Cuba sanctions, a new era in the relationship between Cuba and the United States?

We are firmly in Stage 2 of the new era in the relationship between Cuba and the United States. On 16 June 2017, US President Donald Trump finally unveiled his agenda regarding Cuba.

Trump instructed the Treasury to issue regulations that:

  • will end individual people-to-people travel (1); and
  • prohibit economic, commercial and financial transactions between US and local companies linked to the Cuban Armed Forces, the Business Administration Group (GAESA in Spanish) and intelligence, and/or security services.

On 8 November 2017, almost five months after the President’s announcement in June 2, the Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of Commerce's Bureau of Industry and Security (BIS) implemented changes to the Cuba sanctions program, which took effect on 9 November.

In order to ensure that US business do not trade with the Cuban military, the State Department issued a list of Cuban entities and sub entities with which direct transactions will not be authorized (2) with a main impact on the tourism sector since it includes 84 hotels throughout the island, as well as two tourism agencies, five marinas and some companies related with the armed and Cuban military forces.

The new sanctions package, aside from establishing a general rule of denying licenses to export items for use of the entities on the list, enhances travel restrictions to better enforce the statutory ban on United States tourism to Cuba. The new sanctions package keeps US trips to Cuba for personal visits or study reasons, but determines that such trips should be supported by a sponsoring organization. However, for these trips to be authorized, the regulations determine that travellers will have to be accompanied by a person under the jurisdiction of the United States who is a representative of the sponsoring organization.

Individual trips without educational or academic reasons will no longer be authorized. Cuban-Americans will be able to continue to visit their family in Cuba and send them remittances (3).

How do these changes affect companies in the US?

Domestic investment in Cuba, is largely military and state driven and the impact may be greater than it appears. For example in the construction business, Army sponsored real estate group Inmobiliaria Almest in partnership with the local subsidiary of the French construction company Bouygues, has developed almost all of the hotels erected in the past 20 years (4).

Cuba continues to modestly invest in infrastructure and after the development of Mariel Exclusive Zone as discussed in previous articles5 it has now commissioned the expansion of the José Martí International Airport in Havana, the first foreign contract awarded by Cuba in the airport business6.

Moving forward, any US company will have to be authorized by the US Government (OFAC) (7) to trade with companies linked to the Cuban military. Non-US companies, regardless of where they trade from, may be subject to the Helms-Burton Act (8) which extended the territorial application of the initial embargo to apply to foreign companies trading with Cuba, and penalised foreign companies dealing with properties formerly owned by U.S. citizens but confiscated after the Cuban revolution. In other words, international companies trading with Cuba and the US might still needs to tread carefully in order to avoid fines by the latter.

Will there be any changes for the insurance-reinsurance sector?

Cuba, in order to circumvent the US embargo, places all its reinsurance through London market brokers, and the vast majority of reinsurers accepting Cuban risks are European. Every year, ESICUBA (9) (Seguros Internacionales de Cuba S.A.) requests that brokers and reinsurers confirm their legal status regarding their US jurisdiction connections. Cuban authorities take the view that Lloyd´s of London, as a British domiciled entity, is not subject to US regulations and agrees to using Lloyds capacity for the reinsurance of their risks.


The announced changes to curtail the type of local companies that US companies can trade with.

The forthcoming regulations will be prospective and thus, they will not affect authorized transactions under existing specific licenses for travelers nor for those US companies previously approved.

Whilst the category of restrictions appears small, the impact could be countless because the main target is the Cuban military which controls the majority of the local infrastructure that could benefit from foreign investments for much needed upgrades, which would also need reinsurance capacity abroad.

1 Among the 12 categories that currently allow US citizens to travel to Cuba, educational/people to people exchange, which is currently the most-broad group, allowing US citizens to travel the island to interact and engage with the Cuban people.