CubaBrief: Cuban dictatorship begins to liberalize Cuban economy in response to US economic sanctions. How to push for a democratic opening.

The Cuban dictatorship is taking steps to liberalize the Cuban economy in response to U.S economic sanctions and the challenges of the COVID-19 pandemic.

Reuters reported on July 29th in the article “Cuba Loosens Straitjacket on Private Sector to Stimulate Economy” that “Communist-run Cuba is loosening restrictions on small businesses as it seeks to stimulate a state-dominated economy hammered by the implosion of ally Venezuela, U.S. sanctions and the pandemic.” Meanwhile, Nora Gámez Torres and Mario J. Pentón reported on July 30th in the Miami Herald in their article “We are closing all doors.” The Trump administration goes after Cuban bank in London” that the “United States sanctioned Havin Bank, a London-based Cuban-owned bank, on Thursday in another attempt by the Trump administration to cut off the money flowing to the island’s government.” Havin Bank is part of the Castro regime’s conglomerate GAESA that is run by Raul Castro’s former son-in-law, General Luis Alberto Rodríguez López-Callejas, and has a record of corruption.

This was not supposed to happen, according to the Chamber of Commerce, the Ag Lobby, and the Pro-Castro lobby sanctions do not work, and that the way that the Castro regime would open up the economy in Cuba would be through loosening sanctions and providing credits to the dictatorship that would help Cubans. This was attempted during the Obama Administration and the results were opposite to what was claimed. Trade between the two countries collapsed in 2015 to $185.7 million from a peak of $711.5 million in 2008, the last year of the Bush Administration.

The claim that trade and tourism with the Castro regime will provide “an economic lifeline for the Cuban people” is untrue. During President Barack Obama’s détente with Cuba, the Cuban military’s role in the tourist economy expanded and further centralized economic control.

Over a quarter century, Eusebio Leal, who recently passed away, “turned Old Havana into a painstakingly restored colonial jewel, a tourist draw that brings in more than $170 million a year, according to the most recent available figures. His office became a center of power with unprecedented budgetary freedom from the island’s communist central government. That independence is gone. Last month [ August 2016], the Cuban military took over the business operations of Leal’s City Historian’s Office, absorbing them into a business empire that has grown dramatically since the declaration of detente between the U.S. and Cuba on Dec. 17, 2014.”

Out of a population of 11 million Cubans, 600,000 “work for themselves.” Cuban law restricted Cubans living on the island from starting their own companies, reported the Miami Herald in 2018: “Private sector workers in Cuba, known as cuentapropistas, are licensed only to work for themselves and cannot legally establish companies to expand their work beyond a small scale. Larger enterprises are allowed only for the government and foreigners.”

This is why Cuban dissidents are calling for an end to the internal blockade erected by the Castro regime, and over 20,000 have signed the petition calling for its end.

Eleven years ago the Obama Administration, together with other countries in the region, ignoring the Democratic clause of the Organization of American States (OAS) welcomed the Castro regime back into the democratic regional body in June 2009. Raul Castro was not interested because the dictator preferred to strongly back, what he called, “the legitimate government of President Nicolas Maduro,” and denounced the OAS.

This approach was part of an overall foreign policy by the Obama Administration that Dr. José Azel in a April 24, 2015 article published en El Nuevo Herald titled “The Resurrection of Neville Chamberlain” summarized and identified the architect of the policy. The Obama Doctrine was first addressed by Charles A. Kupchan in 2001, and fully fleshed out in his 2010 book,  How Enemies Become Friends: The Sources of Stable Peace. Dr. Kupchan, currently a professor at Georgetown University, served as special assistant to President Obama for national security affairs from 2014 to 2017. Dr.Azel summarized Kupchan’s approach into four phases:

It must begin, according to Kupchan, by making concessions to our enemies in an act of “unilateral accommodation.” These concessions must be “unusual and costly” to signal benign intent. […] The second phase entails the practice of “reciprocal restraint” where the adversary nations walk away from rivalry, peace breaks out, and geopolitical competition gives way to cooperation.[…] “Social integration” and “the generation of new narratives and identities” are the third and fourth phases of Kupchan’s sequence towards stable peace.

This policy was a failure in RussiaCuba and Iran. The abandonment of sanctions for a policy of neo-appeasement led the world to greater instability, the humanitarian and political crisis in Venezuela, the deaths of Americans in Iraq, and a more aggressive Russia. At the end of the Obama Administration U.S. – Cuba relations were a mess with soldiers marching in Cuba chanting that they would give President Obama a lead hat while U.S. diplomats began to suffer brain injuries.

It is important to recall that the inner circle of power in Cuba is composed of elderly white men that have ruled with absolute power for sixty one years, and maintain the will to continue calling the shots, but their time is drawing to an end. How best to deal with the “biological” succession and push for a democratic transition?

Doing business with a dictatorship that engages in human trafficking, subverts democracy and trains torturers abroad while terrorizing its own citizenry at home is a corrupting process that has demonstrated each time that it has been tried that it does not lead to a constructive end.

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There is an alternative to Kupchan’s failed neo-appeasement policy, or to a policy of military intervention. It is a policy of nonviolent action as laid out by the late strategic nonviolent strategist Gene Sharp. Economic embargoes fall within the 198 methods of nonviolent action that Professor Sharp listed in his writings that are available online at the Albert Einstein Institution’s web site. In addition to state actions there is a long list of actions that can be taken by citizens and non-governmental organizations to push for democratic change and liberalization. The web site also includes two important books by Gene Sharp for pro-democracy activists: From Dictatorship to Democracy and How Non-violent Struggle Works that are required reading.

The Miami Herald, July 30, 2020

“We are closing all doors.” The Trump administration goes after Cuban bank in London

By Nora Gámez Torres and Mario J. Pentón 

Cuban shows Cuban Pesos in one hand & Convertible Pesos in the other 10/22/13. (Yamil Lage/AFP)

The United States sanctioned Havin Bank, a London-based Cuban-owned bank, on Thursday in another attempt by the Trump administration to cut off the money flowing to the island’s government.

The Treasury Department included Havin Bank on a list of blocked entities that companies or persons under U.S. jurisdiction cannot engage with. Any foreign company that uses the United States’ financial system could also violate the Treasury’s regulations if found conducting business with the bank, a senior administration official told the Miami Herald.

“You can’t be a functioning bank in the UK and not have some sort of connection to the U.S.,” he said.

“This continues to close the doors for them,” added the official, who criticized the Cuban government for its “repression” and “stealing” from the people.”

“Every time they think they will have a vehicle to conduct international financial activities, we will shut it down,” the official said. “We are making the cost of the Cuban regime doing business as usual all the higher. We will continue with that until they change their behavior.”

The bank had previously been included in the list of blocked entities but under its original name, Havana International Bank. In 2015, during the thaw of relations promoted by the Obama administration, Treasury removed from its blacklist several officials linked to the bank.

Emilio Morales, director of the Miami-based The Havana Consulting Group, said that the bank in London provided “a small oxygen line” to the government.

“With this designation, everything is going to be more difficult for them. The companies that did business with that bank are going to think twice about continuing it,” he said.

Havana International Bank was created in 1972 as a private limited company in London. Experts believe that the bank carries out operations related to a network of Cuban government offshore companies.

“The government of Cuba has created financial institutions in many countries to facilitate transactions as a means to avoid the investigative tentacles of the OFAC, “ the Treasury’s Office of Foreign Assets Control, said John S. Kavulich, president of the US-Cuba Economic and Trade Council, based in New York.

Cuba’s National Bank, the main shareholder, granted Havin Bank a license to establish an office in Havana in 1995. The bank reported $1.2 million in revenue, according to public documents.

The sanction’s announcement comes shortly after a sudden stop of dollar remittance services from the United States after the French bank Crédit Mutuel closed the accounts of several Cuban companies for fear of the embargo, several sources said.

“These sanctions close an access route for remittances themselves,” Morales said, adding that the Trump administration has put Cuban leader Miguel Diaz-Canel “against the wall: either they make a transparent and deep opening with real benefits for the people or end up fleeing the country like Batista in 1959.”

The New York Times, July 29, 2020

Cuba Loosens Straitjacket on Private Sector to Stimulate Economy

By Reuters

HAVANA — Communist-run Cuba is loosening restrictions on small businesses as it seeks to stimulate a state-dominated economy hammered by the implosion of ally Venezuela, U.S. sanctions and the pandemic.

The import-dependent country is reopening after eliminating the new coronavirus in most provinces and bringing it under control in the Havana area.

President Miguel Diaz-Canel, however, speaking earlier this month, said the country faced an ongoing international crisis and would implement a series of reforms to increase exports, cut imports and stimulate domestic demand.

The economy is forecast to decline this year in tandem with the region, or a bit less than 10%.

The measures include more autonomy for state companies, farmers and local government, dollarization of some internal trade and, Diaz-Canel said, “the improvement of the non-state sector, with immediate priority in the expansion of self-employment and removal of obstacles.”

The non-state sector, excluding agriculture, is composed mainly of small private businesses and cooperatives; their employees, artisans, taxi drivers and tradesmen. All are under the rubric of self-employed, numbering 600,000 before the pandemic left an estimated 40 percent tied to the tourism industry and public transportation without work.

One obstacle already removed is on the right to import and export, albeit through state companies.

“We want to put all forms of management on an equal footing,” Foreign Trade Minister Rodrigo Malmierca said last week during a televised roundtable discussion on the measures.

Economists at home and abroad note the government has promised equal treatment for a decade, so while they back the new measures, it remains to be seen whether they will actually – and effectively – be implemented.

The task is daunting as the government admits it has little foreign exchange to purchase food, fuel and other supplies from abroad, where the peso is worthless.

Cuba, where the state monopolizes retail and foreign trade, faced a liquidity crisis even before the coronavirus pandemic shuttered tourism and hit other revenue earners.

Pandemic fallout has worsened shortages of food, medicine and other goods and led to long lines at retail outlets.

“We hope that with these new measures doing business will improve,” said Maylen Diaz, who runs a cafeteria in the upscale Vedado area of the capital.

Diaz said that since reopening on July 10, she had faced a daily struggle due to a lack of tourists and supplies.

“I think that some businesses will still have to close, others will continue to subsist and resist as long as they can,” she said.

The first wholesale outlet for private eateries, Mercabal, opened last week in Havana boasting large formats and a 20% discount, but just a few products.

For more than a decade private businesses have been forced to purchase supplies from state retail shops or on the informal market.

“I saw the list: chicken, beer, sugar, salt, flour, rice; I think there is yeast, there is coffee,” cafeteria owner Enrique Penabella said, waiting in line with other business owners to sign contracts or pick up goods.

“But if they can’t do the same for people in the retail stores, I doubt they can keep it up,” he added.

(Reporting by Marc Frank; additional reporting by Reuters television; Editing by Dan Grebler)