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AMCHAM CUBA NEWSLETTER                                                                   MAY 2001

 

 

TABLE OF CONTENTS

 

1. "Should US business be frozen out of Cuba still?" - recent debate on alternative US-Cuba policies

2. Commerce Department regulations on food and drug sales still pending

3.  Senators would open Cuba trade

4. US-licensed cargo vessel began, then was unable, to carry approved humanitarian goods to Cuba

5. Cuban official says Cubans would welcome US embargo relaxation

6. Castro's diplomatic forays abroad

7. UN Human Rights Commission again criticizes Cuba

8.  Free Trade Area of the Americas?

9. Meetings on Cuba

10. New sources on Cuba

 

OPINION CORNER - Report on expert discussion at the North American Committee of prospects for best business practices in Cuba

 

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1. "Should the US remain frozen out of the Cuban economy?" Wayne Smith & Dennis Hays advanced alter-native US policies towards Cuba.  Two former State Department officials with years of Latin American experience engaged in a verbal "mano a mano" on US trade and investment policy in Cuba at a May 9 luncheon meeting of AmCham Cuba at the National Press Club. 

 

Discussion was led off by Dr. Wayne Smith, Senior Fellow at CIP (Center for International Policy), Johns Hopkins University Professor and former Chief of the US Interests Section in Havana.  The veteran critic of US Cuba policy challenged the US for failing to adopt a more open policy toward Cuba despite "major tension-relieving moves by the…Castro government in recent years", citing 1/ removal of Cuban troops from Africa and 2/ the end of efforts to export revolution. Instead, Smith said, and the Congress enacted the Cuban Democracy Act in 1992 and the Helms-Burton Act in 1996 both further isolated Cuba by tightening the US economic embargo.  Now, though the Cuban economy is improving marginally and Castro is trading with and getting investments from many close US allies, US business and industry are denied access to Cuba's market.  

 

In addition, the embargo itself is under heavy criticism by human rights leaders within Cuba, the one group in the Cuban population who Smith said should be most likely to applaud possible relaxation of the embargo.  Smith quoted Elizardo Sanchez Santacruz, Director of the Cuban Commission for Human Rights and National Reconciliation, with whom he talked recently in Havana, as calling the embargo "a serious obstacle to a peaceful transition to a more democratic regime as well as demeaning to the Cuban people themselves."  

 

A contrasting view was expressed by Dennis Hays, Executive Vice President of CANF (Cuban-American National Foundation), former US Ambassador to Suriname, and formerly Director of the State Department's Office of Cuban Affairs.  He told the AmCham Cuba audience he would discuss US-Cuban relations solely in business investment terms rather than in a moral context.  He urged continuation of a strong stand against the Castro regime in Cuba.

 

Hays painted a picture of Cuba as a nation so destitute that it can offer no substantial incentives to would-be US investors, even should they be legally permitted access to doing business on the island. "The average per capita income in Cuba is [the equivalent of US] $10 or $12 per month.  The Govern-ment is bankrupt and must borrow short-term at high interest rates, and all major trade involves barter or debt-forgiveness schemes."  Furthermore, he said, Cuba's investment code is highly restrictive and discriminates harshly against the worker.  He noted that investors from France and Chile now show extreme reluctance to invest in Cuba.  "For a hard-nosed evaluation of what investment in Cuba is all about, just ask the Canadians," Hays added.

 

Acknowledging that the Castro government is repugnant by US standards, Smith said in rebuttal, "So what?  The United States maintains robust commercial ties with authoritarian regimes with poor human rights records," China among them.  "It's not up to the US government to say whether we should trade with Cuba.  Let business itself decide."  Smith admitted that the US embargo does not prevent Cuba from buying medicines [and other US products] from third countries, but said that US government restrictions on the sale of such items to Cuba "is inconsistent with US values." 

 

In response, Hays admitted that US business might be able to make money in Cuba -- but for now only by "buying into" a corrupt political system.  He also said that, should such trade be underwritten by US credits, it could involve an expense to US taxpayers. 

 

Rejecting the notion that US taxpayers would be called on to foot the bill for trade with Cuba, Smith said that US rice exporters are fully capable of competing with China for Cuban business.  However, he added, the decision should be theirs, not that of the US government. 

 

In response to a question as to how to pump more dollars into Cuba so as to promote change, Smith was highly critical of efforts to fund anti-Castro groups in Cuba.  He said that such a program would, in the words of Elizardo Sanchez, be "a disaster," that human rights groups in Cuba would reject such aid out of hand as demeaning (though some dissidents have been quoted as welcoming such funds), and that it would be subject to diversion by outside influences.  Further, implementation of Hays' proposal to send aid to Cuban dissident groups would, Smith commented, "constitute sedition."  

 

In sum, Smith blamed the inability of the United States to deal objectively with Cuba in recent years on "political leaders within the US who have responded to the CANF in Pavlovian fashion."  For his part, Hays said that the idea of US business operating profitably in Cuba will remain illusory as long as Fidel Castro is able to trump any move to create a democratic and equitable system in Cuba.

 

AmCham Cuba President Bob Weekley took the occasion to inform members and guests of timely financial support provided by three firms which stepped forward to sponsor this lunch: Porter Wright Morris & Arthur of Washington, DC, with special thanks to AmCham Cuba Board member Judd Kessler, Esq. Riceland Foods of Stuttgart, AZ, and particular appreciation to President Carl Brothers; and Western Trading Co. of Polluck Pines, CA, and thanks to president Ken Kroeker. 

 

[Reported by Henry Goethals, former correspondent in Cuba for US publications, Business Editor of the Times of Havana 1957-60, and member of AmCham Cuba.]

 

2.  Commerce Department regulations on US food and drug sales still incomplete.  Last year, defying prior US embargo legislation, Congress approved sales of food and medicine to Cuba.  The new law, however, requires the Commerce Department to issue rules for US firms to take part in the new trade.  Reuters reported that Commerce says that “by the end of May, [the regulations] will be in place”, but disputes within the Bush Administration may be slowing the process.  The Administration has said repeatedly that it will not soften the embargo until Castro is out of power and democracy restored in Cuba. 

 

3.  New Senate effort for humanitarian aid to Cuba.  Senators Jesse Helms (R-NC), Joe Lieberman (D-CT) and Bob Graham (D-FL) introduced a new Cuban Solidarity Act on May 16.  It calls for pro-active US policy in Cuba's fight for freedom, and authorizes $100 million over the next four years in humanitarian aid that may include food, medicine, telephones, office supplies and educational materials.  The bill also calls for increased support for democratic opposition groups through US agencies.

 

4. US-licensed cargo vessel started, but then was not able to carry humanitarian goods to Cuba.  In late April, the Associated Press says an American cargo ship owned by Crowley Liner Services of Jacksonville, FL, and carrying donated humanitarian goods, in the end by-passed its proposed stop in Havana and proceeded to its final destination in Mexico.  Though the ship had US authorization to transport the goods to Havana, Crowley has explained that the Cuban government advised it that docking would be denied.  The AP quoted Crowley officials who had "talked with more than 100 companies interested in shipping products to Cuba", as fearing backlash from the Cuban-American community, especially in south Florida, if they open up business with Cuba.  John Kavulich, President of the US-Cuba Trade & Economic Council, called the Crowley ship authorization "clearly precedent-setting" and "an important visual moment in the bilateral relationship."  Rep. Jo Ann Emerson (R-MO) hoped "we can expand far beyond licensing a shipping company and get rice shipped down there as well as other commodities."

 

5. Cuban official believes Cubans would welcome US embargo relaxation.  Ambassador Fernando Remirez, Chief of the Cuban Interest Section in Washington, recently told reporters that he thinks that the Cuban people are ready to end the US embargo on Cuba.  Furthermore, the Ambassdor said there is widespread enthusiasm on the part of Cuba's 11.2 million people for anything American.  Remirez hopes that increasing numbers of US tourists in Cuba, plus a growing business lobby, will push the US toward easing sanctions. 

 

On the other hand, the Associated Press reported that Remirez does not predict any early implementation by the Bush Administration of last year's Congressional loosening of restrictions on sales of US agricultural goods and medicinal supplies, or any Bush support for new initiatives in the same direction.  .

 

6. Castro abroad.   In May, Castro toured seven "brother" countries to establish political and economic alliances.  Official visits were made to Algeria, Iran, Malaysia, Qatar, Syria, Libya, and, briefly, Portugal.  Politically, Castro found common ground in his desire to create a front against the hegemony of the United States in Syria, Iran and Libya.  Economically, the Cuban President urged other nations' businesses, especially in Malaysia, to invest in Cuba.

 

The Washington Times reported that, in Iran, Castro discussed “the US-imposed sanctions," medical and construction-technology exchanges, and economic issues with President Mohammed Khatami. 

 

7. Cuba's human rights criticized again.  The UN Human Rights Commission in Geneva, from which the US was dropped last month for extraneous Bush foreign policy actions, again condemned Cuba's human rights record while dismissing the censure of China for similar charges.  The Commission's traditional criticism of Cuba this year focused on Cuba's “limiting civil liberties, outlawing political opposition, imprisoning dissidents, maintaining state control over the press, and failing to hold presidential elections.” 

 

Cuban officials alleged that Cuba’s censure was due to US influence on nations like Canada, Costa Rica, and Mexico whose labels for Cuba as “anti-democratic” echoes US policy, Cuba complained.  For example:

 

- Castro's criticism of Costa Rica's vote condemning Cuban Human Rights led Costa Rica to reject Cuban Consul in San Jose.  Responding to vocal Cuban criticism of Costa Rica’s UN vote to censure Cuba, Costa Rica "revoked Juan Carlos Hernandez’s diplomatic credentials” and maintained that it had faced lobbying on the issue only from Cuba, not the US. 

 

- Mexico split on Cuba HR role.  Debate on the UN human rights vote created some tension in Mexico, Cuba’s traditional ally in the Western Hemisphere. The Miami Herald wrote that Mexico's President Fox was urged by leftist intellectuals, writers, and human rights organizations to “take a stand…consistent with the seriousness of the systematic violations to individual freedoms that the Cuban people are suffering and …to reject the US…embargo.”  Meanwhile, both sides of the Mexican Congress were reported to favor not condemning Cuba.  In the UN Commission, while Mexico abstained from voting, it openly supported the motion to condemn Cuba. 

 

- Cuba fared better in World Bank social indicators. Meanwhile, Reuters says the new World Bank Development Indicators rank Cuba as “better on social measures than most” other developing nations.  They show Cubans' life expectancy of 76 years is longer than that of other Latin Americans, and that “the island’s literacy levels [is equal to] the middle-income nations of Argentina and Uruguay.” 

 

8. Cuba disapproves proposed Americas-wide free trade area.  Last month, Western Hemisphere heads-of-state gathered in Quebec City discussed formation of the world’s largest free trade zone by the year 2005. 

 

Cuba, the only hemispheric nation not represented at the summit, used its annual May Day celebration to allege that “the US government was seeking, via the Free Trade for the Americas Act pact, ‘a gigantic annexation’ of Latin America and the Caribbean”.  Castro decried an eventual "region overrun by Hollywood films, McDonald’s diners and the US dollar," reported Reuters.”  Crying out for “Annexation, No!   Plebiscite, Yes!,” Castro urged a “region-wide revolt” against the proposed free trade zone and called on individual nations to vote on whether or not to join. 

 

9.  Meetings About Cuba.  On Thursday, June 7, 8:30-4:00, CIP (Center for International Policy) will host a conference at the Carnegie Endowment for International Peace in DC.  Addressing US and Cuba Trademarks: Current Status, Prospects and Problems, intellectual property experts, including lawyers and business and trademark specialists from Europe and the US, and Cuban officials, will explain various aspects of trademark disputes between the US and Cuba in principle and as applied to well known products.  They will examine trademark protection, European Union (EU) allegations before the World Trade Organization (WTO) of US violation under Section 211 of the US Omnibus Appropriation Act of `998, the requirements of Inter-American Trademark Convention, and the real potential market for US goods and services in a post-embargo Cuba.  Contact leah@ciponline.org or 202-232-3317 for information. 

 

June 14, Georgetown U's Caribbean Project will hold a briefing and lunch on "Divergent Perspectives on Title III of the Helms-Burton Act".  Speakers at the Russell Senate Office Building #189 (Delaware & Constitution Aves. NE) will be EU Trade Advisor C. Hebebrand and Attorneys Bob Muse and AmCham Cuba's Matias Travieso-Diaz.  Contact mitchet@georgetown.edu or T) 202-687-2058.

 

10.  New Resources. Cuba Business Solutions, Ltd., a London-based marketing and market research agency, together with RMM GmbH, international marketing and market research agency, is advertising services as a new resource for American business interested in gaining qualitative research information on Cuba.  For more information, see info@cubasolutions.com.

 

Have a fine summer!  

 

Sincerely,

 

 

Phoebe Lansdale, Executive Director

Editorial review:  Robert Weekley, President

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Today's OPINION CORNER is a report by Robert Weekley, AmCham Cuba President, on recent discussions  hosted by the National Policy Association and Canada's Foundation for the Americas.]

 

International Meeting on Best Business Practices in Cuba

 

At the second annual conference on "Best Business Practices in Cuba," held in Montreal on June 1, a broad range of speakers and participants worked to develop a realistic portrayal of the opportunities and pitfalls of doing business in today's Cuba.  The conference was co-sponsored by the National Policy Association (NPA) and the Canadian Foundation for the Americas (FOCAL), independent policy organization that monitors and analyzes developments in the Americas.  Its overall purpose was to assess the political risks associated with investing in Cuba and examining the role of the private sector in revitalizing Cuba's independent labor sector. 

 

A broad range of speakers and participants included both theoreticians and practitioners: academics, legal and policy experts, entrepreneurs, and investors.  Despite their wide range of views, discussants agreed overall that Cuba, with its socialist economic system and pervasive one-party government, is a challenging place in which to invest and do business.  Both political and economic risks abound.  However, conferees whose firms currently are investing and those with some years of experience in Cuba contend that, after analyzing the risks, they are moving ahead with larger projects and investments.  They were not shy about saying that it is good to "make hay while the sun shines" in Cuba, that is, to get their business built up now while powerful US corporations remain on the outside looking in.

 

Whether or not one agrees with doing business in Cuba now, hearing day-to-day details of starting and running foreign enterprises in Cuba offered a unique opportunity to validate the policy-based assertions that circulate inside the Washington, DC, beltway.  For example, while most foreign enterprises engage in joint ventures with specialized state-owned enterprises, Cuban managers themselves face challenges not found in capitalist economies.   They are increasingly under government pressure to improve efficiency, service, and profits.  They often feel compelled to employ as many Cubans as possible, undermining efficiencies.  Contracting for construction and supplies, importing equipment and supplies, and coordinating services are time-consuming and have delayed the completion of projects described at the conference. 

 

The NPA's Cuba Working Group has focused on the conditions workers face in Cuba where there are neither independent labor organizations nor unions.  At this conference, operators of foreign businesses in Cuba faced questions about how employers reconcile the Cuban employment regulations with accepted international labor practices.  While admitting that labor conditions are not in accord with international standards, conferees noted that Cubans are eager to work for the foreign enterprises because - despite the shortcomings - working conditions and take-home pay are better than other opportunities on the island.

 

AmCham Cuba Secretary Matias Travieso-Diaz, Esq., of Shaw Pittman led off the discussion with observations based on his years of legal and business experience in Cuba and in Latin American generally.  Travieso-Diaz cited the very large potential for foreign investment in Cuba but noted challenges to investment like arbitrary government decisions that cause delays and uncertainty, and the lack of management control over labor costs.  The Cuban government lacks incentive to improve the system because, Travieso-Diaz contends, it earns more from employees' salaries than from the new foreign investment itself.  He said that he has observed a slowdown in new foreign investment that he attributes to the Cuban government.

 

Rod Lever, political risk analyst with Canada's Export Development Corporation, also noted some Cuban government retrenchment on investment promotion and sustained opposition to greater privatization of enterprises.  He attributes this to Cuba's confidence born of an improved economy and the belief that economic growth will be sustained without additional privatization.  Lever also ticked off the risks to investors, but nonetheless predicted a gradual improvement in conditions for foreign investors. 

 

Efren Cordoba, former International Labor Organization (ILO) officer and university professor, noted many instances in which labor conditions in Cuba are in violation of the ILO Convention.  He said that Cubans work under one of the world's most vigorous disciplinary systems which unfairly favors management in the business-vs.-labor equation.   He concluded that foreign investments have created economic growth in Cuba and many of the investments themselves have been profitable, but that this growth has neither influenced the Cuban labor movement positively nor contributed much to the democratization of Cuban society.

 

Phil Peters of the Lexington Institute spoke of the positive effects of Cuba's limited privatization program.  He said a survey of those working in some 150 of the 160,000 licensed private operations in Cuba have after-tax incomes 3.5 times that of the average Cuban worker.  The result is better goods and services generally available.  Regarding workers at foreign enterprises, he noted that, while workers are assigned by government-operated employment agencies, informal recruitment based on referrals and requests does occur.  Joint ventures surveyed tend to find ways to supplement their workers' pay, often through profit-sharing arrangements.  Peters sees a positive effect of foreign enterprises in Cuba through the transfer of knowledge to Cubans in accounting practices, marketing, human relations management, and other such practices of companies based in capitalist systems.  Juan Carlos Espinosa, Director of the Cuban Studies Center at St. Thomas University noted how "micro inverstments", for example funds received as remittances to Cubans from relatives living abroad, have had a big impact on establishing Cuba's small private enterprises. 

 

David McMillan, VHI International Hoteliers, spent eight years in Cuba working on various hotel developments.  He is experienced in all aspects of enterprise development including financing, risk insurance, contracting, and operating new hotels.  He described many of the common investment risks and noted that average labor costs on recent project have more than doubled.  He said his Cuba experiences have been positive overall, and expressed satisfaction that the people he has worked with at the development level are likely to be tomorrow's leaders in Cuba.  McMillan noted that success in an investment is enhanced by careful and patient negotiation of contracts and agreements up front.  In his experience, Cubans abide meticulously by contracts, and errors at this stage can be hard to rectify.  McMillan also believes that Cuban workers feel they are better off now than before and sees gradual change in Cuba's labor system.  [End of Opinion Corner]