U.S. President Barack Obama announced that he is travelling to Cuba on March 21. Much of the debate about his trip -- the first trip by a U.S. president to Cuba in 88 years -- will center on whether the Cuban government will announce concessions on political freedoms. But the importance of economic reforms, and their benefits for the Cuban people, must also play a central role in bilateral discussions.
Cuba desperately needs access to capital. It needs resources to finance growth and to reduce the size of a state that can no longer bear the burden of economic near-monopoly.
However, little of economic significance can happen in Cuba until the country adopts a working financial system. Obama should encourage Cuba to take a first step by joining the Inter-American Development Bank.
The International Financial Institutions, or IFIs, have a solid history of coaxing many previously economically isolated nations -- Vietnam, Albania, and Myanmar, to name a few -- back into the global financial system. As the IFI with majority Latin ownership, the Inter-American Development Bank is the natural first stop on Cuba's path of return.
The Bank's technical toolkit holds the key to reversing economic decline and helping the Cuban government recognize once and for all that development cannot happen without a functioning financial sector.
In a visit to Washington this past week, Cuba's minister of foreign trade and investment, Rodrigo Malmierca Diaz, participated in the U.S.-Cuba Regulatory Dialogue with senior administration officials. His two-fold message -- Cuba needs capital, and it is open for business -- was warmly received. Notwithstanding Minister Malmierca's reassuring words, his government needs to face the reality that without profound changes, investment will only trickle in by the few millions, rather than the tens of billions of dollars needed to create private-sector jobs and raise income levels for millions of Cuban families.
This endeavor may not be as exciting as striking down the trade embargo and travel ban, but it is of central importance to Cuba's economic success, and it has a direct bearing on the wellbeing and autonomy of the Cuban people.
As pointed out in a forthcoming Atlantic Council report, "Five Steps To Grow the Cuban Economy: What The US and Cuba can do in Obama's Final Year," an improved and expanded financial sector will enable new enterprises to access start-up capital; provide the resources for existing businesses to grow; and allow Cuban citizens to borrow for home purchases and needed durable consumer goods. A more modern and efficient payments system will increase the efficiency of Cuban businesses and ease strains on Cuban households. Small private businesses are on the rise in a number of areas, with new flows of remittances and capital coming in. Supporting these entrepreneurs is a central goal of U.S. policy.
The IDB can help fix structural obstacles: It can help unify Cuba's dual-currency system, address the severe lack of banks and microfinancing options, increase access through mobile banking, and rebuild weak infrastructure through international public-private partnerships. Until these things happen, access to serious international investment remains a dream.
Obama has taken huge steps to move U.S.-Cuba relations forward. As he now considers a presidential visit to Havana, and how to use the few remaining arrows in his quiver to best support the Cuban people, few issues rival allowing Cuba access to technical and financial assistance in order to update its economy.
After the grand restoration of diplomatic relations, the administration's recent modification of financial and investment regulations have seemed like small, incremental adjustments - leaving the impression that the president's ability to maneuver on Cuba is coming to a close. It isn't. Allowing Cuba access to the IDB may be the last big, irreversible move the administration can take to empower the Cuban people and enhance prosperity on the island.
The United States continues to be constrained by the Helms-Burton legislation, which makes it impossible to vote for Cuba's membership to the IDB. But given that the United States does not hold veto power over the matter, a U.S. vote is not needed to approve membership.
And as long as Helms-Burton stands, technical and advisory services must be paid for by third-party trust funds that would ring-fence the IDB's regular budget from being used in Cuba. This will both satisfy U.S. law and advance Cuba's economic reform.
The idea of allowing Cuba to join the Inter-American Development Bank will unleash groans of discomfort from Washington insiders. The Treasury Department may resist, saying that Cubans should not be allowed membership in the IDB without also meeting the minimum requirements to enter the International Monetary Fund and the World Bank. Congressional hardliners will protest that the administration is again giving away too much. The State Department may argue that Cuba needs to do more on human rights before receiving further international privileges.
All valid arguments, yet all beside the point. Over the past decade, the Cuban government has made incremental but important changes to its economic policies. It has created a space for self-employed entrepreneurs, or cuentapropistas, and has created a free-trade zone to attract foreign investment to the port of Mariel. But the long-awaited acceleration of reforms has not come.
The ultimate goal must be to create a more vibrant private sector that shrinks state dominance, advances economic liberties, and provides better living standards for all Cubans. It is an objective we can all agree on -- Republican or Democrat, Cuban-American or not. That begins with IDB membership.