New Cuba regulations provide more ‘wiggle room’ for U.S. businesses

New Cuba regulations provide more 'wiggle room' for U.S. businesses

Credit provision may prompt some businesses to get off the fence on Cuba
Rules could benefit Cuba's growing private sector
Banks waiting to see how business develops
BY MIMI WHITEFIELD
mwhitefield@miamiherald.com

Within hours on Tuesday after the Obama administration announced new
Cuban regulations that allow financing of authorized exports to the
island and more exceptions to the embargo, Miami lawyer Andy Fernandez
began fielding calls from clients interested in dusting off their Cuba
plans.

Some of them had been sitting on the fence as they learned of the
challenges in trying to do business in Cuba, said Fernandez, who has
been helping banks and companies with development of Cuba strategies in
the year since the U.S. and Cuba began normalizing relations. "On the
export side, the financing restriction was a big challenge for my
clients," he said.

Previous cash-in-advance requirements had been an issue for those
interested in selling to Cuba's fledgling private sector. "This will
likely assist in opening up commerce," said Fernandez, the leader of
Holland & Knight's Cuba Action Team. "Folks are a little more encouraged
now that there are fewer bumps in the road from our side. It's fair to
say this now puts the ball in Cuba's court."

The new regulations, which went into effect Wednesday, not only allow
financing of authorized exports but also expand the types of exports
that will generally be approved as well as those that may be sent to the
island on a case-by-case basis if Treasury's Office of Foreign Assets
Control determines such products meet "the needs of the Cuban people."

Goods in that latter category may be exported to state-owned enterprises
and agencies if the ultimate user of the goods and services is the Cuban
people. However, U.S. officials said enterprises that primarily generate
revenue for the state, and products destined for the Cuban military,
police or intelligence and security services would be denied.

In its reporting on the new regulations, Granma, the paper of Cuba's
Communist Party, noted that even though it was a partial recognition and
conditional, it was "the first time that the participation of the Cuban
state has been accepted in this type of negotiations."

Lawyer Saul Cimbler, who has been exploring opportunities for deploying
LED, solar and other energy-efficient technologies in Cuba, said the new
regulations will give him and his partners "more legal authority to go
in." Before, they had been contemplating trying to come in under the
umbrella of construction materials, which are allowed to be exported to
Cuba under a rule change from last year as long as they are used for
private construction.

But the new rules specifically allow U.S. companies to sell energy
production exports to state-owned companies as long as they "provide
goods and services to the Cuban people." That rule change, said Cimbler
"makes it much easier."

The new rules also allow case-by-case licensing of trade to support
education, food processing, disaster preparedness, public health,
sanitation, agricultural production, residential construction, public
transportation, wholesale and retail distribution for consumption by the
Cuban people and to treat public water supplies. Companies interested in
those areas will have to apply for an OFAC license.

"This really escalates the ability of American companies to look at more
possibilities in Cuba," said Cimbler. "There are some real bells and
whistles in this."

The new regulations also could be a boon to Cuba's growing number of
paladares, or private restaurants, that could receive everything from
meat slicers, coffee machines and cooking utensils under the food
processing provision.

Even though previous sets of rule changes allow authorized American
businesses to open and maintain bank accounts in Cuba and U.S. financial
institutions to open correspondent accounts at Cuban banks to handle
processing of authorized transactions, nearly all U.S. banks have
remained on the sidelines.

And despite this week's changes, U.S. banks may continue to sit it out
for the most part, said David Schwartz, chief executive of the Florida
International Bankers Association.

"The administration is looking at anything it can do within the scope of
its authority that won't contravene the embargo," he said. "What we have
[with the new regulations] is some wiggle room for authorized exports.
But we come back to the same issue of the embargo."

There's no urgency "for banks to rush in because this is still limited
in scope," Schwartz said. When there's no longer an embargo, "that's
when you will see banks get excited."

Unless there's a sufficient volume of exports going to Cuba, he said,
"banks aren't going to step in. This is customer driven."

Still, Fernandez said, "banks may be more interested in getting involved
now."

Other changes also will make it easier for Americans to film movies and
television shows in Cuba and organize sports competitions and live
concerts and other performances.

Sara Stephens, executive director of the Center for Democracy in the
Americas, pointed out that a decade ago, the U.S. government banned the
entry of some Cuban artists on the grounds they were security risks.

In contrast, she said, "the Obama administration has not only welcomed
more Cuban artists into the U.S. but with the new regulations is now
ensuring that the cultural bridge that artists build works in both
directions. This means that U.S. musicians, writers, actors and movie
makers will have a much easier time working and performing in Cuba and
engaging with Cubans in the process of creating art."

To that end, Musicabana, the first international music festival produced
by American and Cuban partners in more than 30 years, will take place in
Havana May 5-8. Some 25 bands, artists and global DJs are expected to
take part. The festival will be free for Cubans, and Americans will be
able to attend as long as they fall within the 12 categories of
travelers that the United States allows to visit Cuba.

Source: New Cuba regulations provide more 'wiggle room' for U.S.
businesses | Miami Herald -
http://www.miamiherald.com/news/business/international-business/article56925143.html