lines combined operated a fleet of approximately 144 vessels, managed approximately 14 brands, earned approximately US$28.8 billion in gross revenues, and employed approximately 218,000 men and women.
If each vessel sails at capacity, more than 570,000 passengers would visit the Republic of Cuba from 2017 through 2019.
The gross revenues to the cruise lines from the approximately 335 sailings that include the Republic of Cuba could cumulatively exceed US$761 million for the period 2017 through 2019.
The 570,000 passengers would be projected to spend approximately US$80+ million while in the Republic of Cuba [averaging approximately US$140.00 per person in expenditures and organized/non-organized excursions including cost(s) for tour(s), meals (government-operated and privately-operated), ground transportation (privately-operated classic car tours), sundries and souvenirs (including spirits, coffee, tobacco, artwork and crafts)]. Some passengers could spend considerably more (alcohol, cigars and coffee for example) given the United States duty-free personal exemption of US$800 per person.
Vessel port charges in the Republic of Cuba may exceed US$21 million, ranging up to approximately US$79,000.00 for the largest vessels (684-passenger to 2,744-passenger).
TERRORIST ASSETS REPORT
Calendar Year 2016
Twenty-Fifth Annual Report to the Congress on Assets in the United States Relating to Terrorist Countries and International Terrorism Program Designees
The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, DC, continues to hold US$243.5 million blocked assets relating to the Republic of Cuba.
Ten companies have established the moral compass and operational platform for United States commercial (re)engagement with the Republic of Cuba.
American Airlines, Carnival Corporation, Caterpillar, Delta Air Lines, Jet Blue Airways, Norwegian Cruise Line, Marriott International, Royal Caribbean Cruise Lines, Southwest Airlines and United Airlines have established and maintained operations, as specifically authorized by the Obama Administration and Trump Administration, with entities controlled by the Revolutionary Armed Forces (FAR) of the Republic of Cuba.
While the companies have not issued statements in support of connectivity with FAR-controlled entities, the companies are, by their presence, acknowledging and, thus far, accepting the role of the military in the economy of the Republic of Cuba.
The Obama Administration and Trump Administration acknowledged and acknowledges, respectively, this same reality.
There are issues of complicity: Does cooperation equate to enabling; to sustaining the status quo? Are the companies serving as tools of change or as dams preventing alteration of the commercial, economic and political landscape throughout the Republic of Cuba?
With one exception, the ten companies are engaged in transporting and housing individuals who lawfully visit the Republic of Cuba. The primary beneficiaries of the services provided by five of the nine companies are individuals of Cuban descent who visit their families and friends who reside in the Republic of Cuba.
No executive of a company wants to laud the role of the FAR in the economy of the Republic of Cuba. All the companies prefer civilian control, non-state actors, private enterprise as their contracting partners.
For the companies, the choice is providing a product and/or service that is permitted under law, by regulation, by policy or awaiting an environment within which all commercial, economic and political stars align... as they have since 1959.
A 22-Day Journey Of 5,300 Miles Trumps 1-To-5-Day Journey Without Government Financing
Although vehicles manufactured/assembled/distributed in Alabama, Florida and Mississippi could be delivered from United States ports to ports within the Republic of Cuba in less than one and up to five days, Republic of Cuba government-operated entities (and government of the Republic of Cuba) will select vehicles delivered from the Russian Federation (or other source), an approximately 5,300 mile, twenty-two day journey, due to the provision of long-term financing, which, most importantly, the government of the Republic of Cuba believes may be rolled-over if required by financial circumstances.
MOSCOW, November 27. /TASS/. Avtovaz resumes supplies of cars to Cuba, the company said. Last time the carmaker delivered cars to this country 12 years ago. A total of 344 Lada Vesta and Lada Largus Cross cars will be sent to Cuba, which will be used by local government taxi services, rental and travel companies. Cars will arrive in January 2018.
According to President of AvtoVAZ Nicolas Maure the cars are perfectly adapted to local tasks and conditions, and meet the world quality standards. Cuba is one of the priority export markets for the company and Avtovaz expects to continue to supply Lada to the country in the coming years, increasing volumes, Maure added.
According to the company, the delivery of cars to Cuba is carried out with the assistance of Vnesheconombank, which provided financing, as well as the Russian Export Center.
A reporter for Miami, Florida-based Cuba Standard conducted an interview for the October 2017 issue of the publication with Mrs. Vivian Herrera, General Director of Foreign Trade for the Ministry of Foreign Trade and Investment of the Republic of Cuba (MINCEX). The following are excerpts from the interview:
I happened to notice that at the Havana Fair there was no representation whatsoever of the “non-state sector” of Cuba’s economy. What are the reasons for this omission?
VH: The non-state sector is supposed to provide a significant contribution to Cuba’s domestic sector, meeting the many shortcomings we face here, but it was never meant to become a component or player in Cuba’s foreign trade.
Meaning that the “non-state sector” will not be tied into Cuba’s foreign trade anytime soon?
VH: Whatever connections there may be today or in the future will be through Cuban state enterprises as suppliers, or middlemen. There won't be any private entities conducting their own foreign trade operations. State enterprises today provide whatever is available as wholesale suppliers, especially to private entities or cooperatives working directly with state businesses. This modusoperandi is currently promoted through territorial fairs across Cuba’s provinces.
Is the export of charcoal made by cooperatives to the United States, via a state enterprise, just a one-off event?
VH: Thus far it has been a one-time exception. There is nothing at hand that might suggest otherwise.
Any message to U.S. businesses?
VH: U.S. business people are encouraged to keep an open mind when approaching Cuba’s trade opportunities and learn from those who have been conducting trade successfully with Cuba over the last quarter of a century, with mutual trust and benefits, with confidence and patience, beyond whatever ups and downs may have emerged at some point. Cuba is a trustworthy and loyal partner- different in many ways, but a sound and reliable partner.
Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and BCC Corporate SA (“BCCC”)
11/17/2017
CC Corporate SA Settles Potential Liability for Apparent Violations of the Cuban Assets Control Regulations: BCC Corporate SA (“BCCC”) is a Belgium-based credit card issuer and corporate service company that issues various payment products, such as credit cards, to its European-based corporate customers. At the time of the apparent violations, BCCC was a wholly owned subsidiary of Alpha Card Group (“Alpha Card”), which in turn was owned 50 percent by American Express Company (AMEX), a U.S. financial institution. AMEX has agreed to remit $204,277 to settle potential civil liability for 1,818 apparent violations of the Cuban Assets Control Regulations, 31 C.F.R. part 515 (CACR).
Between April 9, 2009 and February 3, 2014, credit cards BCCC had issued to its corporate customers were used to make credit card purchases in Cuba. Although Alpha Card and BCCC had policies and procedures in place to review transactions for matches to OFAC’s List of Specially Designated Nationals and Blocked Persons for compliance with U.S. economic sanctions laws, Alpha Card and BCCC nevertheless failed to implement controls to prevent BCCC-issued credit cards from being used in Cuba. Between April 9, 2009 and February 3, 2014, BCCC processed 1,818 transactions totaling $583,649.43 for more than 100 distinct corporate customers of BCCC whose cards were used in Cuba or that otherwise involved Cuba. The total base penalty amount for the 1,818 apparent violations was $291,825.
OFAC has determined that AMEX voluntary self-disclosed the apparent violations to OFAC and that the apparent violations constitute a non-egregious case.
ECONOMIC EYE ON CUBA©
November 2017
September 2017 Food/Ag Exports To Cuba Decreased 34%- 1
Healthcare Product Exports US$308,534.00- 2
Humanitarian Donations US$452,451.00- 2
Obama Administration Initiatives Exports Continue To Increase For Airlines/Hotel- 3
U.S. Port Export Data- 14
"Documentary Services Division
U.S. Department of Transportation 1200 New Jersey Avenue, SE West Building Ground Floor
Room W12-140
Washington, DC 20590
Re: 2016 U.S.-Cuba Frequency Allocation Proceeding {Docket DOT-OST-2016-0021)
Dear Sir or Madam:
Alaska Airlines has announced that it plans to discontinue its Los Angeles-Havana service. Alaska's last flight on the route will operate on January 22, 2018. Alaska has no plans to resume service to Havana and has no objection to the Department's reallocation of the frequencies after January 22, 2018."
Alaska Airlines will discontinue flying to Havana, Cuba
Aircraft and crew will be re-deployed to markets with higher demand
SEATTLE, Nov. 14, 2017 /PRNewswire/ -- Alaska Airlines announced today that it will end a daily flight between Los Angeles and Havana, Cuba. The last flight is planned for Jan. 22. The airline will redeploy aircraft used to serve Havana to markets with higher demand.
Alaska Airlines will discontinue flying to Havana, Cuba
"Travel is about making connections, and we were honored to have played a role in helping people make personal connections by traveling between the U.S. and Cuba," said Andrew Harrison, chief commercial officer for Alaska Airlines. "We continually evaluate every route we fly to ensure we have the right number of seats to match the number of people who want to go there."
About 80 percent of Alaska's flyers to Havana visited under a U.S. allowance for individual "people-to-people" educational travel. Changes to U.S. policy last week eliminated that allowance. Given the changes in Cuba travel policies, the airline will redeploy these resources to other markets the airline serves where demand continues to be strong.
Alaska started the Los Angeles-Havana flight on Jan. 5, 2017.
Alaska has launched 44 routes this year, which continue to develop according to forecasts. The company anticipates it will grow about 7.2 percent this year. As the airline looks ahead to 2018, its planning for nearly 8 percent network growth by adding capacity in primarily existing markets. Redeploying aircraft and crews will help the airline support the growth.
Alaska guests who have travel booked to Havana after Jan. 22 will be rebooked on another airline at no additional cost or offered a full refund.
Alaska Airlines, together with Virgin America and its regional partners, flies 40 million guests a year to more than 115 destinations with an average of 1,200 daily flights across the United States and to Mexico, Canada and Costa Rica. With Alaska and Alaska Global Partners, guests can earn and redeem miles on flights to more than 900 destinations worldwide. Alaska Airlines ranked "Highest in Customer Satisfaction Among Traditional Carriers in North America" in the J.D. Power North America Satisfaction Study for 10 consecutive years from 2008 to 2017. Learn more about Alaska's award-winning service at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines, Virgin America and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).
http://knowledge.wharton.upenn.edu/article/future-u-s-business-cuba/
The move last week by the Trump administration to tighten restrictions on travel and trade with Cuba has created new anxieties for individuals and businesses – but it also provides some clear boundaries than can now be navigated, experts say.
Under the new policy changes, individuals will once again only be allowed to travel to Cuba as part of groups licensed by the U.S. Treasury Department as traveling for specific purposes. In addition, Americans will be barred from patronizing 180 businesses that the State Department has determined to be owned by, or that directly benefit, the Cuban military. Businesses will also be restricted from engaging with the 180 entities on the State Department list. The new regulations will not impact some travelers and businesses that had already begun transactions with Cuba – for example, individuals who have already purchased airline tickets or firms that signed contracts prior to the announcements.
Officials say the move is designed to steer investment away from the Cuban military and intelligence and encourage the communist government to further open the island’s economy. It follows restrictions announced in June that rolled back tourist travel and investments in more than half of Cuban industry, but retained many smaller features like permitting family-related travel and professional/academic visits to the country.
The latest actions by the Trump administration create further anxiety for anyone in the U.S. who is interested in relations with Cuba, but the visible impact won’t become clear until the U.S. government fleshes out the new policy.
“The Trump administration’s regulations [on Cuba] were designed to create anxiety and discourage travelers from traveling and businesses from engaging in business,” said John S. Kavulich, president of the U.S.-Cuba Trade and Economic Council, Inc., a not-for-profit that provides liaison services for businesses and the governments in both countries. “And they were successful.”
According to Gustavo Arnavat, a senior adviser at the Center for Strategic and International Studies, a Washington, D.C.-based think tank, the latest Cuba policy appears to permit American companies and individuals to do business with Cuban government-controlled entities, as opposed to those run by its military or its intelligence or security services. Arnavat also represented the U.S. on the board of the Inter-American Development Bank under the Obama administration.
“I think a message is being sent to the Cubans that perhaps the U.S. would be more amenable to trading with them if they would restructure their ownership stakes in companies in order to allow for the military to own fewer of these,” said Arnavat. “I’m not sure that the Cuban government is interested in doing that, but at least that possibility is open.”
Kavulich and Arnavat discussed the implications of the U.S. government’s latest Cuba policy on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
“The [new] regulations were designed to create anxiety and discourage travelers from traveling, businesses from engaging in business.”–John Kavulich
The 180 entities with whom business dealings are banned include 83 hotels, a shopping mall, a couple of rum brands and a cola brand called TropiCola, which Kavulich described as Cuba’s version of Coca-Cola. “What we’re uncertain about is [whether the new policies] mean that U.S. companies can’t deal with these companies, or do they mean a visitor in Cuba can’t buy a TropiCola or these particular rum products?” said Kavulich.
However, Arnavat said the new policy actually lessens the uncertainty on the U.S. approach to Cuba. “We know in terms of regulations what the limits are,” he said. “Any regulation has to be fleshed out, but we at least have a basic understanding of the contours [of the new policy].” He noted that Obama was “very much focused on engagement” with Cuba, while Trump is not. “But at least people now know where Trump stands; whereas before his June 2017 speech [in Miami], they definitely did not know which way he was going.”
According to Kavulich, “the vast majority of economic activity remains under the authority of the Cuban government.” Experts say GAESA, the Cuban military’s business conglomerate, controls almost 60% of the Cuban economy. GAESA’s holdings include the Gaviota hotel chain and TRD, the military retail chain.
While the new policy limits what businesses and individuals could do with respect to Cuba, the reality is that not much will change for many U.S. companies already doing business there. “The Trump administration has grandfathered many U.S. companies that are already engaged with Cuban military entities, specifically airlines, cruise lines and hotels like Marriott, for example,” said Kavulich. “So, it’s not that tremendously impactful. It has a political optic. It creates anxiety, but is any U.S. company being required to stop doing what they were doing? The answer is no.”
Arnavat, while not wanting to be overly optimistic, added that “the new normal” in the U.S. policy on Cuba is “quite positive” in that it retains many features adopted by the Obama administration, which announced that it would re-open diplomatic relations with Cuba in December 2014.
However, the likely impact of the restrictions on individual travel to Cuba is clearer. The new regulations revert to requiring group travel instead of individual “people-to-people” trips. Kavulich said that move would hurt the airlines because they have seen a surge in individuals traveling from the U.S. to Cuba in the past two years. By contrast, the cruise lines will benefit from the new policy because they are better suited for group travel.
“The Cubans could have been much more creative, could have been much faster, and could have been much more giving in entering into agreements with the United States.”–Gustavo Arnavat
Arnavat noted that tourism per se within Cuba by U.S. persons has always been prohibited either under embargo-related regulations or specifically under a law passed by the U.S. Congress in 2000. What the latest policy change does is to eliminate the category of people-to-people travel on an individual basis because the Trump administration felt that was “the most abused.” Some Americans, for example, might say that they are visiting Cuba to meet with Cubans to comply with the official requirement for that category of travel, “but instead they would just simply go to the beach, and hang out.”
Missed Opportunities
According to Kavulich, the new Cuba policy could have been pre-empted. “It’s important to focus on culpability,” he said. “One of the only reasons that President Trump was able to do what he is doing is because of what the Obama administration and the Castro administration didn’t do during the period from December 17, 2014, when Obama first moved to rebuild U.S. ties with Cuba, through January 20, 2017, when Trump assumed office as president.”
The Obama administration could have allowed more regulatory changes, specifically permitting direct correspondent banking, and allowed more than charcoal and coffee to be imported, Kavulich explained. On its part, the Cuban government could have done more to allow the Obama administration initiatives to take their course, “which basically they didn’t.”
Arnavat agreed with Kavulich that “the Cubans could have been much more creative, could have been much faster, and could have been much more giving in entering into agreements with the United States.” However, he noted that the Trump administration has not reversed all of the Obama administration’s initiatives — and that should bring some relief to U.S. companies that had feared much worse.
Kavulich pointed out that 52 U.S. companies have a presence in Cuba, including John Deere, which signed a deal to export farm tractors; Caterpillar, whose Puerto Rico-based distributor is setting up a warehouse and distribution center in Cuba’s Mariel Special Economic Development Zone, and General Electric, which is reportedly interested in setting up a hydroelectric power plant in Cuba’s Matanzas province. However, those companies do not have offices in Cuba, he added. “If the Cuban government had allowed U.S. companies to sell products directly to the self-employed, you would have had such a root system that the Trump administration would have found it difficult to move against it.”
Kavulich noted that those 52 companies have total global revenues of $1 trillion annually. “These are not small players. Yet, most of them, if they are doing anything in Cuba, will not issue a media release. They don’t want to talk about it. And that’s tragic.”
For those 52 companies and others looking to do business outside the United States, including in Cuba, “there’s always political uncertainty,” said Arnavat. That is in addition to the “political risk in the U.S., and that is the change in administration” from Obama to Trump.
“These are not small players. Yet, most of them, if they are doing anything in Cuba, will not issue a media release. They don’t want to talk about it. And that’s tragic.”–John Kavulich
Disenchantment in Cuba
People in Cuba are not happy with the latest policy, said Kavulich. “There’s frustration in that many of those who are either self-employed or are in cooperatives that dealt with U.S. companies feel as though they’re hostages to a greater political good,” he added. “And they don’t see how it helps them.”
Cubans have had anxiety-ridden days of late, Kavulich noted. Looming above all else is the uncertainty around the stepping-down of Raul Castro as president in February, and the likely ascension to that post of first vice president Miguel Díaz-Canel. They also feared retaliation from the U.S. after nearly two dozen U.S. diplomats in Cuba suddenly faced “health issues” such as hearing loss and cognitive difficulties. The Trump administration withdrew nonessential staff from Cuba, but that issue cast dark shadows on U.S.-Cuba ties. Kavulich also pointed to Cuba’s issues with Venezuela not being able to provide the support it once did due to that nation’s own economic struggles, low commodity prices, and high import prices, and also the weather — Hurricane Irma made landfall in Cuba in September. “They’ve gotten pretty much hammered,” he added.
A new regime in Cuba could present new opportunities for U.S. businesses, aided by a change of heart in the White House, some analysts say. However, a new president in Cuba, even if it is Miguel Díaz-Canel, will likely not move to change the country’s relationship with the U.S., Kavulich predicted. “Don’t get your hopes up. The revolution continues,” he said. Arnavat agreed. “Whoever takes over is going to be spending time underscoring his or her revolutionary bona fides. There’s no question about that.”
Rating Action:
Global Credit Research - 08 Nov 2017
New York, November 08, 2017 -- Moody's Investors Service has today affirmed Government of Cuba's Caa2 foreign currency issuer rating, assigned a Caa2 local currency issuer rating, and changed the rating outlook to stable from positive.
The key drivers of the change of outlook are:
1) The rapprochement process with the United States has stalled resulting in a reversal of measures to ease the economic embargo, and in recent months US-Cuba relations have deteriorated
2) Moody's expectations of continued reform momentum and favorable macroeconomic performance have not materialized due to a series of climate shocks, strained relations with the US and the upcoming domestic political transition
Cuba's Caa2 sovereign rating reflects credit weaknesses that include limited access to external financing, structural inefficiencies, political transition risk, and importantly, limited data transparency. The rating also incorporates the economic impact of the growing tourism sector, nickel-related mining activities, and the potential for future economic diversification.
Cuba's long-term local-currency country risk ceilings and the foreign currency bond ceiling remain unchanged at Caa2. The foreign-currency bank deposit ceilings is also unchanged at Caa3. The short-term foreign currency bond and deposit ceilings remain at NP (Not Prime).
RATINGS RATIONALE
RATIONALE FOR THE OUTLOOK CHANGE TO STABLE
The positive outlook on Cuba's Caa2 rating was based on increased prospects for rapprochment with the US as well as for domestic economic reforms. The principal drivers of Moody's decision to change the outlook to stable from positive are the stalled process of rapprochement with the US, and the dimmer prospects for further economic reform on the island.
Restrictions on travel to Cuba, which the previous US administration had loosened, have been tightened. Regulations effective 9 November rescind the travel authorization for individual "people-to-people" exchanges, a broad category increasingly used by Americans under the previous administration to conduct legally authorized travel to the island without the need to participate in organized group exchanges. The tightened controls also include a provision applicable to persons that are otherwise authorized to engage in Cuban travel or other Cuba-related activity, prohibiting them from engaging in most direct financial transactions with 180 entities linked to the Cuban military, which controls a broad swath of the tourist economy.
While the tightened travel authorizations only reinforce the longstanding statutory tourism ban on Cuba, these changes and new sanctions targeting the Cuban military highlight a reversal of the previous rapprochement efforts undertaken by Cuba and the previous US administration. Although a number of relevant measures taken by the previous US administration remain in place, Moody's believes that the changes to be adopted on 9 November will curtail the flow of American visitors to Cuba and diminish impetus for investment into the country, primarily into tourism projects, but also into other sectors that were expecting a further opening up of the Cuban economy.
More recently, diplomatic relations between the US and Cuba have become strained by alleged sonic attacks on US embassy and government personnel in Havana, resulting in the US recalling the majority of the staff from its embassy in Cuba and expelling Cuban diplomats from Washington. These developments will likely constrain further economic or diplomatic openness between the two nations.
Despite recent growth in the tourism sector, Cuba's economic outlook remains challenging following climate and commodity price shocks, and negative spillovers from the economic crisis in Venezuela. The country has been hit by two major hurricanes since late-2016. This caused widespread destruction and affected economic activity. Agriculture, food production, construction and healthcare likely posted a significant contraction owing to the various shocks faced by the economy. Key export prices for nickel have recovered but remain short of the highs achieved in 2008 and 2011, and sugar prices remain near 2015 lows.
Moody's estimates that the Cuban economy contracted 0.9% in 2016 despite a 13.3% increase in visitor arrivals. Moody's forecasts that the economy will contract once again in 2017 by 0.5% before returning to moderate growth of 1.1% in 2018. Nevertheless, prospects for recovery remain fragile and the upcoming political transition will limit the pace of reforms that could support economic recovery.
President Raul Castro will step down at the end of his second five year term in February 2018. This will be the first time since 1959 that a member of the Castro family will not rule Cuba, potentially posing risks to political stability and increasing uncertainty over economic policy and prospects. Moody's believes that risks to economic liberalization are substantial given the state's wavering commitment to private enterprise and Cuba's lack of experience with implementation of market policies.
WHAT COULD MOVE THE RATING UP/DOWN
There could be upward pressure on Cuba's rating if there is a further easing of US economic sanctions or domestic reforms that have a material impact on Cuba's economic prospects. More clarity over the political transition at the end of President Raul Castro's current term would ease concerns over political and social instability. Enhanced data timeliness and transparency would also be credit positive.
Conversely, evidence of increased stress on Cuba's external finances along with deteriorating economic prospects due to external shocks or reform reversal would result in downward pressure on Cuba's rating.
GDP per capita (PPP basis, US$): $7,700 (2016 Actual) (also known as Per Capita Income)
Real GDP growth (% change): -0.9% (2016 Actual) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 3.1% (2016 Actual)
Gen. Gov. Financial Balance/GDP: -6.8% (2016 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: 0.7% (2016 Actual) (also known as External Balance)
External debt/GDP: 23.4% (2016 Actual)
Level of economic development: Low level of economic resilience
Default history: No default events (on bonds or loans) have been recorded since 1983.
Note: Numbers have been updated to 2016 (from 2014), which is what was used for committee purposes.
On 06 November 2017, a rating committee was called to discuss the rating of the Cuba, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have materially decreased. The issuer's institutional strength/ framework, have not materially changed. The issuer's governance and/or management, have not materially changed.
The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.
On 1 November 2017, Eagan, Minnesota-based Sun Country Airlines has returned its Republic of Cuba flight allocations to the United States Department of Transportation (USDOT) due to continuing uncertain market demand:
Application of MN Airlines, LLC d/b/a SUN COUNTRY AIRLINES
For an exemption pursuant to 49 U.S.C. 40109 to provide scheduled service Between the United States and Cuba and Order 2016-2-12 for allocation of newly available Frequencies between the United States and Cuba:
November 1, 2017
Docket DOT-OST-2016-0021
MOTION OF MN AIRLINES, LLC D/B/A SUN COUNTRY AIRLINES FOR RETURN OF FREQUENCY ALLOCATION
MN Airlines, LLC d/b/a Sun Country Airlines (Sun Country), moves to return the Cuba frequency allocation in Order 2016-6-5 dated June 10, 2016, which granted Sun Country's application for (1) once-weekly service (i.e., Saturdays) between Minneapolis/St. Paul and Matanzas and (2) once-weekly service (i.e., Sundays) between Minneapolis/St. Paul and Santa Clara. On January 11, 2017, Sun Country was granted approval of a waiver of the 90-day start up condition placed on the two U.S. - Cuba frequencies awarded to Sun Country in order to allow Sun Country to commence new U.S. - Cuba service using these frequencies on or before the 2017 - 2018 winter traffic season or December 17, 2017. Such a waiver was necessary to give Sun Country additional time to examine and mitigate barriers still in place due to the current
trade embargo between the US and Cuba, and further to more thoroughly evaluate the market opportunities in Cuba, establish procedures and arrange contracts with key vendors.
Regrettably, the market demand remains uncertain and there is still a lack of clarity surrounding travel restrictions; therefore Sun Country does not desire to retain the granted frequency allocations for Saturday-only Minneapolis/St. Paul - Matanzas and Sunday-only Minneapolis/St. Paul -Santa Clara.
WHEREFORE, Sun Country requests DOT to accept the return of Sun Country's Cuba frequency allocations effective immediately and grant such other relief as the Department deems necessary and appropriate.
Memphis, Tennessee-based FedEx Corporation (2017 revenue exceeded US$60 billion) has received approval from the United States Department of Transportation (USDOT) to delay, for the third time, its regularly-scheduled cargo flights from the United States to the Republic of Cuba. FedEx Corporation requested the extension on 7 September 2017 and the USDOT issued the authorization on 5 October 2017:
The Department grants the request of Federal Express Corporation (FedEx) for relief, until June 15, 2018, from the 90-day start-up condition applicable to the Monday-Friday Miami-Matanzas frequencies allocated to FedEx by Notice of Action Taken dated July 15, 2016, in this docket. The Department will require that FedEx inaugurate its Monday-Friday Miami-Matanzas service no later than June 15, 2018. [LINK TO DOCUMENT].
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
November 8, 2017
BACKGROUND CONFERENCE CALL BY SENIOR ADMINISTRATION OFFICIALS
PRESIDENT TRUMP’S CUBA POLICY
MS. FERRÉ: Good morning, everyone. Thank you so much for joining us for this call. My name is Helen Aguirre Ferré. I am director of media affairs at the White House. Our purpose today is to provide you with an overview of the regulations that implemented the President's Cuba policy he announced in June of this year.
I am joined by representatives of the departments of the Treasury, State, and Commerce on this call. I would like to say that this call is on background. It is not for direct attribution to any member on this call. This is call is embargoed until the end of this call.
Before we get to the meat of the regulations I want to provide a brief reminder of the goals of the policy and changes that we outlined, and this I will pass -- at this point, I will pass to my colleague, who is director of policy for the White House.
SENIOR ADMINISTRATION OFFICIAL: Thank you, Helen. And just before I begin let me just -- as a heads up -- we're expecting a fire drill at some point today in the White House so if for some reason, over the course of the next 30 minutes or so if you hear a fire alarm it is a planned fire drill. We are not being told of the exact time so do not panic. It's all planned. I just want to mention that in case you hear a fire alarm, and we have to leave the call. But hopefully that won't happen within the next 30 minutes.
Thank you so much for joining the call today. Let me just tell you that the purpose of this call is to provide you with a brief overview of the regulations that were released a few minutes ago that implement the President's Cuba policy that he announced in his speech in Miami in June of this year.
As Helen mentioned, we are joined by representatives from the Department of the Treasury, State, and Commerce on this call. And so before we get to the meat of the regulations and before I hand it over to our colleagues from the different departments I want to provide you with a brief reminder of the goals of the policy changes that the President announced in June in Little Havana.
The policy, and more specifically, the regulations that we're announcing today are intended to support compliance with U.S. law, including the embargo in Cuba and the statutory ban on tourism.
We will hold the Cuban regime accountable for oppression and human rights abuses ignored under the previous administration's policy. We will further the national security and foreign policy interests of the United States and those of the Cuban people. And we will lay the groundwork for empowering the Cuban people to develop greater economic and political liberties.
These regulations that we are releasing today -- that were just released today are designed to implement each of these important goals.
I want to thank each of the agencies representative of this call -- Treasury, State, and Commerce -- for their great work over the past five months and for their diligent efforts to implement our new Cuba policy. Our actions today show that we stand with the people of Cuba, and I want to reiterate that improvements to the United States-Cuba relationship will depend entirely on the Cuban government's willingness to improve the lives of the Cuban people, including promoting the rule of law, respecting human rights and taking concrete and specific steps to foster political and economic freedoms. So again, thank you for your participation. And now I'm happy to pass the call to my colleague at the Department of the Treasury.
SENIOR ADMINISTRATION OFFICIAL: Good morning, everyone. I’m from Treasury’s Office of Foreign Assets Control, or OFAC. Thanks to everyone for joining the call. As my colleague mentioned, OFAC, Commerce, and State are taking steps today to implement the changes to the Cuba sanctions program announced by the President in June.
OFAC is amending its Cuban assets control regulations, and these regulatory amendments will become effective tomorrow, November 9th, once they're published in the Federal Register.
In addition to the new regulations, OFAC, Commerce, and State issued a joint fact sheet that you should have received already, and OFAC has new and updated FAQs that go into further detail on these changes. All of OFAC's materials can be found online on OFAC's Cuba webpage.
At the highest level, OFAC's amendments to the Cuban regulations are intended to steer economic activities away from the Cuban military, intelligence, and security services in order to expand economic ties to the private small-business sector in Cuba.
Channeling economic activity away from entities controlled by the Cuban military will encourage the government to move toward greater political and economic freedom for the Cuban people. The amended Treasury regulations on travel help to ensure that the restrictions on travel in Cuba are meaningfully implemented without unnecessarily impacting humanitarian, educational, commercial, or other expressly permitted activities.
In accordance with the National Security Presidential Memorandum, or NSPM, issued by the President in June, Americans will be prohibited from engaging in certain direct financial transactions with entities and sub-entities identified by the State Department on the Cuba Restricted List.
Certain transactions will be excluded from this prohibition pursuant to exceptions detailed in the NSPM. Consistent with the administration's intent in avoiding negative impact on American business and travelers, commercial engagements in place prior to the State Department's listing of any entity or sub-entity will continue to be authorized, as will most previously arranged travel. For example, businesses will be permitted to continue transactions outlined in contingent or other types of contractual agreements agreed to prior to the issuance of the new regulations consistent with other regulatory authorizations.
I'll now defer to my colleague, the coordinator for Cuban affairs at the State Department to discuss this list.
SENIOR ADMINISTRATION OFFICIAL: Thanks. Today the Department of State is publishing its list of restricted entities and sub-entities associated with Cuba, otherwise known as the Cuba Restricted List. As directed by the June 16th National Security Presidential Memorandum, the Department of State identified the entities and sub-entities that are under the control of, or act for or on behalf of the Cuban military, intelligence, or security services or personnel.
The department then developed a list of those identified entities and sub-entities with direct financial transactions with which direct financial transactions would disproportionally benefit the Cuban military, intelligence, or security services or personnel at the expense of the Cuban people or private enterprise in Cuba.
The list is comprised of 180 entities and sub-entities including the Ministries of Interior and the armed forces, holding companies, tourism companies, the Mariel Port and Special Development Zone, and 83 hotels across the island. You can find the Cuba Restricted List on the State Department's website by searching under 'Cuba Restricted List'. It's also published in the Federal Register. We will publish updates to it periodically as the need arises.
I'll turn this over to my Treasury colleagues to explain the regulations and how they will be implemented.
SENIOR ADMINISTRATION OFFICIAL: Thanks. So following up and talking about some of the travel restrictions in accordance with the NSPM, OFAC is making changes to the travel authorizations for people-to-people travel.
As announced by the President in June, OFAC is removing the authorization for individual people-to-people travel. Future people-to-people travel will need to meet two requirements. First, all people-to-people travel must be conducted under the auspices of an organization that is subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people contact. And second, such travelers must be accompanied by a person subject to U.S. jurisdiction who is a representative of the sponsoring organization.
Consistent with the administration's interest in avoiding negative impact on Americans for arranging lawful travel to Cuba, certain people-to-people travel that previously was authorized will continue to be authorized where the traveler has already completed at least one travel-related transaction, such as purchasing a flight or reserving accommodations prior to the President's June 16th, 2017 announcement.
With regard to academic educational travel, in accordance with the NSPM, persons subject to U.S. jurisdiction engaging in certain authorized educational travel will now be required to do so under the auspices of an organization that the person is subject to U.S. jurisdiction. These authorized educational travelers will now also be required to be accompanied by a person subject to U.S. jurisdiction who is a representative of the sponsoring organization, unless the traveler is the representative and obtained a certification letter from the sponsoring organization.
Again, consistent with the administration's interest in avoiding negative impacts on Americans for arranging lawful educational travel to Cuba, certain educational travel that was authorized will continue to be authorized where the traveler has already completed at least one travel-related transaction prior to tomorrow when the regulations become effective.
In accordance with the NSPM, OFAC is also requiring under the support for the Cuban people travel category, that each traveler engage in a full-time schedule of activities that result in meaningful interaction with individuals in Cuba. Such activities must also enhance contact with Cuban people, support civil society in Cuba, or promote the Cuban people's independence from Cuban authorities.
So, staying in a room in a rented accommodation of private Cuban residents, known as casa particular, or eating at privately owned Cuban restaurants known as paladares, and shopping at privately owned stores run by self-employed Cubans, cooperativistas are example of authorized activities. However, in order to meet the requirement of the full-time schedule, a traveler must engage in additional authorized support for the Cuban people activities.
Finally, in accordance with the NSPM, OFAC's amending the definition of the term “prohibited officials of the government of Cuba” to include certain additional individuals. This definitional change will affect the scope of certain existing authorizations.
In conclusion, these amendments to the Cuban regulations implement the President's new Cuba policy to ship resources to the Cuban private sector and the nascent middle class. These regulatory changes take effect tomorrow, when the regulations are published in the Federal Register.
Now, I'll turn it over to my colleague from the Commerce Department's Bureau of Industry and Security.
SENIOR ADMINISTRATION OFFICIAL: Thank you, and good morning to everyone. This is the deputy assistant secretary of Commerce for export administration. Our bureau, the Bureau of Industry and Security, will be implementing the President’s Cuba policy -- articulated in the NSPM -- through amendments to our export administration regulations, as they relate to exports, re-exports, and in-country transfers to Cuba and in Cuba.
And our amendments fall into three baskets -- licensing policy, for things that require individual licenses for export to Cuba; and then some changes to parties who are potentially eligible for license exceptions, which are general authorizations; as well as changes to exports to the Cuban private sector.
Specifically, we will amend our regulations to reference the State Department’s Cuba Restricted List for licensing policy. So that potential exporters know that if they have a transaction they’d like to undertake with one of those entities, it will likely be denied.
But exports that are consistent with the NSPM such as agricultural commodities, medicines, medical devices, and items for use by the Cuban private sector will still be approved, likely.
The second thing is, as my colleague mentioned, the expanded list of prohibited Cuban government officials. This is a limitation on three license exceptions or general authorizations we have -- consumer communication devices, support for the Cuban people, and gift parcels. There will be additional universal parties in Cuba who will not be eligible to receive goods under these license exceptions for general authorizations.
And the third change we’re doing is simplifying expanding our license exception called “support for the Cuban people” to make it clear that items that will be eligible for this license exception or general authorization are any items to be used by the Cuban private sector for private-sector economic activities to support free enterprise in Cuba.
An example would be kitchen appliances going to the private sector for use in constructing or renovating privately owned homes. Another example would be vehicles for use by private-sector taxi operators. Those are the kinds of things that will be allowed to go under this general authorization or license exception.
As with the Treasury’s amendment, this regulation of ours will become effective tomorrow, and we will also have a revised set of frequently asked questions up on our website for those who are interested in more detail on the impact of these changes.
So that’s the summary of the changes to the export administration regulations by Department of Commerce.
MS. FERRÉ: Thank you very much. And now we're going to open up, operator, for questions. As a reminder to everyone, this is all embargoed until the end of this call. Everyone, this on background, not for attribution. We have a senior White House official. We have a senior official from the Department of State, from Treasury, and Commerce.
Q Good morning, this is Michelle Caruso-Cabrera from CNBC. I’ve read through these and I just want to understand very clearly. If somebody is going to travel with one of the organizations that are allowed to do people-to-people travel, once these regulations are published tomorrow, those individuals and those people-to-people organizations -- licensed organizations -- cannot place individuals into these hotels, correct?
And to what degree do we know that they’ve been staying in the hotels that are listed here? And how many -- future travels would have to change location or go to an Airbnb, et cetera?
SENIOR ADMINISTRATION OFFICIAL: So this is Treasury, if I understand the question right, if the accommodations or the arrangements have already been made for the travel, they can move forward with travel that’s already been authorized -- already been arranged.
So, if you’ve already booked your flights, if you’ve already booked in a hotel that’s on the list, then you can move forward with that trip. After the regulations become effective tomorrow, then you will not be allowed to do a people-to-people trip that would stay in one of those hotels that’s on the list.
So again, we’re not trying to impact travel that has already been booked or arranged, we are trying to make changes for the future.
Q And how did you pick these specific hotels, and to what degree do you know that they're being used currently by people-to-people licensed organizations?
SENIOR ADMINISTRATION OFFICIAL: Hi, this is State. We have our economic specialist on the line as well. Can you ask the question again?
Q So to -- how did you pick these specific hotels? Because there are other hotels there. And to what degree do you know whether or not currently licensed people-to-people organizations are staying in hotels on the list, and therefore, in the future would have to pick other places?
SENIOR ADMINISTRATION OFFICIAL: So, with regard to the first part of the question, any entity identified as being controlled by the military, intelligence, or security services was evaluated within the guidelines laid out by the NSPM.
The department listed those entities with which direct financial transactions would disproportionately benefit Cuba’s military, intelligence, or security services or personnel at the expense of the Cuban people or private enterprise in Cuba consistent with U.S. national interests.
Some entities controlled by the military, intelligence, or security services or personnel did not meet these criteria and therefore would not appear on the list.
Q Hi, this is (inaudible) with The Hill. I'm just wondering, entities that are included on the prohibited list, would they be able to challenge that, and if so how would that process work?
SENIOR ADMINISTRATION OFFICIAL: Well, we update it periodically based on information that we receive at the State Department. So information we receive we’d evaluate and determine whether it would meet the criteria for changes to the list.
Q Hello, I'm Ambrosio Hernandez, chief anchor here at Channel 23 News Univision Miami. The question is about the Americans -- if I understood correctly -- visiting casas particulares y palabras in Cuba. But then, it was added that they must also engage in support for the Cuban people. Can you explain that to us and also about the packages to Cuba? What is allowed and what is not allowed? Thank you.
SENIOR ADMINISTRATION OFFICIAL: So, thank you. This is Treasury answering the question. First, I'll appreciate that you pronounced the terms better than I did, and what we tried to emphasize that is staying or eating or shopping in some of those privately owned places is something that we wanted to encourage. But what we wanted to say is that that alone is not enough. So, if you stay in one of the privately owned accommodations or eat at a paladares, that alone won't be enough. But, we've always had the support for the Cuban people category. And so what we're saying is that can be -- those will be some of the factors that you can use to demonstrate your support for the Cuban people but you should plan on additional activities that would support the Cuban people.
We actually put out an FAQ that references this that will give us a little bit more detail. I think it's also maybe addressed in our press release to try to make sure we're as clear as can be.
SENIOR ADMINISTRATION OFFICIAL: On the question -- the second part of the question, items eligible for gift parcels, those are generally items that would normally be exchanged in a gift arrangement. The changes that we're making at Commerce to our regulations expand the list of individuals in Cuba who are not eligible to receive such gift parcels. And, as you can expect, they're generally people affiliated with the Communist Party, the government, the military, the intelligence, and security services.
Q My name is Chris Clayton. I'm an editor from DTN/The Progressive Farmer. And I’m curious, we've had some major manufacturers such as John Deere and Caterpillar just announce that they were going to be sending equipment to Cuba after cutting a deal with the Cuban government. Would these business arrangements that have already just recently been announced suddenly now be halted or restricted?
And also you mentioned agricultural exports will be approved likely. What restrictions might there be placed on agricultural exports to Cuba? Thank you.
SENIOR ADMINISTRATION OFFICIAL: So both types of transactions go through the filter that's been described, which is under the Commerce regulations, we would look at whether they're going to entities in the Cuban government that primarily generate revenue for the state. That preexisted these changes. The additional licensing policy is items going directly to any party on the State Department's Cuba Restricted List would also likely be denied. So I can't speak to any specifics of any particular transaction. But those are the policies that we would apply to proposed exports of farm equipment, construction equipment, agricultural items to Cuba.
SENIOR ADMINISTRATION OFFICIAL: And from the Treasury side, I’d say that we made it explicit consistent with the administration's desire to avoid negative impacts on American business. We're saying the commercial engagements that were in place prior to the State Department's listing of any entity or sub-entity will continue to be authorized.
So if you had a contract in place before the State Department lists the entity, then you'll be allowed to continue with the contract.
SENIOR ADMINISTRATION OFFICIAL: And that's the same for Commerce. Even if a U.S. party has a Commerce export license, that would be essentially grandfathered, even if prospectively it wouldn't be approved if it came in later, after the regs became effective.
Q Yes, I’m Patrick Oppmann from CNN in Havana. Wondering why the Four Points Sheraton, which is a U.S. hotel that is a joint venture with Gaviota, which, of course, is one of the companies that's prohibited, was left off the list? Was that on purpose because Sheraton is a U.S. company?
SENIOR ADMINISTRATION OFFICIAL: Look, similar to the answer to the previous question, we assessed how listing identified hotels would affect the Cuban people and whether doing so advances the interests of the United States. In coordination with OFAC, we made the determination that it wouldn't fall under it.
Q Hi, everyone. It's Olivier Knox at Yahoo News. I want to make this practical. How does life change for an American who wants to visit Cuba aboard a cruise ship and bring $100 of rum and cigars? And can you say whether the timing of this announcement is in any way connected to those sound attacks against American diplomats in Havana?
SENIOR ADMINISTRATION OFFICIAL: Look, this list and all of the regulations related to it have nothing to do with the acoustic incidents. All of this is done in accordance with the requirements under the NSPM.
SENIOR ADMINISTRATION OFFICIAL: And from the Treasury perspective, the rules that you referenced didn't change. You're still allowed to travel by the means that you mentioned. You're still allowed to bring back under the 10 quantities that have been in our rules, as long as you're fitting within the revised travel categories that we put out in our regulations.
Q Hey, Josh Lederman, from the Associated Press. Thanks for doing the call.
I was wondering if you could tell us how you're going to police these new changes? For instance, when an American comes back from Cuba, are there going to be OFAC inspectors that ask to see their itinerary to make sure they have sufficient support from the Cuban people? And what are the potential repercussions for Americans who do not comply with the rules that you're outlining today?
SENIOR ADMINISTRATION OFFICIAL: So this is Treasury, again, OFAC. The repercussions are the same as what they have been. I'll start with that part first. As we have enforcement authority, there are penalties. And for willful violations, they can be referred for a criminal prosecution.
In terms of how we'll police it, we'll police it as we have. And we have additional mechanisms in the regulations to ensure that we can. So we rely on all sorts of information that we get from a variety of the agencies. I wouldn't expect to see OFAC at every border point, but I think we can rely -- as we have relied on in the past -- on our interagency colleagues in Customs Border Patrol, all of the agencies that supply us information.
We also have included in the regulations some additional requirements about certain travelers getting letters, making sure that there are documented reasons. And everyone has to make sure that they retain records pursuant to our record-keeping requirements. Because if we have concerns about travel or any other type of transaction that could potentially violate our regulations, then we can come to you and ask you for and review the transaction.
SENIOR ADMINISTRATION OFFICIAL: And then for Commerce, we continue to use our long-standing export enforcement authority to look at a variety of information to determine whether there are potential violations of the Commerce regulations on exports, re-exports to Cuba.
Q Hi, it's Karen DeYoung at the Washington Post. Just following up on the previous question, in the past when restrictions were tighter than they have been in the last few years, the enforcement was -- I think it's fair to say -- fairly lax. And I wonder if you plan on hiring new people to control borders, if travelers should expect to spend more time, if this is going to affect airline flights into government-owned airports for Cuba?
SENIOR ADMINISTRATION OFFICIAL: This is Treasury, OFAC again, I think I disagree with your characterization that our enforcement has been fairly lax. I think when we've seen violations, we've gone after those violaters. We continue to have Cuba-related penalties throughout administrations over time, and we will continue to do so when we see violations. But I think I've already hit that part of your question in response to the previous one.
Thank you very much.
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