If Cuba’s promised economic reforms prove genuine, the United States ought to stand aside.
Here’s a line that few expected to see: Havana is recognizing the value of markets and private enterprise. Earlier this month, the state-controlled daily Granma published 176 reform measures that would permit private banking, private ownership of businesses, private ownership of real estate, and the privatization of state-owned enterprises. This marks an acknowledgment that Fidel Castro’s socialist experiments of the 1960s did not achieve their goals.
“Cuba must not repeat the mistakes of the past, and must not depend, in economic matters, on any single product or any single country. Our country must seek an economic development path where we must inevitably diversify our economy, diversify the way we do business, and the way we project investments,” said Raul Guillermo Rodriguez Castro, Fidel Castro’s great-nephew, to The National, a publication with close ties to the United Arab Emirates government.
Yet the Trump administration moved almost at once to undermine these reforms, imposing fresh sanctions that a University of Miami professor told the Associated Press would “dampen the enthusiasm of foreign investors already in place.” The U.S. State Department condemned Cuba’s reforms as “superficial smoke signals from the Cuban regime.” That stance is self-fulfilling: frightening away foreign capital makes it harder for reforms to take root.
Whether the regime leans toward communism or capitalism, Cuba has always depended on foreign trade partners to survive as a small, resource-poor island. After the revolution of 1959 brought Cuba into conflict with the United States, the Soviet Union stepped in to substitute American trade. Castro promptly nationalized enterprises, established one-party rule of a Soviet stripe, and rebuilt the economy around heavily subsidized trade with the rest of the Soviet bloc.
When the Soviet Union collapsed, Cuba endured a “special period” of acute crisis. While other communist states—China and Vietnam, for instance—moved toward market-oriented reforms, Cubans faced widespread scarcities, even resorting to riding horses when buses ran out of fuel. Washington also purposefully impeded any Cuban opening toward the broader economy. Expecting the Castro government to topple soon, Congress passed a sequence of ever-tighter sanctions aimed at accelerating that collapse, including measures designed to deter private foreign investment in Cuba.
Instead, the Cuban state persisted, and the population endured decades of hardship. In the early 2000s, a new socialist government in oil-rich Venezuela partially replaced Soviet subsidies—until Venezuela’s own economy imploded. Cuba began opening tourism to private enterprise, and President Barack Obama sought to normalize relations, inviting a flood of American visitors and the services that support them. The first Trump administration reversed this opening with fresh sanctions. The coronavirus pandemic then delivered another severe blow to the economy, and Cuba began to witness regular anti-government demonstrations for the first time in years.
The new Cuban reforms are more expansive than anything proposed during the Obama thaw, and their success hinges on access to international markets. Trump had a chance to be the president who reopened Cuba. Yet his heavy-handed approach, aimed at exerting control or exacting vengeance, risks turning a measured transition into chaos.
The misstep during Sudan’s 2019 pro-democracy uprising offers a cautionary tale. The ensuing transitional government needed relief from U.S. sanctions to participate in the global financial system, but Washington demanded a steep price: $335 million in compensation for the old Sudanese government’s ties to Al Qaeda. A year after that payment, Sudan was jolted by a military coup and has since endured one of Africa’s most brutal conflicts. While sanctions were not the sole cause, they added a heavy burden to an already fragile society.
Similar reasoning underpins U.S. grievance against Cuba. In retaliation for the Brothers to the Rescue shootdown, Congress enacted the Helms-Burton Act of 1996, which grants American citizens the right to sue over properties seized during the Cuban revolution. Although U.S. courts could not enforce judgments against the Cuban military, they could punish foreign companies that used American property, turning Helms-Burton into a de facto sanction against private investment.
The Clinton administration paused enforcement of Helms-Burton largely due to pushback from European firms eager to invest in Cuba, but the first Trump administration reopened the law, enabling a roughly $400 million lawsuit against cruise line operators who had carried Americans to Cuba during the Obama thaw. A law aimed at ending communism could, ironically, doom any privatization drive to endless litigation.
While the second Trump administration has shown more flexibility in forgiving past misdeeds, it has also seemed to abandon faith in free markets in favor of direct U.S. dominance over other nations’ economies. After ousting Nicolás Maduro in Venezuela, the administration kept the socialist regime in place but assumed control of the Venezuelan oil sector, consigning the revenue to a perplexing Qatari escrow account. It handed oil to two firms with a history of corrupt contracts. It would be ironic if, after denouncing the Cuban military’s control of the economy, the Trump team ends up elevating it as a favored intermediary for American interests.
And there is always the real danger that Trump could choose to invade Cuba. The appeal is clear: a military strike would permit the United States to exact vengeance and to secure leverage. In an interview with Axios last week, Trump hinted at something akin to the Venezuela episode; and history shows similar thinking when it came to Iran before a costly, inconclusive engagement unfolded.
Perhaps the wisest path is for Washington to step aside. There is no obligation to condition the relationship on Cuba’s humiliation or submission, to back a particular faction within the Communist Party, or to escalate into violent conflict—and with that, substantial downside risk. Instead, the Trump administration could grant the sanctions waivers needed for private investors to capitalize on the reforms as they unfold.
If the reforms are genuine, as the Cuban government asserts, then private sector participation will be difficult to reverse without eroding the benefits. If the reforms are hollow, as the Trump camp contends, private investment will fail to gain traction in the first place. Ultimately, the market will prove more insightful than any bureaucrat on either side.
