CubaBrief: Folly of investing in Cuba. Foreign businessmen jailed and killed. Mass exodus of Cuban professionals. Political repression worsens.

Repression intensifies in Cuba. Photo taken from 11J protests in 2021.

Today, Jerry Haar, professor of international business at Florida International University and a fellow of the Woodrow Wilson International Center and the Council on Competitiveness, published an article in The Hill on “The folly of investing in Cuba.” It makes a good case, but there is an error in the second paragraph.

The claim that it is “the embargo on Cuba” that has “prevented Americans from doing business with Cuban nationals and entities for more than 60 years” ignores that U.S. companies have been doing business with the Cuban dictatorship for over 20 years. Enriching the dictatorship while Cubans continue mired in poverty due to an internal blockade. Only the dictatorship can legally import commercial goods in large quantities to sell. Farmers are barred from selling directly to Cubans, must wait for the Acopio, a government entity to collect their crops, that often rot while waiting, and pay them in worthless pesos. These are all restrictions placed on Cubans by the communist dictatorship.

Professor Haar also fails to mention that businessmen from countries with normal diplomatic and trade relations with Cuba have been arbitrarily detained, and shaken down by Havana. Two high profile cases that drew press attention are United Kingdom’s Stephen Purvis in 2017, and Canadian Cy Tokmakjian in 2015.

Niagara restaurateur John Panoutsopoulos was murdered in Cuba. FACEBOOK

Nor is there any mention of crime. Retired Canadian businessman John Panoutsopoulos was “murdered in his two-bedroom apartment east of Havana sometime between Dec. 12 and 15, 2020. Mr. Panoutsopoulos allegedly took out cash to “purchase another scooter or vehicle for convenience.” According to his daughter, Demi Panoutsopoulos, in a March 4, 2021 report in the Toronto Sun, “This information got into the hands of some dangerous men who ultimately found my father, murdered him and stole the cash.”

On January 18, 2022 in Havana, three Cubans were handed sentences of 23, 21 and 14 years after being found guilty of murder and carrying illegal weapons and explosives, reported The Standard. Four Cubans were originally charged, but “information provided by Global Affairs Canada didn’t make clear the fate of the fourth suspect.”

Demi Panoutsopoulos with her dad John Panoutsopoulos, who was murdered in Cuba in December 2020.

The idea that doing business in Cuba is a good idea in the midst of a massive political crackdown, and exodus of young Cuban professionals smacks of madness. Over 157,000 Cubans have fled to the United States since October 2021. Over this time 3,683 have been intercepted by the U.S. Coastguard in the Florida Straits, compared to 838 in 2020. Willy Allen, an immigration attorney in South Florida interviewed by Local 10 said, “It’s a significant number of young people” under the age of 40 adding “Almost all of them professional, a significant number of doctors, significant number of teachers, significant number of lawyers.”

Political show trials continue in Cuba, and a new draconian penal code sends a clear message to Cubans, the dictatorship is doubling down.

Lázaro Yuri Valle Roca

On July 28, 2022 Cuban journalist Lázaro Yuri Valle Roca was sentenced to five years in prison for “enemy propaganda and resistance,” the Committee to Protect Journalists issued the following statement:

“Cuban authorities have already unjustly held journalist Lázaro Yuri Valle Roca behind bars for more than a year; now he faces years more in prison simply for sharing information,” said CPJ’s Latin America and the Caribbean program coordinator, Natalie Southwick. “Valle’s sentencing is a clear sign that the Cuban government is back to its old playbook, using the extreme measure of jailing journalists to maintain its censorship regime.”

However, it is not just journalists. Christian Solidarity Worldwide has a campaign underway to free Pastor Lorenzo Rosales Fajardo. He was sentenced to eight years in prison in December 2021 following a political show trial.

Lorena, aged 12, David, aged 18, Rev Lorenzo Rosales Fajardo, and his wife Maridilegnis Carballo.

Carlos Martinez is a Cuban American university student at Rockford University and on July 11, 2022 published in the Mises Institute, an article that makes the case that “More than Sixty Years after ‘Liberation,’ Cuba Is a Communist Slave State.” Why are Cubans fleeing the island? Because they want to live in freedom, and the dictatorship since October 2021 has also been encouraging the exodus, and profiting off of it through price gouging airline prices to Nicaragua to obtain hard currency, to leverage the United States successfully for unilateral concessions by weaponizing immigration. However not all Cubans are leaving many are going out to the streets in protest, despite the harsh repression.

The Hill, August 2, 2022

The folly of investing in Cuba

by Jerry Haar, Opinion Contributor – 08/01/22 3:00 PM ET

The Cuban government’s recent announcement that it intends to permit foreign private investment is fueling the hopes and dreams of those in the business community whose naivete, avarice or moral agnosticism allows them to believe that their financial investment in the island economy will turn out to be manageable, profitable and sustainable.

While the embargo on Cuba has prevented Americans from doing business with Cuban nationals and entities for more than 60 years, the Biden administration has recently rolled back Trump-era restrictions and authorized a U.S. license to finance and invest directly in private small businesses on the island.

Admittedly, there are sectors of the Cuban economy that present attractive possibilities, such as tourism, energy, agribusiness and biotechnology. But American firms must bear in mind that foreign companies from Canada, Europe and Asia enjoy “first mover advantage” — they know the turf, the power brokers, the fixers, the suppliers and networks, the culture and the invisible rules of the game. They can also count on their governments to step in to protect their interests due to the loans provided to Cuba — especially loans from Spain, Britain, Canada, France and Japan.

Before a company decides to invest in a foreign locale, be it a “greenfield investment” (building a factory from scratch), a joint venture or an acquisition, the firm must meticulously consider a variety of major factors. With trade, a buyer-seller relationship is relatively easy to terminate, and each party subsequently seeks a new partner. With investment, the cost of putting up a brick-and-mortar facility and dissolving the partnership can be lengthy, complicated and costly. (Trading is like dating. Investing is like marriage.)

In the case of Cuba, the economic environment, infrastructure, operations, markets (internal and external) and opportunity cost will determine whether a company should proceed.

The first thing companies look for is the overall macroeconomic situation and the environment for doing business. In terms of GDP per capita, more than 100 countries fare better than Cuba. But in terms of economic freedom (a more important ranking for investors), the country ranks, according to one estimate, an abominable 172 out of 184 nations. The categories that comprise the ranking include property rights, financial freedom, rule of law, labor freedom and fiscal health.

Prospective investors in Cuba should be aware of the extremely poor state of Cuba’s infrastructure. This includes transport links, housing, internet and facilities for expatriate staff. Only 17 percent of Cuban households have a computer, and Cuba has the lowest mobile phone penetration of any country in Latin America. Water resources and sanitation are also illustrative, with 80 percent of the infrastructure more than 40 years old. Additionally, power outages are not confidence-builders for manufacturing companies eyeing investment in Cuba.

In terms of business operations, there are problems galore. Foreign firms present in Cuba can attest that their operations are challenged by many factors. These include government bureaucracy, the slow pace of decisionmaking and the inability to hire workers and pay them directly. Cuban law generally requires that foreign investors hire workers via public agencies known as “hiring entities” (entidades empleadoras). Low levels of worker productivity and high levels of absenteeism also characterize the Cuban workforce.

As for markets, last year Cuba exported $1.15 billion (versus imports of $3.4 billion), the bulk consisting of commodities: tobacco, sugar and nickel. China, Spain, India, Singapore and Germany were the leading export destinations. In terms of consumer markets, private income (mainly remittances from relatives abroad) is essential to supplement government salaries, as the minimum weekly wage in Cuba is equivalent to a large thin crust pizza from Domino’s. Half of Cuban spending goes for food, clothing, shoes and hygiene products. With a lack of brand awareness, restrictions on pricing, promotions and advertising, consumer goods companies are severely challenged.

Finally, any consideration of foreign direct investment in Cuba must consider opportunity cost — investing in an authoritarian nation where capitalism is absent versus investing in a democratic nation where a free-market system exists, albeit imperfectly. There are far better choices in the Caribbean Basin region, both Spanish- and English-speaking, for tourism; business process outsourcing and IT; light manufacturing; agribusiness; and logistics and transportation services. The Dominican Republic, Costa Rica, Panama, Trinidad and Tobago and Mexico are the most notable.

The 16th century French writer and humanist François Rabelais observed that: “We always long for the forbidden things and desire what is denied us.” The Cuban government’s recent gesture authorizing direct equity investment to entice foreigners is an act of desperation given the island nation’s dire economic situation. Financially astute and socially responsible American corporations will take a pass on this “opportunity” and invest their money elsewhere.

Jerry Haar is a professor of international business at Florida International University and a fellow of the Woodrow Wilson International Center and the Council on Competitiveness. He serves on the boards of The Commonwealth Institute and The World Trade Center Miami.

Committee to Protect Journalists, August 1, 2022

Cuban journalist Lázaro Yuri Valle Roca sentenced to 5 years in prison

A police officer guards the entrance to a court in Havana, Cuba, on May 31, 2022. A Cuban court recently sentenced journalist Lázaro Yuri Valle Roca to five years in prison. (AFP/Yamil Lage)

New York, August 1, 2022 — In response to a Cuban court’s July 28 decision sentencing Cuban journalist Lázaro Yuri Valle Roca to five years in prison for “enemy propaganda and resistance,” the Committee to Protect Journalists issued the following statement of condemnation:

“Cuban authorities have already unjustly held journalist Lázaro Yuri Valle Roca behind bars for more than a year; now he faces years more in prison simply for sharing information,” said CPJ’s Latin America and the Caribbean program coordinator, Natalie Southwick. “Valle’s sentencing is a clear sign that the Cuban government is back to its old playbook, using the extreme measure of jailing journalists to maintain its censorship regime.”

A judge at the People’s Provincial Court in Havana sentenced Valle to five years in prison for contempt and sharing enemy propaganda, according to news reports, a report by the local press freedom group the Cuban Institute for Freedom of Expression and the Press (ICLEP), and ICLEP general manager Normando Hernández, who spoke to CPJ via messaging app.

Valle has been held in pretrial detention since June 15, 2021, when he was arrested after police summoned him to allegedly close a 2020 contempt investigation; the day before his arrest, he had reported on prodemocracy leaflets thrown from a building in Havana for his YouTube channel Delibera. In June 2022, prosecutors requested a six-year sentence in his case.

Valle has suffered from multiple health conditions during his detention, including kidney problems while on hunger strike, according to CPJ research., August 1, 2022

Cuban exodus of young people continues amid economic crisis

By Andrea Torres, Digital Journalist

Since October of last year, U.S. Coast Guard crews have come across 3,683 Cubans. During the previous fiscal year, there were 838 by sea.

MIAMI – A cruise ship recently rescued 12 men at sea and these incidents keep increasing.

Since October of last year, U.S. Coast Guard crews have come across 3,683 Cubans at sea. During the previous fiscal year, there were 838.

The surge of migrants surpassed the historic Mariel boatlift of 1980.

By land, the numbers are much higher. According to U.S. Customs and Border Protection, since October of last year more than 157,000 Cubans have been processed at the US-Mexico border.

“It’s a significant number of young people,” said Willy Allen, an immigration attorney, who added that about 70% of his Cuban clients are younger than 40 years old. “Almost all of them professional, a significant number of doctors, significant number of teachers, significant number of lawyers.”

Allen believes Cubans are fleeing because of a lack of hope since Cuba is in a deep economic crisis. Abdel Legra, a Cuban activist, said the biggest problem is the lack of freedom.

Mises Institute, July 11, 2022

More than Sixty Years after “Liberation,” Cuba Is a Communist Slave State

07/11/2022 Carlos Martinez, Listen to the Audio Mises Wire version of this article.

In his book Anarchy, State, and Utopia, Robert Nozick has a chapter named “The Tale of the Slave” in which he explains the nine phases from the most restrictive to more liberating states of slavery. He writes that even though enslaved people have certain forms of self-rule, they are still enslaved. He asks: “Which transition from case 1 to case 9 made it no longer the tale of a slave?”

Nozick’s question highlights that there is no difference between people under indentured servitude and people who have certain liberties that an owner can take away at any time. Both are enslaved people who must respond to a master; it is just a matter of degrees of serfdom.

Nozick could be describing current Cuban political phenomena and social intercourse. Although Cubans have rights under a constitution, these are always called into question. Politicians and bureaucrats, not surprisingly, are greedy, looking out for their own benefit and taking advantage of situations for their own advancement.

Thus, it should not be difficult to understand that tyrants seek to put chains of servitude on their populace. Some have argued that though these chains are truculent and wanton, the reprimand must succumb to the rulers and not the system itself. The pretension of this essay is nothing more than to expound on how Nozick’s argument, albeit controversial, is fruitful in explaining Cubans’ abnormal conditions.

Cuba’s discrete slavery is exemplified by the economic circumstances laborers encounter. According to Bloomberg, inflation in Cuba finished at 71 percent in 2021 amid reforms to get rid of currency duality. This figure takes on more meaning if the reader assumes that inflation is a form of taxation. When Cuba’s government pays its citizens by printing money instead of using sound currency and real profits, the state levies extra taxes upon its citizens. No one can cover their expenses when 71 percent of their income is taken away by central planners and corrupt public officials. After the currency has undergone devaluation, not much is left.

Likewise, “tiendas moneda libremente convertible,” or free convertible currency stores, play a massive role in discriminating against citizens. According to Reuters, the Cuba-based economist David Pajon said that the stores are a source of inequality. To put this in context, only people who have foreign currency can shop at these stores, which means that only Cubans with relatives outside the country who send them money can shop in them. Furthermore, while the government promotes policies to help the less fortunate, they open stores that are not accessible to regular workers. This Machiavellian scheme engenders a hierarchy in which those who have relatives abroad are privileged, while the rest are left behind.

Cubans cannot even complain about these economic misdemeanors because freedom of speech is restricted. Human Rights Watch states:

The government has repeatedly imposed targeted and arbitrary restrictions on the internet against critics and dissidents, including as part of its ongoing systematic abuses against independent artists and journalists.

The elite is constantly threatening individuals who express what they think on social media, and the government has stated that only authorized journalists have the right to cover news on the island.

Contributing to the freedom of speech issue is that journalists lack tools to do their job. Suzanne Bilello argued in a 1997 report:

Those in Cuba who are trying to establish a free press face significant internal obstacles, including a lack of rudimentary supplies, such as pens and notebooks, inadequate financial resources, and virtually no exposure to the workings of independent media.

Even if it were possible to publish in spite of all the harassment endured, journalists struggle to get supplies and pay for a stable internet connection. Although these issues are very noticeable when searching for a newspaper that does not support the regime, few international organizations have covered them properly.

Traveling to another country is not an alternative for Cubans. If someone is caught making a raft or leaving the island other than by air, they are severely punished and even imprisoned. However, the regulations upon national citizens are minuscule compared to those placed on foreigners.

For example, last year, Cuban journalist Karla Pérez González was prevented from coming back to the island because of her critiques of the Communist dictatorship. Another remarkable example was the case of the Cuban YouTuber Ruhama Fernández, who was barred from traveling outside the island even though she had a visa to visit the US to attend conferences.

The state’s national security agency tracks all dissidents’ locations, meetings, and actions, somewhat like Big Brother in Nineteen Eighty-Four. To further decimate the reader’s morality on this subject, dissidents are always arrested under subjective interpretations of what the agency considers is against the motherland.

Independent journalists argue that while the system regulates all the previously mentioned elements, its administrators are corrupt. Such an innocent assumption breaks apart using Nozick’s logic. Even if the administrators were removed and substituted by angels, Cuba’s condition of slavery would not change a bit. Maybe the lower-class conditions could be better, but people would still be slaves of the state: what Spencer also called “the Coming Slavery.”

Cuba’s issue is not a problem of administrators, angels, or even devils: it is like a tree with poisoned roots. Either a new seed must be planted or the rootstock affecting the tree must be cut. Because it is impossible “to plant” a new Cuba, although Miami could be considered a cultural extension of Cuba, curing Cuba’s wound might be a more reasonable approach. So, now a question arises: How can Cuba be cured of the putrescent tyranny that it is suffering?

Such a question requires more depth than a mere essay. Despite that, an excellent starting point would be to assume that Fidel Castro’s system is condemned and needs to be replaced by a system that rewards individualism as a core social value. This could manifested as opening markets, granting individual rights, and restricting despotic legislators. 

Liberty is an essential element in the construction of every respectable society. Jose Martí, the national hero of Cuba, said perceptively: “Liberty is the right of every man, to be honest, to think and to speak without hypocrisy.” If a man cannot act, speak, or think as he pleases, he is no more than an indentured servant. 

Author: Carlos Martinez

Carlos Martinez is a Cuban American undergraduate student attending Rockford University. He is pursuing a BS in financial economics. Currently, he holds an Associate of Arts degree with a focus on economics and data analysis.