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THE DEADBEAT DICTATOR

Why business deals with Castro are a losing proposition

Avoiding financial relationships with Cuba has saved U.S. taxpayer money….

"Cuba stopped payment on all its foreign commercial and bilateral official debt with non-socialist countries in 1986. Because U.S. financial institutions were prohibited from financial dealings with Cuba, there was no U.S. exposure to Cuba's foreign debt moratorium."
U.S. International Trade Commission Report, 2001
Cuba’s debt continues to swell…..

"Officially, (Cuba’s debt) stands at close to $12 billion -roughly where it was in 1986, when the government defaulted on debt payments and suspended negotiations with creditors. But this figure is misleading. It excludes not just Cuba´s debt with Russia (estimated at $20 billion), but also that with China, Vietnam and the Czech Republic, as well as more recent loans, such as $13 million from South Africa for diesel engines bought in 1997 and $20 million to Chile for mackerel imports." Financial Times
Cuba has not made significant economic reforms and remains rigidly centralized…

Cuba is listed under the category of "Repressed." Its Economic Freedom ranking is 152nd—only Iraq, Libya, and North Korea are ranked lower.

Index of Economic Freedom

"Recent government actions indicate that official attitudes towards economic reform may have soured….Increased obstacles to private sector activities and restrictions to foreign direct investments reveal heightened concerns about the loss of political control inherent in the economic reform process." Moody’s Investors Service.

Cuba refuses to pay its creditors….

"Cuba's efforts to attract direct investment from South Africa and to boost bilateral trade with its close ally are being frustrated by the island nation's failure to settle a 13 million dollar debt……Other companies which have approached the government for credit guarantees for trade with Cuba have been stymied because the Trade and Industry Ministry is wary of exposing itself to the Cuban risk until the debt is settled. "

Xinhua
"…Cuba also wants to pick and chose which countries it pays back. Japan and Germany are receiving payments, but not France, Italy or South Africa. (These countries) have recently cut off further credit to Cuba, in a bid to claw back some of what they are owed." Financial Times
"Debt talks between Cuba and the Paris Club of creditor nations are indefinitely on hold…..on the table was $3.8 billion of official debt to Paris Club members, part of a much larger debt the Caribbean island piled up through the 1980s, until it began to default on payments and then stopped talking with creditors…."

"If foreign investors voice their dissatisfaction or have a conflict with the Cuban Government, they face severe reprisals. Loss of contracts, disagreements and even isolation can be a deathblow to a small or medium-sized company trying to make ends meet. Investors who are driven out of the island are generally not compensated. It is virtually impossible to file a claim against the Cuban Government in local courts. Furthermore, the Cuban Government doesn't have any assets abroad that may be seized. ….In the last year investors in Cuba have had a hard time particularly with the Cuban Government. One significant problem is the unreliability of the Cuban Government to pay its bills." Pax Christi Report.

"Today, Cuba continues to struggle to pay its creditors. Substantial sums remain unpaid to bunker suppliers, ship owners and ship repairers…debts remain unpaid, a trickle of payments subsists and the heated negotiations continue…" Canadian Maritime Advocate.

"U.S. exports to Cuba…based on average 1996-1998 trade data, would have been less than 0.5 percent of total U.S. exports….U.S. imports from Cuba, excluding sugar, would have been approximately $69 million to $146 million annually, or less than 0.5 percent of total U.S. imports."
U.S. International Trade Commission Report.

Still think Cuba is a good place to do business?

A WEAKER POLICY ON CUBA, A STRONGER CASTRO

By Frank Calzón
The Miami Herald
Agosto 18, 2002

The U.S. House of Representatives recently voted to end restrictions on travel, and to lift restrictions on financing exports, to Cuba. The Senate will consider the legislation soon.

While the White House has threatened to veto any legislation that would ''bolster the Cuban dictatorship,'' the anti-embargo lobby is arguing that U.S. tourism will benefit Cubans without strengthening Fidel Castro and that trade with Havana will mean substantial U.S. profits.

Cuban Americans boast about their political power, but they have been out maneuvered and outspent. South Florida Republican Reps. Ileana Ros-Lehtinen and Lincoln Díaz Balart, New Jersey Democrat Rep. Robert Menén- dez, and Florida's Democratic Sens. Bob Graham and Bill Nelson tried valiantly to thwart the legislation, but the coalition to lift the embargo is now calling the shots. If the Senate votes as the House did, President Bush will have to accept a weaker policy on Cuba or veto important anti-terrorist legislation.

The coalition to lift sanctions includes some well-meaning people who believe that the embargo is obsolete and that the United States ought to try something new. The trouble is that ''something new'' is the failed policy of engagement tried for years by Canada, Spain and other countries.

Cuba's communist dictator not only spurns foreign leaders' pleas to reform; he also has backtracked on some of the measures he was forced to implement when he lost Soviet assistance. Castro shows ''economic flexibility'' only under severe pressure.

WITH AN IRON HAND

When Castro received millions of Soviet subsidies, he ran Cuba with an iron hand. An influx of American tourist dollars will only strengthen his repressive regime.

Who is working to save Castro's regime? Admirers of the former Soviet Union and communist Nicaragua are. So are several large, grain corporations who also want U.S. government credits ''to sell'' to Castro. Credits mean that U.S. taxpayers pick up the tab if Castro doesn't pay. This is to which Bush alluded when he said that U.S. financing for Cuba's purchases of U.S. agricultural goods ``would just be a foreign-aid program in disguise.''

In a July 11 letter to Congress, Secretary of State Colin Powell warned that several countries have ``suspended official credits, because Cuba has failed to make payments on its debt -- including debt incurred while making agricultural purchases from these countries. Two governments have approached the United States to complain that Cuba's payment of cash for U.S. agricultural products have meant that they are not getting paid at all.''

The inability of the Castro government to pay its debts has sent foreign investment in Cuba plummeting to $39.9 million in 2001 from $448 million in 2000. Associated Press reports that ``the European Union excluded Cuba from a multibillion dollar pool of aid because of its poor human-rights record.''

Remittances from exiles are down, and when Russia closed its spy facility, the Castro government lost $200 million in revenues annually.

But assuming that the Castro government could pay for what it bought, who is going to make millions in profit? Not U.S. factory workers, who would have to compete with the Cubans whom the Castro government pays $15 a month. Also, how many U.S. companies will relocate to exploit a cheap, educated, submissive labor force in a country that bans independent labor unions and has no environmental constraints?

What about some of those ''moderate'' Cuban-American groups subsidized by ''progressive'' foundations and U.S. business interests pushing to lift the embargo? Some mistakenly believe that ending the embargo will bring democracy to Cuba. Some have business aspirations (they don't want to miss Castro's fire sales). Some are made up of aspiring politicians who think that dallying with Castro will turn them into electable celebrities.

Others, no doubt, work for Havana's security services. While Miami sleeps, many are working to ensure that the misery and repression in Cuba not only continues but is supported by American dollars.

*Frank Calzón is executive director of the Center for a Free Cuba in Washington, D.C.