American Cuban Case Study Case Study
Cuban Liberty and Democratic Act (Libertad) is an Act of the United States Congress that was passed and signed into law in March 1996. The bill was aimed at extending sanctions to foreign States and organisations that partner with Cuba. This law affects international trade because it effectively authorises the USA to impose sanctions and stiff penalties on any nation or foreign organization that chooses to trade with Cuba or any Cuban Company. Foreign companies that had invested in both the USA and Cuba found it difficult to do business because of lack of economic freedom. This embargo had a negative effect on American firms especially those who competed with foreign firms from Asian and European markets. This is because the foreign firms took advantage of the investment opportunities created by the exiting of American firms and those of her allies from the Cuban market. Investors from Europe and Asia invested heavily in Cuban tourism and hospitality industry, telecommunication and infrastructure. This gave them a competitive edge over their American rival companies.
The Libertad law allowed the USA to extend sanctions and penalties to foreign firms who continued to trade with Cuba. This resulted in adverse effects on multinational firms across Europe. This prompted the European Commission to enact legislation that protected European companies from Libertad. The European Union filed a petition with the World Trade Organization (WTO) to have Libertad illegalised. The move though not 100% successful, led to a compromised agreement as both the USA and the EU were keen to avoid bitter undiplomatic confrontations. President Bill Clinton directed Congress to delete Title III – PROTECTION OF PROPERTY RIGHTS OF UNITED STATES NATIONALS – While the EU companies were allowed to make limited investments in Cuba without fear of sanctions from the USA.
The biggest loser of this embargo was the Cuban economy. The economy was deprived of foreign investments in key areas such as infrastructure, telecommunication and tourism and hospitality. Cuban citizens also suffered due to lack of vital imports such as food and medicine. The USA multinational companies also lost a competitive edge when their rival firms took advantage of the embargo to invest in Cuba. This was especially after the EU intervened to allow companies from Europe to invest in Cuba. It could therefore be argued that multinational companies from Europe draw benefits from this embargo. The embargo is considered to be a failure from some quarters because despite the sanctions, no changes in legislation and policy have been made by the Cuban authorities. Businessmen and Cuban citizens seem to be the only real victims.
Some of the factors that have led to Cuba’s continued sanctions include lack of a democratically elected government, hostile nationalisation of farming and other firms in the private sector, alignment with the soviet, Cuba’s participation in the Angolan civil war and arresting and detaining opposition politicians without following due process.
Businesses that will mostly be impacted by the lifting of sanctions against Cuba and the restoration diplomatic relations are tourism, hotel and hospitality, foreign exchange, transport and communication, infrastructure development among others.