Trump Could Ice Thawing U.S. Relations with Cuba

The United States’ relationship with Cuba has thawed over the last two years, thanks in part to a December 2014 agreement between President Barack Obama and Cuban President Raul Castro to end a decades-long period of policy isolation. In the years since, major corporations have signed deals to do business with the Caribbean island and optimism about the future of the former enemies has grown among citizens of the two countries.

With President-elect Donald Trump set to take office on January 20, though, many wonder whether the warming U.S.-Cuba relationship will begin to again freeze.

“We believe [Trump] will reverse almost all the things that President Obama did,” said Horatio Ortiz, managing director of Classified Worldwide Consulting, a frontier market intelligence and security firm.

Trump warned back in September at a Florida campaign event that U.S. policies toward Cuba could change if he were elected President, calling the agreement one-sided and benefitting the “Castro regime.”

“All of the concessions that Barack Obama has granted the Castro Regime were done through executive order, which means the next president can reverse them – and that is what I will do, unless the Castro Regime meets our demands. Those demands will include religious and political freedom for the Cuban people,” Trump said.

More recently, Trump again warned about potentially cutting ties with Cuba on Twitter (NYSE:TWTR) and in a formal statement following former Cuban President Fidel Castro’s death last month.

It’s true that little has been achieved by the Obama administration in the way of dismantling Cuba’s single-party political system or improving human rights. The Cuban Commission for Human Rights and National Reconciliation (CCDHRN) has documented 9,484 political arrests in Cuba through the end of November 2016, up from 8,616 for all of 2015. What’s more, the totalitarian reins may very well tighten once Trump takes office.

“The hardline Communists in Cuba will use this Trump presidency as a new call to arms against the imperialistic/capitalistic America,” said Ross Thompson, Ortiz’s colleague and fellow managing director at Classified Worldwide Consulting.

“They lost Fidel and that was a very big blow as far as their image…they need to kind of drum up some fervor and we see the target of that being anti-Trump kind of like it was pro-Fidel.”

Industries That Stand to Lose

The tourism industry has been at the forefront of U.S. business in Cuba following the 2014 agreement. Though Americans are still unable to visit Cuba purely for tourism purposes due to a longstanding embargo, it’s much easier to get to the Caribbean island than it once was thanks to multimillion-dollar agreements between major U.S. corporations and the Cuban government.

Ten U.S. airlines regularly fly commercial flights to Cuba including American (NASDAQ:AAL), JetBlue (NASDAQ:JBLU) and Southwest (NYSE:LUV). Several cruise lines including Carnival (NYSE:CCL), Royal Caribbean (NYSE:RCL) and Norwegian (NASDAQ:NCLH) have also received approval to sail to Havana, while Starwood Hotels & Resorts (NYSE:HOT) signed a deal to manage three hotels in the Cuban capital.

Meanwhile telecommunications companies including AT&T (NYSE:T), Verizon (NYSE:VZ) Sprint (NYSE:S) and T-Mobile (NYSE:PCS) reached agreements with the Cuban government to offer roaming service to U.S. travelers.

Tech corporations, too, made headlines recently with their own initiatives to enter the Cuban market. Alphabet's Google (NASDAQ:GOOGL) signed a deal with Cuba’s state telecom company to install computer servers on the island, thereby improving Internet service for the Cuban people. General Electric (NYSE:GE) is hoping to reach an agreement soon to be able to sell power, aviation and medical equipment to the Cuban government.

In theory, U.S. investment in Cuba by all these names and others could be rolled back under a President Trump, though experts note it would not happen overnight.

“It’s not like one fell swoop, it’s something that requires this collaborative process among U.S. agencies, but in theory the authority is there. Just like President Obama had the authority to do this, [Trump] has the authority to undo it,” said Pedro A. Freyre, international practice chair at law firm Akerman LLP.

Freyre, who was born in Havana but came to the U.S. with his family in 1960, says there are other industries in which the president-elect would have a tougher time imposing any sort of regulations.

“What he could not undo is the framework for sales of agricultural and pharmaceutical commodities because of a carve out from the embargo. It’s not regulation, it’s law…those sales throughout the years have been in the range of hundreds of millions of dollars, which is not an insignificant amount in the context of Cuba,” he said.

According to a 2015 U.S. Department of Agriculture report, U.S. agricultural exports to Cuba totaled $300 million in 2014. With seven out of the top 10 agricultural states having voted for Donald Trump, Freyre says their investment in Cuba will likely be something the new administration takes into consideration.

Another factor to consider is how Cuban-Americans feel about expanding relations with Cuba. According to a 2016 poll conducted by Florida International University, 63% of Cuban-American residents in Miami-Dade County, Florida oppose the continuing embargo.

“I think that there is a very broad consensus with Cuban-Americans that we all want to see a free and prosperous Cuba…where people can speak their minds and where people can have their own business and where Cuba moves up,” said Freyre, who believes it will be difficult for Trump to achieve success with Cuba through harsh measures.