Friday, February 28, 2014

Lining a Dictator's Pockets

Lining a Dictator's Pockets
No good would come of lifting the embargo on Cuba.
By Jorge Benitez Feb. 27, 2014

Based on a new poll it commissioned on U.S. relations with Cuba, the
Atlantic Council issued a report recently calling for a "policy shift"
that would end the U.S. embargo on the Castro regime. But when asked to
respond to the statement that "after more than 50 years of no U.S.
relations with Cuba the Castro regime remains in power," 51 percent of
those polled want to keep the current policy in place.

Nevertheless, the key issue is not whether the embargo is popular.
Rather, the main question is, would dropping the embargo better serve
the interests of the United States? The answer to this question remains
a strong "no," because ending the embargo would be bad business,
strengthen an oppressive government and abandon American values.

The U.S. should not normalize trade with the Castro regime for the plain
and simple reasons that his ventures lose money and his government is an
international "deadbeat." Any economic partnerships with authoritarian
regimes are morally suspect, but making deals with the Castro government
is pouring billions of dollars down the drain. In 1986, Cuba defaulted
on its multibillion dollar debt to the Paris Club of nations. That debt
is now estimated to be around $37 billion and the Castro government
refuses to pay it. A couple of months ago, Russia had to write off 90
percent of Cuba's $32 billion debt. That's almost $29 billion dollars
that Castro will never pay back to Moscow. In November, Mexico wrote off
$340 million of Cuba's debt to its development bank, Bancomext. It is no
wonder that, according to Moody's, Cuba's credit rating is Caaa1, which
means worse than highly speculative and a "substantial risk" to investors.

It makes no business sense to drop the embargo for the sake of trading
with a government that reneged on so many loans its credit rating is now
at the subprime or "junk bond" level. Yet, loans are what would be
necessary to "normalize" relations with Cuba. The embargo allows for
U.S. food and humanitarian supplies to be sold to Cuba. In fact, the
U.S. is currently the fifth largest exporter to Cuba. The big difference
is that, according to the embargo, the Castro government must pay for
all U.S. imports with cash, no credit allowed.

[See a collection of political cartoons on the economy.]

This brings us to the most overlooked and dangerous factor in trading
with Cuba. Most of the Cuban economy is owned by the Castro government
and all foreign trade is channeled through agencies that support the
regime. For example, all foreign companies must pay wages in hard
currency (dollars or euros) to the Cuban government, and from those
wages the state pays in local currency (Cuban pesos) a small percentage
to the individual employees. As a report by the Brooking Foundation
described it: "If the firm pays the employment agency $500 a month and
the employment agency pays the workers 500 pesos, over 90 percent of the
wage payment disappears in the currency conversion; the effective
compensation is instantly deflated to $21 per month." Brookings said
this may be "the world's heaviest labor tax." Or as one Cuban worker
disclosed: "In Cuba, it's a great myth that we live off the state. In
fact, it's the state that lives off of us."

This is why decades of trade between Cuba and market economies in
Europe, Canada and Latin America have only lined the pockets of the
Castro government and not produced any of the promised political or
economic benefits for the people of Cuba. This is what "normalized"
relations with Cuba looks like. If the U.S. dropped the embargo, our
companies would join those from around the world that pay dearly to the
Castro regime as it exploits the Cuban people. It is this corrupt
system, not the embargo, which deprives the people of Cuba of the
benefits of trade and the skill of their labor. As the U.S. argued in
the United Nations, "the Cuban Government's own policy was the largest
obstacle to the country's own development, concentrating political and
economic decisions in the hands of the few and stifling economic growth."

Ending the embargo on the Castro regime would be a blow not only to
American wallets, but also to American values. The American people want
"free trade with free people," not manipulated trade that strengthens an
authoritarian government's oppression of its people. The Castro regime
is on its last few breaths and the Cuban Spring will soon come to
millions who will remember that for decades the U.S. chose solidarity
with the Cuban people instead of business partnerships with the dictator
in Havana.

Jorge Benitez is director of the NATOSource blog and a senior fellow at
the Atlantic Council.

Source: Lifting the U.S. Embargo on Castro's Cuba Would Be a Mistake -
US News -

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