What’s next in Havana

President Obama has had many wins recently.  His now-famed “best week ever” continues as embassies in Havana and Washington re-open for the first time in 54 years. Since the historic announcement of December 17, 2014, new travel opportunities have opened up for Americans, trade options have expanded for agriculture, pharmaceuticals, and telecommunications, and Americans can send four times the amount of remittances they could previously. The opening of embassies is the most tangible summation of the seven-month normalization of US-Cuba relations.  

This begs the question: what’s next?  

{mosads}Praise for Obama’s Cuba policy has come from long-time supporters as well as some unexpected actors. Former Secretary of Commerce Carlos Gutierrez, a native Cuban and a Bush administration cabinet member recently defended the president’s policy, calling it the best way to support the Cuban people. Indeed, most Americans agree that moving from a policy of regime change to a policy of engagement is the best way to assist Cuba’s deprived citizenry. Supporting economic reform and reintegration is the best place to start.  

Cuba’s languishing economy needs to grow its nascent private sector and attract greater foreign investment. Cuba has a long way to go in order to be able to do either, and U.S. policy should now focus on facilitating technical advice and sector reforms. Roadblocks prohibiting capital flow and international assistance are still a part of US sanctions policy, and though some of these remain politically insurmountable, Obama has executive running room to do more in support of Cuban economic reform.  

First, the small private sector in Cuba is starved for capital; Obama recently quadrupled the amount in remittances Americans are allowed to send to Cuba each year, a move sure to help spur growth. The administration should remove the cap entirely, allowing maximum access to capital for Cuban entrepreneurs.

Second, three Washington-headquartered international financial institutions (IFI’s) should be nudged to help Cuba reform its economy. Last week the Atlantic Council released a report titled Cuba’s Economic Reintegration: Begin with the International Financial Institutions, authored by Cuban economist Pavel Vidal and former IMF economist Scott Brown. The report advocates that the Inter-American Development Bank, World Bank, and International Monetary Fund play a greater role in Cuba’s economic future, helping to address structural obstacles including a dual-currency system, poor and inaccessible statistical data, and weak infrastructure. It is a perfect marriage of what these organizations are set up to do and the kind of assistance Cuba needs.  

The economic reintegration of previously isolated countries such as Vietnam, Albania and, most recently, Myanmar are examples of the benefits of the IFIs’ technical advice, structural reforms, and targeted assistance. The Atlantic Council’s report shows that, in Albania and Vietnam, IFI-supported increases in national income per capita were accompanied by improvements in health outcomes, education, and life expectancy. Transportation infrastructure and public utilities modernized.  

With economic reforms based on best practices, solid institutions replace centralized control with a system based on free markets, competition, and transparency. The benefits go not only to large foreign investors but also to small businesses, farmers, employees, and consumers. The wider the benefits of reform are spread, the more popular they will be; once in place, reversal will be increasingly difficult. 

Obama can endorse greater IFI support for Cuba, giving these institutions leeway to begin with non-lending confidence-building measures and technical missions. US law today has mechanisms that require it to withdraw funds from the IFIs if these institutions grant assistance to Cuba. This understandably makes these institutions skittish about assisting Cuba. While changes in US law may not be politically viable, Obama should consider negotiating a two-year “truce” with Congress whereby Congress agrees to allow the IFIs to offer technical assistance and best practice missions to support Cuban economic reforms without withdrawing funds from these institutions.  

While the U.S. does its part, so must Cuba. So far, Cuba has not shown any interest in seeking out this assistance.  With embassies now re-opened, Washington – and the institutions headquartered there – is no longer be synonymous with the enemy camp. Cuba must look for help and the United States should encourage it.  

It would be wonderful if Cuba’s system changed overnight, allowing political and economic freedoms to flourish.  Chances are that won’t happen.  Therefore, as we do with Vietnam, we must both defend human rights and do everything possible to open the island’s economy to allow Cuba’s entrepreneurial people to forge their own economic destinies.  The visit of Vietnam’s premiere earlier this month was a clear example that a former enemy’s economic transition now contributes to a profound friendship.   

Opportunity from a more open economy, access to capital, and greater foreign investment will facilitate economic freedoms for Cuba’s citizens. Obama can implement policies that do exactly that.

Schechter and DeLevie-Orey are respectively director and assistant director of the Atlantic Council’s Adrienne Arsht Latin America Center.