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CASE : U.S.-CUBAN TRADEA COLD WAR STRATEGY BECAME A

COLD WAR RELIC?

CHAPTER : 7

Subject: international BusinessProfessor: Reshmi Menon

Prepared by: Achla Shah

Roll No : 62

MBA - Finance

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Case Facts:

The U.S. Embargo of Cuba-a resilient foreign

trade policy-which encompasses a variety ofpolitical leaders, economic events, and historicaleras

What is the meaning ofEmbargo?

- A specific type of quota that prohibits all forms oftrade

- Embargoes can be placed on either imports orexports, on whole categories of productsregardless of origin, on specific products withspecific countries or on all products with givencountries.

- It is imposed in an effort to use economic meansto achieve political goals.

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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 governmentin 1959

Castro is a controversial and highly divisive world figure, beinglauded as a champion of anti-imperialism, but alternately hiscritics have accused him of being a dictator whoseauthoritarian administration has overseen multiple humanrights abuses. Nonetheless, he has had a significant influenceon the politics of a number of other world leaders,namely Nelson Mandela, Hugo Chvez and Evo Morales, andhe is widely idolized by many leftists, socialists and anti-imperialists 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.

http://en.wikipedia.org/wiki/Nelson_Mandelahttp://en.wikipedia.org/wiki/Hugo_Ch%C3%A1vezhttp://en.wikipedia.org/wiki/Evo_Moraleshttp://en.wikipedia.org/wiki/Evo_Moraleshttp://en.wikipedia.org/wiki/Evo_Moraleshttp://en.wikipedia.org/wiki/Evo_Moraleshttp://en.wikipedia.org/wiki/Hugo_Ch%C3%A1vezhttp://en.wikipedia.org/wiki/Hugo_Ch%C3%A1vezhttp://en.wikipedia.org/wiki/Nelson_Mandela

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The cold War Sets

In: In 1962, U.S. initiated the full trade embargo of Cuba.

In 1963-the treasury Department setregulations-thatprohibited 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 toassassinate Castro

U.S. sponsorship of an invasion by Cuban exiles at theBay Of Pigs

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Enacting the

Embargo:

The U.S. Congress passed the Cuban Democracy Act in1992and 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 usingexpatriated property in Cuba that U.S. citizens has

owned.

It forbade normal U.S. relations with any future Cuban

Govt. that included Fidel Castro.

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Shifting

Sympathies:

In 1964,all members of the Organization of AmericanStates 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 withCuba.

A poll in 2007 showed that 62 percent of American

favored establishing diplomatic relations with Cuba.

A growing number of leaders in America publicallyfavored normalization of U.S.- Cuban trade.

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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

Cons:

Potential for business with Cuba- highly limited-lowpurchasing power of people

Need to export enough to pay for imports

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Questions:

Q.1- Shou ld the U.S. seek to tighten the econom ic g ripon 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.

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Q.2-Shou ld the U.S. no rmal ize business relat ions w ith

Cuba? If so , shou ld the U.S. st ip ulate any cond it ions?

Answer-Yes, the U.S. government should normalizebusiness 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.

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Q.3-Assume,You are Cubas leader. What kind of trade

relat ionship with the U.S. would be in your b est

interest?

Answer-Cuba is largely dependent upon U.S. as it is avery 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 twocountries

Also, U.S.s dominance and power over other countries

is also very important for Cuba.

For employment, growth, prosperity of Cuba, U.S.-Cubantrade 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.

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Q.4-how does the stru ctu re and relat ionsh ips o f U.S.

po l i t ica l system inf lu ence theexistenceand

speci f ication of the trade embargo?Answer- U.S. is one of the very powerful world economy.

Its trade relations and political relations with othercountries is dominated and favored because of its strongposition in the world economy.

Because of its power position , it implied embargo on

Cuba and also obliged other countries to follow thesame.

The main reason behind imposing embargo was theconflicts 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 withCuba and to weaken the Cuban economy.

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Thank You