In December President Obama announced that the U.S. would begin to ease their trade restrictions with Cuba, possibly heralding an end to an embargo that has been in place since the Cold War. The announcement stirred up excitement for businesses and consumers here in the U.S. - would the embargo lift make it easier and cheaper to purchase Cuban goods, such as cigars and rum?
The announcement made by the president in December of last year was arranged with Cuba as part of a deal to release an American prisoner named Alan Gross. The president also said the deal was intended to end an outdated approach to trade that didn't give Cubans and Americans the opportunities they deserved. Travel is now possible between the countries, with Americans allowed to visit Cuba for school, business, or creative purposes. Banking between the two countries is now allowed as well.
Companies that would especially benefit from the lifting of the trade embargo are especially excited about the news. Cruise lines and shipping companies are gearing up for the big changes that are on the way. Other American companies that produce products for everyday use are likely to benefit as well.
Changes for Cubans include being able to send and receive money from relatives in the U.S., as well as better telecommunications on the island. Also Cuban specialty goods, like rum, clothing, and cigars, could be exported from the country.
How much of an effect would the lifting of the embargo have on Cuba's cigar and rum business? It may not as dramatic and sudden as you think. Many tobacco experts agree that the president's announcement is great news for cigar aficionados.
It would allow travelers from the U.S. to bring home up to $100 worth of cigars. But a big part of the reason why Americans and others have coveted the Cuban cigar is because of their restricted access. It turns out that the mystique surrounding the Cuban cigar is a big part of why it sells.
Something that many American cigar enthusiasts don't know is that most Cuban cigars are made from tobacco not grown on the island. Because tobacco growers were exiled by Fidel Castro in the early 1960's, many of them ended up moving their operations to the nearby Dominican Republic.
These growers kept their trademark while growing their tobacco in a different country. This means that cigars that are made from tobacco grown in both Cuba and the Dominican republic are sold under the same brand name.
An embargo lift may hurt the producers of quality cigars in other countries, such as the Dominican Republic, Honduras, Ecuador, and Mexico because Americans would be scrambling to buy Cubans. Tobacco experts say this rush to buy Cubans would likely only be a temporary thing.
The lift on the embargo would have benefits for the economies of both countries. U.S. economists estimate that $1.2 billion in sales are lost every year because of it, and the Cuban economy misses out on $685 million a year.
The embargo began in 1960 by the U.S. shortly after Fidel Castro took dictatorial control over the island. Trade and diplomatic relations between the countries has remained tight ever since. The Cuban people have suffered because of the lack of trade and exposure to other cultures besides the one imposed on them by Castro's regime. President Obama made the announcement in December 2014, but cannot get the embargo lifted without Congress on board with the decision.