A Cuban Travel Boom Approaches, But Are They Ready?

It’s not unusual for a Canadian travel agency to get a lot of calls during the winter, but recently, Jury Krytiuk’s phone has been ringing constantly.

“In the last couple of weeks, since Obama made his statement about easing restrictions, I would say the request that we’re getting is quadruple compared to what it used to be,” Krytiuk says, referencing President Obama’s Dec. 17 announcement that the U.S. and Cuba would begin a renewed diplomatic relationship. Previously, Americans had to apply for a license to travel to Cuba, but that’s no longer necessary. Travelers going to the island for one of the 12 existing categories of travel (which do not include tourism) can go to Cuba with a general license. The dollar limit on Americans’ spending in Cuba was also lifted.

Krytiuk has been selling Cuba travel for four decades and books thousands of tours of the island for Americans each year. Travelers have been telling Krytiuk they want to go to Cuba as soon as possible, not only because they believe it will be easier to go, but also because they’re concerned that American influence may change the landscape of the country.

It remains to be seen how much Cuba will open up its economy at large to U.S. enterprises, but no matter the impact of the changing relationship between the countries, one thing is clear: Demand for travel to Cuba is higher than ever. In his announcement, Obama named a number of changes, like allowing Americans to use their credit and debit cards on the island. For years, the roughly 500,000 Americans authorized to travel to Cuba did so with wads of cash, so this is a major shift.

The Treasury Department has already issued a long list of amendments to the sanctions on the island, but simply stating “travelers will now be allowed to use U.S. credit and debit cards in Cuba” does not make it so. It’ll take more than a few magic words from the president and the Treasury Department to unleash the power of plastic in Cuba.

An Island Stuck in the Past

The U.S. arms embargo on Cuba began in 1958, when conflict escalated between revolutionaries (including Fidel and Raúl Castro) and then-president Fulgencio Batista. The Castros and their forces ousted Batista in January 1959, and actions taken to establish Communist rule prompted the U.S. to reduce or cut off various forms of trade. This culminated in the end of diplomatic ties between the U.S. in Cuba in January 1961. The terms of the relationship has changed from time to time, but this latest announcement is the biggest development in half a century.

Talk to anyone who’s been to Cuba and they’ll tell you about the frozen-in-time quality of the island. It’s not that Cubans have some sort of outstanding affection for midcentury goods and appliances, that’s just when they lost access to upgrades developed beyond their shores.

“Cubans are well-educated and have the ability to fix things,” says Sonja E. Kelly, a fellow at the Center for Financial Inclusion at Accion. She researches global financial inclusion, particularly among vulnerable populations, like Cubans. Kelly visited Cuba two years ago for a conference. “I went to somebody’s home while I was there and went and had tea with him and his wife, and it was like my grandmother’s kitchen. All the appliances were so old and taken care of so well, because they knew they couldn’t get new ones.”

In a country where appliances and vehicles are often more than half a century old, it should be no surprise that the financial infrastructure lags behind. Credit and debit card processing isn’t very common in Cuba — not for Cubans, not for Canadians, not for anyone, including the emerging U.S. market.

“The U.S. has issued these regulations about how U.S. financial institutions are going to be allowed to operate in Cuba, but from the Cuba side, we still don’t know what that’s going to look like,” Kelly said. The independent, small-business economy in Cuba is growing, and it’s a segment highly patronized by American visitors, but those business owners have little access to financial services and credit. In other words, the casas particulares and paladares (private home accommodations and independently owned restaurants, respectively) that tourists want to experience while in Cuba are the least likely to have credit card terminals.

Major Potential for Growth

By openly starting to change the relationship between the U.S. and Cuba, the U.S. government has essentially started lining up the dominoes needed to set off a huge economic transformation for the country. Setup is only part of it — there are key players in this potential chain reaction who have yet to fill in the gaps.

Congress is one domino, as it has the power to lift the trade embargo that remains in effect. Payment processing networks are another, though MasterCard announced it will remove its block on U.S.-issued cards in Cuba effective March 1, and others are expected to follow suit. In an email to Credit.com, an American Express spokesperson said the company is planning on initiating business activities in Cuba. A Discover representative said the company looks “forward to providing our cardmembers with the opportunity to use their cards in any open market around the world.” Visa did not respond to a request for comment.

The issuing banks hold another domino — just because MasterCard will process payments doesn’t mean your issuer has signed on to facilitate them. Cardholders will have to check specifics with their card providers.

Let’s not forget who holds the biggest domino of all: Cuba.

“Nothing’s quick in Cuba,” says Tomas Bilbao, executive director of the Cuba Study Group, a nonprofit working to empower Cubans and effect change in the country. He says the Cuban government knows the economy needs to grow, but there’s a lot that needs to happen before card processing becomes widespread on the island. “They need to take advantage of the changes any way they can, which would provide an incentive for them to build up the infrastructure, but the infrastructure costs something.”

This development will have to work both ways, Bilbao says, with Cuba needing to open up its existing banking sector to foreign partnerships, allowing visitors to access their services while on the island. For example, there hasn’t been much investment in ATMs, Bilbao says, so there’s a long way to go before Americans may experience the ease of accessing money while traveling that they do in other countries.

What to Know Before You Go

There are 12 categories of authorized travel by an American to Cuba, and tourism remains excluded from that list, but it has certainly become easier to visit the island in recent weeks. As a result of the new financial policies, it’s also safer.

“It’s important to recognize that the White House took appropriate steps to ensure the safety of these travelers,” says Matthew Aho, an expert on the regulatory ins and outs of the Cuba/U.S. embargo and consultant with the Cuba Practice at Akerman LLP in New York. Because Americans had to travel with all of the cash they expected to use, they ran the risk of losing it or running out, which is not a good situation to find yourself in while abroad. The infrastructure isn’t quite up to speed, but at least Americans should no longer have to deal with legal roadblocks when trying to get money. Insurance companies are also now allowed to provide insurance services to Americans authorized to travel to Cuba.

Despite the fact that there aren’t many places to use a credit or debit card in Cuba, it’s helpful to have the option or at least carry the cards as a backup plan if you exhaust your cash resources while in the country. It’s crucial you check with your card issuer before you go about whether or not they’re facilitating transactions with Cuban merchants, and it is still in your best interest to prepay for much of your trip through a travel agency so you aren’t forced to carry a lot of cash.

Right now, the biggest mystery is how accommodating the Cuban government will be in bolstering its financial system so it can handle banking relationships with the U.S., credit card processing and ATM access.

“It’s very difficult to guess what the Cuban government is or is not going to do. It’s very dangerous to enter into speculation when it comes to Cuba,” Bilbao says. Given how much is uncertain, he advises U.S. travelers to plan ahead so you can patronize enterprises least likely to quickly adopt card processing: Small businesses. “Carefully planning your trip to take advantage of the better services or customer service and value that independent entrepreneurs in Cuba have to offer would greatly increase the enjoyment and value of your trip.”