Trade analysts cautious about trade with Cuba

The United States’ effort to remove Cuba from the list of states that sponsor terrorism is a limited but significant step likely lead to the reopening of embassies, say trade analysts. But the overall engagement will still be limited by the U.S. embargo.

Air cargo carriers are likely to increasingly request permission to start scheduled services, and agricultural exporters are seeking greater flexibility to obtain credits, analysts add. These gradual measures can also present a more favorable outlook for Cuba’s newly developed super-container port of Mariel and the special economic zone that is to open around it.

“This is a limited but significant step that will move the bilateral relations towards appointing top-level diplomatic representation in each country by reopening embassies, but will still be limited by the U.S. embargo,” says Diego Moya-Ocampos, a senior analyst with IHS Global Insight.

The US embargo on Cuba was imposed in 1960 and intensified in 1962 following Cuba’s nationalization of US citizens’ and corporations’ assets, in the hope it would accelerate the fall of the Castro brothers’ Communist government, now in power for 56 years, or lead to a process of democratization.

According to Moya-Ocampos, both sides will now be intent on moving their relationship from hostility towards gradual increased co-operation.

But in terms of regional trade, Cuba’s removal will have almost no implications, as the majority of Cuba’s partners in the Latin America and Caribbean region are already openly doing business with Cuba.

“However it will moderately benefit trade and investment – especially with US, Western and transnational companies – in the agriculture, sugar, financial services, and transport and tourist sectors in the three-year outlook, although only in the extent that these activities are not restricted by the U.S. embargo,” IHS concludes.