The Economist explains

Why the United States and Cuba are cosying up

By H.T.

Update, July 1st 2015: This morning Barack Obama will announce the restoration of diplomatic ties between Cuba and America. They were severed in 1960, when the United States banned exports to Fidel Castro’s young regime and he turned to the Soviet Union for support. The two embassies will probably be reopened within weeks. America’s trade embargo will last a while longer however; ending it requires help from Congress.

ON MAY 29th America took a further step in healing the wounds of the cold war. The Obama administration officially removed Cuba from a list of rogue regimes that it designates as state-sponsors of terrorism (a list that now includes only Iran, Sudan and Syria). The move, which President Barack Obama initiated on April 14th after a historic meeting with his Cuban counterpart, Raúl Castro, in Panama City, required a 45-day Congressional notification period. Though the State Department said it still had “significant concerns and disagreements with a wide range of Cuba’s policies and actions”, these did not prevent it from removing Cuba from the list. As a result, Cuba will now be free of a series of financial and other sanctions that it says have seriously disrupted its diplomatic activities, including paying salaries to its envoys in Washington. But America’s trade embargo against Cuba remains in place, and talks on reopening embassies in each others’ countries to progress slowly. Given the difficulties, why are both leaders so keen to bury the hatchet?

For Mr Obama, the reasons are more obvious. America’s long-standing attempt to isolate Cuba both commercially and diplomatically has been an utter failure. It has failed to dislodge the Castros, hurt the Cuban people, and stoked anti-Americanism in the rest of Latin America. Those who most vociferously back the trade blockade are Cuban-Americans of a similar generation to the Castros who have now become a grumpy minority. Polls indicate that the majority of Cuban-Americans younger than 65 not only support Mr Obama’s efforts to improve relations, but also want to end the embargo. That suggests that the president’s outreach to Cuba may partly be a way of repaying young Hispanic Democrats who helped bring him to power. It also improves America’s stature across Latin America. It helps the Obama administration recuperate influence lost to the late Hugo Chávez before he died and left Venezuela’s socialist economy in a tailspin, unable to bankroll his so-called Bolivarian Revolution across parts of the hemisphere.

It may be no coincidence that secret talks between Cuba and America began shortly after Mr Chávez’s death in 2013, because that is the best explanation for Mr Castro’s embrace of detente: he needed a new benefactor. Following the plunge in oil prices, Venezuela’s shipments of subsidised oil to Cuba have dropped, meaning that the island has to find more hard currency: and American visitors, who are now able to travel to Cuba with greater freedom thanks to Mr Obama’s policies, are the most promising source. Mr Castro also needs a bone to throw to his own people, who have seen meagre economic growth despite reforms that he introduced to allow some private enterprise when he officially took over from his brother in 2008. In a sign of rising optimism, the number of American flags hanging outside Cuban homes has increased since December. There are anecdotal reports that some Cuban couples have stopped using condoms because they now feel confident enough to have children.

There’s the rub for Mr Castro, though. A thaw with America has raised expectations among the Cuban people that will be hard to satisfy unless he loosens the system of command and control that the regime has built. Already American businesses such as Airbnb, the lodging website; Netflix, the internet entertainment provider; and IDT International, a mobile-phone company, have used the new rules to launch businesses in Cuba that bypass state monopolies. Mr Obama has cleverly sought to craft the new rules so that they support the 400,000 people working in small restaurants, guesthouses and other service companies set up by private individuals in Cuba. Wary of what this economic liberalisation will mean for his regime, Mr Castro is first focusing on diplomatic issues. If it comes to lifting the embargo altogether, he may worry that the resulting wave of trade and investment would sweep him and his ruling clique out of power once and for all.

Dig deeper:
Despite the thaw with America Cuba's economy is struggling (May 2015)
American business is eager to cross the Florida Strait (April 2015)

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