CASE : U.S.

-CUBAN TRADE
A COLD WAR STRATEGY BECAME A COLD WAR RELIC? CHAPTER : 7
Subject: international Business Professor: Reshmi Menon Prepared by: Achla Shah Roll No : 62 MBA - Finance

Case Facts:

The U.S. Embargo of Cuba-a resilient foreign trade policy-which encompasses a variety of political leaders, economic events, and historical eras What is the meaning of Embargo? A specific type of quota that prohibits all forms of trade Embargoes can be placed on either imports or exports, on whole categories of products regardless of origin, on specific products with specific countries or on all products with given countries. It is imposed in an effort to use economic means to achieve political goals.

After the Revolution:

In the 1950, over 2/3 of Cuban foreign trade took place with the U.S. Fidel Castro- prime Minister Of Cuba from 1959-1976 and then president from1976-2008 overthrew Batista government in 1959 Castro is a controversial and highly divisive world figure, being lauded as a champion of anti-imperialism, but alternately his critics have accused him of being a dictator whose authoritarian administration has overseen multiple human rights abuses. Nonetheless, he has had a significant influence on the politics of a number of other world leaders, namely Nelson Mandela, Hugo Chvez and Evo Morales, and he is widely idolized by many leftists, socialists and antiimperialists across the world In turn , U.S. cancelled agreements to buy Cuban sugar Cuba retaliated by seizing U.S. oil Refineries Oil companies refused to supply Cuba with crude oil.

The cold War Sets In: 1962, U.S. initiated the full trade embargo of Cuba. In
In 1963-the treasury Department set regulations-that prohibited all unlicensed financial transactions, - forbade direct or indirect imports from Cuba, - Imposed a total freeze on cuban Govt. Assets held in U.S. In the next several decades various incidents took place which strained their relations Placement and removal of Soviet Missiles in Cuba Exposes that the CIA had tried to airlift someone to assassinate Castro U.S. sponsorship of an invasion by Cuban exiles at the Bay Of Pigs

Enacting the Embargo:

The U.S. Congress passed the Cuban Democracy Act in 1992and Helms-Burton Act in 1996-which has stipulation to penalize foreign companies that did business with Cuba. Also, legal actions against non-U.S. companies using expatriated property in Cuba that U.S. citizens has owned. It forbade normal U.S. relations with any future Cuban Govt. that included Fidel Castro.

Shifting Sympathies:

In 1964,all members of the Organization of American States except Mexico endorsed the embargo. In 1995,the U.S. nations voted 117 to 3 against the U.S. embargo. By 2001, 150 nations had normal trade relations with Cuba. A poll in 2007 showed that 62 percent of American favored establishing diplomatic relations with Cuba. A growing number of leaders in America publically favored normalization of U.S.- Cuban trade.

Pros and Cons Of Doing Business with Cuba:

Pros:

highly qualified workforce near-perfect literacy rate High demand foe foreign products and services Potential markets for U.S. Companies and industries Possibility for tourism Huge agricultural market Potential for business with Cuba- highly limited-low purchasing power of people Need to export enough to pay for imports

Cons:

Questions:
Q.1- Should the U.S. seek to tighten the economic grip on Cuba ? If so, why? Answer- U.S. should not seek to tighten economic grip on Cuba as it is already a weak economy as compared to U.S. due to the political environment of the country for the past few decades. For U.S. industries and companies Cuba is a very potential market. Also the workforce is efficient, so there is a possibility of efficient labor at lower cost for U.S. industries. Also, other countries of the world started favoring Cuba and also doubted the rationale of U.S. on imposing the embargo.

Q.2-Should the U.S. normalize business relations with Cuba? If so, should the U.S. stipulate any conditions? Answer-Yes, the U.S. government should normalize business relations with Cuba. Cuba has attracted large investments from many businesses from other industries largely drawn by its Highly qualified workforce Near-perfect literacy rates Demand for foreign good and services Market potential of Cuba is very high. The most important stipulation should be that any amount of political upheaval should not adversely affect the terms and conditions of trade as agreed upon.

Q.3-Assume,You are Cubas leader. What kind of trade relationship with the U.S. would be in your best interest? Answer-Cuba is largely dependent upon U.S. as it is a very strong economy. In 2006,the U.S. was the fourth largest exporter of agricultural products to Cuba, so we can understand the importance of trade relations between these two countries Also, U.S.s dominance and power over other countries is also very important for Cuba. For employment, growth, prosperity of Cuba, U.S.-Cuban trade relation has to be harmonized. Long term, Sustainable, mutually beneficial for growth such relationship with the U.S. would be in the Best interest of Cuba.

Q.4-how does the structure and relationships of U.S. political system influence the existence and specification of the trade embargo? Answer- U.S. is one of the very powerful world economy. Its trade relations and political relations with other countries is dominated and favored because of its strong position in the world economy. Because of its power position , it implied embargo on Cuba and also obliged other countries to follow the same. The main reason behind imposing embargo was the conflicts of political leaders in the 150s decade. The consequences went on till 2006. wherever U.S. was able to influence directly or indirectly with other countries-it did to prevent from trading with Cuba and to weaken the Cuban economy.

Thank You