AMCHAM CUBA NEWSLETTER                   FEBRUARY 2002        

 

970 17^th St. NW #422. Washington DC 20006-2605      202-833-3548

1110 Brickell Av.  #430, Miami FL 33131-2605               305-358-8992

 

In this issue…

1.      Cuba’s Economic Woes Mount

2.      Cuba Gets the Goods

3.      US Visitors Find Warmth, Take Heat

4.      Cooperation Is In The Air

5.      WTO Gets In The Act

6.      Reich Is In The Loop

7.      Bush Stays His Course

 

 

[We hope you find this guest-edited issue of AmCham Cuba’s newsletter refreshing.  As we spell out below, we will welcome your comments.]

 

1.  Cuba’s Economic Woes Continue to Mount as a result of being especially hard hit by the worldwide economic slow-down and the fall-off in international travel after the Sept. 11 attacks.  Tourism, Cuba’s most important economic sector, has declined sharply. The high season, December- March, shows dramatic weakness so far this year:  Hotel occupancy is down at least 25% in Havana, 40% at Varadero, and up to 20% in the rest of the country, foreign hotel management sources report.  While Cuba’s Tourism Ministry continues to put the best face on the economy, sharply reduced foreign exchange earnings from tourism are a significant economic drag..

 

Another contributing factor is a decline in Cuba’s second largest source of foreign exchange.  Expatriate remittances are down due to the economic downturn in the United States where most of the funds originate.

 

Secondary sectors, food processing and light industry, also feel the pinch as suppliers heavily dependent on tourism experience declining revenues.

 

Hurricane Michelle left widespread damage in 45% of Cuba’s land area containing 53% of the population.  Food aid has been required in areas affected by the hurricane.

 

Removal of Russian surveillance facilities cost the Cuban economy $200 million in Russian rent.

 

Vice President Carlos Lage has cited “the hard blow” caused by a fall in world prices for Cuba’s commodity exports such as sugar and nickel.

 

The peso’s dollar value is rapidly eroding.  Increased illegal speculation is betting on further decline.

 

 

AmCham Cuba, a non-p0rofit organization, is member of the US Chamber of Commerce.

On top of all this, Cuba is experiencing the worst outbreak of potentially lethal dengue fever since 1981.  Adding to the drain of government funds is a declared "war" against the mosquito-borne viral disease.  Fumigation brigades of thousands are spraying affected areas as bulldozers clear rubble and garbage from streets In Havana.

 

The Cuban government is beginning to acknowledge the growing economic crisis. The official news-paper Granma recently summarized the situation:  “Despite inevitable restrictions imposed by the world economic crisis, the price drop for some exports and the decrease in tourism, plus the effects of Hurricane Michelle, the country attempts to maintain levels of food, health care and electricity achieved in recent years.”  Castro went on TV to rally the nation, advising that “well-thought-out measures were being applied to protect the economy, and that these would not hurt the population.”  He said that shops selling merchandise in dollars would not be closed, agricultural markets would be maintained, that “not one centavo” would be added to official prices of goods and services - both rationed and non-rationed - and that the value of the Cuban peso would be defended resolutely.

 

The Cuban government desperately wants US credits and tourism revenue because Cuba urgently needs hard currency to finance imports.  While Cuba can trade freely with other countries, it is experiencing a cash crunch and finding it difficult to service its substantial foreign debt.  When it can get further credits, it does so at very high rates because of the risk.

 

Cuba experienced a precipitous economic decline in the early 1990s after the loss of Soviet support.  The government’s response to that crisis, known as the “Special Period”, included pragmatic ideological and political adjustments.  Many observers see the makings of a new “special [economic] period” now, accompanied by some further ideological “adjustments”.

 

 

2.  Cuba Gets the Goods, receiving US food shipments purchased directly by the Cuban Government for the first time since President Fidel Castro took power in 1959.  Corn, rice, wheat, poultry and other food are being delivered through February.  US firms involved include Farmland Industries based in Kansas City, ConAgra, Archer Daniels Midland, the Indiana-based Marsh supermarket chain, Riceland Foods, and agricultural giant Cargill.  Florida-based Crowley Maritime Corporation is providing shipping services.  Castro has said the food will replenish reserves depleted since early November by Hurricane Michelle which barreled across the island, destroying tens of thousands of homes and severely damaging crops

 

Although nearly all trade between the two nations is banned under the US embargo, Congress passed a law last year permitting the direct commercial sale of American food and medical supplies to Cuba, but with caveats.  The Bush administration agreed to temporarily speed up licensing and other procedures, required that each sale be licensed by the US, as well as cargo ship s carrying the food directly from US ports, and banned both US government and private financing.  Before Hurricane Michelle, Castro's government refused to take advantage of the new law, saying the US restrictions were insulting.  Cuban officials objected to restrictions that prevented Cuba from obtaining a US government or bank loan to buy the food.  Therefore, cash-poor Cuba must make all such purchases either with cash or through loans from third countries.

 

After the hurricane, Cuba rejected a US offer of humanitarian help, which the US would have funneled through non-governmental organizations in Cuba.  Cuba said it prefers to purchase US food and medicine directly.  Since then, Cuba then signed over $35 million in contracts for direct commercial purchases of American food.  It has not yet bought any medicine and medical supplies.

 

An easing of financial restrictions, simpler licensing procedures, and efforts to create two-way trade between Cuba and the US are all moves that the Cuban government ``will respond to positively,'' Pedro Alvarez, Head of Cuba's food import program is reported to have said

 

As pressure builds to open up US-Cuba trade, a leading anti-embargo group estimates that US farmers lose $1.24 billion yearly because of the sanctions. The Washington-based Cuba Policy Foundation says that America is missing out on up to $3.6 billion more in related benefits.   “Isolation has not led to reform and it's costing farmers and drug companies that want to do business,'' said Sally Grooms Cowal, Foundation President and former US diplomat who housed Cuban boy Elian Gonzalez toward the end of his stay in America.  Further, Cowal said, “removing the existing US ban on travel by Americans to Cuba will be as important as easing trade policies….  If we flood Cuba with Americans, we flood Cuba with American and democra-tic values,”, adding that “George Bush has often said that free trade leads to democracy.''   

 

Cowal is among hundreds of American policy makers and business people who have traveled to Cuba in recent months to explore possibilities for rapprochement between the two countries. ``I'm optimistic that Congress will vote to lift the travel ban this year,'' said Cowal.

 

 

3.  US Visitors to Cuba Find Warmth, Take Heat.   In Cuba, a steady stream of prominent US visitors find themselves ardently wooed as seemingly Cuban authorities pursue changes in US embargo policy more aggressively.  At the same time, opponents of change are increasing their fire.

 

An influential delegation of women traveling on a Treasury Department license granted to the University of Washington recently met with Fidel Castro for three hours.  The 75-year-old President gave personal attention to each one, demonstrating that he had done his homework on the the American visitors’ backgrounds.  He singled out Sen. Maria Cantwell (D-Wash) for an additional two-hour discussion and personally escorted her to the airport.

 

Illinois Governor George Ryan was another visitor, along with representatives of Illinois-based firms Ferris Manufacturing, Medline, DMS Pharmaceutical, JLR International and Century Healthcare.  They met with Castro at the Palace of the Revolution where dinner lasted nearly six hours.  “We had a great discussion,'' said Ryan, who added, “I think he would…open up trade with the US in a minute, but he just isn't able to'' due to the embargo.  He predicted that Cuba will decide to add pharmaceutical products to its post-hurricane shopping list.

 

A US Congressional delegation in Havana seeking to ease and even eliminate the sanctions also received a warm welcome.  Participating were Reps. William Delahunt (D-MA), Stephen Lynch (D-MA), Jo Ann Emerson (R-MO), Vic Snyder (D-AK), William Lacy Clay (D-MO), and Hilda L. Solis (D-CA).  All pronounced themselves against US policy towards Cuba, saying that Cuba could become a new market for American products. 

 

This Congressional delegation came under fire in Cuba for focusing only on criticisms of US sanctions at the expense of discussions on Cuba's internal human rights.  A leading Cuban dissident, Oswaldo Payá Sardiñas of the Christian Liberation Movement, said the only issue the delegation wanted to discuss was the US embargo.  Payá charged that the visitors should “question whether there existed conditions whereby Cubans could freely participate with dignity in commerce, [foreign] investments, and cultural exchanges.”

 

Supporters of lifting the embargo maintain that more US tourists and investments would influence Cuban society toward more openness.  Opponents emphasize that private property is illegal in Cuba, workers are not permitted to contract directly with companies, and a foreign company must go through the government for local workers.  Cuba’s government assigns workers, collects their wages from the firm in dollars, and compensates workers directly in pesos.  Opponents of investment in Cuba also stress Cuba’s restrictions on the Cuban peoples’ lack of access to “foreigner only” tourist facilities.

 

 

4.  Cooperation Is In the Air as contacts between Cuban diplomats and US officials at the Interests Section in Havana have recently become unusually frequent and constructive.

.

The latest example of what seems an unusual trend of quiet cooperation and positive diplomacy is that Fidel Castro is reported as being surprisingly “laid-back” about the arrival of detainees at Guantanamo and even offered medical and health assistance.  His brother and heir-apparent Raul Castro reported  that “a new climate of cooperation reigns in Cuba-US relations”, and said in a conversation with foreign media that ”If any prisoners escape from the US base at Guantanamo, we would send them straight back to American custody.” 

 

Ricardo Alarcon, President of Cuba's National Assembly, hailed the cooperation as a model for improving ties.  Cuba's notable moves towards cooperating with the Americans points to a strong desire for some kind of rapprochement and replacement of hostile rhetoric by a more conciliatory tone.   Alarcon said he believed the Cuban government could deal with the Republican government of President Bush, despite his ties to anti-Castro Cuban-Americans in Florida.  While expressing concern at the appointment of Otto Reich (see item 6) as the Administration's Latin American policy chief, Alarcon said he was not worried that Reich could scuttle any warming of U.S.-Cuban ties.

 

In another rare case of joint efforts, FBI agents and Cuban authorities are cooperating in investigation of the mid-December killing in Cuba of five people, two of them residents of Miami.  The case has shaken a nation unused to violent crime.

 

The head of the international police body Interpol said in late January that he had picked up a large dossier from the Cuban authorities outlining Cuban efforts since Sept. 11 in the global war on terrorism.  The Interpol head, an American, said he was "absolutely satisfied" with briefings by Cuban police and the Interior Ministry on a range of subjects -- from terrorism to drugs. 

 

Those seeing a rapprochement in Cuba-US relations also point to other concrete moves such as the permanent posting of a US Coast Guard official in Havana to liaise with Cuba.

 

“First came the food sales and now you have Castro cooperating with, instead of attacking, Bush over Guantanamo," a Western diplomat is quoted as saying.  "The tone in US-Cuba relations seems to have taken a turn for the better."   He added that such cooperation could be applied also to other areas of mutual interest like the fight on drug trafficking, migration issues, and the global war on terrorism.   US Senators and Congressman from both parties recently in Cuba, emerging from separate meetings, also emphasized the cooperative tone Castro had struck over the need to end terrorism, the fight against drug trafficking, and trade.

 

 

5.  WTO Gets In The Act with a ruling in favor of an American law designed to protect trademarks originally held by firms seized by Castro.  The 1998 US legislation denies trade-mark protection in US courts for such Cuban brands without the consent of the original owner.  The US law had stripped France’s Pernod Ricard of any right to challenge Bermuda-based Bacardi in the US over the use of the Havana Club brand name on rum products.  The EU (European Union) then took the dispute to the World Trade Organization maintaining that the US law violated the WTO’s “Agreement on Trade-Related Aspects of Intellectual Property Rights” (TRIP).  The victory for the American position reinforces the legal structure of the embargo.

 

 

6. Reich is in the loop as US Latin America policy chief.  President Bush's recess appointment of Otto Reich as Assistant Secretary of State for Western Hemisphere Affairs has upset some opponents, but most are resigned to it.  Reich is a Cuban-American and a staunch critic of Fidel Castro.

 

Cuba’s response to the Reich appointment was muted, observers believe, to minimize disputes with the US government as it seeks chances to ease Washington's economic embargo.  William Goodfellow, Director of the Center for International Policy (CIP) in Washington, said the quiet response from Cuban leaders and leftist leaders across Latin America was understandable. "Nobody wants to burn bridges.  They are resigned to dealing with him at least this year, so why court trouble?" he said. 

 

Critics claim Reich will have serious trouble trying to build bipartisan consensus on issues.  We will have policy deadlock, some critics predict.  “Democrats and Republicans will not be able to agree on a common approach," added Goodfellow.

 

 

7.  Bush’s Cuba policy stays on course, Cuba-watchers are quick to note, despite the Cuban charm offensive.   While some analysts believe a shift in US-Cuban relations is under way,  Reich’s recent appointment is hardly a conciliatory signal to Havana.  Bush has been quieter than normal on the Cuba issue but most observers believe that is a result of being consumed by  weightier matters.

 

The Bush Administration just this week forcefully dismissed speculation about a possible improvement in relations with Cuba built on the series of cooperation initiatives advanced by Cuba.  A US State Department spokesman reiterated US conditions for any rapprochement, saying "Cuba has not taken any of the steps necessary to make improvement of relations possible.  These steps include free elec-tions, the release of political prisoners, and the removal of draconian laws that for example send Cuban citizens to prison if they criticize their government….It'’s not a question of our relationship, it's a question of the Cuban government's continued denial of basic human rights," the spokesman explained.

 

Bush would be expected to veto any significant changes to the embargo that Congress might approve and can be expected to be responsive to his (and Jeb Bush’s) Cuban-American constituency in Florida.  Most Cuba watchers believe that those assuming that significant change in the relationship between the two countries is in the works are at best premature.

 

Bush’s Cuba policy has remained consistent, even in recently suspending for another six months a law allowing US citizens and companies to sue foreign firms using Cuban property confiscated by Cuba.     Bush first suspended the controversial provisions in July 2001, following ten six-month suspensions in a row by his predecessor, Bill Clinton.  The provision is part of the 1996 Helms-Burton Act.  In a letter to key members of Congress, Bush said extending the suspension is "necessary to the national interests of the United States and will expedite a transition to democracy in Cuba."  Extending the suspension, which has reluctant acceptance within Bush’s Cuban-American constituency, lets the US avoid potential disputes with European Union nations whose firms have investments in Cuba.  

 

To illustrate the firmness of its policy, the Bush Administration denied travel licenses to an agribusiness group, claiming it was too large, unfocused and loaded with participants going for tourist reasons.  The group of 100 people contained two former US agriculture secretaries in the Clinton Administration.

 

The forty year-old US embargo is still “in place” despite all the activities and initiatives a high-ranking State Department official recently reiterated.  The Bush Administration seems determined to freeze the situation right there.  With his sky-high poll numbers, few doubt Bush’s ability to continue to do so over the near term at least, unless there is a lot more “give” by the Cuban government.  Stay tuned.

 

 

*    *    *

 

This issue of AmCham Cuba’s newsletter was prepared by Board Chairman Edward L. Bartholomew as Guest Editor.  In addition to reporting recent events relevant to US business plans for Cuba, it reflects his views.  We would be pleased to have comments and rejoinders to pass on to Ed, or even to use in one of our Opinion Corners in a later issue.  As Ed says, “stay tuned”, because we firmly agree with him that events and policy adjustments are inevitable over time, and we will share them with our members as they arise.

 

AmCham Cuba News:  Members may be glad to learn that the number of Friends of AmCham Cuba has been growing over recent weeks.  We are grateful to individuals who have elected to increase their support from the normal $100/year individual dues rate to $500/year, and to those new subscribers who have signed on in the Friends’ category.  AmCham Cuba’s key clients, of course, American corporations, are active members at $500/year or $1500/year depending on their volume of business.  Corporate members and Friends of AmCham Cuba receive in-depth reports on investment in Cuba and US-Cuba relations, and more contacts with speakers and other experts, than we can normally make available to individual members.  Corporate members and Friends can also obtain research assistance from our members and other scholars and specialists.

 

AmCham Cuba officers continue to attend seminars and take part in discussions on Cuba, recently including meetings of the National Policy Association (NPA) and the Cuban-American National Foundation (CANF), Congressional hearings, and sessions on Cuba at universities in Washington and Miami.  We retain crit ical opinion pieces offered at such meetings or received in exchanges with other Cuba-watch groups in our files for your perusal.  Please enrich this collection by forwarding your own opinions and reports that you come across either for our archives or for publication by AmCham Cuba.   

 

With good wishes.

 

                         Sincerely,

 

 

 

 Phoebe Lansdale

 Executive Director      

Feb. 4, 2002