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Should American Taxpayers Subsidize Fidel Castro?
by Frank Calzon

Executive Summary

At the end of July, the U.S. House of Representatives voted on two amendments, each approved by 95 vote margins, to end restrictions on travel and 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 argues that US tourism will benefit Cubans without strengthening Castro, and that trade with Havana will mean substantial American profits. These arguments are misguided at best and disingenuous at worst.

Fidel Castro is broke, and at issue is not trade, but extending American export credit and export insurance to his regime, both of which are funded by American taxpayers. Since last year, American companies are allowed to ‘trade’ with Castro’s government on a cash and carry basis. But when Castro defaults on his purchases, under the proposed policy American taxpayers will have the burden of picking up his tab.

Agriculture Subsidies

Nine American presidents, from both political parties have supported restrictions on travel to Cuba. And while the anti-Embargo lobby and many editorial pages across the nation try to explain away this long-lasting U.S. policy in terms of domestic political considerations (i.e., the Cuban American vote), the facts prove otherwise.

In a July 11th letter to the House Committee on Appropriations, Secretary of State Colin Powell and Secretary of the Treasury Paul O’Neill said that: “Trade by other nations with Cuba has brought no change to Cuba’s despotic practices, and it has frequently proved to be an unprofitable enterprise.”

Unprofitable, indeed. France, Spain, Italy and Venezuela have suspended official credits to Castro’s Cuba -- not because of the Cuban communities in those nations -- but because Cuba has failed to make payments on its debt, including debt incurred on agricultural purchases. Powell and O’Neill wrote that, “two governments have approached the U.S. to complain that Cuba’s payments of cash for U.S. agricultural products have meant that they are not getting paid at all.”

Reuters reported on July 8, 2002 that, “Direct foreign investment in Cuba plummeted to $38.9 million in 2001 from $488 million the year before.” And earlier in the year, despite Castro’s tantrum, Russia closed its spy facility near Havana, thus denying his government $200 million per year in rent payments.

Castro’s current creditors are far from happy with these circumstances, as many have not received payment on interest or principal credit since 1986. Without even counting Castro’s debt to Russia, which he will not pay because he declares his debt as to a country that “no longer exists,” Havana owes billions of dollars to western banks and former socialist countries.

The situation in Cuba is thus much more a problem of policy than politics. President Bush announced his “U.S. Initiative for a New Cuba” on May 20, 2002, and declared that, “Cuban purchases of U.S. agricultural goods ... would be a foreign aid program in disguise.” And who pays for aid to foreign governments, but the American taxpayers who will eventually foot the tab for the defaults on his debts.

If this is not enough evidence, those lobbying for American credits and imminent subsidies should ask the Canadians for their advice. On August 7, 2002, the Montreal Gazette reported that, “Lilac Islands, a 15,000 ton Cuban-owned ship, has been held in the port of Conakry, the Guinean capital, for the past month while an Ontario company, armed with legal judgements, pursues Cuba for more than $3 million U.S. Last week, Guinea’s Court of Appeals upheld the continuance of the steel-laden ship’s detention-pending the payment of more than $275,000 in debt to Adecon Ship Management of Mississauga. Adacon claims the total debt on several judgements exceeds $3 million.” Imagine U.S. companies chasing down Cuban cargo ships in international waters to collect payment, while American taxpayers sit on the sidelines knowing that they’ll pick up the bill when the debtor doesn’t pay.

Trade with Cuba does not represent trade with Cuban business owners, entrepreneurs or consumers; Trade with Cuba is trade with the Castro government itself, which monopolizes virtually all enterprises and exploits Cuban workers as their sole employer. Said Condoleezza Rice, President Bush’s national security advisor, “In Cuba, Fidel Castro is still the one man through whom everything has to go. Any trade that goes through Cuba is going to strengthen Cuba’s regime.”

Regime Supporting Terror

While the anti-Embargo lobby insists on the right of American tourists to travel to Cuba, they ignore other rights and national security considerations. Each right must be weighted against its impact on other rights. As John Stuart Mill once said, “one man’s right to swing his arm ends where my nose begins.” And in the case of Cuba, the desire to travel must be weighed against the risks inherent in subsidizing a regime that poses a national security threat to the United States.

Consider: In their July 11th letter to the Appropriations Committee, Secretary Powell and Secretary O’Neill said that, “A relationship of continuing hostility exists between Cuba and the United States;” that “Cuba has long been listed by the State Department as a state-sponsor of terrorism;” and that, “[Cuba] continues to harbor fugitives from the American justice system, and it supports international terrorist organizations.” Castro has provided a safe haven for more than 70 fugitives from U.S. justice, including several accused of killing American police officers.

Due to the end of Soviet subsidies and his disastrous economic policies, Castro is bankrupt. His lack of cash restricts his ability to engage or support anti-American actions around the world.

But his anti-American commitment remains. On May 10, 2001, Agence France Presse quoted Castro’s speech at the University of Tehran, where he stated: “Iran and Cuba, in cooperation with each other, can bring America to its knees.”

What, specifically, does Castro have in mind? In a May 6th speech, John Bolton, Undersecretary of State for Arms Control, warned Americans that “Cuba has at least a limited offensive biological warfare research and development effort ... [and] has provided dual-use biotechnology to other rogue states.” Few are demanding that the administration produce a “smoking gun” to prove its assessment of the threat posed by Iraq, Iran, or North Korea, but the evidence is surely in on Castro, who needs American tourism to make up for Soviet money lost, so he can once again pursue a more active anti-American role in the world.

What Opening the Travel Ban Will Do

Some say that the opening of U.S. tourism to Cuba will bring the two cultures together, but the reality is far different. Currently, Castro sets aside hotels, beaches, stores, restaurants, and even hospitals for foreigners, and prohibits his own people from staying in those hotels and patronizing those facilities. U.S. tourism under current conditions would freeze in place Castro’s tourist apartheid, and likely exacerbate it. People-to-people contact under Castro’s regime is far from likely.

But contact between cultures of a different, and often nefarious, kind is much more likely. A March 2002 report released by Johns Hopkins University says that Cuba is “increasingly reported to be a major destination for sex tourists from North America and Europe. The increase is attributed to a concurrent drop in political restrictions on travel to Cuba and a crackdown on sex tourism in Southeast Asia, causing sex tourists to seek out alternative destinations. According to general news reports, Cuba is one of many countries that have replaced Southeast Asia as a destination for pedophiles and sex tourists ... Canadian sex tourism is also cited as largely responsible for the revival of Havana brothels and child prostitution.”

Conclusion

In their same May letter to the House Appropriations Committee, shortly before the body passed two amendments ending restrictions on travel and financing exports to Cuba, Secretaries Powell and O’Neill stated that, “Current economic circumstances in Cuba do not support changing our position on trade with Cuba. Moreover, the lack of a sound economic rationale makes it more likely that Castro would use any liberalizing of our trade position for his political benefit.”

Providing trade benefits to America’s enemies, especially those on the State Department’s list of terrorist nations, makes as much sense as selling U.S. scrap metal to Japan in the 1930s -- some of which was used to build up the Japanese military and, later, attack Pearl Harbor.

But apart from security policy, one of the greatest advantages of the U.S. embargo on Cuba is that it has saved U.S. taxpayers millions of dollars in unappropriated export insurance and subsidies. American banks aren’t among the consortium of creditors, like those in France, Spain and Canada, who have been waiting for years to be paid what they are owed.

Fidel Castro is broke. He can’t pay his debts, and several of his most important trading partners have suspended credits and export insurance. Yet, like the second to last scene in a bad Hollywood western, some are out trying to muster a cavalry to save his regime. This time, it is a cavalry of American tourists and special interests whose objectives will only strengthen the Western Hemisphere’s most enduring dictatorship.

Capital markets lie only when con artists run the show. And forcing American taxpayers to subsidize Cuba, which has seen a 92% decrease in foreign investment (from $488 million in 2000 to $39 million in 2001) is a leap from a precipice trumping Enron and Worldcom combined. A policy of moving exports from a cash-and-carry basis to credit extensions is like sentencing taxpayers to investing in Enron or WorldCom right before those stocks plummeted. American taxpayers did not have to bail out those companies. And they should not be forced to bail out the head of an openly hostile government, especially when his default is more a question of “when” than “if.”

If you are interested in contacting your senator or representative on this important issue, please write to:

Your Senator
United States Senate
Washington, DC 20510 Your Representative
United States House of Representatives
Washington, DC 20515

You can also call the Capitol switchboard at (202) 225-3121, and ask for your senator or representative by name.

Frank Calzon is executive director of Center for a Free Cuba.