Political Risk - Environment - Trade Embargoes - Example

1. Presented By –
Isha Joshi
(BBA-FT IV sem)

2. 
 Economic and Trade sanctions are imposed on the target countries in
order to persuade or force the target country’s government to change
its policies.
 Reason behind these sanctions
- National Security Issues- Military sensitive issues
- Nuclear, Chemical, and Biological Weapons
- Missile Technology
- Procurement of Specialized Arms
- Foreign Policy Issues
- Human Right Abuse
- Democratization
US Trade Sanctions
(Reasons for Economic/Trade Sanctions)

3. 
 Economic/ Trade sanctions can be levied in different ways; by
- Limiting exports to the target country
- Limiting imports of good and services from the target country.
- They can prohibit private financial transactions between the
U.S (business & citizens), and the target country’s
businesses, and government.
- They can also restrict U.S government programs like (EX-
IM Bank) and (OPIC) from assisting in trade and
investment with the target country.
Source: The Heritage Foundation “ A Users Guide to Economic Sanctions”.
http://thf_media.s3.amazonaws.com/1997/pdf/bg1126.pdf
US Trade Sanctions
(Different forms of Economic/ Trade Sanctions)

4. 
US Trade Sanctions and It’s effect
on US Businesses
Focus: Cuba

5. 
 The U.S. placed a trade embargo on Cuba in 1961, which
eventually turned into a comprehensive unilateral economic,
trade, and financial sanction.
 Reasons behind this sanction:
- Castro seized all American properties and industries in Cuba.
- A move from communism towards the democratization of
Cuba
 Freedom of speech and press
 Freedom of religion
 Freedom of political affiliation
U.S Trade Sanctions on CUBA

6.  Over the past 50 years, the U.S. as extended, adjusted and added to the regulations of
the Cuban sanction.
 Trading With the Enemy Act of 1917, section 5(b);
 Foreign Assistance Act of 1961, section 620(a);
 Cuba Assets Control Regulations of 1963;
 Cuban Democracy Act of 1992, also known as the Torricelli Act;
 Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996, (Helms-Burton
Act);
 The Trade Sanctions Reform and Export Enhancement Act of 2000.
U.S Trade Sanctions on CUBA

7.  Tourism: Cuba’s biggest source of income.
 Tourism brings in 2.7 billion into Cuba primarily from Canada and the European Union.
 20,000 Cuban-American now travel every month since the removal of the ban in April 2009.
(Note: Only Cuban- Americans can travel to Cuba).
American businesses in the travel and tourism market could gain tremendously, if the embargo was completely
lifted. The companies below could benefit from entering the Cuban tourism and travel market.
 Royal Caribbean
 Carnival Cruise Line
 Oil- Undiscovered oil in Cuba has led countries like China, Spain, Russia, India, Norway, Malaysia,
Vietnam, Angola, BUT not the U.S to partner up with Cuba to drill oil. The U.S geological survey
estimates that Cuba has 4.6 billion barrels of undiscovered oil.
Senator Lisa Murkowski (R- Alaska ) and Mary Landrieu (D -Louisiana ) worked on a legislature that would
lift the trade embargo on US oil companies, by allowing them to do to business with Cuba. However, this
legislation never passed.
U.S. Trade Sanction on Cuba
(Effect on US Businesses)

8. 
 Nickel- Cuba has the third largest reserves of nickels in the world. In 2007, Cuba exported 2.7 billion
worth of
 The U.S does not have nickels, so they import all their nickels from Canada and Australia. By
removing the trade embargo on Cuba, U.S businesses will have the ability to import nickels from Cuba.
 Agriculture
 The 2000 Trade Sanctions Reform and Export Enhancement Reform.
- Aimed at relaxing the enforcement of the economic and trade sanction;
by allowing the export and sale of agricultural produce and medicine to Cuba.
Produce exported to Cuba
 Fish, Forest Product, Fresh fruits and Vegetable, Milk Powder, Processed Foods, Wheat
and Dry Beans.
Since the implementation of the Trade Sanctions Reform and Export Enhancement Reform,
 US export of agricultural food to Cuba in 2008- 710 million
 US export of Agricultural food to Cuba by 2009- 2.8 billion
U.S. Trade Sanction on Cuba
(Effect on US Businesses)

9. 
 Problem: Financial transactions between the U.S. exporter and
Cuban buyer is problematic and inefficient .
Reasons:
 Cash-against documentation transaction is the current form of
payment .
 Transactions have to be processed through a third- countries
financial institution. This procedure increases the cost of
agricultural product sales to Cuba.
 Cuban buyers are also not allowed to take goods on credit.
 Solution: Removing the embargo on business travels and financial
regulations will increase the sale of agricultural goods, and provide an
environment for strong business relationship for both parties.
U.S. Trade Sanction on Cuba
(Effect on US Businesses)