Tuesday, November 20, 2007

Cuban Embargo

Trick-or-Treat at the United Nations and at the Havana Trade Fair

The Cuban Granma International website showed the following two news items:

United Nations, October 30 — The United Nations today, by 184 votes, expressed its opposition to the blockade maintained against Cuba for almost half a century by the United States. . . .

WITH the presence this time of 52 countries and more than 1,200 business representatives, the Havana Trade Fair is celebrating its 25th anniversary. . . .

Confiscations in Cuba in 1960 and United States Retaliation

Castro’s Cuba confiscated practically all private properties, without compensation, in 1960, including holdings of individuals and companies from the United States. All American properties were estimated at around two billion dollars, at that time.

“September 4, 1961. The Foreign Assistance Act of 1961 passes in the U.S. Congress. It prohibits aid to Cuba and authorizes the President to create a "total embargo upon all trade" with Cuba.

February 7, 1962. President Kennedy broadens the partial trade restrictions imposed by Eisenhower to a ban on all trade with Cuba, except for non-subsidized sale of foods and medicines.”[1]

Over the years, some other changes have been made, including what is known as the Helms-Burton Act, H.R.927, Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, sponsored by Senator Jesse Helms, Republican of North Carolina, and Dan Burton, Republican of Indiana.


Castro is a skillful propagandist. He gave the embargo the name blockade. During the past forty five years, he has endlessly repeated that the blockade is the reason for all economic failures in Cuba. Let us keep in mind that Castro, as Joseph Goebbels did in Nazi Germany, is putting to work the concept that when a lie is continuously repeated, it turns axiomatically into a truth in the minds of people subject to these ideological outpourings. Also, Castro, as Goebbels did in his time, has absolute control of all the media, including television. Television is the main media tool for advertising in market economy countries. It is the basic propaganda tool for political indoctrination in Cuba, and is used by Castro to hammer into their minds what he wants the people to believe.

Blaming the US embargo for Cuba’s woes has also gained acceptance by many government and forums internationally. The dissemination of the blockade tall tale (“patraña” in Spanish) has been systematically conveyed by left-wing organizations and fellow-travelers from all over the world.

Cuba’s Economic Failures

The truth is that Cuba’s economic failures stem from Communism, as showcased by the poor economic performances of the Soviet Union and its satellite Eastern European countries during the last century.

Inefficient State ownership and control of farms in Cuba is the main culprit of food scarcities as demonstrated by the ration card system, implemented more than forty years ago, which provides meager allocations of foodstuff to the Cuban population. “. . . the existence (in Cuba) of a major dependence on foreign sources for foodstuff while thousands of hectares of cultivatable land are underutilized or left idle. . . .”[2] is undeniable, as confirmed by Raúl Castro’s own words in a speech on July 26, 2007. (A sad recognition of forty-seven years of communist failures.) [3]:

“. . . And I am talking of products that I think can be grown here --it seems to me that there is plenty of land-- and we have had good rains last year and this. . . . No one, no individual or country, can afford to spend more than what they have. It seems elementary, but we do not always think and act in accordance with this inescapable reality.

To have more, we have to begin by producing more, with a sense of rationality and efficiency, so that we may reduce imports, especially of food products, that may be grown here, whose domestic production is still a long way away from meeting the needs of the population.

We face the imperative of making our land produce more, and the land is there to be tilled either with tractors or with oxen, as it was done before the tractor existed. . . .”

President Jimmy Carter in a speech during his visit to Cuba in 2002 said, in regards to the embargo, “. . . I should add that these restraints are not the source of Cuba’s economic problems. Cuba can trade with more than 100 countries, and buy medicines, for example, more cheaply in Mexico than in the United States. . . .”[4]

Nevertheless, Castro dramatizes his blockade tirades calling it “genocide against the Cuban people”, without any concern about the Communist internal conditions that make the Cuban economy fail.

Cuba’s Economic Mismanagement

What did happen with the richness that Castro obtained by confiscating, without compensation, all the properties of Cuban and American individuals and companies? What did happen with the subsidies provided by the Soviet Union and its satellite countries estimated at several billion dollars annually? What did happen with the wealth represented by the products and services received from and not paid for to many of the 100 countries that have or had commercial ties with Castro’s Cuba?

Simply, Castro squandered all of this richness. He is an excellent propagandist, but is also a terrible economic administrator. The Cuban people are chained to an economic system that does not work, where the Communist economic inefficiency is magnified by Castro’s microeconomic whims. On top of these inefficiencies, there were, and still are, significant resources devoted to keeping an expensive intelligence network in foreign countries, to finance turmoil in Latin America, to send expeditionary troops to Africa (for instance, more than 50,000 Cuban soldiers in Angola in the 1970s), to pay for expensive propaganda projects (for instance, a medical school in Cuba, free to foreign students), and travel and living expenses to numerous foreign sympathizers that attend propaganda gatherings in Cuba.

Castro’s Cuba can buy from over 100 countries, as referred to by President Carter. Those countries have not joined the United States embargo. The volume of business has dramatically decreased because of Castro’s policy, in many instances, of “buying but not paying”. Countries with unpaid balances stop shipping their products or services. These countries have learned that they cannot sell to Cuba on credit, (“no se puede vender a Cuba al fiado.”)

Except for Spain, that continues dealing with Castro’s Cuba in spite of the huge Cuban unpaid balances.

The newspaper “Negocio” (in Spain) reported that Castro’s dictatorship owes Spain 825 million Euros. . . . and counting interests accrued on the unpaid balances the total debt is around 1.8 billion Euros. . . . The Cuban dictatorship has stated, without providing any explanation, that they do not foresee paying this debt. . . . Spain is considering cancelling this debt. . . . Spanish authorities are taking into account the economic conditions prevailing in Cuba and its scant paying capacity.

“The truth is that Cuba owes the Western countries grouped in the Paris Club. . . .owes Russia (mostly from the Soviet years,). . . . and owes the ex-Communist countries in Eastern Europe. . . .” “Furthermore there is also another commercial and bank debt in default. . . . with (foreign) private companies and financial organizations (originating from loans and commercial transactions) . . . . Cuba’s situation, as explained by economists, is similar to that of a family when their finances reach a crisis point: what they earn is not enough to pay their debts. . . .”[5]

“Cuban debt amounts to 15.4 billion dollars, that the Central Bank divides in active (7.8) and frozen (7.6,) since 1986,. . . . 60% with Paris Club members, as reported by an official source. The 2006 Statistical Annual Report, National Statistics Office. . . . indicates that the active debt increased 1.9 billions between December 2005 and same month last year.”[6] (These numbers do not include interests accrued on unpaid balances.)

The Cuban report does not include debts to Russia and ex-Communist countries estimated at 24.5 and 2.2 billion dollars, respectively.

Castro’s blockade contention is negated by purchases of foodstuffs from American companies in recent years. The caveat is that Castro’s Cuba has to pay in cash for whatever they buy from USA exporters. “. . . Cuba is to pay about $500 million USD this year (2005) to purchase U.S. products. . . .”[7] This is around the same than the purchases of U.S. products in 2006.

Many people favor the termination of the US embargo, and most of them think that there will be political gains for the United States. “How Castro would keep his hard fist policy after a normalization of relations and commerce with its staunch enemy? How he could justify in front of the world’s public opinion and the Latin American and European governments that he should keep his hard fist against the pacific opposition (in Cuba) when it cannot be argued that dissidents are enemy agents?”[8]

If the embargo were discontinued, the United States, most likely, will keep the cash payment terms. Castro would denounce this no credit policy as an imperialist aggression. If credit terms were allowed, Castro would find some other point of contention. A Cuban government officer recently said that the blockade has inflicted damages to Cuba amounting to 222 billion dollars. Castro would put his propaganda skills into play and would coin a new catchy name for the US not compensating for the blockade’s negative effects over the years.

“De casta le viene al galgo ser rabilargo.” (It's in the blood of the greyhound to be long-tailed.) The hard fist is an innate condition for the governing Castro. “A rose is a rose, is a rose.” Castro, Fidel before, and Raul now, is a dictator, is a dictator. Nothing will change them; neither the world public opinion, nor all the saints in heaven. Actually, not even the devil.

(“Verdaderamente, ni el mismo diablo”).

Gonzalo Fernández

Fernández graduated from Havana University with an accounting degree. He is a business consultant in Raleigh, North Carolina. Wrote "Estados Financieros" (Financial Statements), UTEHA, Mexico, third edition, 1966. Fernández is a coauthor of the "Handbook of Financing Growth", Marks, Robbins, Fernández and Funkhouser, John Wiley and Sons, Inc, New Jersey, 2005. He is a Past-President of the Raleigh Chapter of the Institute of Management Accountants.

[1] Historyofcuba.com, written and compiled by J.A. Sierra.

[2] Oscar Espinosa Chepe, “The Periodical Period,” cubaencuentro.com, October 25, 2001. (Translation.)

[3] Version in English, www.granma.cubaweb.cu.

[4] Carter’s own words to the Cubans,” excerpts from the speech delivered by former President Jimmy Carter in Havana in Spanish. The English translation was provided by the Carter Center at Emory University in Atlanta, The Miami Herald, www.miami.com, posted May 15, 2002.

[5] Pedro Alfonso, “Gigantic Castro’s Debt,” El Nuevo Herald electrónico, March 17, 2002. (Tanslation.)

[6] AFP/Havana (Agence France Presse,) Cuban external debt is over 15.3 billion dollars , July 24, 2007.

[7] www.granma.cu, Digital Granma International.

[8] Miguel Rivero, “The Sea of the Lost Time,” cubaencuentro.com, September 13, 2002. (Translation.)