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PRESIDENT TRUMP RISKS ALIENATING ALLIES OVER CUBAN AMERICAN PROPERTY CLAIMS

William M. LeoGrande

February 14, 2019

The Trump administration is seriously considering whether to allow Title III of the Cuban Liberty and Democratic Solidarity Act (Helms-Burton) to go into effect in March, according to National Security Adviser John Bolton. On January 16, Secretary of State Mike Pompeo announced that he was suspending Title III for just 45 days instead of the ususal six months while the administration reviews whether its implementation would promote democracy in Cuba. He warned foreign companies doing business on the island that they had better “reconsider whether they are trafficking in confiscated property and abetting this dictatorship.”

Title III allows U.S. nationals to file suit in U.S. courts against anyone “trafficking” in their confiscated property in Cuba—that is, anyone profiting from it. If President Trump allows Title III to go fully into effect, he will open the door to as many as 200,0000 law suits by U.S. nationals, most of them Cuban Americans, whose property was taken by the Cuban government after 1959. U.S. courts would be swamped, the ability of U.S. companies to do business on the island would be crippled, and allies abroad might retaliate for U.S. suits brought against their companies in Cuba. Once the suits have been filed, there will be no way to undo the resulting legal chaos and the tangle of resulting litigation could take years to unwind.

The U.S. Foreign Claims Settlement Commission has certified 5,913 claims of U.S. nationals whose property was seized. These are the claims that Cuba recognizies and that the United States and Cuba had begun to discuss during the Obama administration. But Title III takes the unusual position of allowing naturalized Cuban Americans who lost property to also file suit against alleged traffickers. Normally, international law recognizes the sovereign right of governments to dispose of the property of their own citizens. According to the Department of State, by including Cuban Americans who were not U.S. citizens when their property was taken, Title III creates the potential for an estimated 75,000-200,000 claims worth “tens of billions of dollars.”

Back in 1996, when the law was being debated in Congress, angry opposition from U.S. allies Canada, Mexico, and the European Union, whose companies doing business in Cuba would be the targets of Title III law suits, led President Bill Clinton to insist on a presidential waiver provision in Title III. As a result, the president has the authority to suspend for six months the right to file Title III law suits, and he can renew that suspension indefinitely. Every six months since the Cuban Liberty and Democratic Solidarity Act was passed, successive presidents, Democrat and Republican alike, have continued the suspension of Title III.

U.S. allies have denounced Title III’s extraterritorial reach. Mexico, Canada, the United Kingdom, and the European Union all passed laws prohibiting compliance with it. The European Union also filed a complaint with the World Trade Organization, which it did not pursue after President Clinton suspended Title III. In fact, the principal justification both President Clinton and President George W. Bush offered for continuing the suspension was the need to maintain cooperation with European allies.

If President Trump does not renew the suspension, all these old wounds with allies will be reopened as U.S. claimants try to haul foreign companies into U.S. courts for doing business in Cuba. We already have enough tough issues on our agenda with Mexico, Canada, and Europe without adding another one. At this very moment, Washington is trying to muster their support in dealing with the Venezuelan crisis, support that could be endangered if the administration picks a fight with them over Title III.

U.S. businesses would not be exempt from potential liability. A Cuban American family in Miami claims to have owned the land on which José Martí International Airport was built, so any U.S. carrier using the air field could conceivably be sued under Title III. Another family that owned the Port of Santiago could file suit against U.S. cruise ships docking there.

Moreover, it would be almost impossible for a U.S. or foreign company to know in advance whether a proposed business opportunity in Cuba might become the subject of Title III litigation. “This will effectively end for decades any attempt to restore trade between the U.S. and Cuba,” attorney Robert Muse told the Tampa Bay Times.

When President Trump announced new sanctions on Cuba back in June 2017, senior administration officials said they were designed “to not disrupt existing business” that U.S. companies were doing in Cuba. If the president fails to continue the suspension of Title III, business relations will be disrupted far more severely and irreparably than they would be by any regulatory change.

William M. LeoGrande is Professor of Government at American University in Washington, DC, and co-author with Peter Kornbluh of Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana (University of North Carolina Press, 2015)

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CUBA MUST CONTEND WITH A NEW COLD WAR IN THE WESTERN HEMISPHERE

WORLD POLITICS REVIEW, Thursday, Jan. 24, 2019

Cuba faces a much tougher international environment today than it did just a few years ago. Relations with Latin America have cooled as relations with Washington have regressed to a level of animosity reminiscent of the Cold War. In response, Havana is looking to old ideological comrades in Moscow and Beijing to compensate for the deterioration of ties in its own backyard.

These setbacks abroad come at a time when the Cuban economy is vulnerable. Export earnings have been falling, foreign reserves are low, and the debt service burden is heavy, as Cuba tries to retire old debts that it renegotiated. Despite the economic reforms begun in 2011, domestic productivity is still weak, making Cuba dependent on foreign investment for capital to fuel growth.

A decade ago, progressive governments dominated Latin America. Cuba had friendly presidents in every major Latin American country except Mexico and Colombia, and even those two were not actively hostile. In Venezuela, Hugo Chavez saw himself as a protégé of Fidel Castro, promoting “21st-century socialism” in the hemisphere financed by his country’s vast oil wealth. At its peak, Venezuela provided about two-thirds of Cuba’s oil consumption at highly subsidized prices, with the cost offset by some 40,000 Cuban doctors and teachers serving Venezuela’s poor.

Under Presidents Luiz Inacio Lula da Silva and Dilma Rousseff, Brazil’s state development bank provided $832 million in loans to modernize Cuba’s aging port at Mariel. Pressure from Latin American heads of state at the Sixth Summit of the Americas in Colombia in 2012 contributed to President Barack Obama’s landmark decision to normalize U.S.-Cuban relations.

But in recent years, the progressive “pink tide” of leftist governments has given way to a riptide of conservatism. Chavez is gone and his successor, Nicolas Maduro, presides over an ever-worsening political crisis and an economy in free fall, with 80,000 percent hyper-inflation last year. Venezuela’s oil production is down by two-thirds because of mismanagement and neglect. Oil shipments to Cuba have fallen by 50 percent, forcing the government to ration energy consumption by state entities, stunting economic growth.

In Brazil and Colombia, far-right governments have aligned themselves with Washington’s threatening stance toward Havana. New Brazilian President Jair Bolsonaro’s denunciations led Cuba to end its “More Doctors” program, under which some 8,000 Cuban physicians served Brazil’s poor, earning Havana $250 million annually. In Chile, Argentina, Ecuador, Guatemala, Paraguay and Peru, progressive presidents have been replaced by conservatives. In short, Latin America has become a much less hospitable diplomatic environment for Cuba. It is no coincidence that on his first major international tour, Cuban President Miguel Diaz-Canel’s destination was not Latin America, but Russia, followed by North Korea, China, Vietnam and Laos.

The reversal of Havana’s fortunes in Latin America has been serious, but the reversal of relations with Washington has been disastrous. In the two years after Obama and Castro announced their plans to normalize relations on Dec. 17, 2014, the two governments re-established diplomatic relations, expanded trade and travel, and signed 23 bilateral accords on issues of mutual interest. Some 60 U.S. companies signed commercial deals with Havana, and the number of U.S. visitors jumped 57 percent between 2014 and 2016. Castro’s strategy of opening Cuba to U.S. trade and investment as part of his plan to modernize the economy seemed to be paying off.

Donald Trump’s election changed all that. In June 2017, Trump declared he was “canceling” Obama’s policy of engagement and tightening the embargo. Then the mysterious medical problems that afflicted some two dozen U.S. diplomats in Havana became the excuse for downsizing the embassy, thereby crippling educational, cultural and commercial exchanges. Washington imposed a travel advisory warning Americans not to go to Cuba, and in the first half of 2018, the number of U.S. visitors plummeted nearly 24 percent. However, cruise ship arrivals increased over the next six months, so the total number of U.S. visitors ended the year flat.

Then John Bolton, who targeted Cuba during George W. Bush’s administration with false claims that Havana was developing biological weapons, became Trump’s national security adviser last April. Speaking in Miami on the eve of the U.S. midterm elections, he ratcheted up the threatening, insulting rhetoric, declaring Cuba a member of a “Troika of Tyranny”—along with Venezuela and Nicaragua—and promising more sanctions to come. The administration is reportedly weighing sanctions on individual Cuban officials, imposing more restrictions on travel to the island, and returning Cuba to the Department of State’s list of state sponsors of international terrorism.

But the most serious sanction under review is allowing Title III of the Cuban Liberty and Democratic Solidarity Act—known as the Helms-Burton Act, for its original sponsors—to go into effect. Suspended by every president since the law passed in 1996, Title III would allow U.S. nationals, including Cuban-Americans, who lost property after the 1959 revolution to sue both the U.S. and foreign companies in U.S. courts for “trafficking” in their property—that is, making a profit from it.

During its first two years, the Trump administration continued the suspension of Title III, which has to be renewed every six months. But with a new deadline looming this month, hard-liners in the National Security Council—led by Bolton and Mauricio Claver-Carone, a long-time lobbyist for regime change policies aimed at Cuba—argued against suspension. The result was a short 45-day suspension, giving the Trump administration more time to assess the consequences of letting Title III go into effect.

Activating Title III would open a floodgate of litigation and damage Cuba’s efforts to attract foreign investment since U.S. and foreign firms would be loath to risk getting caught up in costly court fights. It would also prompt counter-measures by European governments unwilling to countenance Washington’s assertion of extraterritorial jurisdiction over their firms.

Faced with this new standoff in the Caribbean, Cuba is rejuvenating relations with its old Cold War allies, Russia and China, both of which are expanding their presence in Latin America. Moscow was the first stop on Diaz-Canel’s first major foreign trip last November, and he came away with $260 million in new economic assistance and $50 million in military aid to refurbish Cuba’s aging Soviet-era arsenal. Diaz-Canel and Russian President Vladimir Putin reaffirmed that their “strategic partnership” extended beyond just economic cooperation. In Beijing, Diaz-Canel met with President Xi Jingping and signed several economic cooperation agreements. China pledged new investments in communications, energy and biotechnology—sectors where U.S. firms had hoped to gain a foothold before U.S.-Cuban relations soured.

A small island like Cuba has to be integrated into the global economy in order to prosper. Raul Castro clearly recognized that when he sought to repair diplomatic and commercial relations with Latin America and the United States. Historically, Cuba has suffered because of its economic dependence on a series of global patrons: Spain, the United States, the Soviet Union and Venezuela. Cuba’s leaders would prefer to diversify economic ties across a wide range of countries regardless of ideology. But the Trump administration’s renewed hostility, along with the collaboration of conservative Latin American governments, leaves Cuba no choice but to look for allies among Washington’s global rivals.

William M. LeoGrande is professor of government at American University in Washington, D.C., and co-author with Peter Kornbluh of “Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana.”

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SIXTY YEARS AFTER THE REVOLUTION, IS A ‘NEW CUBA’ EMERGING?

World Politics Review, Monday, Jan. 14, 2019

William M. LeoGrande |

Is the Cuban Revolution reinventing itself at age 60? That was my unmistakable impression during a visit to Cuba last month. Change is in the air as the island celebrates the anniversary of the 1959 revolution.

Last year, Raul Castro stepped down as president in favor of his protégé, 58-year-old Miguel Diaz-Canel, who promised a “new Cuba” — a government more open and responsive to people’s needs. In the ensuing months, three constituencies — the churches, the private sector and the arts community — took advantage of that promise to launch organized campaigns pushing back against government policies they opposed. And in each case, the government backed off.

Continue reading: LeoGrande, Is a New Cuba Emerging

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IS CUBA’S VISION OF MARKET SOCIALISM SUSTAINABLE?

William M. LeoGrande

Tuesday, July 31, 2018

Just three months after Miguel Diaz-Canel took over the presidency of Cuba from Raul Castro, his government has unveiled a new Council of Ministers—essentially, Cuba’s Cabinet—along with the draft of a new constitution and sweeping new regulations on the island’s emergent private sector. While the changes announced represent continuity with the basic reform program Raul Castro laid out during his tenure, they are nevertheless significant milestones along the road to a more market-oriented socialist system.

The discussion and approval of the draft constitution was the main event of last week’s National Assembly meeting. The revised charter will now be circulated for public debate, revised, reconsidered by the National Assembly, and then submitted to voters in a referendum early next year. The avowed reason for revamping the constitution is to align it with the economic reforms spelled out in 2011 and 2016 that constitute the blueprint for Cuba’s transition to market socialism. Cuba’s 1976 constitution, adopted at the height of its adherence to a Soviet model of central planning, reflected “historical circumstances, and social and economic conditions, which have changed with the passing of time,” as Raul Castro explained two years ago. …

Continue Reading: Is Cubas Vision of Market Socialism Sustainable_

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CAN CUBA’S MIGUEL DÍAZ-CANEL COMPLETE RAÚL CASTRO’S ECONOMIC REVOLUTION?

BY WILLIAM M. LEOGRANDE ON 5/3/18 AT 12:18 PM

Original Article: MIGUEL DÍAZ-CANEL

When Miguel Díaz-Canel formally accepted the presidency of Cuba in April, he became the first non-Castro to run the country since Fidel’s revolution swept the island in 1959.

In his inaugural address, the new president pledged to continue Raúl Castro’s vision, most notably his unfinished “updating” of the economy, a Cuban form of market socialism launched in 2011 to replace the former Soviet-style central planning system. If he is successful, his reforms would produce the most profound transformation since Fidel took power six decades ago and lay the groundwork for what his brother Raúl called “prosperous and sustainable socialism.”

Salvador Sanchez Ceren recibe a VicePresidente de Cuba, Miguel Diaz Canel.

Miguel Díaz-Canel

But, in taking the helm of government, Díaz-Canel faces strong political headwinds. He has to force Raúl’s economic reforms through a resistant bureaucracy—something even Raúl had trouble doing. He has to hold together a fractious political elite, which is divided over how far and how fast to push economic change for fear of unleashing forces beyond its control. And he has to deliver the goods to a population increasingly vocal in its demands for a higher standard of living and a greater say in politics.

Never has the pursuit of continuity seemed so hard.

Progress has been slow. A total of 313 specific economic reforms were approved by the Cuban Communist Party in 2011. By 2016, less than a quarter of them had been achieved. The plans call for state enterprises that are subject to market prices and efficient enough to show a profit, a vibrant private sector to generate jobs and tax revenue, and an open door for foreign direct investment to provide the capital for growth.

But the reforms are stalled, held back by recalcitrant bureaucrats loathe to give up their authority and perks, and by senior Communist Party leaders who worry that the reintroduction of markets, private property and foreign investment betrays the revolutionary values for which they fought. Raúl called their attitude “an obsolete mentality based on decades of paternalism.”

Foreign investors have been wary. Minister of Foreign Trade and Investment Rodrigo Malmierca says Cuba needs to attract $2.5 billion a year in direct foreign investment. But in the three years since Cuba adopted a new investment law with attractive concessions, it has raised just $3.4 billion. Cuba’s opaque and unresponsive bureaucracy still deters all but the most intrepid foreign companies.

On the domestic front, most state enterprises lack adequate cost accounting systems. Introducing them and requiring that state enterprises make a profit has been an excruciatingly slow process. Some 20 percent of the state budget still goes to cover deficits from failing state companies. But closing them en masse is something the government has been unwilling to do, as it would create a huge unemployment problem.

The government has licensed 580,000 private businesses—a five-fold increase since 2010—and the agricultural sector is composed almost entirely of private farms and cooperatives. In total, the private sector now employs 29 percent of the labor force.

But in the eyes of some Cubans, private businesses have been too successful. Hemmed in by unrealistic regulations, many private companies skirt the law—buying supplies on the black market because there are no wholesale markets, evading taxes because the rates are extortionate and operating beyond the terms of their licenses because the permits are so narrow.

To conservatives in the Communist Party, this looks suspiciously like incipient capitalism run amok. To the average Cuban, the private sector’s growth has fueled rising and visible inequality. Today, unlike a decade ago, you can find fashionably dressed Cubans eating at the most expensive restaurants and staying at tourist hotels once reserved for foreigners. Meanwhile, most people struggle to get by on inadequate state salaries.

Raúl understood that market reforms would produce inequality, but he expected the changes to boost productivity, stimulate growth and raise everyone’s standard of living, thereby blunting discontent over the inequality. It hasn’t worked out that way. Because the state sector is so resistant to change, growth has been anemic, undermining the political logic of the reform process. A Cuban economist advising the government told me that Cuba’s senior leadership understands what economic steps it needs to take to put the economy on sound footing; what worries them is the political risk.

That explains why Cuba still has two currencies—the Cuban peso and the Cuban convertible peso, which is has the same value as the U.S. dollar—and multiple exchange rates. Introduced in the 1990s to attract remittances from the Cuban diaspora, the two-peso system is now a huge drag on economic growth, making realistic cost accounting almost impossible. But currency unification is complex and will ripple through the economy in unpredictable ways. With a chronic shortage of foreign reserves and no access to help from international financial institutions, Cuba will have to manage the conversion on its own.

So while Díaz-Canel’s most urgent tasks are economic, his bigger problems are political. Independent opinion polls conducted in Cuba consistently show that discontent with the economy is pervasive, and faith in the government’s ability to improve things is low. In a 2016 poll by NORC (formerly the National Opinion Research Center) at the University of Chicago, 70 percent of Cubans cited the economy as the country’s most serious problem, and half thought that inequality had become too great. Discontent is even higher among younger generations, who have no memory of the revolution’s halcyon days in the 1960s and 1970s.

As Díaz-Canel tries to navigate the ship of state through these dangerous shoals, he also has to keep an eye out for mutiny among the crew.

Although decision-making among Cuba’s top leadership is opaque, signals point to divisions over the economic reforms and how to respond to expressions of popular discontent that have grown with the expansion of the internet. Raúl Castro’s authority as a revolutionary veteran enabled him to manage these disagreements and maintain elite cohesion—an advantage Díaz-Canel will not enjoy. Although he is a seasoned politician who has spent three decades working his way up the political ladder, he is not well known outside the two provinces where he served as Communist Party first secretary. But he will not be alone. Raúl still serves as Community Party leader, and he promises to be there supporting Díaz-Canel, telling the National Assembly that he expects the new president to ultimately become leader of the party as well.

So Cuba’s new president is no mere puppet. Through a calibrated handover of power, he will become the man in charge. And he has his work cut out for him.

William M. LeoGrande is a professor of government at American University in Washington, D.C., and co-author with Peter Kornbluh of Back Channel to Cuba: The Hidden History of Negotiations Between Washington and Havana (University of North Carolina Press, 2015).

 

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CUBA’S NEW GENERATION TAKES THE HELM WITH AN IMMEDIATE TEST: THE ECONOMY

World Politics Review, Tuesday, April 24, 2018

William M. LeoGrande

For a man stepping down after half a century at the apex of Cuba’s government—first as the island’s longtime defense minister and vice president, then as president—Raul Castro was in good humor last week, looking relaxed and happy as he handed the presidency to his designated successor, Miguel Diaz-Canel. Departing from the prepared text of his valedictory speech in Havana, Castro cracked jokes, reminisced about the revolution and quipped that he planned to travel more, “since I’m supposed to have less work to do.”

There were no big surprises at the National Assembly meeting that installed Diaz-Canel as the first non-Castro to lead Cuba in six decades. Raul Castro did not decide at the last minute to stay in office, or sneak his son Alejandro into the presidency, as fevered commentary out of Miami kept predicting  Instead, the central theme of the conclave was continuity.

Continue reading: Leogrqande, April 2018, Cuba,s New Generation Takes the Helm With an Immediate Test: the Economy

Conclusion

But the significance of all the personnel changes and even the constitutional amendments pale in comparison to the urgent need to jump-start the economy, as the speeches by both Castro and Diaz-Canel implicitly acknowledge. Cuba’s younger generations are not just tired of octogenarian leadership; they are tired of economic hardship.

Miguel Diaz-Canel’s ascension to the presidency represents a major step in the generational transition of leadership in the Cuban state. But nothing will improve the prospects for a smooth transition more than a growing economy that finally raises the standard of living and gives young Cubans hope for the future.

Asume Miguel Díaz-Canel presidencia de Cuba

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RAÚL CASTRO’S UNFINISHED LEGACY IN CUBA

BY WILLIAM M. LEOGRANDE | APRIL 9, 2018

CASTRO’S ATTEMPTS AT REFORM REMAIN UNFULFILLED. WHAT CAN CUBANS EXPECT FROM HIS SUCCESSOR?

 Original Article: Raúl’s Unfinished Legacy

 Raúl Castro and Miguel Díaz-Canel,

This month, Cuba’s Raúl Castro will leave office at the end of his second term as president, having set in motion changes to the island’s economy, politics and social relations more sweeping than any since the revolution in 1959. As he steps down after a decade at the helm, those changes are still a work in progress. The far-reaching economic reforms he launched in 2011 are at best half-finished and the pace of change has slowed. His efforts to strengthen Cuba’s political institutions are about to face the stress test of a generational leadership transition. And the Cuban public is clamoring for a better life and a greater voice. Will Miguel Díaz-Canel, Raúl’s likely successor, be able to carry these changes through to completion?

Throughout Fidel Castro’s 57 years as Cuba’s líder máximo, Raúl was second in command, in the shadow of his charismatic sibling. But behind the scenes, he proved to be an effective manager, turning the rag-tag Rebel Army into the most effective and respected institution in the country. Cuba’s armed forces scored impressive victories in Africa, and then took on domestic economic responsibilities with an efficiency that surpassed most civilian enterprises.

Raúl recognized the inherent shortcomings of the hyper-centralized socialism Cuba adopted from the Soviet Union. As armed forces minister, he mandated the use of market-oriented business practices in the military enterprises under his command and sent officers abroad to business school. When the collapse of the Soviet Union threw Cuba into deep recession, Raúl pushed for the pragmatic use of market mechanisms to jump-start the economy. He overcame Fidel’s reluctance by framing economic recovery as a matter of national security, declaring, “Beans are more important than cannons.”

Updating the economy

Within months of assuming office as acting president in 2006, Raúl let loose a blistering attack on economic inefficiency. “We are tired of excuses,” he told the National Assembly that December. “No one, no individual or country, can afford to spend more than what they have,” he said repeatedly.

The drumbeat of criticism foreshadowed his most ambitious and potentially transformative initiative, the updating of Cuba’s economy. The reforms sought to transform the economy by unleashing market forces, demanding that state enterprises make a profit or close, promoting a significant private and cooperative sector, and welcoming foreign direct investment (FDI) to stimulate growth. The goal: a model of socialism that combined the efficiency and productivity of markets with the social benefits of free health care and education, and minimized inequality.

The reform process has been slow going. As of 2016, only 21 percent of the 313 reforms adopted in 2011 had been completed. Subsidies to failing state enterprises still consume some 20 percent of the state budget – almost as much education. After a period of rapid growth during which the number of registered private sector businesses expanded five-fold, new state regulationsrecently reined them in. While Cuban officials aspire to attract $2.5 billion annually in FDI, they are still well short of the goal. Progress has been slowed by officials who fear the reforms represent a slippery slope toward capitalism, not to mention a threat to their own job security.

State-building

On the political front, Raúl’s changes have been less dramatic, but equally important for the system’s sustainability. Fidel chaffed at the restrictions formal institutions imposed on his political instincts and impromptu decision-making. Raúl has moved Cuba away from a system built around the charismatic and unquestioned authority of the líder máximo to one that relies increasingly on the strength of institutions and collective decision-making. “It is vitally necessary to reinforce the country’s institutions,” he told the Communist Party’s Central Committee in 2008. Only strong institutions could “ensure the continuity of the Revolution when its historic leaders are gone.”

A central tenet of this project has been to fill leadership positions with people who have proven track records of achievement, rather than following Fidel’s penchant for elevating young, inexperienced protégés who quickly crashed and burned – people Raúl mocked as “test tube leaders.” Miguel Díaz-Canel, Raúl’s likely successor, has a decades-long record of effective leadership within the Communist Party and government at both the provincial and national levels.

To underscore the idea that no one is indispensable, Raúl proposed term limits of no more than two five-year terms for all senior party and government posts. When aging leaders stay in power too long, the results are “never positive,” he observed, pointing to the gerontocracy than ran the Soviet Union into the ground. He set the example himself, declaring in 2013 that he would step down in 2018 at the end of his second term.

Raúl also established a more collective leadership style, inviting debate and seeking to build consensus on major issues. In fact, he may have been collegial to a fault, allowing skeptics to slow the implementation of the economic reforms.

Lacking Raúl’s authority as one of the historic leaders of the revolution, Díaz-Canel will most likely have to give even greater deference to the views of others in the leadership, making it tougher to come to decisions on contentious issues.

The expanding public sphere

For someone who spent most of his life running Cuba’s national security apparatus, and battling U.S. efforts to create a fifth column of internal opposition, Raúl has presided over a significant expansion of personal liberty and access to information that has spilled over into political expression. In his inaugural speech as president, Raúl pledged to do away with the “excess of prohibitions and regulations” through which the state controlled a wide range of social interactions. He legalized personal cell phones and computers. He allowed people to sell their cars and houses without going through the state. He repealed the prohibition on Cubans staying in tourist hotels, and abolished the tarjeta blanca exit permit required every time a Cuban wanted to travel abroad.

In 1961, Fidel defined cultural policy as, “Within the revolution, everything. Against the revolution, nothing.” During Raúl’s presidency, the boundaries of what is “within the revolution” have expanded, allowing more space for critical cultural expression, often with political overtones. The expansion of internet connectivity has given Cubans access to a world of information, with only a few dozen sites blocked by censors. Cuban blogs, discussion forums and independent news services have flourished, initiating vigorous online debates on a wide range of issues.

Some senior Cuban officials have voiced concerns that expanded Internet access poses political risks, especially since the United States has repeatedly tried to use it as a means of waging information warfare. Just two months ago, the Trump administration formed a Cuba Internet Task Force as part of its policy to undermine the Cuban government. Nevertheless, Cuban leaders understand that connectivity is a prerequisite for building a 21st Century economy, despite the risk.

The state still represses small dissident groups that advocate overturning Cuba’s socialist system. Instead of the long prison terms meted out during Fidel Castro’s days, however, the state’s current strategy is harassment and disruption. When dissidents try to meet or demonstrate, they are arrested, held for a few hours, and then released.

Díaz-Canel’s attitude toward critics is uncertain. In 2013, he publicly defended a group of students whose critical blog was banned by a university administration. In February 2017, however, he gave a speech to a closed Communist Party meeting attacking prominent online critics as counter-revolutionary. At the very least, that speech signals the continuing influence of party leaders intolerant of critical expression.

The Washington roller coaster

For the last two years of Barack Obama’s presidency, it appeared that normalizing relations between the United States and Cuba would be one of Obama’s and Raúl’s most important legacies. After December 17, 2014, when the two presidents made simultaneous television broadcasts announcing they had decided to re-establish diplomatic relations, their governments made rapid diplomatic progress, reopening embassies and signing two dozen bilateral agreements. The number of U.S. visitors to Cuba more than doubled and U.S. businesses lined up to sign commercial deals with Havana.

But President Donald Trump’s announcement in June 2017 that he was canceling Obama’s policy of engagement has cast doubt on the permanence of the new relationship. Last October, the administration used unexplained injuries suffered by U.S. government personnel in Havana as an excuse to reduce staffing at the embassy so dramatically that it can barely function. Then the administration expelled an equal number of Cuban diplomats from Washington.

For Raúl, the decision to normalize relations was driven by economic imperatives. In the past two decades, tourism has become a pillar of Cuba’s domestic economy, and no country sends more tourists to the Caribbean than the United States. Likewise, Cuba needs $2.5 billion a year in FDI to sustain a decent rate of growth, and no country sends more FDI to the Caribbean than the United States.

But Raúl’s decision was not without risk. From the outset, others in the leadership had doubts about the wisdom of it. Suspicious of U.S. intentions, they worried that defending the revolution from Obama’s soft power might be harder than defending it against open hostility. Those worries went public after Obama’s trip to Cuba in March 2016, when Fidel wrote a critical article for Granma, giving political cover for others to articulate an even tougher line against engagement.

The Trump administration’s hostility reinforces Cuban conservatives who argued from the beginning that Washington could not be trusted. That, in turn, makes it harder for the next Cuban president – and the next U.S. president – to get normalization back on track.

Unfinished business

The timely and constitutionally prescribed succession of leaders signals the institutional strength of the Cuban regime. That said, Díaz-Canel inherits a formidable agenda of tough issues: fundamental economic changes that are desperately needed but still incomplete, a rapidly evolving public sphere in which Cubans are better informed and more outspoken but have few ways to hold leaders accountable, and an uncertain relationship with Washington that is likely to get worse before it gets better.

If Díaz-Canel can successfully carry through to completion the transformations Raúl began, Raúl will be remembered as Cuba’s Deng Xiaoping – the revolutionary Chinese founder who achieved détente with the United States and began the transition from a failed centrally planned socialism to an economically viable market socialism. But if relations with Washington remain mired in animosity and the economic reforms fail, Raúl will be remembered as just one more reform communist who could not force the system to change despite his best efforts.

LeoGrande is Professor of Government at American University in Washington, DC, and co-author with Peter Kornbluh of Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana (University of North Carolina Press, 2015).

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TRUMP’S NEW CUBA SANCTIONS MISS THEIR MARK

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BY WILLIAM M. LEOGRANDE | NOVEMBER 9, 2017

Original Article: SANCTIONS MISS THEIR MARK

REGULATIONS ON TRAVEL AND TRADE WILL LIKELY HAVE LITTLE IMPACT ON CUBA’S GOVERNMENT, HURTING ORDINARY CUBANS INSTEAD.

After two years of restored diplomatic ties, new U.S. regulations on Cuba are bringing back a thicket of travel, financial and trade restrictions – and a tougher stance toward the island. The goal of these restrictions, according to U.S. President Donald Trump, is to starve the Cuban government of money from travel, remittances and commercial ties. But the real victims of the new sanctions will be U.S. residents whose right to travel is curtailed, Cuban families who depend on remittances to survive, the struggling Cuban private sector, and U.S. businesses that will face an even greater disadvantage competing with Asian and European firms.

The regulations issued by the Treasury and Commerce Departments on Nov. 8 re-impose significant limits on educational travel to Cuba that former President Barack Obama relaxed. They also redefine “prohibited officials of the Government of Cuba” expansively, potentially cutting off remittances to hundreds of thousands of Cuban families. Finally, they prohibit anyone subject to U.S. jurisdiction from engaging in any “direct financial transactions” with entities controlled by the Cuban military or security forces that “disproportionately benefits” those entities.

All this marks the implementation of new sanctions Trump announced on June 16, 2017, at a Cuban American rally in Miami. The sanctions were mandated by the National Security Presidential Memorandum the president signed onstage, and included several major changes to the Cuban Assets Control Regulations (CACR), which spell out the operational details of the U.S. embargo.

Educational travel

In January 2011, Obama relaxed restrictions that former President George W. Bush had imposed on educational exchanges with Cuba – restrictions so onerous they eliminated most U.S. study abroad programs. Trump’s new regulations re-impose the Bush era restrictions, albeit with some exceptions for students accompanied by a representative of their U.S. academic institution. When combined with the State Department’s Sept. 29 travel warning advising people not to visit Cuba at all because of the injuries suffered by two dozen personnel at the U.S. embassy, the new restrictions on educational travel could drastically reduce U.S. study abroad in Cuba, which had been on the upswing since 2014.

U.S. visitors traveling under the “people-to-people” educational license (for educational travel not leading to an academic degree) can no longer travel on their own. They must now travel with organized groups under the auspices of a U.S.-based, licensed travel provider. Obama had lifted the group travel requirement in March 2016, providing an immediate boon to Cuba’s emerging private sector because individual travelers are much more likely to stay at private B&Bs (casas particulares), eat in private restaurants (paladares), take private taxis, and hire private guides. Most organized groups are too large for private rentals and thus have to be booked into government-owned hotels. Consequently, although Trump’s policy purports to boost Cuba’s private sector, the prohibition on individualized people-to-people travel hits the private sector hardest.

Although Cuban private businesses may suffer, the new travel regulations are not likely to put a huge dent in the number of U.S. visitors. The volume of travelers from the United States jumped dramatically in 2015, up 77 percent over 2014, after Obama and Cuba’s President Raúl Castro announced their intention to normalize relations in December 2014. This surge occurred before Obama ended the prohibition on individualized “people-to-people” travel. U.S. visitors are far more likely to be deterred by the State Department’s travel warning. Even then, a significant decline in U.S. visitors will not do serious damage to the Cuban tourist industry, which hosted four million foreign visitors in 2016 and is on track to host 4.7 million this year, of which only seven percent were non-Cuban American U.S. visitors.

Remittances

The new regulations redefine “prohibited officials of the Government of Cuba” to include all employees of the Ministry of the Revolutionary Armed Forces and Ministry of the Interior, thousands of ordinary Cubans who volunteer as leaders of their local Committees for the Defense of the Revolution, as well as senior government and party officials. The previous regulatory definition of prohibited officials, put into place by Obama in October 2016, was limited to members of the Council of Ministers and flag officers of the Revolutionary Armed Forces. The new definition encompasses hundreds of thousands of people, since the armed forces manage a significant number of commercial enterprises such as the Gaviota hotel chain and TRD Caribe retail stores, especially in the fast-growing tourism sector.

Cubans who are “prohibited” are not allowed to receive payments from U.S. nationals. That includes remittances and gift packages (Cuban Assets Control Regulations,  §515.570), so the new regulations could potentially deprive hundreds of thousands of Cuban families of support from their relatives abroad. However, the actual impact is harder to predict. There is no way to enforce this prohibition since the U.S. government does not have a list of all the people covered in the expanded definition. Moreover, Cuban Americans can carry funds and gift packages to family when they travel or can wire funds through third countries, just as they did in 1994 when former U.S. President Bill Clinton tried, unsuccessfully, to cut off remittances to punish Cuba for the balsero (rafters) migration crisis.

Apart from whether the new prohibition proves effective, it would seem to run counter to the purported aim of Trump’s policy to empower the Cuban people by directing U.S. funds to them, rather than to the Cuban government. Remittances are by far best way to do that because the dollars go directly to family on the island.

Transactions with military-linked enterprises

The most complex regulatory change is the prohibition on engaging in any “direct financial transactions” with businesses controlled by the Cuban military or security forces if they “disproportionately benefit” those forces. This is a potentially significant prohibition because the Cuban armed forces ministry administers commercial holding companies involved in everything from banking and port management to hotels and retail sales. The presence of military enterprises is greatest in the tourist sector, where both U.S. visitors and U.S. companies are most likely to encounter them.

The U.S. Department of State was tasked with creating a list of prohibited enterprises, which it released along with the new regulations. The list includes 180 entities, 58 percent of which are in the tourist sector, including 84 hotels – by far the largest category of businesses included. Some of the entities listed are holding companies for hundreds of retail outlets, but U.S. travelers and companies can still do business with subsidiaries of prohibited entities so long as the subsidiaries themselves are not specifically listed. Quite reasonably, the State Department took the view that it could not expect travelers to know which retail outlets might be subsidiaries of prohibited entities unless they were specifically named.

Senator Marco Rubio (R-Fla.) and Representative Mario Díaz-Balart (R-Fla.), who were the intellectual authors of the ban on transactions with military-linked enterprises, complained that the State Department’s list was not inclusive enough because “bureaucrats” were “refusing” to carry out Trump’s policy. Rubio wanted to see the entire Cuban tourist sector put off-limits because the Minister of Tourism, Manuel Marrero Cruz, is a former military officer. According to Rubio, that means the entire sector is controlled by the armed forces.

The Cuban government was not happy with the sanctions either. Josefina Vidal, Director General for U.S. Affairs in the Foreign Ministry, said the new measures “confirm the serious regress of bilateral relations as a result of the decisions adopted by the government of the President Donald Trump,” and called some of them “subversive.”

In truth, the impact of these sanctions on commercial relations with Cuba is likely to be limited. The Cuban government, adept at coping with U.S. hostility for the past half century, may feel the pinch, but it can look elsewhere for trade partners and tourists. Also, in order to avoid disrupting ongoing business relationships, the new regulations exempt existing contracts from the prohibition on doing business with military-linked enterprises. So, for example, Marriott-Starwood Hotels’ contract to manage hotels owned by holding companies administered by the armed forces ministry is not affected by the new regulations. Moreover, even future contracts will be allowed with military-linked businesses involving ports, airports, and telecommunications, which are the three sectors in which most U.S. businesses (cruise ship lines, airlines, and cell phone companies) now operate.

On balance, the regulatory burden falls most heavily on U.S. academic institutions, whose study abroad programs in Cuba will be curtailed; on U.S. travelers who can no longer travel by themselves on a people-to-people educational license; on Cuban-Americans whose families on the island who will no longer be eligible to receive remittances and gift packages; and on U.S. businesses that may want to sell goods to Cuba in sectors where their counterparts are commercial enterprises managed by the armed forces ministry.

The Cubans who will suffer most are small business owners, suppliers, and employees who cater to individual U.S. travelers; employees of state firms managed by the armed forces ministry and their families, who may lose remittances and gifts; and Cubans who might have found employment with U.S. companies whose potential business deals are now blocked.

The Cuban state will suffer only marginally from Trump’s new sanctions – certainly not enough to force it into the sorts of concessions Washington demands.

 

 

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CUBA AFTER CASTRO: THE COMING ELECTIONS AND A HISTORIC CHANGING OF THE GUARD

World Politics Review, October 17, 2017.

 William M. LeoGrande

Historic “Changing of the Guard”: Raul Castro to Miguel Diaz-Canel

On Nov. 26, Cubans will go to the polls to elect delegates to 168 municipal assemblies, the first step in an electoral process that will culminate next February when the National Assembly, Cuba’s parliament, will select a new president. In 2013, when Raul Castro pledged not to seek a third term, he also imposed a two-term limit for all senior government and Communist Party leadership positions.  That means the succession will replace not only Castro but almost all the remaining members of the “historical generation” who fought to overthrow Fulgencio Batista’s dictatorship in 1959.

The changing of the guard comes at a delicate political moment. Castro’s ambitious economic reform program, the “updating” of the economy, is still a work in progress and has yet to significantly raise the standard of living of most Cubans. Moreover, it is encountering resistance from state and party bureaucrats who are loath to lose control over the levers of economic power and the perks those provide.

The economy has also been struggling because of declining oil shipments from Venezuela, which sells oil to Cuba at subsidized prices, helping to ease Cuba’s chronic shortage of hard currency. The political and economic chaos engulfing Venezuela has caused oil production to decline, and shipments to Cuba are running 13 percent below last year and 37 percent below their peak in 2008. The resulting energy shortage has forced Cuba to impose drastic conservation measures and pushed the economy into a mild recession last year.

In September, Cuba’s economic woes were exacerbated when Hurricane Irma came ashore, inflicting several billion dollars’ worth of damage as it tracked along the north coast before turning toward the Florida Keys. The storm hit some of Cuba’s most lucrative tourist resorts, cutting into the one sector of the economy that has enjoyed sustained growth in recent years. Most of the major hotels predicted they would reopen for business quickly, but the storm did enormous damage to the power grid, leaving large swaths of central Cuba in darkness.

Popular discontent over the economy and impatience with the slow pace of improvement are both running high. In an independent opinion poll taken in late 2016, 46 percent of Cubans rated the nation’s economic performance as poor or very poor, 35 percent rated it as fair, and only 13 percent rated it as good or excellent. Solid majorities reported not seeing much economic progress in recent years for the country or themselves, and they had low expectations for the future.

The economy is not Cubans’ only source of anxiety. With the election of Donald Trump, Havana’s relations with Washington entered a period of uncertainty. In his speech to Cuban Americans on June 16 in Miami, Trump blasted the Cuban government as a murderous dictatorship, echoing the Cold War rhetoric of regime change. Although the new economic sanctions Trump imposed were surprisingly mild—the result of intense lobbying by the U.S. business community—the prospects for improved relations and expanded commercial ties look dim in the near term.

Secretary of State Rex Tillerson’s decision to withdraw nonessential from the U.S. embassy in Havana in the wake of mysterious health problems among nearly two dozen staff and family members, the expulsion of most Cuban diplomats from Washington, and the State Department’s decision to issue a travel advisory warning U.S. residents not to travel to Cuba, pushed relations to a low point not seen since December 2014, when then-President Barack Obama’s normalization process began.

Cuba’s new post-Castro leaders will therefore face an imposing array of problems, and they will have to answer to a population that has become more vocal in expressing its discontent. The expansion of internet access, the ability of Cubans to travel abroad without state permission and Raul Castro’s own calls for more open debate about Cuba’s problems have fueled an increasingly robust public sphere.

As the leadership transition gets under way, First Vice President Miguel Diaz-Canel is the likely successor to Raul Castro as president, but little is known about this party veteran’s real views. Until recently, he kept a low profile, but even as his public visibility has increased, his speeches have simply reiterated well established policy, providing little insight into his own thinking.

Continue Reading:

Historic Changing of the Guard

 

Miguel Diaz-Canel

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THE TROUBLE WITH CUBA’S NEW ECONOMY

Why economic opening on the island has been slower  –  and less effective  –  than many hoped.

BY WILLIAM M. LEOGRANDE

America’s Quarterly, Cuba’s New Economy, 11 October 2017,

 When Raúl Castro steps down as Cuba’s president in February 2018, he will hand off to his successor the unfinished task of reforming the economy. It is Cuba’s most urgent need and, at the same time, an increasingly controversial one.

Castro succeeded his brother Fidel as president in 2008 amid serious structural economic problems on the island. State salaries were inadequate to cover basic needs, productivity in state enterprises was weak, and foreign reserves were chronically low. Agricultural production was so poor that Cuba had to import 80 percent of its food at a cost of $2 billion annually. The dual currency and exchange rate system produced severe distortions in the labor market and external sector.

Three years later, the Sixth Congress of the Communist Party of Cuba endorsed the Guidelines of the Economic and Social Policy of the Party and the Revolution, a document of 313 economic objectives comprising Castro’s plan to “update” the economy. In it, Castro was unsparing in his criticism of the hyper-centralized economic system imported from the Soviet Union in the 1970s. The key problem was low productivity. “No country or person can spend more than they have,” he reminded his comrades. “Two plus two is four. Never five, much less six or seven – as we have sometimes pretended.”

The Guidelines were a blueprint for a new economic policy in which the state’s role would be restricted to strategic sectors, leaving the rest to private enterprise and cooperatives. Decision-making would be decentralized to give managers greater authority, and state enterprises would be required to operate profitably or close. Wage incentives would reward productivity, and market mechanisms would balance supply and demand. Foreign investment would be actively sought. The social programs emblematic of the revolution – free health care and education – would continue, and no one would be left behind.

The pace of change had been intentionally deliberate – “without haste, but without pause,” in Castro’s oft-repeated phrase. But recent signals indicate the reforms may be stalled and that some of Cuba’s leaders are having doubts. At the Seventh Communist Party Congress in 2016, Castro reported that only 21 percent of the guidelines adopted in 2011 had been fully implemented.

The process of rationalizing state enterprises, which produce about three-quarters of GDP, has been especially slow. In April 2010, Castro noted that a million state sector workers – 20 percent of the labor force – were employed unproductively. By 2015, the state labor force had been reduced by 718,000 people and 15 percent of state enterprises had been closed. Nevertheless, productivity remained low and a significant number of firms still operated in deficit.

As workers were laid off from state enterprises, the private sector was expected to provide alternative employment. Although self-employment (cuentapropismo) was first legalized in the 1980s, it was not until Castro’s new economic policy that the state accepted the private businesses and cooperatives as a permanent part the economy. By 2017, some 543,000 people had self-employment licenses, operating a variety of small businesses.

The Seventh Party Congress promised to give private businesses legal status, but the National Assembly has yet to make good on it. Instead, the pendulum has swung in the opposite direction. In July 2017, Castro criticized the private sector for tax evasion and black-marketeering, though he insisted that private enterprise would remain a permanent part of the economic landscape. On Aug. 1, however, the government suspended the issuance of new licenses for some private occupations, including the most popular – private restaurants (paladares) and bed and breakfast rentals (casas particulares). A number of successful, high-profile businesses were closed for violating their licenses. More ominously, in a private Communist Party meeting, First Vice President Miguel Díaz-Canel, Castro’s likely successor, accused some private businesses of being counter-revolutionary.

Ideological suspicion has also hampered Cuba’s search for foreign direct investment (FDI). In 2014, Cuba adopted a new FDI law with competitive tax rates and concessions, hoping to attract $2 billion in FDI annually. By the end of 2016, however, only $1.3 billion had been approved in total. The problem was interminable bureaucratic delays in the approval of proposed projects. “It is necessary to overcome, once and for all, the obsolete mentality of prejudices toward foreign investment,” Castro insisted. “We must rid ourselves of unfounded fears of foreign capital.”

The most difficult task that Cuba’s new president will inherit is the unification of the dual currency and exchange rates. State sector employees are paid an average monthly wage of 779 Cuban pesos (CUP), which is insufficient for a decent standard of living. Convertible pesos (CUC) exchange 1-to-1 with the U.S. dollar and 24-to-1 with the CUP. Some Cubans have access to CUC through remittances or through work in the tourist sector (from tips), the private sector, in joint ventures, or work abroad. The imbalance drives highly skilled professionals out of the state sector and into low-skill jobs paying higher wages in CUCs – what Cubans call the “inverted pyramid.” Among state enterprises, half a dozen different exchange rates between CUPs and CUCs are in effect, ranging from 1-to-1 to 10-to-1, creating disincentives to export at a time when Cuba suffers from chronic balance of payments shortfalls and inadequate foreign reserves.

The government has been promising monetary unification since 2013, but implementation keeps getting delayed. The task is complex, and will reverberate through the economy with effects that are not entirely predictable. The government has little margin for error; it has no significant foreign reserves to cushion dislocations and no access to assistance from international financial institutions. Moreover, Cuba currently faces other serious economic challenges: the decline in shipments of cheap oil from Venezuela; the unprecedented damage from Hurricane Irma; and the unpredictability of relations with the United States.

Finally, while the reform process has had limited success stimulating growth, it has produced a noticeable rise in inequality, price increases that outpace wage growth, and rumblings of political discontent. When food prices surged in 2015-16, the state stepped in, imposing price controls. It did the same to taxi drivers, some of whom resisted by stopping work. The message, Castro made clear, was that markets had a role to play in the new economic policy, but a strictly regulated one, subordinate to political exigencies.

Formidable challenges await Cuba’s new president. He or she will have to hold together a shaky elite coalition behind the economic reform process, push the needed changes through a reluctant bureaucracy while maintaining economic stability, and simultaneously navigate the political shoals of popular discontent over a stagnant standard of living and growing inequality. At stake is nothing less than the future of Cuban socialism.

LeoGrande is Professor of Government at American University in Washington, DC, and co-author with Peter Kornbluh of  Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana (University of North Carolina Press, 2015)

 

“ACTUALIZANDO” (UPDATING) THE Cuban Economy: An Immense Task

Cuba’s unsung heroes! Professional and amateur car mechanics, keeping the economy ticking over.

Maintenance and repairs: urgent everywhere.

Coffee imports from Vietnam in a quasi-“dollar” store. Cuba provided technical assistance to Vietnam’s coffee sector in the 1970s. Now Vietnam is the world’s second largest producer while Cuba’s coffee production has plummeted.

Photos by Arch Ritter, March 2014

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