U.S. loosens embargo on Cuba, making trade and travel easier

An American classic car passes next to the building of the US Interests Section in Havana, Cuba, Wednesday, Dec. 17, 2014. (AP / Desmond Boylan)

WASHINGTON -- The Obama administration is putting a large dent in the U.S. embargo against Cuba as of Friday, significantly loosening restrictions on American trade and investment.

The new rules also open up the communist island to greater American travel and allow U.S. citizens to start bringing home small amounts of Cuban cigars after more than a half-century ban.

Thursday's announcement of new Treasury and Commerce Department regulations are the next step in President Barack Obama's plan to re-establish diplomatic relations with Cuba. They come three days after U.S. officials confirmed the release of 53 political prisoners Cuba had promised to free.

Only Congress can end the five-decade embargo. But the measures give permission for Americans to use credit cards in Cuba and U.S. companies to export telephone, computer and Internet technologies. Investments in some small business are permitted. General tourist travel is still prohibited, but Americans authorized to visit Cuba need no longer apply for special licenses.

Obama announced last month that he would soften the embargo and begin restoring diplomatic ties with Havana, saying "these 50 years have shown that isolation has not worked." The deal was the product of 18 months of secret talks that culminated in the exchange of imprisoned spies and release of Alan Gross, a U.S. government contractor who had been imprisoned in Cuba for five years.

The few U.S. companies facilitating travel to Cuba say inquiries have exploded since December. American visits could triple this year, from about 90,000 annually. "We're hiring more people, we've secured more hotel rooms and assets in Cuba to provide additional travel," said Tom Popper, president of New York-based insightCuba.

With the new regulations public, the focus shifts to American businesses and the Cuban government. Some changes could take months as U.S. firms analyze the risks and benefits of moving into a complicated new market. And the Cuban government has said nothing publicly about how it will regulate new trade with the United States. Foreign companies currently deal almost entirely with state-owned firms that are notoriously slow, inefficient and short on cash.

Cuba will likely be more open to a surge in new travellers than to other potential effects of the loosened rules.

But Cuban hotels generally fall short of international standards and those with better food and service are almost always fully booked during the winter high season.

"This is good news, but we're lacking infrastructure in hotels and in administration," said Maikel Gonzalez, a 34-year-old hotel receptionist. "American tourists are really demanding. How do I explain to one that the taxi didn't come because it doesn't have tires or that there's no water in the rooms?"

Individual Cubans can legally rent out their homes or apartments-- a potential source of thousands of rooms for travellers and a flood of funding for private citizens that would be largely outside state control.

Also casting a shadow on potential deals is the possibility of litigation by Cuban-Americans and U.S. firms whose property was confiscated in Fidel Castro's 1959 revolution and may try to sue companies entering into business with the Cuban government. In Washington, Congress may also seek to erect barriers to new investment.

The sudden rapprochement between Cold War foes has divided U.S. lawmakers. Republican Marco Rubio of Florida and Democrat Bob Menendez of New Jersey, both Cuban-Americans, have been particularly opposed.

But some pro-business types have welcomed the opportunity to open up a new export market in a country 90 miles from Florida. Thomas Donohue, the head of the U.S. Chamber of Commerce, for example, said Wednesday it was better for the U.S. to sell computers, smartphones and cars to Cuba than to cede such business to countries like Russia and China. Still, the embargo as a whole appears unlikely to fall anytime soon.

Starting Friday, U.S. companies will be able to export mobile phones, televisions, memory devices, recording devices, computers and software to a country with notoriously poor Internet and telecommunications infrastructure. Internet-based communications will fall under a general license. The new rules "immediately enable the American people to provide more resources to empower the Cuban population to become less dependent upon the state-driven economy," White House spokesman Josh Earnest said Thursday.

With hundreds of thousands of Cuban-Americans visiting family each year, Cuba is already awash in American products brought in people's luggage, including iPhones and flat-screen TVs. The main barriers to Internet access are high prices and restrictions imposed by a government desperate for hard currency and worried about allowing citizens unrestricted communications among themselves and with the outside world.

Americans permitted to travel to Cuba for family visits, official U.S. government business, journalism, research, education, religious activity and other reasons now fall under a U.S. general license and don't need to apply for a separate license. A limit on remittance payments to family members in Cuba will be raised to $8,000 per year, from $2,000. Americans visiting Cuba will be allowed to bring home $100 in alcohol and tobacco products, and $400 in total goods.

The U.S. is now "one step closer to replacing out of date policies," Treasury Secretary Jacob Lew said Thursday.