When You're US$70 Billion In Debt... Should You Open An Office In Havana?

The Honorable Alejandro Garcia Padilla (D), Governor of the Commonwealth of Puerto Rico (population 3.5 million), visited the Republic of Cuba to participate (as an observer) in the 4 June 2016 Summit of the Association of Caribbean States (ACS).  Governor Garcia Padilla is the first serving governor of Puerto Rico to visit the Republic of Cuba.

During his visit, the Governor reported that the Commonwealth of Puerto Rico was seeking to establish a representative office in the city of Havana, Republic of Cuba, for the purpose of promoting "trade and cultural exchanges."

The Commonwealth of Puerto Rico exported agricultural commodities, food products and healthcare products to the Republic of Cuba valued at US$1,082,168.00 during the period 2003 through 2014 of which US$1,037,563.00 consisted of healthcare products.  There were no commercial exports in 2015 or thus far in 2016.  During the period 2000 through 2014, product donations from Puerto Rico to the Republic of Cuba were valued at US$1,008,863.00.

The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury "authorizes persons subject to U.S. jurisdiction to may establish and maintain a physical presence in Cuba, such as an office, warehouse, or retail outlet, in Cuba to engage in transactions authorized by or exempt from the CACR in the following categories: entities engaging in non-commercial activities authorized by section 515.574 (Support for the Cuban People); entities engaging in humanitarian projects set forth in section 515.575(b) (Humanitarian projects); private foundations or research or educational institutes engaging in transactions authorized by section 515.576; news bureaus; exporters of certain goods authorized for export or reexport pursuant to 31 CFR §§ 515.533 and 515.559; entities providing mail or parcel transmission services; providers of telecommunications or internet-based services; entities organizing or conducting certain educational activities; religious organizations; and providers of carrier and certain travel services. These persons may employ Cuban nationals in Cuba as well as persons subject to U.S. jurisdiction in Cuba (and such persons may maintain a domicile in Cuba). These persons may open and maintain bank accounts to facilitate authorized transactions. For a complete description of what this general license authorizes and the restrictions that apply, see 31 CFR § 515.573. Persons subject to U.S. jurisdiction that do not meet the terms of the general license may apply to OFAC for a specific license. Such applications will be reviewed on a case- by-case basis.  Additional authorizations from the Cuban government may also be required."

To establish an office in the Republic of Cuba, the Commonwealth of Puerto Rico, which is severely restrained by financial issues (US$70 billion debt; US$2 billion due 1 July 2016; seeking assistance from the United States Congress) could:

1) Rent office space (US$3,000.00 per month), purchase/import a vehicle (US$30,000.00), have a citizen of Puerto Rico reside in Havana (US$60,000.00), lease an apartment (US$2,000.00 per month) hire a Republic of Cuba national as an assistant (US$10,000.00).  The first year cost would be approximately US$160,000.00.

2) Retain (US$3,000.00+ per month) a consultancy/law firm that has a presence within the Republic of Cuba and then have representatives of the Commonwealth of Puerto Rico visit as required (US$10,000.00).  The first year cost would be approximately US$46,000.00.

3) Create a reciprocal agreement with the Chamber of Commerce of the Republic of Cuba whereby it would represent the interests of the Commonwealth of Puerto Rico in the Republic of Cuba and the Commonwealth of Puerto Rico would represent the interests of the Chamber of Commerce in Puerto Rico.  Each party would contribute its staff and invoice the other party for out-of-pocket expenses.  This type of relationship might require a license from the OFAC.