POLITICAL AND ECONOMIC IMPACT ON THE US OF DELAY IN NORMALIZATION OF RELATIONS

Created: 4/12/1977

OCR scan of the original document, errors are possible

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SUBJECT: Political and Economic Impact on the US of Delay in Normalization of Relations with Cuba

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1. We do not believeelayormalizing ourHavana would have any significant effect on US politicalinterests. Many of our friends

would be concerned and disappointed, and some Would Join third NOrra leaders in public expressions of disapprobation. In Latin America, tbe Cuban issue has declined in significance since the OAS decided in5 to allow all member states freedom of actionstablishing relations with the Castro Government. Now Cuba Is well on its way to reintegration in regional affairs, and the Latin Americans are focusing on their bilateral problems with Washingtonthey are not overly concerned about our relations with Havana. Some of the more conservative military governmentsouth and Central America would be pleased to see us maintain the status quo toward Cuba.

The Cubans would respondelay in normalizing relations by stepping up their propaganda campaign against the US; they would press hard on the Puerto Rico independence Issue in the UN and other international fora, and they might choose toajor public campaign against the US presenceuantanamo. If theissions were resumed, the Cubans would most likely harass the flights. Havana would not, however, revoke agreements which are in Its Interestssucharitime boundry settlementenewed hijacking treaty. It wouldajor incidentsuch as the bombing of the Cubana aircraft last Octoberto cause Havana to annul or suspend these agreements.

On the economic side, even with normalization, Havana's hard currency balance-of-payments problems <ind its reluctance to become dependent on the US will restrict commerce. Annual US sales to Havana0 would be limitedillion at mostless than three percent of total US exports to Latin America and roughly equivalent to US markets in Ecuador, Guatemala, or Panama. US foodstuff producers and small manufacturers would have to forego this small new market, but multinationals could continue trading with Havana through their foreign subsidiaries. Failure to gain access to Cuban sugar would have little impact on US consumers, since competing exporters will absorb most of Cuba's transportation advantage as long as thereugar surplus on the world market. While transportation differentials could be important for US nickel consumers, most current Cuban production is committed, and new capacity will not come on line until.