Cuba’s efforts to “update” its socialist system through a series of economic reforms just got more complicated. The death of Venezuela’s Hugo Chávez, its principal benefactor, could seriously disrupt what is already a precarious process of maintaining top-down political control while liberalizing elements of the economy. Raúl Castro’s announcement that he will step down in five years and the emergence of younger leaders born after the 1959 revolution add further uncertainty to the island’s future.

These new circumstances offer President Obama a rare opportunity to turn the page of history from an outdated Cold War approach to Cuba to a new era of constructive engagement. In his second term in office, he should place a big bet by investing political capital in defrosting relations, an approach that will advance U.S. interests in a stable, prosperous and democratic Cuba.

Under Castro, the Cuban government has undertaken important reforms to modernize and liberalize the economy. Cubans are now permitted to buy and sell property, open their own businesses, hire employees and enter into co-ops, with state-owned enterprises on a more equal footing. The updating of the Soviet-style economic system is a gradual and highly controlled process. But the recent legal emergence of formal, small-scale private businesses (cuentapropistas) that can now compete on a more equal footing with state-owned enterprises opens a window into a profound shift in thinking already under way on the island. The reforms also offer new opportunities for U.S. engagement.

Castro’s loosening of the apron strings extends beyond the economy. In January, the Cuban government lifted exit controls for most citizens, which is likely to accelerate the process of reconciliation within the Cuban diaspora. It could also result in a swift uptick of Cubans departing for the United States, demanding a reconsideration of U.S. migration policy to manage the increase. The gradual handoff of power to a next generation of more pragmatic party and military leaders who will determine the pace and scope of the reform process is yet further evidence that the Castro generation is looking forward to securing a viable legacy.

The U.S. approach to Cuba has likewise undergone important changes since Obama took office. Since the expansion of travel and remittances in 2009, hundreds of thousands of the 1.8 million Cuban Americans living in the United States have sent more than $2 billion to relatives there, providing important fuel to the burgeoning private sector and empowering citizens to be less dependent on the Cuban state.

Much more, however, could be done. In his second term, Obama has a wealth of policy options available to him through executive authority that would reframe U.S. support for the Cuban people and advance U.S. national interests.

In his second term, the president can (and should):

  • Appoint a special envoy to open a discrete dialogue with Havana without preconditions to discuss such issues as migration, travel, counterterrorism and counternarcotics, energy and the environment, and trade and investment. Such talks could result in provisions that strengthen border security, protect Florida from oil spills, break down the walls of communication that prevent our diplomats from traveling outside Havana and help U.S. businesses export more goods, and thereby create jobs.
  • Authorize financial and technical assistance to support burgeoning small businesses and permit trade in goods and services with certified independent entrepreneurs.
  • Expand the list of exports licensed for sale to Cuba, including school and art supplies, water and food preparation systems and telecommunications equipment.
  • Grant general licenses for journalists, researchers, humanitarian organizations and others to facilitate people-to-people exchanges.
  • Remove Cuba from the list of state sponsors of terrorism, where it does not belong, allowing a greater share of U.S.-sourced components and services in products that enter Cuban commerce.

This list is not exhaustive; the president can take any number of unilateral steps to improve relations and increase U.S. support to the Cuban people, as mandated by Congress. He can also expect significant pushback from a well-organized and vocal minority of elected officials who are increasingly out of step with their constituencies on this issue. (In the 2012 election, Obama’s share of the Cuban-American vote increased by 10 points in Miami-Dade county.) He can win the argument, however, by demonstrating that these measures are in the spirit of the congressional mandate to encourage a free and prosperous Cuba.

The trend toward reform in Cuba is evident and suggests that an inflection point is approaching. Now is the time to employ a new paradigm by opening a long overdue direct dialogue with our next-door neighbor and thereby test the willingness of the Cuban government to engage constructively, including on the case of U.S. citizen Alan Gross. By invoking his executive authority to expand trade, travel and communications with the Cuban people, Obama can continue to help them make the transition from subjects to citizens. The moment has come to rise above historical grievances and extend that outstretched hand he so eloquently promised just four years ago.