GLOBAL ECONOMY

Ahead of trip, Obama administration loosens Cuban government's use of dollar, travel

FILE - In this Sept. 29, 2015 file photo, President Barack Obama stands with Cuba's President Raul Castro before a bilateral meeting at the United Nations headquarters. President Barack Obama will use his historic trip to Cuba to chip away at key remaining U.S. obstacles to travel and commerce with the communist island, working to push his rapprochement past the point of no return before he leaves office. (AP Photo/Andrew Harnik, File)

FILE - In this Sept. 29, 2015 file photo, President Barack Obama stands with Cuba's President Raul Castro before a bilateral meeting at the United Nations headquarters. President Barack Obama will use his historic trip to Cuba to chip away at key remaining U.S. obstacles to travel and commerce with the communist island, working to push his rapprochement past the point of no return before he leaves office. (AP Photo/Andrew Harnik, File)  (ap)

Just days before President Barack Obama’s historic trip to Cuba, his administration announced Tuesday it is loosening the communist government’s use of the dollar and further easing travel restrictions to the island.

The new measures allow U.S. banks to process Cuban government transactions that pass even momentarily through the U.S. banking system. A ban on those transactions crippled Cuba's ability to buy and sell goods internationally and became one of Cuba's biggest complains about the U.S. trade embargo.

The new regulations also expand the ability for Cubans legally living in the U.S. to earn salaries beyond living expenses as long as they don't pay special taxes in Cuba, specifically mentioning athletes, artists and performers as potential beneficiaries. Until Tuesday, only Cubans who had begun the process of emigrating to the U.S. could legally earn money in the United States beyond a tiny living stipend.

Major League Baseball is negotiating with both the U.S. and Cuban governments to create a legal means for Cuban baseball players to play in the U.S. without having to abandon their country, eliminating the need for some of the world's highest-priciest baseball talent to use human traffickers to get to the major leagues.

This is the fifth round of measures aimed at punching holes in the embargo on Cuba through executive action while Congress leaves the embargo itself in place.

“Today’s steps build on the actions of the last 15 months as we continue to break down economic barriers, empower the Cuban people and advance their financial freedoms, and chart a new course in U.S.-Cuba relations,” U.S. Treasury Secretary Jacob J. Lew said in a statement.

“Today we are building on this progress by facilitating travel for additional Americans looking to engage with Cubans; allowing Cuban citizens to earn a salary in the United States; and expanding access to the U.S. financial system as well as trade and commercial opportunities.”

The Cuban government made no immediate comment on the measures.

As for ordinary Americans, they can now take "people-to-people" educational trips to Cuba on their own instead of joining expensive group tours. That means any American can legally go to Cuba after filling out a form asserting that their trip is for educational purposes instead of tourism. Although they'll be required to keep records for five years about what they did in Cuba, they won't have to submit them to the government unless asked.

The Obama administration had previously allowed independent travel for specific purposes like supporting religious organizations or participating in sports events. Tuesday's move was expected to have much greater impact because the definition of educational travel is so amorphous that it can include virtually any activity that isn't lying on a beach drinking mojitos.

U.S. leisure travel to Cuba nearly doubled last year, to more than 160,000 visitors, and Tuesday's measure is expected to add another increase of between 10 and 20 percent, helping fill seats on as many as 110 commercial flights a day starting later this year.

"It's the closest thing to straight-away travel," said Tom Popper, president of insightCuba, one of the largest companies organizing U.S. travel to Cuba. "The message to most Americans that the travel restrictions are really loosening will come across more clearly. I think we'll see another surge in interest."

The elimination of the tour requirement could cost the Cuban government many millions of dollars in revenue and allow U.S. travelers to see Cuba in a far more independent way than before. Because the Cuban government controls virtually all the travel industry, American groups were required to stay in state hotels, travel on state buses, pay for the food through a state agency and use state tour guides to show them the sights.

This measure is expected to fill the demand for direct flights that U.S. airlines hope to launch in the coming months. At least eight U.S. airlines have submitted applications to the U.S. Department of Transportation outlining their plans and routes for possible commercial flights to the island.

Obama arrives in Havana on Sunday and is expected to call for the elimination of the nearly six-decade-old trade embargo on Cuba. Meanwhile, his administration has now eliminated a once-unimaginable number of trade and travel limits through executive action. More than a year after Obama and President Raul Castro announced the reestablishment of diplomatic relations, U.S. companies can now manufacture goods in Cuba, export to the Cuban government and fly regularly scheduled flights to Cuba. The Starwood hotel chain says it soon expects to get U.S. approval to manage hotels in Cuba.

The ban on international transactions that passed through the U.S. banking system for even a second had seriously hobbled Cuba's ability to engage in international trade. Many banks have refused to do any business related to Cuba because of the fear of U.S. litigation, which has cost some banks many hundreds of millions of dollars in fines.

That had infuriated the Cuban government, which accused the U.S. of waging an economic war against Cuba around the world that overrode other countries' laws allowing business with Cuba. With Cuba's centrally planned, export-dependent economy constantly short of cash for goods ranging from paint to heavy machinery, any interference with its ability to do business had outsize impact on the island's decaying infrastructure.

"They're elevated it now to just about the single most important irritant of the larger embargo," said Robert Muse, an attorney specializing in U.S. law on Cuba. "Cuba is like a coupon-clipping bargain shopper. They don't have money to burn and they're trying to stretch hard currencies as far as they can."

Based on reporting by the Associated Press.

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