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The Comandantes Reserves

The Comandante’s Reserves

From CUBA MONTHLY ECONOMIC REPORT
SPECIAL ISSUE, August 1997
October 20, 1997
Archives
Research Dept.
La Nueva Cuba
May 29, 2006

The lack of transparency of Fidel Castro government in Cuba is very well
known. Information about the inner workings of the government, however,
is becoming available, though in a fragmented way as high Cuban
government officials defect and freely report their experiences in Cuba.
The information reported in this special edition of the Cuba Monthly
Economic Report comes from just such a source—Jesus M. Fernandez, who
left Cuba in May 1996 after holding important positions in the Cuban
government, including Secretary of the Food Committee of the Cabinet and
Secretary of the Foreign Exchange Commission of the Food Group.

The July 28, 1997, issue of Forbes magazine lists Fidel Castro as one of
the richest people in the world, with a net worth of $1.4 billion.
Forbes’ estimate of the funds that Castro controls may be low, however;
it merely assigns to him 10 percent of an estimate of Cuba’s gross
domestic product. In fact, in addition to controlling the Cuban economy,
Castro possesses and personally controls international bank accounts and
large amounts of gold and commodities, and has done so virtually from
the start of the Revolution.

“Fidel’s Checking Account”

What today is referred to in the innermost circles of the government as
“the Comandante’s reserves” had its origin in 1959 in the famous
“Fidel’s checking account.” From this account—which proved to be an
administrative nightmare to Cuban fiscal authorities, being subject to
no control or budget—Fidel Castro drew funds with which to satisfy all
manner of needs and requests throughout the Island, instantly creating
an image of himself as powerful benefactor. It was then that it was
decided to create an account in Castro’s name, not related to his
official titles, that he would personally manage without giving an
accounting to anyone. This account, which was in pesos, served as
precedent for later creating a dollar account to finance international
transactions, primarily of a political nature. This dollar account was
used to finance subversion in other countries and propaganda activities
such as the meeting of the Tricontinental Assembly.

Though the amounts involved are not known, the account was financed from
state funds and from the forced exchange of dollars from Cuban workers
at the American Naval Base in Guantanamo. In that account were also
deposited foreign funds whose purpose was to finance insurrections in
Latin America.

In 1970 it became known that the proceeds from the sale of to
Canada—the intermediary for which was Merejo Curbelo, brother of the
Minister of , Comandante Raul Curbelo—were deposited in
Castro’s account. The magnitude of the sale has been estimated at
between $5 million and $10 million. Sales of cattle have continued to
this day and have included as a buyer. The cattle come from
another of Fidel Castro’s exclusive reserves, which contains some 50,000
head of cattle.

Also in 1970, Emilio Quesada Rey, excolleague of Fidel Castro at the
University of Havana, created an integrated system of reserves under
Castro’s exclusive control. These reserved consisted of automobiles,
trucks, tractors, and other wheeled vehicles, and general construction
equipment. By then, reserves of , also managed by Fidel Castro,
were in existence. From these reserves Castro assigned resources to
productive enterprises without any sort of plan and provided gifts to
many of his collaborators and allies, both at home and abroad.

The Comandante’s Reserves

In 1976, the State Committee for the Provision of Technical Material was
created under the direction of Provisions of the Central Planning Board
(JUCEPLAN). Irma Sanchez, a member of the Central Planning Board, was
placed in charge of the new committee as Minister-President. The new
committee would become the most powerful organ of the Cuban government,
since it centralized control of the country’s physical resources, with
the exception of foodstuffs, clothing, and shoes. The resources it
managed included equipment and machinery, petroleum, and construction
and raw materials.

The new committee expanded the reserves personally controlled by Fidel
Castro. By then~, those who knew of them at JUCEPLAN referred to them as
“the Comandante’s reserves.” The reserve of automobiles, for example,
came to number 7,000 units, which were stored outside in the area of
Managua, south of Havana. The reserve of trucks, which also numbered in
the thousands, was kept in Alberro, in the area of Cotorro in the
province of Havana. These reserves were administered by Castro
separately from the planning system, which he himself did not trust; he
assigned resources and equiment only to projects he initiated and
directed. This system caused a great deal of discomfort among the
middle-level economic planners, and it generated friction and strong
disputes among Vice Minister of the Central Planning Board Luis
Gutierrez, Irma Sanchez, Emilio Quesada, Osvaldo Dorticos (in charge of
the Central Planning Board), and Fidel Castro himself. By then the lines
that could have separated what was public property managed by Castro and
what was de facto private property had been erased.

At the start of the war in Angola, in the middle of the 1970s, Castro’s
financial reserve was funded in part by monies from the Soviet Uluon and
the rest of the Soviet block for financing Cuban military operations in
that country. The same was true with respect to the war in Etiopia.

At the same time, the Cuban armed forces accumulated large quantities of
canned goods. These reserves were located in Cuba and were maintained at
great cost to the country because of the need to renew them frequently
to keep them fresh. These reserves are currently being turned over to
military personnel as compensation for their lack of access to dollars
and because they cannot be maintained fresh as before given the economic
crisis. The reserves were never used to supply the civilian population.

Castro’s Enterprises

At the beginning of the l980s, the sources of funds for the Comandante’s
reserves were diversified. Of unknown ownership, they were enterprises
created to generate finds outside the planning system, as if they were
the private property of certain government officials. These enterprises
also served to launder drug money, which became known during the process
leading up the execution by firing squad of General Arnaldo Ochoa in
1989. The most important of these enterprises are the following.

The Corporation CIMEX was founded by Jose Luis Padron, a Colonel who was
assistant to Jose Abrahantes, the Minister of the Interior who was
arrested along with General Ochoa; by Orlando Perez, expresident of the
National Bank; by Regino Boti, ex-minister of JUCEPLAN; and by Emilio
Aragones, ambassador to Argentina and one of the persons closest to
Castro on financial matters since the days of the Sierra Maestra. This
corporation is a conglomeration of export and enterprises that
currently has
chains of stores in Cuba that only sell in dollars. The
most important of these is the chain Panamericarna, which has sales of
$1 million a day. Part of CIMEX is the Treviso company, initially run by
Colonel Tony de la Guardia, who was shot with General Ochoa in 1989. The
firm sells tobacco products, shellfish, and construction materials. It
also produces knock-offs or adulterations of high quality international
goods, such as Chivas Regal whiskey or Levi’s pants.

From this enterprise, the now defunct Department MC (for convertible
money) in the Interior Ministry was created. This was a secret operation
designed to get around the U.S. embargo on Cuba. This department
generated several million dollars a year, which was presented to Castro
on his birthday, every August 13. The largest amount we know of involved
a “gift” of $10 million, delivered in a suitcase full of bills by Jose
Abrahantes during one of Castro’s birthday parties in the 1980s. Part of
this money came from drug trafficking.

Independent of the net earnings of MC, CIMEX should generate a minimum
of $50 million a year, possibly much more. There is information that on
one occasion, toward the end of the 1980s, the enterprise suffered a
lose of several million dollars speculating on the London financial
markets. On that occasion, became involved, severely
criticizing functionaries of CIMEX for playing at capitalism, but no one
was seriously punished.

Cubanacan is a group of enterprises founded by Abraham Masiques, a Cuban
entrepreneur who is a friend of Castro’s. Cubanacan is the enterprise
that open the door to foreign in . Like CIMEX it has
several chains of stores that sell in dollars. Cubanacan controls
approximately $600 million in foreign capital, primarily from Melia, LTI
International, TRIP, Delta International, Golden Tulip International,
Cosmo World, and Super Club. It is estimated that Cubanacan currently
contributes around $30 million a year to “the Comandante’s reserves.”

EI Palacio de Convenciones (literally, The Convention Palace)
contributes its net earnings to the Comadante’s account. Its eamings are
generated ty international events held there, many of a political
nature. The earnings it generates are on the order of $3 million to $5
million a year.

Cubalse consists of a single store that was originally dedicated to
selling to the diplomatic community. It is now open to any member of the
general public who has dollars. It is the only store that always has
beef, which it sells at monopoly prices. The beef comes from Castro’s
cattle reserve. Cubalse’s net eamings go to enrich Castro’s reserve. It
is estimated that it can generate net earnings on the order of $30
million a year.

Medicuba, which sells pharmaceutical products manufactured in the
country, especially vaccines, generates an unknown amount of revenue
that is estimated to be several million dollars. Fidel Castro is the
principal investor in the biotechnology sector. He is kept informed of
rescarch on AIDS and other programs in this field.

Other Revenue Sources

In addition to the earnings of these enterprises, the Comandante’s
reserves are also supplied from other transactions, possibly the largest
of which was the sale of rum factories and distilleries under the Havana
Club name to the French firm Pernaud Ricard. The sale price has been
estimated at $50 million, an amount that reportedly was deposited in its
entirety in the Comandante’s reserves.

Instrurmental in this transaction were Alejandro Roca, Minister of the
Food Industry; Miguel Castillo, personal administrator of the
Comandante’s reserves; and Jose Alberto (Pepin) Naranjo, chief of staff
to the commander in chief. This transaction continues to generate
earnings for the Comandante’s account through commissions from the sale
of Cuban rums and through the currency exchange from the salaries of
Cuban workers.

A part of the net eamings of several foreign enterprises engaged in the
growing of citrus also goes to the Comandante’s reserves Very gross
estimates place these contributions at not less than $10 million or $15
million. One of the best known entrepreneurs in this sector is Max
Marambio, chief of Salvador Allende’s guard. Another is Angel Domper,
who is married to one of the Che Guevara’s daughters. These Chilean
businessmen are believed to be millionaires.

Another source of income to the Comandante’s reserves comes from loans
that Castro makes to the national economy from these funds. Whenever
there is a shortfall in the flow of foreing exchange—something that
occurs frequently in the importation of food and oil– government
officials in charge of payment submit requests for loans through Carlos
Lage, Prime Minister of Cuba. If Lage passes on the request, Castro
generally approves the loan, noting the date the loan is due and the
interest to be paid. The latter is normally 10 percent, regardless of
the length of the loan. We know of two specific transactions, one of $20
million and the other of $30 million, for imported foodstuffs, mostly
cereals, and there have been other occasions involving the import of oil.

Back in the days when the Soviet Union allowed Cuba to sell for dollars
its oil surplus, part of the proceeds from this implicit subsidy were
suspected of making their way into the Comandante’s reserves. The reason
for this suspicion is that it became established custom at JUCEPLAN that
the dollars from nonconventional exports would go to such reserves.

Cuban Banking

In 1984, the Banco Financiero Internacional was founded, becoming the
first Cuban entity operating with dollars in complete autonomy from the
state system. It operates as a corporation whose owners are the Cuban
government and some foreign investors who are suspected of acting as
stand-ins for other persons. This enterprise is located in the CIMEX
corporation. The apparent objective of this bank was to remove from the
National Bank of Cuba actions that were intended to 1eave no trace. The
main clients of this bank, which has 16 branches in Cuba and an unknown
number abroad (we know they exist in the United Kingdom and in Canada),
are the same firms associated with the Comandante’s reserves.

E1 Banco de Inversiones, SA is located in the Someillan building in
Havana and forms part of an important mechanism that makes loans to the
Cuban government at high interest rates. It is run by Hector Rodriguez
Llompart, ex-president of the National Bank of Cuba, and a Swiss-Israeli
citizen named Andre. It is suspected that this bank’s capital comes from
the Banco Financiero Internacional.

The operations of these two banks are so secretive that they give rise
to many suspicions, including that they are involved in the laundering
of drug money. The scandal involving the Grupo Oasis of , which
operated the tourist center at Cayo Largo, planted the seeds of this
suspicion.

The Comandante’s reserves, both financial and physical, also benefit
from many of the foreign donations Cuba receives, including, for
example, the World Food Program of the FAO, which made many donations of
milk to Cuba between the 1970s and 1990s. The milk was intended for
infants in the eastern pro
vinces of Cuba, but was diverted intead to
Nicaragua for political purposes.

Institutional Evolution

The above information appears to confirm that the Cuban economy is
undergoing a major institutional evolution, in which four economic
subsystems are emerging. The first is Fidel Castro’s economy, with his
enterprises, financial institutions, and virtually absolute control of
the country’s resources. The second subsystem, in parrnership with
Castro’s economy, conists of the foreign enterprises, allowed to
generate and repatriate earnings at th cost of helping Castro’s own
finances. The third system is the remains of the old planned economy and
public enterprises, including the industry, still struggling for
survival but in a general state of neglect and decay. The fourth system
is the Cuban marginal private sector, consisting of those who are
falling outside the other three systems (mainly the self-employed) and
those who, though still working in the public sector, do not earn enough
to make ends meet. It appears that the first two subsystems are
thriving, while the latter two are carrying the burdens imposed by
predatory economics of the first two. In the aggregate, everything seems
to indicate that the Cuban economy is in a freefall, with no visible
solution, something similar to what happened to Zaire (now Congo) under
Mobutu Sese Seko.

Dollar remittances from exiled Cubans to relatives in the island are
playing an important role in helping some weather the current economic
crisis. However, the remittances, combined with the alleged foreign
investment activity in Cuba, are offering Castro an excellent vehicle to
hide money laundering activities. Forbes’ estimate of Castro’s fortune
may very well fall short of the reality.

http://www.lanuevacuba.com/archivo/the-comandantes-reserves.htm

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