CASTRO’S ‘HAIL MARY’ PASS: WITHOUT LIFE-SUPPORT — DEBT RELIEF AND HELP ON REACTORS — THE END IS AT HAND

Precis: Fidel Castro evidently hopes to save his
regime by staving off financial ruin with the help of the French,
Spanish, Canadian, Japanese and British governments. Unless
Congress acts to prevent a stealthy rescheduling of Cuban debt in
the Paris Club, it may find that the additional — and
potentially mortal — pressure it hoped to bring to bear through
the Libertad bill will be negated and Castro’s dictatorship given
decisive new life-support. At the same time, Fidel may be
given the means to create a dangerous new threat to the United
States in the form of irretrievably flawed nuclear reactors
capable of creating a Chernobyl-like catastrophe for the American
mainland.

(Washington, D.C.): Fidel Castro’s flashy campaign-style
swing through New York City this week — redolent of
self-confidence and defiant strength — coincided with fresh
evidence that his despotic regime is actually in desperate
straits: Cuba is actively recruiting several Western governments
through the Paris Club of official creditors in a bid to un-block
Cuba’s access to medium-term government and private bank credits,
ostensibly “to finance economic recovery.”

This extraordinary move speaks volumes about the Cuban
economic melt-down: With an unpayable hard currency foreign debt
of some $8 billion and the world’s second-lowest creditworthiness
rating, this stealthy Paris Club initiative may be Castro’s last
hope. Without debt relief, he would be left to harvest the bitter
fruits of over three decades of communist strangulation of Cuba’s
economy and systematic political repression.

The Name of the Game: Rescheduling to Survive

Castro may have learned an important lesson from the hard
experience of the departed Soviet and other Eastern Bloc comrades
that he managed to outlast: Financial life-support from Western
nations disposed to bail-out communist regimes may make the
difference, in some cases literally, between life and death. By
engaging France, Canada, Spain, Japan and Britain and possibly
other Western nations in discussions of debt-equity swaps and
similar bookkeeping sleights-of-hand, he even hopes to circumvent
the impediment that would otherwise be presented by Cuba’s status
as a non-member of the International Monetary Fund. A lack of
association with such a multilateral institution is ordinarily a
show-stopper for rescheduling wannabes. His adoption of such a
sophisticated approach, like the selective jettisoning of his
trademark combat fatigues, suggests less a commitment to reform
than a concern over his grim fate. Ever the doctrinaire Leninist,
Castro is proving himself capable of taking one step back in
order to live to take two steps forward.

The so-called “informal dialogue” between Mr.
Francisco Soberon, the President of the National Bank of Cuba — a
position once held by none other than Ernesto “Che”
Guevara — and Cuba’s main Western creditors was revealed by
Mr. Soberon in a seminar held recently by The Economist
magazine and reported in yesterday’s Financial Times. He
confirmed that Havana has been forced to rely on expensive
short-term credits which have substantially complicated the
country’s already parlous financial condition. According to the FT,
no less an authority than Christian Noyer, the chairman of the
Paris Club, acknowledged earlier this month that several
Western creditors were arguing for an “informal”
arrangement to grant Cuba debt relief, despite its lack of
association with any of the multilateral financial institutions.

The Bottom Line

Obviously, Congress must not permit such a rescheduling to
proceed. In the absence of swift legislative action aimed at
preventing a Cuban debt rescheduling, it seems clear that the
effect of that debt relief would be seriously to diminish — if
not more than offset — the additional economic pressure
that veto-proof bipartisan majorities have recently sought to
apply through the Libertad Act. All other things being equal,
the latest evidence suggests that this pressure could be
sufficient to finish off the Castro regime, once and for all.

At a minimum, the funds that would be freed up were Havana’s
debt to be rescheduled — to say nothing of new Cuban borrowing
that would likely become possible — would facilitate Castro’s
efforts to bring on-line two dangerous nuclear reactors at the
Juragua complex near Cienfuegos. Russia has recently announced
that it intends to cooperate in the completion of these fatally
flawed Chernobyls-in-the-making, despite blithe assurances
from the likes of Rep. David Obey that they would not do so.
As noted in recent testimony supplied on 1 August by the Center
for Security Policy Board Member Roger W. Robinson, Jr. to the
House International Relations Committee in August, design,
construction, equipment and siting deficiencies in these
Soviet-era VVER-440 reactors virtually ensure that, if fueled and
made operational, they would expose tens of millions of Americans
to a devastating radioactive plume.⁽¹⁾

The Center commends to the attention of policy-makers and
business-leaders — both in the United States and in friendly
nations overseas — the attached,
extremely thoughtful column by A.M. Rosenthal. It brilliantly
underscores the point that it is futile to trying to reform
Castro by bailing him out. And it elegantly argues the need to
use, instead, every instrument of economic and financial power to
bring him down.

(1) This testimony was highlighted in a
Center Press Release entitled “Center’s
Robinson Urges Congress to Thwart the Coming Cuban Chernobyl
Nuclear Crisis,” (No. 95-P 51,
2 August 1995). For a copy of the complete text, please contact
the Center.