The Impact of Normalized U.S.-Cuban Relations on Major League Baseball

Following yesterday’s historic announcement by President Obama that the United States will re-establish full relations with Cuba, many baseball fans have been speculating what impact this news is likely to have on Major League Baseball. Cuba, of course, is a baseball hotbed, producing a number of impact MLB players in recent years (Jose Abreu, Yasiel Puig, Yoenis Cespedes).

In the long-term, normalized relations with Cuba could potentially result in a significant influx of Cuban talent into U.S. professional baseball, while also opening up other lucrative business opportunities for MLB. In the short-term, however, yesterday’s announcement will likely have little immediate impact on professional baseball in the United States, and if anything, might even temporarily decrease the flow of players defecting to the U.S. from Cuba.

MLB has been preparing for some time for the day U.S. relations with Cuba would become normalized. Shortly after President Obama announced the policy change, MLB released an official statement responding to the news:

“Major League Baseball is closely monitoring the White House’s announcement regarding Cuban-American relations. While there are not sufficient details to make a realistic evaluation, we will continue to track this significant issue, and we will keep our Clubs informed if this different direction may impact the manner in which they conduct business on issues related to Cuba.”

Indeed, the specific details of President Obama’s announced policy change are still somewhat vague. According to the New York Times, the two countries will initially discuss the re-establishment of diplomatic relations, including the re-opening of the U.S. embassy in Havana. In addition, the U.S. will reportedly begin to work with the Cuban government “on issues like counternarcotics, environmental protection and human trafficking.”

And while President Obama’s announcement may eventually pave the way towards the elimination of emigration restrictions between the two countries, or the lifting of the U.S. trade embargo with Cuba, such policy changes appear to be months — if not years — away. So while yesterday’s thawing of relations between the United States and Cuba is historic, it will likely have little immediate impact on baseball.

To the extent yesterday’s announcement has any immediate impact on MLB, it could actually decrease the rate at which Cuban players defect to the United States in the short-term future. As has been well-documented in recent months, Cuban players currently must endure harrowing ordeals in order to defect to the U.S., often relying on human traffickers to smuggle them off of the island.

While one would hope improved relations between the two countries would eventually allow Cuban players intent on defecting to do so more safely, this will take some time. So depending on the exact nature of the initial coordination between the U.S. and Cuba, any efforts to reduce human trafficking between the countries could potentially make it more difficult for Cuban players to defect.

Moreover, even if the U.S. and Cuba eventually pave the way for players to move more freely between the countries — until MLB changes its existing draft-eligibility rules — few Cuban players will emigrate straight to the United States. As Wendy Thurm explained earlier this year, currently, any Cuban player who directly seeks asylum in the United States (such as Jose Fernandez) is considered draft-eligible, while those that first establish residency elsewhere — in the Dominican Republic, for instance — are permitted to sign as international free agents for significantly more money.

So if yesterday’s announcement does eventually lead to normalized relations between the U.S. and Cuba, MLB will likely need to adjust the way it treats Cuban prospects in order to deal with the increased flow of Cuban talent entering the game on a more rational basis. This could play out in several ways.

First, it’s possible once relations are normalized, MLB teams would simply be allowed to sign players directly out of Cuba, as they currently do for prospects living in the Dominican Republic or in Venezuela.  In that case, teams would be able to sign Cuban players to professional contracts once they reach 16 years of age.  Should that happen, one would expect some MLB teams would eventually establish their own baseball academies in Cuba — similar to those run in the D.R. and Venezuela — in order to better scout and develop these prospects.

Alternatively, opening up another significant pool of international talent could increase the pressure on MLB to establish an international draft, subjecting unsigned Cuban players (as well as those in the D.R. and Venezuela) to the Rule 4 draft each June. While such a plan has been discussed in the past, it’s currently tabled until MLB’s current collective bargaining agreement is renegotiated with the players union in 2016.

A third possibility — and perhaps the most likely — is the Cuban government would continue to place some restrictions on its players’ ability to leave the country, as a way to ensure its own league (the Serie Nacional) remains viable.  For instance, although the Cuban government passed a law last year permitting its players to sign contracts with foreign teams, to take advantage of the law players must agree to continue to “fulfill their commitments at home.”  These commitments include paying Cuban taxes on any income earned abroad, and — more importantly — continuing to play in the Serie Nacional each year from November through mid-April. This requirement would obviously make it difficult for a Cuban player to sign with a U.S. team, as the commitment to play in the Serie Nacional would force the player to miss both spring training and the start of MLB’s regular season.

So if relations between the United States and Cuba do eventually normalize, the most likely outcome is probably that MLB would negotiate some form of cooperation agreement with the Cuban Baseball Federation — similar to the one MLB has signed with Japan’s Nippon Professional Baseball (NPB) — governing when Cuban players will be allowed to play in the United States. As with the MLB-NPB pact, such an agreement could establish a posting system requiring MLB teams to pay significant sums of money to the Cuban Federation to sign Cuban players.

While the likely expansion of MLB’s talent pool is the most obvious potential impact of normalized relations with Cuba, the policy change could eventually create lucrative new business opportunities for MLB as well. For instance, the elimination of the U.S. trade embargo with Cuba would give MLB access to a new, baseball-crazed market. And while Cuba’s current per capita income – roughly $20 per month – may limit the profits that MLB is able to generate in the nation in the short-term, if increased business relations with the U.S. spur economic development in the country, then this new market could prove more lucrative in the future.

In fact, as the Cuban economy develops, it isn’t inconceivable that MLB could someday consider placing a team in Havana (whether via relocation or expansion). Although the city’s current population of just over 2.1 million people would rank among the smallest in the majors (ahead of only the Milwaukee, Kansas City and Cleveland metropolitan areas – admittedly, not exactly an apples-to-apples comparison), the nation’s total population of over 11 million could be large enough to one day support a MLB team.

Given these possibilities, it’s not surprising MLB will continue to monitor the developments in Cuba closely. In the short-term, though, baseball fans are unlikely to see any immediate impact from yesterday’s announcement.

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Nathaniel Grow is an Associate Professor of Business Law and Ethics at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.

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Johnston
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Havana Marlins! Loria vs Communism would be epic.