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IMPLICATIONS OF LIFTING THE U.S. EMBARGO AND TRAVEL BAN OF CUBA

IMPLICATIONS OF LIFTING THE U.S. EMBARGO AND TRAVEL BAN OF CUBA
2007-12-11.

Testimony at the U.S. Senate Finance Committee, Washington, D.C.,
December 11, 2007. Prepared by Jaime Suchlicki, Professor of History and
Director of the Institute for Cuban and Cuban-American Studies,
University of Miami

I appreciate the opportunity to address this hearing on "Promoting
American Agricultural and Medical Exports to Cuba Act of 2007."

Opponents of U.S. policy toward Cuba continue to claim that if the
embargo and the travel ban are lifted the Cuban people would benefit
economically. American companies will penetrate and influence the Cuban
market; the Communist would begin to crumble and a transition to
a democratic society would be accelerated.

These expectations are based on several incorrect assumptions. First
that the Castro brothers and the Cuban leadership are naive and
inexperienced and, therefore, would allow tourists and investments from
the U.S. to subvert the revolution and influence internal developments
in the island.

Second that Cuba would open up and allow U.S. investments in all sectors
of the , instead of selecting which companies could invest.
Third that the Castro brothers are so interested in close relations with
the U.S. that they are willing to risk what has been uppermost in their
minds for 47 years – total control of power and a legacy of opposition
to "yankee imperialism" – in exchange for economic improvements for the
Cubans.

A change in U.S. policy toward Cuba may have different and unintended
results. The lifting of the embargo and the travel ban without
meaningful changes in Cuba will:

• Guarantee the continuation of the current totalitarian structures;

• Strengthen state enterprises, since money will flow into
businesses owned by the Cuban government. Most businesses are owned in
Cuba by the state and, in all foreign investments, the Cuban government
retains a partnership interest.

• Lead to greater repression and control since the Cuban
leadership will fear that U.S. influence will subvert the revolution and
weaken the Communist party's hold on the Cuban people.

• Delay instead of accelerate a transition to democracy in the island.

• Allow Castro to borrow from international organizations. Loans
will be wasted by Cuba's inefficient and wasteful system, and will be
uncollectible. The reason Cuba has been unable to pay back loans to
other countries is not because of the U.S. embargo, but because its
economic system stifles productivity and the Castro brothers continue to
spend on the military, on adventures abroad, and on supporting a
bankrupt welfare system in the island.

• Perpetuate the rather extensive control that the military holds
over the economy and foster the further development of "mafia type"
groups that manage and profit from important sectors of the economy,
particularly , biotechnology , and agriculture.

• Negate the basic tenets of U.S. policy in Latin America since
the Ford/Carter era, which emphasize democracy, , and market
economies, and send the wrong message to Latin American democracies that
the U.S. is willing to support a military dictatorship in Cuba and a
succession of power to General .

• Send the wrong message to the enemies of the U.S.: that a
foreign leader can seize U.S. properties without compensation; allow the
use of his territory for the introduction of nuclear missiles aimed at
the U.S.; espouse terrorism and anti-U.S. causes throughout the world;
and eventually the U.S. will "forget and forgive," and reward him with
tourism, investments an economic aid.

Specific considerations:
Tourism:

• If tourists are allowed to visit Cuba, the Castro government
will follow the same practices of the Soviet Union and Eastern European
countries in the past: tourist would have to obtain visas from the Cuban
Interests Section in Washington; their travel would be controlled and
channeled into the tourist resorts built in the island away from the
major centers of population; and tourists will be screened carefully to
prevent "subversive propaganda" from entering the island.

• Tourist dollars would be spent on products, i.e. rum, tobacco,
etc., produced by state enterprises, and tourists would stay in hotels
owned partially or wholly by the Cuban government.

• The Cuban government would be able to select which U.S. hotel
chains will be allowed to invest in the island in joint ventures with
the Cuban government.

• The economic impact of tourism, while providing the Castro
government with much needed dollars, would be limited. Dollars will
flow in small quantities to the Cuban poor; state and foreign
enterprises will benefit most and a large percentage of the tourist
dollars spent on the island will be sent abroad by the foreign entities
operating hotels and nightclubs.

• A large influx of tourists into Cuba will have a dislocating
effect on the economies of smaller Caribbean islands such as Jamaica,
the Dominican Republic, Bahamas, and Puerto Rico, as well as Florida;
highly dependent on tourism for their well being. Careful planning must
take place, lest we create significant hardships and social problems in
these countries.

• Since tourism will become a two-way affair, with Cubans visiting
the U.S. in great numbers, it is likely that many will stay in the U.S.
as illegal immigrants, complicating a rather thorny issue in American
domestic politics.

• If we honestly belief that tourism can bring democracy to a
foreign society we should also encourage Americans to visit North Korea
and Iran to democratize those countries.

Trade

• No foreign trade that is independent from the state is permitted
in Cuba.

• Cuba would export to the U.S. most of its products, cigars,
rums, citrus, vegetables, nickel, seafood, biotechnology, etc. Yet
since all of these products are produced by Cuban state enterprises,
with workers being paid below minimum wages, and Cuba has great need for
dollars, the Cuban government could dump products in the U.S. market at
very low prices, and without regard for cost or economic rationality.
Many of these products will compete unfairly with U.S. agriculture and
manufactured products, or with products imported form the Caribbean and
elsewhere.

• Cuban products are not strategically important to the U.S., and
are in great abundance in the U.S. internal market, or from other
traditional U.S. trading partners.

• There is little question about Cuba's chronic need for U.S.
technology, products and services. Yet, need alone does not determine
the size or viability of a market. Cuba's large foreign debt, owed to
both Western and former Communist countries, the abysmal performance of
its economy, and the low prices for its major exports make the
"bountiful market" perception a perilous mirage.

• From the U.S. point of view, therefore, increased commercial
ties with Cuba would create severe market distortions for the already
precarious regional economy of the Caribbean and Central America. It
would provide the U.S. market with products that are of little value and
in abundant supply. And, while some U.S. firms could benefit from a
resumed trade relationship, it would not help in any significant way the
overall U.S. economy. Cuba does not have the potential to become an
important
client like , Russia, or even .

Investments

• Cuba has promoted investments in tourism as its highest priority
and only recently has begun to promote investments in other sectors.
Cuba has not permitted greater individual in economic matters.
Unlike China, Cuba has not legalized private agriculture or manufacturing.

• Investments are directed and approved by the Cuban government.
They would be limited, however, given the lack of an extensive internal
market, the uncertainties surroundings the long-term risk to foreign
, an uncertain political situation; and the opportunities
provided by other markets in Latin America and elsewhere.

• The Cuban constitution still outlaws foreign ownership of most
properties and forbids any Cubans from participating in joint ventures
with foreigners.

• It is illegal for foreign companies to hire Cuban workers
directly. Foreign employers must pay the wages owed to their employees
directly to the Cuban government in hard currency. The Cuban government
then pays out to the Cuban workers in Cuban pesos, which are worth a
fraction of the hard currency.

• All arbitration most take place in the corrupt and arbitrary
government offices or in the government controlled judiciary, where
little protection is given to the investor.

• Foreign investors must also confront political uncertainties
that do not exist in many other countries. They must contend with the
possibility of the regime's reversing its policies, the legal questions
surrounding previously confiscated properties, and potential sanctions
against foreign investors that cooperated with the Castro government in
the event that an anti-Castro government eventually comes to power.

• Opposition to market reforms will limit the extent to which the
private sector emerges and functions effectively, and thereby will slow,
if not prevent, attaining a measurable degree of economic recovery. The
Castro brothers fear the likely erosion of political power that
accompanies the restructuring of the economy along free market rules.
Adoption of market reforms may well represent a solution to the economic
crisis, but a full-blown reform process carries with it the risk of loss
of control over society, as well as the economy, and threatens to
alienate some of the regime's key constituencies.

Final considerations:

• The embargo is not the cause of Cuba's economic misery… A
failed economic system, similar to what existed in Eastern Europe and
the Soviet Union and lack of productivity and incentives is what is
stifling the Cuban economy.

• American tourists will not bring democracy to Cuba. Over the
past decades hundred of thousands of Canadian, European and Latin
American tourists have visited the island. Cuba is not more democratic
today. If anything, Cuba is more totalitarian, with the state and its
control apparatus having been strengthened as a result of the influx of
tourist dollars.

• Cuba's limited economic reforms were enacted in the early 1990s,
when the island's economic contraction was at its worst. Once the
economy began to stabilize by 1996 as a result of foreign tourism and
investments, and exile remittances, the earlier reforms were halted by
Castro.

• The embargo and the travel ban should be retained as a
negotiating tool with a future regime to accelerate change in the
island. If it's given away without meaningful concessions in return,
what is the U.S. left with to influence developments in Cuba.

• The travel ban and the embargo should be retained until there is
a regime in Cuba willing to provide irreversible concessions in the
areas of human rights, democratization and market economics. Providing
the Castro brothers unilateral concessions without major changes in the
island is a gift they don't deserve and have not earned.

Jaime Suchlicki is Professor History and Director of the Institute for
Cuban and Cuban-American Studies, at the University of Miami. He was
the founding Executive Director of the North-South Center. From 1984
untill 1994 he was also the editor of the prestigious "Journal of
Interamerican Studies and world Affairs." Dr. Suchlicki is currently
the Editor of "Cuban Affairs", and the author of Cuba: From Columbus to
Castro, now in its fifth edition, and Mexico: from Montezuma to the Rise
of PAN. He is a highly regarded consultant to the private and public
sector on Cuba and Latin American Affairs.

http://www.miscelaneasdecuba.net/web/article.asp?artID=13033

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