November 1997

IN THIS ISSUE:

1. Cuban Communist Party meeting and post-Castro options assessed

2. A revitalized Church prepares for Pope’s visit

3. Pilgrims cautious about travel to Cuba

4. Cuban churches face new purchase restrictions

5. US embargo protested overwelmingly by UN General Assembly

6. Bills introduced to limit US embargos and expand humanitarian aid for Cuba

7. Clinton conditions any gradual improvements in relations with Cuba on steps to democratization

8. International summits involving Castro

9. EU defers complaint against US at WTO

11. Cuba’s economy

12. Recent views of “experts” on Cuba

1. Dr. Jaime Suchlicki assessed Communist Party meeting and post-Castro options. At a breakfast meeting Oct. 24, the prestigious historian from U. Miami, said the recent Communist Party meeting had given Castro a platform from which to confirm roles of his brother Raul and the army after Fidel leaves power. Suchlicki told AmCham Cuba and Atlantic Council guests that Castro is unlikely to resign or be removed. He thinks the Castro government will “delay” the Pope’s January visit which might threaten Castro’s control of the masses without adding to gains already achieved at their Rome meeting.

Cuba’s economic difficulties persist, he said, but collapse has been forestalled as a result of improved remittances, citrus and biotechnology exports, and tourism. Suchlicki urged no revision of US policies towards Cuba until Fidel is gone, but said that eventually US trade and investments are likely to expand when currency, property, and investment reforms assure better protection of US business in Cuba. He cited Texaco, Anheuser Busch, and Camel among US firms which are basing their entry strategies on incremental Cuban improvements.

2. Msgr. Cisneros says a revitalized Cuban Church prepares for Pope. Members and guests on Nov. 10 heard a prominent Cuban-American priest, Monsignor Octavio Cisneros, describe the Papal visit to Cuba Jan. 21-25 as purely spiritual, a “shepherd who visits his sheep”, bringing the church’s truths to the people and a “moment of grace for the Cuban soul”. The concept that the Pope’s success be judged in terms of his such truths, which Cisneros described as the basis for human liberties, is perhaps a substitute for measurement by others of the visit’s success in terms of political achievements [for example, S. Kovaleski, writing for the Washington Post from Havana Oct. 15, who said Castro is working to ensure that the papal trip will be a public relations and financial success for Cuba, and an opportunity to generate more international condemnation of the US economic embargo.] A recent letter by the Cuban bishops said those preparing for the visit should openly preach Jesus’ word, encourage hope, help restore personal, family and social ethical values, and promote reconciliation among Cubans.

Msgr. Cisneros, who visits Cuba often as Vice Postulator for the Canonization of Father Felix Varela, described the Church that awaits the Pope as “carrying out its mission with austerity and sacrifice” and very limited resources. Overseas contributions are controlled by the State, colleges and schools remain in its hands, access to the media is denied, publications are hampered by lack of equipment, and intense scrutiny limits even the limited information which does make it to print. He said that, for the first time in over 30 years, “an institution that is independent from the government and from the Communist Party...[is] carrying out a program involving mass mobilizations of Cubans,” though some recent public Church events have been blocked (-Kovaleski, Washington Post 10/15).

The Church was reinvigorated by the appointment in 1981 of the dynamic Bishop Jaime Ortega who brought it into the international spotlight by visiting Spanish-speaking US priests and UN Sec. Gen. Perez de Cuellar in 1984. Msgr. Cisneros in 1986 attended Ortega’s First Encuentro Nacional Eclesial Cubano, where the Pope was represented by Cardinal Prironio and from which the exuberant congregation departed “more prayerful, missionary and evangelizing” and committed to future challenges. Since then, despite a more hostile Government in the post-Soviet era, Cisneros said the Cuban bishops have consistently opposed unilateral policies like the US embargo, the Church is reaching growing numbers of Cubans, there are more priests, seminarians, new dioceses, and newly appointed bishops, and ”a revival of.. attendance to Mass and...participation of the laity in the sacraments.”

3. Tickets sell slowly for January cruise to Havana. Sales for the Miami Archdiocese cruise to Havana are reported somewhat below expectations, with 25% of staterooms sold to 260 passengers out of a potential 1200, as of mid-October. Fear of revocation of Cuban permission to dock is one factor, especially since tickets costing $599-$1,399 are non-refundable (- Miami Herald, New York Times). Cuba has given permission both for the cruise ship and direct flights from the US, while CUBAInfo 11/13 quoted Caridad Diego, Communist Party chief of religious affairs, as saying that the US Government had not yet approved the direct flights.

4. New purchasing restrictions ration Cuban churches. New restrictions limit the ability of churches to legally buy goods from fax machines to soap and toilet paper, in an effort to stem abuses of the right to buy from state shops. Juan Tamayo, in the Miami Herald Oct. 18, said the Aug. 4 Resolution 144-97 was passed to church officials by the Communist Party only in October. It bans purchases of electrical goods, cooking utensils, dishes, diapers and cribs, and rations per-patient quantities of toilet articles - which are seldom in stock. Tamayo said churches mainly bypass the state shops and avoid high duty legal imports, preferring to get necessities as illegal gifts from foreign diplomats and to buy supplies like fax paper on the black market.

Permissions a month in advance, plus sworn declarations of intended use, will be required from selected “approved institutions” (not including tolerated but unrecognized groups like those promoting human rights). Church officials reportedly fear the permit requirement could wreck services of parishes feeding and getting doctors for the elderly. The threat of enforcement may be greater than actual implementation of the measure which implies that the “churches...[are] growing too active” and “things are closing.”

5. UN General Assembly protests US embargo. Annual embarrassment of the US at the UN was the largest in the six years of voting on the economic embargo on Cuba. By 143 to only 3 (Uzbekistan, Israel, and the US), the Assembly supported a non-binding resolution condemning the US embargo, and 17 abstained. Cuban Speaker Ricardo Alarcon told the Assembly that figures of the National Association of Manufacturers (NAM) show that the US between 1993 and 1996 had imposed 61 economic sanctions on 35 nations (“42% of the world population”), whereas the US representative to the UN, Victor Marrero, called economic sanctions “an essential foreign policy tool.”

6. Congress initiatives address concerns about embargo impact. New bills would address doubts raised abroad by US embargos. US businesses claim unilateral trade sanctions reduce US business access to valuable foreign markets - at a cost of $19 billion per year in lost business due to fears the US cannot meet long-term shipping and parts commitments. A coalition of 400+ large US firms is supporting measures introduced in the lower house by Reps. Hamilton and Crane and in the upper house by Sen. Lugar, to require the government to define the foreign policy objective of a proposed sanction and assess its impact on American industry and agriculture. The bills would limit new sanctions to two years until extended by Congress. Commenting on the proposals, Fort-Worth’s Star-Telegram editorialized that sanctions “have had no effect on the offensive behavior of the targeted nations” and “too often...make somebody or some group in this country feel good without accomplishing a thing.” Furthermore, Amb. Ernest Preeg in the Oct. 28 Journal of Commerce said that Cuban-Americans “are undermining the embargos by sending increasingly large amounts of US currency to friends and relatives in Cuba” - an estimated $800 million in 1996, far more than offsetting the embargo.

On a separate aspect of Helms-Burton, the Washington Post Nov. 19 supported bills introduced to drop sections restricting sales of food, medicine and medical equipment. These proposals are also supported by the US Chamber, humanitarian and medical groups, and groups representing much of the Cuban-American emigrant community. The Post accused the Administration of rationalizing blockade of these items by pointing to loopholes which allow their sale with licenses and donations, and said the denial impacts children, women, and the elderly, and that using them as a political weapon “tramples on American humanitarian tradition.”

7. President cautious in seeking gradually improving relations with Cuba. Clinton, on TV Nov. 8, said his desire for “a gradually evolving relationship” is conditioned on some indication of Cuba’s opening up and moveing toward democracy.

8. Castro doing well at international summits. At the Nov. 7-9 Ibero-American annual Summit meeting on Venezuela’s Margarita Island, Castro won new condemnations of Helms-Burton from members - 19 Latin American heads of state and leaders from Spain and Portugal. The Margarita Declaration called for more cooperation on trade and opposed US Congressional attempts to impose new sanctions on Cuba.

Xinhua reported 10/27 that Cuba would host a Latin American Parliament Commission meeting 11/13-15, to discuss political matters, tourism, health and labor issues.

9. Explanations for postponement of resolution of EU complaint before WTO. Wayne Smith in CUBAInfo Nov. 13 wrote that “quiet understanding” explains the European Union’s decision not to resume its protest to the World Trade Organization against the US on Helms-Burton after the Oct. 15 deadline for EU-US agreement on global guidelines for confiscated properties. Since Pres. Clinton has no waiver authority for enforcing Title IV, Dr. Smith sees high odds that at some point in 1998 he will “have little choice but to implement at least minimal sanctions against some European countries”, leading to resumption of the WTO complaint and retaliatory legislation against which the US may claim a national security escape.

Ralph Galliano in US-Cuba Policy Report of Oct. 30 said that the EU suspended its complaint “in hopes the Clinton administration can obtain a waiver amendment to Title IV.”

10. Kennedy Recollections. The media reported Nov. 19 on 1962 tapes released on Kennedy Administration discussion of the space trip of now Sen. Glenn. Policy wonks in attendance considered blaming any failure of the mission on Castro.

John F. Kennedy Jr. visited Cuba on a private trip, 35 years after the Cuban missile crisis, Dana Hull reported in the Washington Post Oct. 25.

11. Cuba’s economic woes. The September Cuba Monthly Economic Report issued by DevTech’s Miami office said Cuban leaders see encouraging signs of recovery, while also citing Vice President Carlos Lage’s reasons for improving the people’s standard of living. He listed these as a) Helms-Burton, which “has severely complicated the... financial situation” as Cuba can only access short-term financing at high interest, b) the poor sugar harvest, and c) deteriorating infrastructure, particularly electric generation, transport and communication. Larry Rohter described Cuba’s poverty in the New York Times on Oct. 26 in a story of Havana’s Teeming Shantytowns.

Though Cuba’s Government estimates growth of 1-2%, independent sources predict contraction by 2-3%. The State controls 78% of arable land but produces only 69% of consumption. To meet higher prices for tobacco, raise productivity, and reduce waste and theft, 10,000 new tobacco workers are being added are 60,000 and getting hard currency incentives. Pork production growth suffers from a lack of hard currency with which to buy feed, and half of all facilities are in disrepair. Blaming external factors for the disastrous sugar harvest, authorities also admit that some refinery production costs are almost four times others. Summer bombings set back revenues of the main income source, tourism, but price reductions are now trying to lure Germans and other tourists, and visitors report that the dollar zone of Havana is teeming. While the 83-year old Matahmbre copper mine has exhausted profitable reserves, a few miles away new copper deposits are expected to be strip-mined in coming years. Petroleum production has stabilized at a modest 31,000 barrels/day, providing 50% of fuel used for electricity and 15% of total fuel consumed. Cuba hopes for rising mining and petroleum revenues from agreements with British, Canadian, French, and Swedish firms.

Trade may be faring better. Dev Tech's Report predicted trade growth with Venezuela under a recent agreement, investments by Spanish, Brazilian and Israeli joint ventures, and sales of about $500,000 by British businessmen during an exploratory visit sponsored by CARITAG (Caribbean Trade Advisory Group) of the British Chamber of Commerce of Ultramar. The Chamber’s president said the attractive Cuban market is handicapped by lack of export credit lines due to Cuba’s large debt to Britain. The Journal of Commerce on Nov. 7 reported inauguration of the Mariel Free Trade Zone, third in the Havana area, and quoted Foreign Investment Minister Feradaz who said that 150 foreign firms who signed on to the zones employ 1700 workers.

12. Views of “experts” expressed at recent meetings and in publications.

At a panel discussion Nov. 14 at CSIS (Ctr. for Strategic & Intl. Studies), Jorge Sanguinetty of DevTech Systems, Inc. recalled his analysis given to the ASCE last month that Castro’s vaunted “socialist economy” really has four interacting subsystems: a) a large economy administered personally by Castro, b) a prosperous economy of foreign investment, c) a deteriorating planned economy, and d) a harshly limited private economy comprising the self-employed. He said Castro’s commitment to socialism is contradicted by lack of commitment to installing reliable national accounts, abandonment of long-term planning since 1962, long reliance on Soviet subsidies and lack of effort to develop the internal economy, lack of productive discipline in the public enterprises, a current breakdown in central planning to manage the economy, and surreptitious creation of private enterprises in the hands of Castro and intimate collaborators.

Sanguinetty blamed economic difficulties on the lack of an economic agenda, and said advocates of lifting the US embargo do not acknowledge Castro’s “own embargo [on]...Cuban workers and would-be entrepreneurs.” He said lifting the embargo would only benefit Castro’s monopolistic power which impedes others from benefitting from free domestic and foreign trade, free enterprise, and private property.

Ernesto Betancourt, former Radio Marti director and OAS economist, told the CSIS group that the recent Party Congress gave Castro an emotional platform on which to build a tie to Che Guevara (who, he said, was not the capable administrative or military man of legend) and to enhance the role of the military. He dubbed as hypocracies the levy of a $200 license taxes on recently approved guest houses, and the invitation to the Pope while requiring the Church to make and pay for all arrangements. He said Cuba’s inflated annual remittance figures ($800 million, "probably double the real level") cover Castro’s laundering of drug money.

Roger Noriega, Senator Foreign Relations Committee staff, said that Sen. Helms will not tolerate softening of the Helms-Burton Act, and that Title IV is supposed to globalize restraints on firms usurping expropriated properties but could be more lenient if the EU moves toward arbitrating use of expropriated property. Pres. Clinton’s failure to enforce Title IV, he said, was “evidence of untrustworthiness” and a major reason he lost on the Fast Track legislation for freer trade.

John Richardson, Deputy Head of the European Commission’s Washington Delegation, disagreed with most of Mr. Noriega’s views, except that Castro’s regime is abhorrent. He reviewed the European Parliament’s steady human rights policy since 1993 and efforts leading to codification of standards for pluralistic democracy and a basic standard of living. He told the CSIS audience that EU aid to Cuba, largely humanitarian aid and agricultural reform, plus some energy efficiency and local government strengthening, is tightly tied to Cuban performance in these areas.

Writing for the fall issue of World Affairs, AmCham Cuba member Maria Werlau examines the reform-generating capabilities of foreign investment. Her article on Investment in Cuba: The Limits of Commercial Engagement, says two factors challenge arguments for commercial engagement with Cuba: a) poor Cuban business prospects limit opportunities to attract a sufficient level of investment to impact meaningfully on the economy and society, and b) the design of Cuba’s foreign investment structure secures regime survival by accessing foreign capital while suppressing its socio-economic and political impact.

Ms. Werlau says the most important reform-generating attributes of foreign investment are restrained by detrimental side-effects which hinder establishment in Cuba of a stable free-market democracy. These include investment risks like restricted liquidity, reversibility, potential claims on confiscated properties, inability to hire workers directly, mounting socio-political ferment, resentment of foreigners, and negative international public opinion. By creating an enclave system for foreign ventures, captive to the nomenklatura, concessionary to foreigners, and lacking transparency and competitiveness, Werlau says Cuba has negated the theoretical bases for successful capitalism.

The Economist Intelligence Unit’s new publication, Reassessing Cuba: Emerging opportunities and operating challenges, is a 170-page research report on the Cuban market. It analyzes critical industries, reviews and forecasts the economic climate, evaluates implications of recent trade legislation, and offers guidelines for operating in Cuba. Case studies highlight problems addressed by Sherritt, ITT, Stet of Italy, and other Canadian, Israeli, and Spanish firms. It is available for $495 from The Economist at 212-554-0643 in New York.

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AmCham Cuba board looks ahead. The challenge of expanding corporate membership was a primary concern of the Directors who met Nov. 10. Somewhat unique to this chamber, they cited the indefinite waiting period before US businesses can legally move into Cuba and the responsibly of meeting US business concerns while refraining from political positions.

The Board explored ways to expand AmCham Cuba’s value by conduiting additional economic data sources to corporate members including specialized publications and internet sources like Cuba On-Line, and by cooperating on research requested by members. It accepted with deep regret resignation from the Advisory Council of Amb. Harry Shlaudeman who is leaving the Washington area.

AmCham Cuba’s 1997 income was reported to be slightly higher than budgeted, while there has been a moderate drop in outgo for rent and meetings, except for one-time costs associated with the move to Suite 422.

Keep your information and opinions coming.

Sincerely,

Phoebe Lansdale, Executive Director

Nov. 28 1997

Dec. 4 AmCham Cuba Miami lunch. On Thurs., Dec. 4, legal issues facing a post- Castro Cuba will be examined. Jose Sirven, partner at Holland & Knight, will speak to members and guests at the Coral Gables Biltmore at noon. He will consider changes needed in Cuba’s legal structure upon return to a free market Cuba. Can the 1940 constitution serve a democratic and capitalistic Cuba? What should be done about the existing socialist constitu- tion? Is a referendum needed? What new statutes and regulations should be considered, and can older, long-ignored laws be usefully brought out of obscurity? How should laws violating human and civil rights be dealth with? What are prospects for an independent judiciary? Call our Florida Representative, Carlos Porro, at 305-358-8992 to reserve a place at this important event.