Implications of Cuba’s leadership change

Cuban Excerpt from the Testimony before the Committee on Foreign affairs. Sub-committee on the Western Hemisphere. United States House of Representatives.  

Submitted by: Nancy Menges*, Luis Fleischman*, and Nicole Ferrand.*

Due to his illness, Fidel Castro appointed his brother, Raul Castro acting president of Cuba in July, 2006. On February 24, 2008, Cuba’s highest governing body, The Council of State, made this appointment permanent. Though characterized as a better and more pragmatic manager, Raul, who has been Defense Minister for the past forty nine years, has been a life long communist and remains ideologically close to his brother. Therefore, many believe that though there may be some minor changes that he will not deviate significantly from the last almost half century of Castro rule. From his hospital bed, Fidel remains an important presence and continues in his post as the head of the Cuban Communist Party.

Since becoming president, Raul has promised “structural changes” and said “we have to make our government’s management more efficient”. According to recent news reports, he has acknowledged that the average Cuban salary of twelve to seventeen dollars a month is too little to live on. While Raul talks of increasing salaries and lessening government control over the economy, his actions have only been reflected in minor changes in policy. For example, the Cuban government has decentralized the production and distribution of milk and has ordered new buses from China to ease major transportation problems. However, in terms of how the majority of the Cuban population still lives, very little has changed. Food continues to be rationed by neighborhood block committees, goods such as eggs and chicken are in short supply, the monthly ration reportedly only lasts for one or two weeks, housing is limited and overcrowded, and in spite of people’s efforts to get ahead, the government taxes income earned from private initiatives or refuses to grant licenses to “businesses on the side”.

What is interesting is that after the fall of the Soviet Union and the halt in their economic support, Cuba’s economy (according to a February 23, 2008 report in the Economist) shrank by 35 percent. As a result, Castro declared a “special period” and opened the economy to tourism, foreign investment in certain sectors, farmers markets, small privately owned businesses, and legalized the use of the dollar which opened the way to hard currency via remittances from one million plus Cuban Americans.1 This special period lasted from 1989 to 1996 and was reversed even though the economy was beginning to stabilize. The reasons why it was reversed perhaps have implications for how the current leadership may react. Apparently, the reforms were stopped because Castro believed that some people in society were benefiting more than others and that “it was a threat to the regime as it undermined party control”.2 In terms of current financial support, Cuba now relies on Chinese credit and three to four billion dollars worth of free oil from Hugo Chavez as well as an additional one and a half billion dollars of additional aid from the Venezuelan president.  

While there has been a change in leadership in Cuba, there has not been a transition to any significant change in ideology, in governance, in the abysmal living conditions of most Cubans, nor in the area of human freedoms. As reported by various human rights organizations, there are approximately two hundred political prisoners incarcerated in Cuban jails. It is also important to keep in mind that the Castro brothers remain hostile to American values and principles, especially democratic governance, capitalism and free markets and that they have spent their entire adult lives fighting against our way of life. In addition, it was not that long ago that Castro met with Ahmendinejad of Iran and proclaimed, “Together, we will bring the U.S. to its knees”.

The Embargo

The United States embargo against Cuba is an economic, commercial and financial instrument enacted on February 7, 1962 after Cuba expropriated the properties of U.S. citizens and corporations. The embargo was tightened in 1963 after the Cuban Missile Crisis and was reinforced in October 1992 by the Cuban Democracy Act and in 1996 by the Cuban Liberty and Democracy Solidarity Act (known as the Helms-Burton Act). This latter measure applies to foreign companies trading with Cuba and is meant to penalize those companies that allegedly traffic in property formerly owned by US citizens but expropriated by Cuba after the revolution. In October 2000, the embargo was further altered by the Trade Sanctions, Reform and Export Enhancement Act that relaxed the sale of agricultural goods and medicines to Cuba for humanitarian reasons.

Contrary to critics’ claims, lifting of the embargo and the travel ban without meaningful changes in Cuba will have several negative repercussions. First, it will send a poor message about U.S. toleration both of Cuba’s patterns of unsavory behavior and its totalitarian system. Second, a cessation of the embargo will strengthen state enterprises since most Cuban businesses are run by the state and since the Cuban government retains a partnership interest in all foreign investment. Third, it will lead to greater domestic repression and control because the leadership fears the “subversive” effects of U.S. influence upon the Cuban people. A transition to democracy on the island will thus be delayed.

The economic impact of tourism, while providing the Castro government with much needed dollars, would be limited. Dollars will flow in small quantities to the Cuban poor; state and foreign enterprises will benefit most. We have to keep in mind that no foreign trade that is independent from the state is permitted in Cuba and workers are paid below comparable wages. Cuban leaders, in any event, would allow only enough commerce to maintain their regime.

Investments will be directed and approved by the Cuban government. The Cuban government is unlikely to create a level plain field for American companies, allowing some to invest while discriminating capriciously against others. It is illegal for foreign companies to hire or fire Cuban workers directly and hiring is done by the Ministry of Labor. Foreign companies must pay the wages owed to their employees directly to the Cuban government in hard currency. The Cuban government then pays out to the Cuban workers in Cuban pesos, which are worth 1/20 of a U.S. dollar, pocketing 90 percent of every dollar it receives.3

The lifting of the embargo would allow the Castro’s to borrow from international organizations: such as the IMF, the World Bank, etc. Since Cuba owes billions of dollars to the former Soviet Union, to the Club of Paris, and to others, and has refused in the past to acknowledge or pay these debts, new loans will be wasted by Castro’s inefficient and wasteful system, and will be uncollectible. The reason Castro has been unable to pay back loans is not because of the U.S. embargo, but because his economic system stifles productivity and he continues to spend on the military, on adventures abroad, and on supporting a bankrupt welfare system on the island.4

Opponents to the embargo cite US trade with China as a reason for ending the Cuban embargo; but this example merely illustrates that American policy has been inconsistent. Trade with China, if it shows anything, demonstrates that there is little correlation between commerce and political liberalization, at least over the short term. After all, the Chinese Communist Party has, in the last two decades, managed to increase both trade and political repression. So far, commerce has strengthened the hands of communists in China.5

The embargo should only be lifted when Cuba changes its current system and develops a democratic society. U.S. policy towards Cuba is not anachronistic but is rather aimed at the legitimate goal of a free Cuba; the lifting of the embargo now will be an important psychological victory for Castro and would be interpreted as a defeat for U.S. policy. There is also no indication that negotiation and incentives can influence Cuba, which has ignored such “carrot and stick” approaches in the past. Without major internal reforms in Cuba, the Castro government – not the Cuban people – will be the main beneficiary of the lifting of the embargo, since it will use this newly-acquired wealth to strengthen its hold on the Cuban people, to rebuild its military apparatus, and to engage again in supporting anti-American terrorist and violent groups in Latin America and elsewhere.6

The reason for Cuba’s economic suffering is a Marxist system that discourages incentives. As in Eastern Europe under Communism, the failed Communist system is the cause of the economic suffering of the Cubans, not the U.S. embargo.7

The embargo was never established to overthrow the Castro government. The embargo was established to punish the Castro government for the confiscation of American properties and to pressure it to slow down its move into the Communist camp. The embargo has been maintained to show that Marxist-Leninism does not work as an economic or political system and to use it as a tool to extract human rights, economic and political concessions from the current or future Cuban government.

Hugo Chavez plays a crucial role in providing life-oxygen to the Cuban regime. In this time of history it is Hugo Chavez who represents the main threat to regional stability and geo-political security in the western hemisphere and perhaps beyond. 

Nancy Menges, Editor in Chief of the Americas Report. Mrs. Menges, the co-founder of the Menges Hemispheric Security Project, is in charge of the weekly edition of CSP’s Americas Report. Fluent in Spanish, she holds a degree in International Relations from the University of Wisconsin-Madison and has studied at the University of the Americas in Mexico City. Her postgraduate degree has been earned from the University of Maryland. She has testified in Congress and submitted CSP’s statement regarding US-Colombian relations to the House Subcommittee on the Western Hemisphere.

Dr. Luis Fleischman is an advisor to the Menges Hemispheric Security Project at the Center for Security Policy in Washington DC. He is also an adjunct professor of Political Science and Sociology at Wilkes Honor College at Florida Atlantic University.

Nicole M. Ferrand is a research analyst and editor of “The Americas Report” of the Menges Hemispheric Security Project at the Center for Security Policy in Washington DC. (www.centerforsecuritypolicy.org). She is a graduate of Columbia University in Economics and Political Science with a background in Law from Peruvian University, UNIFE and in Corporate Finance from Georgetown University.

1. The Economist, Feb 23, 2008. The Commandante’s Last Move.
2. The Economist, Feb 23, 2008. The Commandante’s Last Move
3. Cuban Communism. By Irving Louis Horowitz, Jaime Suchlicki
4. What lifting embargo on Cuba would really mean. By Georgie Ann Geyer. July 20, 2000
5. In Defense of the Cuban Embargo. Gordon G. Chang. February 20, 2008
6. In Defense of the Cuban Embargo. Gordon G. Chang. February 20, 2008
7. Why the Cuban Trade Embargo Should Be Maintained. November 10, 1994. The Heritage Foundation.

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