CubaBrief: Bipartisan Senate bill would end Cuban embargo. Why trade with such a deadbeat? Will U.S. taxpayers subsidize the Castro regime?

Senators Amy Klobuchar (D-Minn.), Jerry Moran (R-Kan.), Chris Murphy (D-Conn.), Roger Marshall (R-Kan.), and Elizabeth Warren (D-Mass.) on March 6, 2023 introduced a bill that would end economic sanctions on Cuba and lift restrictions on funding the Cuban dictatorship.

The name of the Bill: the “Freedom to Export to Cuba Act of 2023” is misleading on two fronts. First, cash and carry trade has existed between Cuba and the United States since 2000 with the passage of Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), 22 U.S.C. §§ 7201-7211 . U.S. businesses have sold $6.9 billion in products to the Cuban government over the past 23 years. What have sanctions done? They have limited resources to the dictatorship, especially the military, and protected U.S. taxpayers by not providing credits, or financing to Havana which is a decades long notorious deadbeat.

Reading the text of this Bill reveals that it opens the door to loan guarantees, and subsidizing the Cuban dictatorship in order to also provide subsidies to businesses investing in Cuba.

Over the past fifteen years a dangerous trend has been growing in the United States. Some businesses are rigging the economy to avoid losses in a way that runs counter to the basic tenets of capitalism. If their investment fails, the taxpayer bails them out, and if they succeed they pocket the profits. Professor Joan C. Williams and Congressman Ro Khanna in their article “It’s Time to End Slash-and-Burn Capitalism” published on October 28, 2020 in the Harvard Business Review defined this phenomenon.

“Privatizing profits while socializing risks isn’t capitalism: It’s rigged roulette. Equally important, practicing capitalism does not mean insisting on special treatment from government that benefits shareholders at the expense of other stakeholders.”

$6.9 billion ended up in the coffers of American businesses. James Prevor, President and Editor in Chief of the publication Produce Business in the October 2002 article, “Cuba Caution”, described how Havana “had exhausted all its credit lines and, at best, was simply rotating the accounts. When the opportunity came to buy from the United States, Cuba simply abandoned all those suppliers who supported the country for 40 years and began buying from us.”

Source: CubaTrade.org

The suppliers were not the ones impacted by Cuba’s failure to pay its debts, the taxpayers of the suppliers’ home countries were the one’s left holding the bag.

The Cuban dictatorship’s objective is to get the United States to open up credits and financing of transactions with Havana. Once that happens then payments for American goods will be defaulted on, and creditors will join the long line that includes the Paris Club seeking to have their debts paid.

The U.S. Embargo on Cuba has saved U.S. taxpayers billions, but over the decades there have been repeated attempts by the Chamber of Commerce and the Agriculture lobby to end it. This is because they will have it rigged to socialize risk, passing on debts to taxpayers, while seeking profits together with the Castro dictatorship in a bait and switch.

Paris Club members owed billions by Havana that has consistently failed to pay.

The attempt by Mr. Bernal in The Hill article, reproduced below, to equate the economy of the Dominican Republic with that of Cuba is mistaken. It is true that they have roughly similar size Spanish speaking populations and are both in the Caribbean, but fails to mention the great disparity in economic freedom. The Dominican Republic is rated Moderately Free and listed at 65 versus Cuba that is rated Repressed and listed at 175 (just above North Korea) in the Heritage Foundation’s 2023 Index of Economic Freedom.

Cuban economist Elías Amor Bravo in his article “The US Embargo and Cuba’s Famous Cigar Festival” published in the Havana Times on March 5, 2023 explores the regime’s business monopoly with Cuban tobacco, also references the internal blockade, and correctly assigns blame to Cuban communist officials for the economic misery in Cuba.

This blog has examined the role of the internal blockade, and it exists due to communist central planning, and continues to the present day. Anyone that wants to do business in Cuba has to do it with the Cuban dictatorship because the sole importer is the government.

The Hill, March 6, 2023

Bipartisan Senate bill would end Cuban embargo

by Rafael Bernal – 03/06/23 3:51 PM ET

 

A bipartisan group of senators on Monday introduced a bill that would end the commercial blockade on Cuba while maintaining other U.S. laws that impose human rights-based restrictions on the island nation.

The bill, introduced by Sens. Amy Klobuchar (D-Minn.), Jerry Moran (R-Kan.), Chris Murphy (D-Conn.), Roger Marshall (R-Kan.), and Elizabeth Warren (D-Mass.), showcases political divisions over a blockade that’s been in place more than six decades.

An array of powerful Democrats and Republicans oppose leniency toward the Cuban regime, to say nothing of a radical policy shift such as lifting the trade embargo.

But some Republicans see Cuba as an untapped market of 11 million people a stone’s throw from Florida, and some Democrats see the embargo as a Cold War-era anachronism.

“I have long pushed to reform our relationship with Cuba, which for decades has been defined by conflicts of the past instead of looking toward the future,” Klobuchar said in a statement.

“By ending the trade embargo with Cuba once and for all, our bipartisan legislation will turn the page on the failed policy of isolation while creating a new export market and generating economic opportunities for American businesses,” she added.

It’s no coincidence that both Republican co-sponsors are from Kansas, a major agricultural state.

“The unilateral trade embargo on Cuba blocks our own farmers, ranchers and manufacturers from selling into a market only 90 miles from our shoreline, while foreign competitors benefit at our expense,” Moran said. 

In 2020, Cuba’s top imports were poultry meat, wheat, corn, concentrated milk, rice and dried legumes, according to the Observatory of Economic Complexity. And its top import partners were Spain, China, Italy, Brazil, Canada and the United States.

While the United States is one of the top exporters of food to Cuba — indeed the top exporter, according to a January 2022 report by CBS Miami — restrictions on trade make it harder for U.S. farmers to export their food there, according to a 2021 report from the Congressional Research Service (CRS).

And because of the embargo, the Cuban government imposes restrictions on who can import and distribute U.S. products, further diminishing the market for those goods.

“I’m proud to sign onto the Freedom to Export to Cuba Act. It’s important for the United States to boost our economic opportunities and increase market access for American-made goods,” said Marshall.

According to the CRS report, Cuba was the ninth largest export market for U.S. agricultural products before 1960; it now ranks as the 50th market, according to the U.S. Department of Agriculture.

The Dominican Republic, a U.S. ally in the Caribbean with a population similar to Cuba’s, ranks 15th and over the past three years has imported seven times more U.S. agricultural products than Cuba.

Because of its proximity to Cuba, the United States has a baked-in advantage over other major agricultural producers, but countries such as Brazil remain competitive because of unfettered trade with the island.

“This legislation will expand market opportunities for U.S. producers by allowing them to compete on a level playing field with other countries. It is time to amend our own laws to give U.S. producers fair access to market to consumers in Cuba,” Moran said.

While the economic argument may sway some Republicans from the plains states, any easing of sanctions on the communist regime is an uphill battle.

According to the bill’s proponents, it would maintain restrictions tied to the Cuban government’s human rights record and to its takeover of private property following the 1959 revolution.

“We can expand opportunities for American businesses and farmers to trade with Cuba while still holding the Cuban government accountable for its human rights record. This bipartisan legislation is a smart fix that will create American jobs and benefit the Cuban people,” Murphy said.

But if the bill is picked up by the Senate Foreign Relations Committee (SFRC), it will face two powerful Cuba hawks on either side of the aisle in Sen. Marco Rubio (R-Fla.) and panel Chairman Bob Menéndez (D-N.J.).

“So good luck with that,” said a senior Democratic aide.

And even if the bill manages to avoid SFRC, it’s unlikely it will be put to a vote unless leadership is convinced there’s enough support for to get 60 votes.

Still, the bill gives voice to those who seek to rethink a policy toward Cuba that’s remained essentially static for more than half a century.

“It is long past time for us to normalize relations with Cuba,” Warren said. “This legislation takes important steps to remove barriers for U.S. trade and relations between our two countries and moves us in the right direction by increasing economic opportunities for Americans and the Cuban people.”

https://thehill.com/latino/3886489-bipartisan-senate-bill-would-end-cuban-embargo/

Havana Times, March 5, 2023

The US Embargo and Cuba’s Famous Cigar Festival

Spectacular data was offered from the productive and commercial monopoly consortium of Cuban tobacco, Habanos SA.

By Elías Amor Bravo (14ymedio)

HAVANA TIMES – For all those who do not believe the story of the embargo/blockade and who are bored with all the pitiful complaints by the Cuban communist leaders, I recommend a visit to the 23rd edition of the Cigar Festival held in Havana from Feb. 28 to March 3rd. It has nothing to do with an embargoed country. Quite the contrary. In addition, business is going smoothly.

At a press conference, data was offered from the productive and commercial monopoly consortium of Cuban tobacco, the so-called Habanos SA, the golden retirement of Murillo,* which generated revenues in 2022 of 545 million dollars, 2% more than the previous year.

The multinational extension of the regime’s monopoly corporation is spectacular, since it has 4,769 specialized points of sale (157 Habano, 17 Cohiba Atmosphere, 587 Habanos Terrace, 2,744 Habanos Point and 1,264 Habanos Specialist), with a growth of 10% more than in 2021. Who would have thought? Despite the campaigns, Cuban tobacco consumption continues to increase. The festival has invited 140 specialized journalists from 20 countries around the world. Who said that the Castro government doesn’t know about marketing?

Someone could misinterpret this initial tone, but it’s not my intention. The point is that anywhere Cuba has a competitive product in world markets, which sells well, at good prices, which catches investors and tobacco smokers who come to enjoy cigarettes and order their purchases, the ’blockade’ simply does not exist. It’s not even mentioned. I looked in the communist state press that covers the Havana event to see if there was any statement against the embargo/blockade by the leaders who attended. Nothing. Don’t even bother looking. It’s something for Cuba’s high society, in the most stale style of millionaires and speculators. Let them enjoy themselves, Murillo included.

The state press pursued Díaz Canel and Murillo at the inauguration in the Cuban capital of the twenty-third cigar festival that, in order to spare no expense, will go on until next Saturday, March 4. A week to enjoy, at the expense of Habanos SA and the regime, the excellence of the best product of the Island since colonial times.

Along with white gold [sugar], Cuba was internationally recognized for the quality of its tobacco from the first tobacco planters of my beloved and never forgotten Santiago de las Vegas, a municipality that stood up to the cigar stores of the metropolis, to the painstaking  growers of the Vuelta Bajo region in Pinar del Río. The cigar business has survived the revolution amazingly well, and there it continues, on its feet, demonstrating what Cuba can and could do in many other areas of commerce.

So in the most triumphant tone one can imagine and with the whining far away, Díaz Canel and Murillo dedicated themselves to public relations, and at the press conference at the Palacio de Convenciones, they recreated themselves with the economic results of the Habanos SA monopoly and presented the company’s management balance sheet for 2022 with great fanfare. Some discovered a Murillo who was much more relaxed than in the time of the Ordering Task.** It’s what the elite do far from the spotlight.

As it is not an embargoed, blockaded, or besieged nation, there at the press conference the world was informed from Cuba that Spain, France, Germany, China and Switzerland were the five main markets for the cigars last year. How good it would have been to include the United States. The leaders limited themselves to saying that only the order of the nations had changed with respect to 2021. Not a reference to the northern neighbor. Neither good nor bad.

Among the activities of the festival, in addition to the visit of businessmen and tycoons from half the world, who arrive in their private jets to the besieged Island and stay in the new hotels with astronomical prices, visits to Habana factories and tobacco plantations were scheduled in the western province of Pinar del Río as the state press says, and I admit, “internationally recognized as the land of the best tobacco in the world.”

Also in that framework of a besieged and embargoed nation, the state monopoly presented the novelties of the event, basically the launches of the Montecristo Open, Bolívar New Gold Medal and Master Line (banded) products. Innovation continues to be a fundamental element of the creativity of Cuban tobacco merchants, which makes you wonder what this sector could be like if there were no communist economic model governing the destinies of the economy and the nation.

Malmierca, minister of foreign trade and foreign investment, also walked through the festival and ended up destroying the argument of the embargo/blockade by reporting at the press conference that the fair has 2,000 attendees from 110 countries, 250 exhibitors from 10 other countries and 6,459 square feet of exhibition space. Figures like these would not be possible in an embargoed country.

Malmierca welcomed exhibitors from Italy, Hungary, Spain, Panama, Mexico, Costa Rica, Canada, Ecuador and China, including Cuban exhibitors. Of the 70 stands at the fair, 59 are Cuban, who, as Malmierca said, “show the varied offers of our country in the field of crafts, cultural and musical production, fashion, tourism, gastronomy and also everything related to cigars.”

Malmierca pointed out that “this trade fair will be an ideal framework for technical and commercial exchanges between companies, suppliers and the public that will be able to have access to the exhibition,” but those exchanges will be only for certain companies, basically the state ones, those that live within the regime.

I wish that the exchanges would serve Cuban private companies, guided by the motive of profit and profitability, but the regime’s internal blockade is another thing, the worst of all.

Translated by Regina Anavy for Translating Cuba

Translator’s notes:

*Marino Murillo is the Former Minister of Economy and Planning.
**The Ordering Task is a collection of measures that include eliminating the Cuban Convertible Peso (CUC), leaving the Cuban peso as the only national currency, raising prices, raising salaries (but not as much as prices), opening stores that take payment only in hard currency, which must be in the form of specially issued pre-paid debit cards, and a broad range of other measures targeted to different elements of the Cuban economy. 

https://havanatimes.org/features/the-us-embargo-and-cubas-famous-cigar-festival/

From the Archives

Produce Business, October 2002

THE FRUITS

OF THOUGHT

Cuban Caution

By James Prevor

President & Editor-in-Chief

Mr. James Prevor

The buzz in the produce trade, indeed in the whole food industry, is all about Cuba. How could it be otherwise?

Closed for four decades, all the sudden a market is available and it is a market right on our doorstep, a market likely to buy principally from the USA.

Think about how hard everyone works to boost sales — from commodity promotion boards to state departments of agriculture, from individual produce shippers to massive integrated food companies. It is an enormous battle. Fortunes are spent with tremendous effort exerted to boost consumption by the smallest of amounts, to win some tiny sliver of market share. The bottom line is that in long-established markets with mature distribution and consumption habits, it is very difficult to win new business.

Cuba is a special phenomenon because business with the United States was artificially restrained due to the U.S. embargo on trade with Cuba. Now, there has been a crack in that embargo, and Cuba is permitted to purchase food as long as U.S. firms do not provide credit. So all the sudden, it is like a tidal wave of new business as trade patterns begin to switch back to their natural state.

Now we get the chance to go where every business opportunity is new and potentially substantial. It is like a breath of fresh air for a seller.

The air, however, is not completely clean. Although anyone in Cuba now can request a purchase from a U.S. company, in the end, only the government can actually make the purchase. It is a system likely to lead to great corruption. And indeed, the pattern of Cuban purchases is not what one would expect of a rather poor Caribbean island. It is, instead, a pattern of purchases being made with an ulterior motive.

It is consciously designed to “spread the wealth” to buy in as many different states and Congressional districts as possible. This is not a concern to most buyers, but it seems to be a concern to the Cuban government. Why?

Well, the law currently allows only the purchase of food and medicine and only for cash. Initially it wasn’t thought that U.S. firms would get much business at all. After all, Europe, Canada and South America all provided credit terms to Cuba.

What wasn’t fully recognized, however, is that Cuba is an international deadbeat. It had exhausted all its credit lines and, at best, was simply rotating the accounts. When the opportunity came to buy from the United States, Cuba simply abandoned all those suppliers who supported the country for 40 years and began buying from us.

Produce shippers need to be careful to not get used as pawns in a program crop game. Here is the plan. Cuba really needs mostly basic commodities like corn, soybeans, wheat and rice. But these alone won’t provide the broad base of support Castro needs to get legislation more to his liking. So the key is to find other producers, including produce growers all across the country. 

Then the plan is to use purchases to build an army of support. The first goal is to get access to more credit. There is an argument that if private companies want to give Castro credit, we should let them. Many argue that since the collapse of the Soviet Union, Cuba is no threat to us, and normal commercial relations are likely to speed reform.

Yet it seems highly unlikely that many private vendors are chomping at the bit to extend credit to Cuba. Recently the Dutch seized a ship as a result of default by the Cuban government on various extended credit. Castro’s regime also owes Europe about $11 billion, Japan almost $2 billion, Argentina over $11/2 billion — all this besides the $25 billion that the former Soviet Union lent to the island nation.

This also gives no recognition to the billions of dollars Cuba owes to those it expropriated property from when Castro seized power.

But what the really big grain traders want is to sell to Cuba on credit — and get those credits provided or guaranteed by various federal loan programs. In effect, these agribusiness behemoths want to sell to Cuba and have the U.S. tax-payer pick up the tab.

And their bet is that once produce shippers have gotten a taste of the business, they will become a kind of Amen corner for the Cuban lobby, pushing Congress to approve whatever laws will be to the liking of the Cuban government. This really brings to the forefront why trade with a communist country poses unique dangers to a democratic society.

In trading with a capitalist economy, the political desires of the state just don’t matter very much. There is no way for the government to use the purchases of dozens or hundreds of private actors to influence the law. And if a private party tries to make trade conditional on supporting a political program, vendors can just go sell his competitors. But one buyer controlling the purse strings of a whole country can use the purchasing power to do a lot of mischief.

The great genius of the American Republic has been that it does not require all men to be angels. It is expected that people shall act in factions with varying interests. And it was the genius of the founding fathers to recognize that a great continental scale republic, in which factions would engage in many shifting alliances, would be most likely to produce a stable society. So we can expect that those who benefit from Cuban business will be especially supportive of Cuban needs.

Fortunately, Cuba is not Russia, and its small size will limit its ability to form a stable coalition to warp U.S. government policy in its favor. Even the biggest vendors to Cuba will have other more important interests. But we can expect Castro to try, and should be mindful that those of us in the produce industry don’t become dupes in a plan to use our tax money so some soybean exporter can strike it rich. pb

Sun Sentinel, June 5, 2000

News

WHY TRADE WITH SUCH A DEADBEAT?

By NICK NICKOLICH

South Florida Sun-Sentinel

Jun 05, 2000 at 12:00 am

With the passing of the legislation on trade with China in Congress, a new project has been rushed into the House by two U.S. senators, Max Baucus, D-Mont., and Pat Rogers, R-Kan., aimed to end the four decades of U.S. trade embargo against Cuba. But the real lobbying force behind this project are foreign countries already losing money in Cuba and some powerful U.S. industrial and food exporters that have lured American farmers and industries into believing that Cuba can indeed become a significant and long-lasting market for their products.

In Cuba’s centralized economy the state controls all labor, means of production and distribution of goods. Since there is no market economy in Cuba, there is little to no buying power in internationally traded paper. The Cuban national currency has no trading value in world markets. How, then, can Cubans pay for the food, medicines and goods sold to them, via the Cuban government, by U.S. firms? They simply can’t.

After three decades of USSR subsidies, Cubans became experts in luring foreign companies and banks to pump money and merchandise into the island and not paying their bills. Evidence of this is found in the billions of dollars owed by Cuba to Japan, the United Kingdom, Germany, Canada, Argentina, Italy, Mexico, Spain and others. The communist government of Fidel Castro stalled most foreign debt payments from the mid-1980s, and now owes more than $15 billion dollars.

In 1998, Argentina conducted negotiations with its single biggest debtor, Cuba, whose $1.6 billion owed to Buenos Aires was a barrier to economic relations between the two Latin American nations. The same year, Havana struck two public deals with Japan and Italy to restructure more than $800 million in debt. Britain forgave Cuba 8.5 million in interest arrears and said 8.5 million in new credit cover would become available as Cuba fulfilled its repayment terms on the principal.

Cuba has been able to trade with the entire world (but the U.S.) all along. What the Cuban government badly needs are fresh lines of credit, and both Baucus and Rogers are ready to hand them over to Castro on a silver platter.

With all the mounting debt and the ongoing infusion of good money over bad money in Cuba, who will end up paying? Certainly not the manufacturers or the banks that benefit from substantial tax write-offs each year. When Britain forgives millions in interest, it is the British taxpayer who foots the bill. When Japan renegotiates the billions of yen Cuba owes to Japanese firms, the Japanese taxpayer pays. And if the U.S. trade embargo is lifted and Castro gets fresh U.S. lines of credit to buy American products (that Castro can’t and won’t repay), it will be the American taxpayer who then will be stuck with the bottom line.

All the existing creditor countries are counting on the end of the U.S. trade embargo and on the infusion of American capital. First, it will help Castro pay them back what he owes them. Second, American tourism would certainly help fill up the many European-owned hotels built in Cuba during the past 10 years.

The U.S. will become the fool again and politicians like Baucus and Rogers would have gained large financial campaign support from the multinational consortiums that understand rather well the benefits of international trade protection under current U.S. law.

The Cuban economy is bankrupt many times over and beyond repair under its present socioeconomic system. Castro has made it clear that his control over the people won’t change under his guard, or under his eventual successor.

So the American people are given the illusion that opening the U.S. market (cash) to Cuba will eventually give freedom and prosperity to the Cuban population. Ironically, the American taxpayer will then be contributing, out of their pockets, for the human rights abuses that the people of Cuba are forced to endure.

The author is a resident of Miami.

https://www.sun-sentinel.com/news/fl-xpm-2000-06-05-0006040285-story.html