Cuba:

U.S. Policy Changes Increased Engagement with Private Sector, but Agency Information Collection Is Limited

GAO-17-201: Published: Dec 15, 2016. Publicly Released: Jan 17, 2017.

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Contact:

David B. Gootnick
(202) 512-3149
gootnickd@gao.gov

 

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youngc1@gao.gov

View Spanish version of Highlights (PDF, 1 page).

In 2014, the President announced a shift in U.S. policy toward Cuba—restoring diplomatic relations, modifying the long-standing economic embargo, and increasing support for the Cuban people, including the nascent private sector.

Along with the import of cigars and rum, new U.S. regulations have fostered some travel and commerce with Cuba—but the embargo and Cuban government barriers still limit economic engagement.

Federal agencies have begun to engage with U.S. businesses and Cuban entrepreneurs, but with uncertain results.

We recommended agencies start collecting information necessary to monitor the economic impacts of the policy change.

Private Taxi in Havana, Cuba

Photo of a 1950s style car on a road. Graffiti and monument in the background.

Photo of a 1950s style car on a road. Graffiti and monument in the background.

Additional Materials:

Contact:

David B. Gootnick
(202) 512-3149
gootnickd@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

View Spanish version of Highlights (PDF, 1 page).

What GAO Found

The Cuban private sector has grown rapidly since 2008 but remains small compared with other economies and faces various constraints. The Cuban private sector includes (1) self-employed entrepreneurs, (2) agricultural cooperatives and other private farmers, and (3) nonagricultural cooperatives. Cuban government data indicate that the percentage of the Cuban workforce in the private sector has grown from 17 percent in 2008 to 29 percent in 2015. However, the Cuban private sector is smaller than in 16 comparable countries GAO analyzed. It is also still highly constrained by the Cuban government and faces challenges, including a lack of access to needed supplies and equipment.

Examples of a Cuban Private Sector Restaurant, Bookseller, and Auto Repair Shop

Examples of a Cuban Private Sector Restaurant, Bookseller, and Auto Repair Shop U.S. regulatory changes have created some new opportunities in Cuba, but economic engagement is still limited. The U.S. government has made six sets of regulatory changes since December 2014 to ease restrictions on travel, remittances, financial services, and trade with Cuba. For example, the Department of Commerce created a new export license exemption to facilitate U.S. exports that support the Cuban people, including the private sector. The regulatory changes have generated U.S. business interest; however, relatively few commercial deals have been completed. In addition, U.S. trade with Cuba has decreased, driven by declining agricultural exports, which have been legal since 2000. Changes in remittance and travel regulations are expected to benefit the Cuban private sector through increased capital and purchases from U.S. visitors. Although the regulatory changes have created some new opportunities for U.S. businesses and the Cuban private sector, embargo restrictions and Cuban government barriers continue to limit U.S.-Cuba economic engagement.

U.S. agencies have conducted a range of activities to support U.S. policy changes; however, embargo restrictions, resource constraints, and Cuban government priorities affect their ability to support U.S. businesses or engage the Cuban private sector. Within these limitations, the Department of State (State) and other U.S. agencies have engaged with the Cuban government, U.S. businesses, and the Cuban private sector. Among other things, they have established memoranda of understanding with the Cuban government, hosted events with Cuban entrepreneurs, and promoted training opportunities. However, U.S. agencies have not collected and documented key information on the Cuban economy, the effects of regulatory changes, and agency activities, in accordance with federal standards for internal control. Without collecting and documenting information, agencies risk being unable to monitor and assess changes over time in economic engagement with Cuba, including with the private sector.

Why GAO Did This Study

In the more than 50 years since it established an embargo on Cuba, the U.S. government has pursued a policy designed to isolate Cuba's communist regime. In December 2014, the President announced a significant change in U.S. policy. Since then, the U.S. government has restored diplomatic relations with Cuba and modified some aspects of the U.S. embargo. The Cuban government has also implemented economic reforms in recent years to allow for certain private sector activity. While much of Cuba's economy is still state-controlled and the U.S. embargo on Cuba remains in place, developments in recent years have created new opportunities for U.S. economic engagement with Cuba.

This report examines what is known about (1) the size and scope of the Cuban private sector, (2) the effect of changes to U.S. legal and regulatory restrictions on the Cuban private sector and U.S. businesses, and (3) the extent to which the U.S. government has planned and implemented activities to increase U.S. engagement with the Cuban private sector and expand U.S. economic opportunities in Cuba. GAO analyzed U.S. government and other assessments of the Cuban private sector, analyzed Cuban government data, interviewed U.S. federal and nonfederal Cuba experts, and conducted fieldwork in Cuba.

What GAO Recommends

GAO recommends that State, in consultation with key agencies, take steps to identify and collect information to monitor changes in economic engagement resulting from the shift in U.S. policy. State concurred with the recommendation.

For more information, contact David B. Gootnick at (202) 512-3149 or gootnickd@gao.gov.

Recommendation for Executive Action

  1. Status: Open

    Comments: State concurred with this recommendation. As of April 2017, State reported that it is taking steps to identify and collect information that would enable it to monitor the Cuban economy and changes in the economic environment, including with the Cuban private sector. For example, State noted that Embassy Havana has developed a plan for in-country travel and reporting by identifying key sectors and provinces that can provide additional insights on the Cuban economy. GAO will continue to monitor State's efforts to implement this recommendation.

    Recommendation: To ensure that all relevant U.S. agencies have information on the effect of changes in U.S. policy related to Cuba, the Secretary of State, in consultation with the Department of Commerce, Department of the Treasury, U.S. Department of Agriculture, and other relevant agencies, should take steps to identify and begin to collect the information that would allow them to monitor changes in economic engagement, including with the Cuban private sector.

    Agency Affected: Department of State

 

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