WHY THE CUBAN TRADE EMBARGO
SHOULD BE MAINTAINED
By John P. Sweeney

INTRODUCTION

W ith the end of the Cold War and collapse of the Soviet Union, there has been a growing chorus of cries for the United States to lift the economic embargo on Cuba. This chorus has included even such responsible anti-communist voices as those of former President Richard Nixon and the editorial page of The Wall Street Journal. Such calls are curious, coming as they are just when it appears that the 32-year-old embargo may be bearing fruit. Five years after losing the financial patronage of the former Soviet Union, Fidel Castro's communist regime is facing severe shortages and growing popular discontent. Cuba's economy has shrunk by more than half since 1989, the black market is more dynamic than the formal command economy controlled by the state, and Fidel Castro's efforts to build a huge tourism industry and attract billions of dollars in new foreign investments have thus far proved dismal failures.

This economic collapse has imperiled the stability of the Castro regime. The Soviet Union's demise robbed Castro of his ideological base and about $4.5 billion a year in direct subsidies, exposing the complete failure of the communist revolution to improve the lives of the Cuban people. Moreover, as the economy's collapse has accelerated, popular discontent has increased to levels that threaten the survival of the regime. That was made clear in August, when thousands of Cubans rioted in Havana's Old Waterfront district, and by the subsequent flight to sea of more than 30,000 Cubans of all ages. Another indication that Castro's grip on power is slipping is the increased repression of organized dissident groups by Cuban security forces.

While the embargo may finally begin working, Castro remains defiant. He refuses to allow true free-market reforms and rejects democratic political reforms. Instead, he is conducting an aggressive international campaign to get the embargo lifted without making any economic or political concessions in return. Castro is trying to force the United States to lift the embargo in order to resuscitate his dying communist regime with billions of dollars in trade, investment, and international aid...

Make demands of U.S. allies in the Western Hemisphere, including Mexico and Canada to stop coddling Castro and start calling for real change.  Link future free trade agreements between the United States and Latin American/Caribbean nations to redoubled efforts by these countries to persuade Castro to liberalize Cuba's economy and its political system. Prepare for a possibility that Castro's collapse could unleash a lengthy period of social and political chaos and perhaps even civil war, in Cuba...

THE CUBAN CRISIS

In 1994 Cuba suffers its worst economic crisis since Fidel Castro seized power in 1959. The island's gross social product (equivalent to gross domestic product) has plunged nearly 60 percent, including this year's projected contraction of 5 percent. Power blackouts occur daily in Havana and other major cities. Over two-thirds of the island's industrial facilities are shut down almost permanently due to a lack of raw materials. Gasoline is very scarce, and automotive transportation is at a virtual standstill. Animal power is used for heavy agricultural activities, and most Cubans get about on bicycles or on foot. Over half of Cuba's work force is now unemployed, although unemployment officially remains a crime punishable by imprisonment.

Since July 1993, when the Castro regime authorized the use of U.S. dollars, Cuba's own currency has become worthless. Although the official exchange rate between the peso and the U.S. dollar is one-to-one, the black market rate in August was 130 pesos to the dollar. No one will work for pesos, since the minimum wage is now equivalent to about three dollars a month. Productivity has dropped 45 percent since 1990, according to Cuban economists, and many state employees no longer bother to go to work. Instead, they have joined the fast-swelling ranks of self-employed or black market workers whose economic activities are marked by the struggle to survive from one day to the next without earning too much income lest they be charged with illegal enrichment and jailed.

Many Cuban women have turned to prostitution in a desperate effort to feed their children and families, since government rationing provides only half of the average family's monthly nutrition needs. In May, Cuba's minimum wage would buy "only a two-pound chicken, or a pound of pork, or four liters of milk in unofficial markets." Many Cuban families now survive on one daily meal consisting of rice, beans, soy, and water. For months, Cubans have been deprived even of bath soap. Infectious diseases once thought to be eradicated, such as tuberculosis and malaria, are returning as Cuba's free health care system collapses. Hospitals lack even the most basic supplies such as bandages and surgical thread for sutures. There are not enough pencils and ruled paper to supply the country's school system.

Although some Cuban economists said the economy would "hit bottom" in 1994, the poor performance of the critical sugar industry indicates that the crisis actually will grow substantially worse during 1995. Sugar production has dropped from an estimated 8.1 million metric tons in 1989 to barely 4.2 million metric tons last year. This year's crop will be even lower; one reliable estimate forecasts 4 million metric tons for 1994 and 3.5 million metric tons for 1995.

Before Castro took power in 1959, Cuba ranked third in per capita income in Latin America.
Today, after 35 (now 43) years of socialism and more than $85 billion in Soviet and Chinese economic and military aid, Cuba's per capita income is now one of the lowest in the Western Hemisphere, possibly even at the level of such impoverished countries as Haiti.

The Embargo Didn't Cause Cuba's Misery. 

Fidel Castro blames the U.S. trade embargo for the collapse of the Cuban economy. The truth, however, is that Cuba's economic destruction was caused by the regime's ruinous economic policies. Specifically, Castro's command economy, based on a 1976 "constitution" and "laws" which prohibit private enterprise and ownership of property, completely destroyed the free market in Cuba, hindering economic growth and prosperity.

The United States first imposed a trade embargo on Cuba on February 3, 1962, in response to Castro's confiscation of all privately owned properties and other productive assets, as well as his aggressive support for violent communist revolution throughout the Western Hemisphere. The original goals of the embargo were to compel Castro to open Cuba's economy and establish democracy, to weaken Cuba's communist regime, and to force Castro to relinquish power. From the beginning, however, many industrialized countries have refused to cooperate with U.S. policy towards communist Cuba and have continued to maintain diplomatic and trade relations with the dictatorship. This includes such important U.S. partners as Canada and Mexico.

Soviet patronage and subsidies in excess of $4.5 billion a year enabled Castro to resist the U.S. trade embargo until 1989, all the while claiming a fictitious "success" for his Marxist revolution and building one of the most repressive and murderous regimes in the annals of communist totalitarianism. At least 13,000 Cuban citizens have been executed since 1959, and over 100,000 have been jailed for opposing the Castro regime, including at least 28,000 still in prison today.

The collapse of the Soviet Union deprived Castro not only of billions of dollars in yearly subsidies, but also of the ideological bases which had sustained his totalitarian regime ever since he came to power in 1959. Even before the Soviet Union fell apart, however, Cuba's lengthy economic decline already was accelerating. In 1989, Cuba reported a trade deficit of $2.73 billion on exports of $5.39 billion and imports of $8.12 billion. By 1993, the trade deficit had dropped to an estimated $310 million, but exports had fallen by over 70 percent to $1.53 billion while imports had contracted nearly 80 percent to $1.84 billion. Moscow's refusal in 1990 to sign a new five-year trade agreement with Cuba marked the end of the special relationship between the two nations which had sustained Castro's tyranny for thirty years.

When Castro lost his Soviet support, many analysts forecast the swift collapse of his dictatorship. In November of 1991, for example, Cuba specialists at the Soviet Academy of Sciences predicted that the cutoff in Soviet economic assistance would "fully paralyze" the Cuban economy within a year. Yet Castro has survived. His endurance in the face of economic devastation and resulting political instability has been aided by the fact that Cuba's population totals about 11 million. This relatively small population -- roughly similar to Ecuador's and about half the size of Venezuela's -- has made it easier for the regime to use repressive measures to contain the spread of dissident groups. At the same time, it has made it easier for Castro to absorb the impact of the loss of Cuba's Soviet patronage... 

A GROWING MOVEMENT TO LIFT THE EMBARGO:                                              Page Up  

The Secretary of State's remarks were not an isolated development. They reflected growing sentiment among many U.S. policymakers, and Americans in general, who favor lifting the trade embargo on Cuba. Now that the Cold War is over, many Americans appear to believe that the time has come for the United States to remove the embargo against Cuba unilaterally without demanding any political or economic concessions from Fidel Castro... 

The list of those who favor lifting the embargo goes beyond the United States, though. NAFTA partners Mexico and Canada, two of Cuba's largest trading partners, also are among the most forceful proponents of ending the embargo. Practically every country in Latin America and the Caribbean wants it lifted. Australia, France, Germany, Italy, Spain, and Russia openly oppose it. In October, the U.N. General Assembly, for the third consecutive year, passed a non-binding resolution calling on Washington to end the embargo. Among the 184 delegations at the U.N., only Israel backed the United States, where a growing chorus of liberals and conservatives, ranging from Jesse Jackson to William F. Buckley and The Wall Street Journal, also are saying that it is time to end the embargo.

"Exporting Capitalism?": The Comparison with China { See: Permanent Normal Trade Relations (PNTR) }

Those who favor lifting the embargo often point to the examples of Vietnam and China to justify their position, claiming that eliminating the embargo will encourage the growth of a free-market economy which will undermine the communist regime. Such comparisons are not valid.  If capitalism is destroying communism in China, the driving force is not international trade but a strong domestic market economy tolerated by the communist government. China's market economy is dominated by many millions of small entrepreneurs contesting the communist command economy. Moreover, China's market economy has been growing in depth and diversity since the mid-1980s... 

None of the alleged "market reforms" undertaken to date in Cuba are true free-market initiatives. Free enterprise remains highly restricted. Foreign investors doing business in Cuba today deal mainly with Castro's regime. Cuban partners in joint ventures and mixed companies are approved by Castro as "safe." Moreover, unlike China, Cuba has barely started to open up its economy, and what little has been done to date has been permitted with great official reluctance and with the objective of assuring the communist government's political survival. China's economic transformation has been under way since 1978, when important agricultural reforms were introduced, including the right of peasant farmers to grow the crops they wished and retain some of their profit. Moreover, the government of China has encouraged the marketization of the country's coastal provinces, and since 1992 the Chinese constitution has incorporated the concept of the "socialist market economy." Although China remains a communist nation where political freedoms are sharply restricted, the ruling regime has permitted vigorous development of the private sector, thus laying the seeds for its eventual demise and potential replacement by a politically pluralist, more open society.

The Myth of Lost Opportunities for Americans. Many of those wishing to see the embargo lifted also argue that American businesses will lose out to competition from other countries whose governments do not restrict trade and investment in Cuba. But this argument is weak. Before the communist revolution, the United States was Cuba's largest trading partner: nearly 80 percent of Cuba's two-way volume of trade involved the U.S. Regardless of when the embargo is lifted, the United States will quickly regain its prominent role in the Cuban economy. Moreover, the Cuban- American community, totaling over 1.8 million people, will be an important source of investment capital and management experience.

CREATING THE CONDITIONS FOR CHANGE IN CUBA

Castro's recent comments and actions make it clear how fruitless it would be for the United States to make concessions now. Even without access to U.S. markets and investments, there are many steps Castro could take to improve economic and political conditions within his country, but he refuses to do so. These include:

Adopting free-market policies that include a reform of Cuba's  1976 "constitution" and passage of laws to abolish all legal prohibition of private enterprise and property ownership.

Holding all inclusive democratic elections in the context of a politically pluralist society in which the Communist Party is compelled to compete with democratic organizations and political parties.

Freeing all political prisoners currently in Cuban jails.

Disbanding the Interior Ministry's security police and the Committees for the Defense of the Revolution, which function as thought-control police and as spies in every neighborhood in Cuba.

Eliminating the forced Marxist political indoctrination, which is a central feature of Cuba's education system.

Restoring all confiscated assets and properties to their rightful owners, or agreeing to pay appropriate compensation for what the regime has stolen from them.

{ The Venerated Cuban Constitution of 1940  Remains Permanently Suspended By Fidel Castro During His Forty+ Year Reign }

Maintain the embargo until irreversible economic and political reforms leading to democratic capitalism are in place. Tightening the economic screws may lead to more disturbances and riots, as well as increased repression as Castro struggles to remain in power. However, the embargo remains the only effective instrument available to the U.S. government in trying to force the economic and democratic concessions it has been demanding of Castro for over three decades. Maintaining the embargo now will help to end the Castro regime more quickly...

Link future free trade agreements between the United States and Latin American/Caribbean nations to redoubled efforts by these countries to persuade Castro to liberalize Cuba's economy and political system. In recent years, many of the region's elected leaders have tried unsuccessfully to persuade Castro to open Cuba's economy and democratize its political system. Castro has rejected all of these overtures while gaining the support of these Latin American and Caribbean nations in pressuring the U.S. to lift the embargo.

At the same time, Castro's intransigence has not slowed efforts by many of these countries, including NAFTA partners Mexico and Canada, to expand trade relations with Cuba. In June 1994, Mexico surpassed Spain as the largest foreign investor in Cuba when a Monterrey firm paid $1.5 billion for a 49 percent stake in the state telephone company, Empresas Telecomunicaciones de Cuba (ETEC).[The investment by Grupo Domos forms part of an arrangement between the Cuban and Mexican governments, brokered by Mexico's Export Bank (Bancomext), to swap $340 million in Cuban debts for stakes in Cuban industries, including Varadero's Hotel Tuxpan and the transfer of the island's largest cement plant to Cemex. In September 1994, Mexpetrol, a consortium of private Mexican oil companies and state-owned Pemex, announced a $200 million joint venture with Cuba's state oil company to operate the Cienfuegos refinery, one of three on the island, which at full capacity can process 65,000 barrels a day of crude oil. Glassmaker Grupo Vitro, which owns U.S. glassmaker Anchor Glass and reported total world sales of $3.5 billion in 1993, also confirmed in September that it may acquire a glass bottling plant in Cuba. On September 13, 1994, UPI reported from Mexico City that Mexican construction, transportation, and tourism firms "are poised to increase trade and investment" in Cuba if the U.S. lifts its trade embargo, with "much of the increase in trade probably channeled through Miami."] Spain is Cuba's second-largest trading partner, dominating the island's tourism industry, but Canadian companies are aggressively courting Castro's regime, particularly in the mining and energy sectors. The U.S. should use its leverage as the most important trading nation in the hemisphere to correct this. For example, the NAFTA trade relationship carries an implicit agreement with the shared goal of building a trade zone in the Western Hemisphere based on free markets and respect for democracy. Those principles apply to all other countries in the Americas seeking closer trade relations with the U.S. and U.S. investment to help develop their economies. ...

With Castro's collapse more likely in the near term than ever before, however, the U.S. government does not appear to have a policy for dealing with the likelihood that it will take place amid bloodshed, armed conflict, and chaos. A recent Rand study argues that the Departments of Defense and State must conceive such a strategy "according to three general tasks: Containment of the crisis, with the aim of damage limitation for both the United States and Cuba. Alleviation of the crisis, for the purpose of reducing human suffering among refugees and noncombatants on the island. Resolution of the crisis, unilaterally or multilaterally, by diplomatic or other nonmilitary means.... " The study's most important conclusion is that the end of Castro's regime could come at any time  [and the] Administration should prepare now for the transition that could begin without significant warning...

Reinforce the U.S. Naval Base at Guantanamo in anticipation of any form of attack by pro-Castro forces. The Administration should consider the possibility that a desperate Castro might attempt to provoke a violent U.S. military response which could galvanize Cuban support for the regime based on old fears, nurtured for decades by Castro's propaganda machine, of "Yanqui" imperialism and colonialism. In this context, all Cuban refugees now at Guantanamo should be admitted to the U.S. or transported to other safe havens. Once that is done, the Administration should reinforce the base with tactical aircraft and at least a brigade-sized combat unit capable of holding off a surprise attack.

...Provide financial and other support to more than 150 dissident groups within Cuba that are struggling to bring down Castro. Such groups include the Catholic Church, which is dedicated to peaceful change. No support should be provided to dissident groups intent on triggering violent change, for the United States must avoid inflaming anti-American sentiment at all costs. Dissident groups dedicated to peaceful change will be the basis on which a civil society will be created in a post-Castro Cuba, and their growth should be encouraged and supported in much the same way the Reagan Administration clandestinely supported Lech Walesa's Solidarity labor movement in Poland after martial law was imposed in late 1981. Such support would include financing of publications and income subsidies to permit dissidents to support themselves and their families.

Increase the broadcasting activities of Radio Martí. These broadcasts should urge the Cuban people to bring down Castro peacefully and should specify that under no circumstances will the U.S. interfere militarily in Cuba's domestic affairs. They should also stress that what the U.S. wants is a stable, friendly relationship with a democratic, free-market Cuba and that the U.S. is willing to negotiate with the Cuban government as long as Castro implements the comprehensive political and economic reforms he needs to revive his stalled economy.

CONCLUSION

The 32-year-old trade embargo against Cuba may finally be producing its intended results of destabilizing the island's communist government and weakening Fidel Castro's control of the Cuban people. Castro has resisted change for over five years since losing the Soviet Union's financial support, but his final collapse may be closer than ever before. Nevertheless, he continues his visceral loathing of democracy and the free market, all the while demanding the embargo be lifted without condition. It seems clear that Castro believes his survival hinges on the embargo's elimination. Paradoxically, just as Castro's communist government may be close to falling, a chorus of voices in the U.S. has risen to call for the lifting of the embargo. They cite several reasons: to ease the suffering of the Cuban people, to capitalize on the trade and investment opportunities other countries allegedly are enjoying in Cuba, and to establish the bases of a free-market economy that in time will compel democratic reforms as well. But the greatest beneficiary would be Fidel Castro, whose 35-year-old communist dictatorship would be fortified overnight if he were allowed access to the billions of dollars in financial aid from multilateral agencies, credit guarantees, and investment that would start flowing into Cuba.

The United States would truly abandon the Cuban people by relaxing or lifting the trade embargo against that reprehensible dictatorship.  Instead, the U.S. government must reject all pressures to ease the embargo until the objectives for which it was imposed are initiated.  Anything less would constitute an unacceptable breach of faith with the Cuban people, who today are among the remaining people left in the world who still suffer the brutalities of such a totalitarian regime

John P. Sweeney is a Policy Analyst at The Heritage Foundation © 1995 Persimmon IT, Inc.

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