Foreign investors, who have operated in Cuba for decades even amid the risks of escalating conflict with the United States, are leaving the country en masse due to mounting pressure from the Donald Trump administration. The influx of investors abroad affected the financial, tourism and mining sectors. The latter may be particularly painful for local authorities, for whom the presence of major foreign industrial giants on the island has been an influx of foreign exchange and business expertise. We retell the key points from the Wall Street Journal’s big article.
Who’s leaving: Payment systems, hotels and mining
The few international companies that until recently continued to operate in Cuba are leaving the country, He writes June 6, The Wall Street Journal. All this exacerbates the local economic crisis and increases the effectiveness of the pressure exerted by the Donald Trump administration on Havana.
- The Central Bank of Cuba announced that as of June 6, transactions using the island’s Visa and MasterCard payment systems will be suspended for all foreigners. Previously, this ban only applied to cards issued in the United States.
- Spanish hotel chains Iberostar and Meliá have abandoned management of at least 12 hotels in Cuba.
- Canadian company Royalton Hotels & Resorts has completely halted its operations in the country after facing a sharp decline in tourist flow.
- Another Canadian company, mining company Sherit International, is also on the verge of leaving Cuba: in May, it suspended operations on the island and evacuated all employees. Meanwhile, Sherit International is one of the major foreign investors in the country. As the Wall Street Journal notes, the Canadian company’s former CEO was once called Fidel Castro’s “favorite capitalist.”
- The publication notes that even earlier, many major foreign airlines stopped flying to Cuba due to a shortage of jet fuel.
In recent years, foreign investors, especially in the tourism and mining sectors, have continued to operate in Cuba despite the risks of escalating relations between local authorities and the White House. Corporations provided the island with currency and trading expertise. But increasing pressure from the Trump administration has become a major threat to them as well.
As Ricardo Torres, an economist at American University in Washington, put it in a commentary for the Wall Street Journal, “This is a turning point — a serious blow to an already weak economy.”
Why they are leaving: Increased sanctions risk due to Trump’s decree
The departure of Sherret International may be particularly painful for Cuba. The Canadian company has extracted tens of thousands of tons of nickel and cobalt from the Moa mine in the east of the island for more than three decades and “basically trained a whole bunch of Cuban entrepreneurs” in how modern business works, says former Canadian ambassador to Cuba Mark Entwistle. A few months ago, Sherritt International was discussing plans to expand production, and its CEO, Peter Hancock, noted that developing “in conditions of uncertainty is nothing new.”
But now the uncertainty is too great. The company’s shares fell by more than 50% amid the latest news.
Spain’s Melia explained that 15 of its hotels were closed due to circumstances beyond the chain’s control. Most of the facilities have been closed recently “due to power supply problems and low demand.” Iberostar said it would cease operating 12 hotels “as part of efforts to adapt to the international regulatory environment.”
The exodus of investors was probably set to take place in the first place by May decree Trump is against the Cuban military-owned conglomerate GAESA, which Secretary of State Marco Rubio has described as “the heart of the kleptocratic communist regime.” The White House estimates that GAESA controls at least 40% of the island’s economy, including hotels operated in partnership with foreign companies.
Sanctions were also imposed under the decree on the Moa Nickel Project, a joint venture between Sherritt International and the Cuban state-owned nickel company. The United States claims that this joint project also helps support local authorities.
The decree effectively forced investors to choose between continuing to do business with entities linked to the Cuban state or risking secondary restrictions.
Otherwise, how does Washington put pressure on Havana?
The White House is launching a massive campaign of pressure on the Cuban authorities. In May, the United States charged former Cuban President Raul Castro with murder in connection with the military’s downing of civilian aircraft in the 1990s.
On June 4, Washington imposed sanctions on current President Miguel Díaz-Canel, members of his family, Castro’s son and grandson, as well as a number of Cuban organizations.
The island’s economy was already stagnant. But the situation worsened when the Trump administration imposed an oil blockade following the January arrest of Venezuelan leader Nicolas Maduro, whose government has long supported oil supplies to Havana.
Without this resource, public transportation on the island began to operate intermittently, farmers had difficulty getting their produce to market, and residents faced regular power outages. In addition, the Cuban peso exchange rate collapsed further.
The exodus of foreign investors, on top of all these problems, “is what you would call a double whammy,” said Ted Henken, a Cuba expert at Baruch College. “It’s been a gradual but merciless strangulation by the Trump administration.”