For Cuba-watchers waiting on President Joe Biden to end the embargo and throw open the gates of US trade with Havana, Robert Muse has some advice: Don’t hold your breath.

Muse, a Washington attorney with decades of legal experience on the US-Cuba relationship, said Biden is not Obama—even though he served as Obama’s vice president from 2009 to 2017.

Speaking in a Feb. 11 webinar hosted by the London-based Caribbean Council, he said that unlike Obama—who saw Cuba’s participation in Central America and Angola from a somewhat revolutionary point of view—“Joe Biden doesn’t share those sympathies. He’s 79 years old, and he’s been pretty consistent over the years. Biden’s formative experience as a young adult were in the Cold War; he remembers vividly the Cuban missile crisis.”

As a result, he’s less likely to advocate a total end to the 60-year-old embargo, said Muse.

However, Biden could lift restrictions on remittances to the island—which are now capped at $300 per month—and permit the resumption of direct flights from US airports to Cuban provincial capitals other than Havana, such as Camagüey, Holguín and Santiago de Cuba.

Biden’s inauguration coincides with a crucial moment in Cuba’s ongoing economic crisis.

Effective Jan. 1, Cuba scrapped its dual-currency system, devaluing the Cuban peso for the first time ever, from one to the dollar to 1-to-24.

The elimination of the convertible peso (CUC) and the adoption of the Cuban peso as the island’s only official currency effectively amounts to a 96% devaluation—one of the government’s most radical decisions since the 1959 revolution that brought Fidel Castro to power.

That “almost wiped out a decade’s worth of GDP growth,” said British research fellow Emily Morris, a Cuba expert at University College London’s Institute of the Americas.

“It’s something which they’ve been meaning to do for a very long time,” said Morris, participating in the same webinar as Muse. “With the new unified exchange rate, the idea is that instead of the complex process of allocating foreign exchange through the planning system, the market will become the allocator of foreign exchange. That’s the target.”

Meanwhile, wages have been increased five-fold, while benefits and minimum wages will be indexed to basic prices. At the same time, non-state earnings will be set by the private sector.

These three shocks together—devaluation, wages and prices—are supposed to finally enable the Cuban economy to work with the use of the market mechanism,” said Morris, who from 1995 to 2008 was a senior editor with the Economic Intelligence Unit. “Clearly, if the economy is going to integrate into the global market, they need to work with world market prices.”

Rewards and risks

The potential rewards of eliminating Cuba’s dual-currency system are clear: better incentives, efficiency, dynamism, growth and an overall improvement in living standards, she said. Nearly all economists—both in Cuba itself and abroad—that a single currency and market-determined prices are “the essential missing ingredient” in the decentralization of decision-making.

Yet the risks are also clear, with the most obvious one being inflation. Rapidly rising prices could potentially lead to poverty, unemployment, uncertainty and recession.

“Capping prices will create queues in black markets, and delay—and even jeopardize—adjustments,” said Morris. “Experience has also demonstrated that uncontrolled inflation causes disruptions that can result in serious damage to both efficiency and output. So the authorities are attempting to negotiate on a case-by-case basis at a local level, and to design rules that define what abusive and speculative prices are, and impose fines. This effort to contain inflation is a huge and in some ways, an impossibly complex task.”

There’s also a serious risk of increasing poverty and unemployment, even as the government dismantles Cuba’s rationing system. Some 100,000 people already having signed onto the official unemployment register.

“Before, they didn’t sign on because they were working in the private sector, or the informal economy. But with an increase in state wages and prices, their real purchasing power has gone down and the relative attractiveness of state employment has gone up.”

Despite the recent lifting of restrictions on the private sector, it no longer holds the appeal it did previously. In fact, nearly half the island’s 600,000 or so registered cuentapropistas (self-employed) have allowed their licenses to lapse given the current economic downturn.

“Uncertainty can create fear, and a catastrophic loss of confidence. Incentives dissipate, hopes fade and investment stalls,” Morris warned. “In the worst case, if confidence collapses and the economy lacks the capacity to adjust, it’s possible that the disruption will lead to recession. This has happened before, in the transitions experienced by other countries of the former Soviet bloc during the process of liberalization.”

On the plus side, Cuba has performed admirably in stemming COVID infections, with only 25 deaths per million inhabitants (compared to Iceland, which has seen 85 deaths per million, and the UK, with 1,700 deaths per million). That could help Cuba open up earlier to tourism.

An even bigger, potentially enormous boost, to Cuba would be a lifting of the US embargo and the unimpeded flow of American tourists to the island, along with access to financing from the World Bank and Inter-American Development Bank.

The danger of uncertainty

After Obama was inaugurated, said Muse, it took him nine months to rescind the “draconian restrictions” on Cuban-American travel and remittances imposed by his predecessor, George W. Bush, “and another two years before he reinstated people-to-people travel. It was a rather slow and tentative start.”

And even though Obama went on to re-establish full diplomatic ties and open a US Embassy in Havana in his second term, Muse said many regret Obama didn’t go even further than he did.

“One of the chief critiques of the Obama normalization push is that they didn’t push hard enough on the commercial end of the embargo, for example, to permit the importation of Cuban agricultural commodities,” he said. “That would have been a simple regulatory stroke of a pen, but it was never done.”

If the 2020 presidential election proved anything, it was that Florida’s 29 electoral votes are not necessary to win. Nevertheless, with either Biden running for re-election or Kamala Harris as the Democratic candidate in 2024, Muse said “Florida is probably going to be a Republican state for at least another couple of election cycles.”

That said, the Democrats should focus not so much on Miami—stronghold of the Cuban exile lobby—but more on cities like Tampa, Jacksonville and Pensacola, where white, working-class voters might support Democratic candidates if they saw some economic advantage, such as a boost in port trade with Cuba.

Meanwhile, the National Security Council plans a review of Trump’s Cuba policy—a job that’s been entrusted to Juan González, director of the NSC’s Latin America division.

“Biden keeps saying that the situation between the US and Cuba is not what it was four years ago,” he said. “I take this as a warning that there’s not going to be a wholesale revision of the Cuban asset control regulations.”

Complicating matters is Cuba’s renewed State Department status, as of Jan. 12,  as a terrorist-supporting nation—along with Syria, Iran and North Korea.

“[Former Secretary of State] Mike Pompeo left an exploding cigar on his way out the door: he relisted Cuba as a terrorist nation,” said Muse. “That designation has to go before there can be meaningful regulatory reform.”

Muse added: “With no possibility of repealing the embargo, the only solution is a unilateral termination of the embargo on Cuba. Joe Biden has that power. If he does, the recourse of embargo supporters would be minimal—but that’s not going to happen in the next year or two.”