Have a cigar - Cuba and Europe to write a business plan

Have a cigar: Cuba and Europe to write a business plan
BY ROBIN EMMOTT
BRUSSELS Thu Feb 20, 2014 1:25am EST

(Reuters) - Eleven months before Barack Obama's historic handshake with
Raul Castro, Europe staged its own show of friendliness with Cuba. While
little noticed, this gesture may end up doing far more to end the
communist island's isolation.

It all happened one hot January day last year at an EU-Latin America
summit in Chile. Castro cheerily waved alongside European Commission
President Jose Manuel Barroso for the official group picture and then,
as the photo gathering broke up, German Chancellor Angela Merkel shook
his hand.

This was low key compared with when the U.S. and Cuban presidents
greeted each other on December 10 after half a century of hostility. But
all this warmth at Nelson Mandela's memorial service in South Africa has
brought no radical change and the U.S. trade embargo on Cuba, imposed in
1962, remains.

By contrast, the European Union decided last week to seek negotiations
with Havana on increasing trade, investment and dialogue. This will mark
their closest contacts after years of tension about Cuba's human rights
record, over which the EU imposed its own sanctions until 2008.

While any accord will be modest, Havana said it would consider the EU
invitation to talks constructively. Castro needs trading partners as he
tries to ensure the survival of the Cuban revolution, which his brother
Fidel led, through a transition from hardline communism to a more
pragmatic model.

The gesture from Merkel, who grew up in the now defunct East Germany,
was all the more notable as her country - along with fellow EU members
Poland and the Czech Republic - has been reluctant to deal closely with
Cuba, partly out of a lingering distaste for its own communist past.

Gianni Pittella, vice-president of the European Parliament who attended
the Santiago summit, said the decision to seek negotiations with Cuba
had been a long process that gathered pace in Chile. Europe's strategy
is to encourage change.

"Besides trade and investment, I hope it will be possible to begin a
structured dialogue with Cuban civil society and with those who support
a peaceful transition on the island," said Pittella, who also awarded
the EU's human rights prize to Cuban dissident Guillermo Farinas last year.

The proposed accord, said EU officials, would give Brussels a bigger
role in Havana's market-oriented reforms, position EU companies for
Cuba's transition to a more open economy and allow the Europe to press
for political freedoms on the island.

CARIBBEAN CAPITALISM

The EU is already Cuba's top foreign investor but divisions after the
summit nearly ended the overtures before they had scarcely begun.

After the EU's foreign policy chief Catherine Ashton returned from
Chile, the draft accord with Havana languished in the European Council's
red marble building in Brussels for months, unable to gain the support
of all 28 EU members.

Apart from the governments in Berlin, Warsaw and Prague, Sweden also had
misgivings about what they regard as Havana's repression of political
dissent.

"Four countries felt it was not yet the time," said one EU official who
declined to be named. "In the end, the majority was able to convince
them that negotiating with Cuba would be a more effective way of
bringing change."

What helped to change minds was Cuba's progress in implementing its
five-year plan since 2011 which has relaxed the state's grip on the
economy. This has been accompanied by a relaxation of curbs on foreign
travel and Internet use, as well as a fall in numbers of political
prisoners.

An accord with Cuba, which could be agreed by late next year, had been
the EU's goal since 1996, although what Brussels is offering is modest
for now and is only a starting point.

The EU believes Cuba has the potential to become a dynamic economy like
the Dominican Republic, another Caribbean island nation which once
depended on sugar exports. It has diversified into manufacturing via
free-trade zones that attract investors.

Cuba's problem is that aside from nickel, cigars and rum, it sells
little to the outside world. Exports to the EU were worth just 739
million euros ($1 billion) in 2012, barely up from a decade ago.

Still, there are niches to be exploited. Seafood exports have doubled
over the past decade and Cuba is trying to attract global shippers to
its deep-water Mariel port near Havana.

While it is too early for the EU and Cuba to discuss trade
liberalization, a similar accord with Central American states a decade
ago led to a deal giving them duty-free access to the EU's 500 million
consumers.

PRAGMATISM

Human rights remain the biggest stumbling block. Ties with Cuba were
strained when Europe imposed the sanctions in 2003 in response to the
arrest of 75 dissidents. All were released into exile later but the
Human Rights Watch group says Cuba still punishes dissent with beatings
and threats of long-term imprisonment.

Diplomats say any serious violation of human rights during negotiations
would interrupt the talks.

Poland, the Czech Republic and Germany have insisted the proposed accord
set out steps that Cuba - the Western hemisphere's only one-party state
- must take to encourage democracy. One EU diplomat said the document
contained "our strongest human rights language yet" in EU affairs.

EU negotiators still want to be pragmatic because progress could unravel
if pressure on Havana provokes a backlash, especially in a country where
sovereignty is fiercely defended as a tenet of the 1959 revolution.
Nevertheless, the issue cannot be swept under the carpet.

"There will be some mention of human rights (in the proposed accord).
The Cubans are not going to get away from that," said Paul Hare, a
former British ambassador to Cuba.

If the European Union is being pragmatic, so is Castro.

EU officials read Havana's openness to an accord as recognition by
Castro - who replaced his ailing brother in 2008 - that Cuba cannot
survive forever on its ideological ties with leftist governments in
Venezuela, Bolivia and Ecuador.

Cubans make a similar point. "Cuba is becoming more and more realistic
in searching for economic partners," said Carlos Alzugaray, a former
ambassador to the EU. "Policy will be nuanced by this more pragmatic and
realist approach."

Fidel learnt a harsh lesson about relying on a single ally and donor
when the Soviet Union's collapse in 1991 plunged the Cuban economy into
crisis.

Today, Venezuela is Cuba's biggest trading partner and benefactor but
serious economic and political problems there mean Havana worries about
losing its economic lifeline.

Ties with China are weak, even though both are run by communist parties.
Bilateral trade was just $1.8 billion in 2013, no more than China's
trade with the Dominican Republic - with which Beijing does not even
have diplomatic relations.

"The feeling in Cuba is that they have to diversify their allies," said
another EU official. "After what happened with the Soviets, the Cubans
don't want to be let down again." ($1 = 0.7272 euros)

(Additional reporting by David Adams in Miami, Martin Santa in Brussels
and Ben Blanchard in Beijing; editing by David Stamp)

Source: Have a cigar: Cuba and Europe to write a business plan | Reuters
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http://www.reuters.com/article/2014/02/20/us-eu-cuba-insight-idUSBREA1J0AE20140220