Obama Can Bend Cuba Embargo to Help Open Economy, Groups Say

President Barack Obama should break free of the embargo on Cuba and assert his authority to promote a free-market overhaul taking place on the communist island.

The recommendation is contained in concurrent reports to be published today by the Cuba Study Group and the Council of the Americas, two groups seeking to end a decades-old deadlock on U.S. policy toward Cuba.

Among steps Obama can take without violating sanctions passed by Congress are opening U.S. markets, as well as authorizing the sale of American goods and services, to the estimated 400,000 private entrepreneurs that have arisen since Cuban President Raul Castro started cutting state payrolls in 2011. The reports also recommend allowing U.S. credit card and insurance companies to provide basic financial services to licensed U.S. travelers to Cuba.

“We’ve been sitting on the sidelines with our hands tied by an antiquated law that’s being too strictly interpreted,” said Chris Sabatini, an author of the report and senior policy director for the Council of the Americas, a business-backed group based in New York. “There’s more Obama can do to be a catalyst for meaningful economic change.”

Obama in 2009 allowed companies for the first time to provide communications services to the Caribbean island of 11 million and lifted a travel ban for Cuban-Americans. The loosening of restrictions, while heralded by the White House as a way to undermine the Castro government’s control of information, was seen as insufficient by potential investors including Verizon Communications Inc. and AT&T Inc.

Economic Overhaul

Now, in a second term, and with private business expanding in Cuba, Obama has a freer hand to do more, said Sabatini. An exception to the embargo allowing U.S. businesses and consumers to trade with non-state enterprises in Cuba would be small in scale though help empower a growing, viable constituency for change on the island, he said.

Since his brother Fidel started handing over power in 2006, Castro has relaxed state control of the economy in the biggest economic overhaul since the 1959 revolution. To provide jobs for the 1 million state workers being laid off, the government began allowing the buying and selling of homes and the creation of farming co-operatives and other private businesses.

The latest sign of change are new rules that took effect in January allowing most Cubans to bypass requirements they obtain an exit visa or invitation from abroad to leave the island.

Castro in December said that he hopes that productivity gains will boost economic growth this year to at least 3.7 percent. Gross domestic product expanded 3.1 percent in 2012.

Repeal Legislation

The Washington-based Cuba Study Group urges Obama to gain even more leverage by getting Congress to repeal the so-called Helms-Burton act of 1996 and other legislation that conditions the easing of sanctions on regime change.

Any move to ease the five-decade-old embargo would probably encounter anti-Castro resistance in Florida, one of the biggest prizes in recent presidential elections, and opposition from key lawmakers including Senator Robert Menendez, the Democratic chairman of the Senate Foreign Relations Committee.

A bill introduced by Representative Jose Serrano, a New York Democrat, in the 112th Congress to dismantle the web of legislation governing relations with Cuba since as early as the 1960s received no co-sponsors.

Another obstacle to an improvement in relations is the fate of U.S. contractor Alan Gross, who remains jailed in a Havana prison three years after he was arrested on charges of spying for carrying telecommunications equipment to the island.

A delegation of U.S. lawmakers led by Senator Patrick Leahy, a Democrat from Vermont, is in Cuba this week and is expected to meet with Gross and seek his immediate release.

To contact the reporters on this story: Joshua Goodman in Rio de Janeiro at jgoodman19@bloomberg.net;

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net.

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