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CUBA’S CRITICAL JUNCTURE: MAIN CHALLENGES

Vegard Bye. Senior Research Fellow Centre for Development and the Environment, University of Oslo. vegard.bye@sum.uio.no

Complete Article: CUBA’S CRITICAL JUNCTURE

Abstract

Cuba is rapidly approaching a critical juncture, where a complete and generational change of leadership is unavoidable (between 2018 and 2021). The country and its Revolution is up against some unavoidable and complicated choices in the coming four years. With the rapidly approaching end of the Castro era, without any clear new leadership structure in sight, and with an apparently unsolvable economic crisis and rapidly shrinking confidence in the political power bloc particularly among the younger generations, a deep legitimacy crisis is looming. What are the principal challenges ahead, and how can and will they be solved?

  1. Introduction

Cuba is rapidly approaching a critical juncture, as a complete and generational change of leadership seems inevitable between now and 2021. The country and its revolution will be facing a series of complex, unavoidable choices in the next four years. With the end of the ‘Castro era’ and no clear new leadership structure in sight, combined with an apparently unsolvable economic crisis and rapidly shrinking confidence in the political power bloc, particularly among the younger generations,1 a deep legitimacy crisis is looming.

This study analyses some of the main challenges represented by the new international setting particularly concerning relations with the USA and the change from Barack Obama (2008–2016 to Donald J. Trump (2016) in the White House. These issues include how the economic crisis is undermining the welfare state that was once the pride of the Cuban Revolution, and the political challenges that may ensue; and how the monolithic character of the Cuban power structure is being put to the test by the increasing differentiation of interests between the early winners and the early losers of the economic reforms. The study also indicates some of the dilemmas of post-totalitarian political transformation identified in the theoretical literature, and relates these to other similar processes. Finally, we present some paradigm choices facing the next generation of leaders, and then discuss how a game of power, hegemony and legitimacy may unfold in post-Castro Cuba. While the most likely outcome still seems to be the continuation of some type of authoritarian and neo-patrimonial system, it is also possible to imagine some key post-Castro decisions that could take the country in a more pluralistic and participatory direction – although President Trump’s return to confrontationalism is making that even less likely. The harsh choice may be between re-building legitimacy and reverting to a much more repressive system.

Discussing political structures and their possible transformation is highly complicated regarding a system as opaque as that of Cuba, where there is no academic or media tradition of open analysis of power structures or ready access to reliable data. Such discussion may become quite speculative, as it is virtually impossible to underpin crucial observations about power relations with firm quantitative data – turning the choice of methodology towards qualitative analysis. Still, we believe it is worth putting together the available theoretical and empirical elements that may give indications about the future direction of a country that has played such a significant role in world politics and political/ideological discussions – a role quite out of proportion to its small size. Cuba offers a laboratory for the analysis of transformative politics.

……………………………….

  1. Conclusions

As yet, fairly authoritarian scenarios appear to be the likely outcomes of the transformation process. However, there remains the question of how absolute is the power that Cuba’s formal power bloc continues to exercise – and whether other options may emerge, against the odds, as the post-Castro generation prepares to take over the reins. Recently revealed remarks by First Vice President Miguel Díaz-Canel, the most likely presidential candidate in February 2018, leave few expectations for a prompt break with the past.15

The information monopoly has been definitely broken in Cuba – although the information hegemony may still be in place (Hoffmann 2016). Young people, also party loyalists, encounter no problems in seeking alternative information and views about the outside world as well their own country, including about the root causes of the economic failure. This will have consequences for how the next generation of leaders will need to communicate with the populace, and take public opinion into account, if they want to build a new capital of legitimacy. Moreover, the Party’s social hegemony appears to be slipping away, particularly among younger Cubans who hardly care about what happens at a Party Congress or in other formal decision-making bodies. This may even mean an actual loss of absolute political power – how relevant, then, will the three documents of principle discussed at the 7th Party Congress and ‘supported’ by the mid-2017 session of the National Assembly will be for the future of Cuba?

On the other hand, there seem to be no indications of counter-hegemonic forces developing, within or outside of party and state structures. Still, we should remain aware to the possibility that the looming ‘crisis of legitimacy’ in Cuba might become a ‘crisis of hegemony’ or of ‘authority’ (see Gramsci 1999Anderson 1976). It is no simple matter to apply such concepts, originally developed for analysing social and class forces in early industrial Europe, to the transformation process of a post-totalitarian system or an authoritarian socialist system searching for alternatives. However, the alternative Gramscian concepts of a passive revolution vs. the creation of a counter-hegemonic bloc may still be relevant. In the former, the bourgeoisie (or nomenclature in the Cuban case) would allow certain demands by looking beyond its economic-political interests and allowing the forms of hegemony to change (typically in the way the Nordic model was conceived in the 1930s). This would imply that the Cuban power elite might have to look for a similar adaptation of its hegemonic bloc in order to meet the emerging legitimacy crisis, particularly after 2018. The alternative might well be a deep organic crisis, tempting new social forces to set about building a counter-hegemonic historical bloc, leading to what Gramsci called ‘creating the new’ (which in Cuba would be some kind of post-socialism), rather than ‘restoring the old’ through a passive revolution.

One possible source of challenge to the existing hegemony of the Cuban political system would come from civil society, perhaps feeding on the growing self-confidence felt by private entrepreneurs as their critical economic role becomes more visible and recognised by the regime. ‘What is threatening to authoritarian regimes’, noted Przeworksi (1991: 54–55), ‘is not the breakdown of legitimacy but the organisation of counter-hegemony: collective projects for an alternative future. Only when collective alternatives are available does political choice become available to isolated citizens.’ Thus, according to Przeworski and building on the Gramsci concept of hegemony, the emergence of civil society organisations in itself becomes a relevant force for regime transformation only in a situation of falling legitimacy, if civil society organisations manage to organise a ‘counter-hegemonic bloc’. This has not yet happened in Cuba, nor is there any sign that it is about to happen. That being said, however, serious problems of legitimacy at a critical juncture may result in a new situation.

Moreover, no negotiation scenario is yet on the table in Cuba. Linz and Stepan (1996), Przeworski (1991) and Saxonberg (2013) all introduce the issue of negotiations at specific points during post-totalitarian transformation. Przeworski sees the issue of alliance building between groups willing to negotiate on the part of the regime and civil society as decisive for the outcome of any negotiation: ‘visible splits in the power bloc indicate to the civil society that political space may have been opened for autonomous organization. Hence, popular mobilization and splits in the regime may feed on each other’ (1991: 57).

Cuba has not yet arrived there: power-bloc splits are not evident, nor is there anything like a counterpart with which to negotiate. For that to happen, the combination of regime crisis –perhaps with the prospects of serious repression – and the emergence of a counter-hegemonic alternative would be required. It can only be speculated whether and under what circumstances such a situation might emerge.

Scenario forecasting in Cuba is a highly risky business. Here we make an attempt, identifying three basic scenarios that will gradually emerge with greater clarity as decisions and circumstances unfold in the time ahead:

  1. A neo-patrimonial system, whether ‘socialist’ as in China and Vietnam, or an ‘oligarchic’ variety as in Russia or Angola;16
  2. A transnational neo-authoritarian system: neoliberal capitalism based on massive US and other foreign direct investments, with the full dismantling of the current state and power structure (Cuba as a mini-Florida);
  3. Transformation to a mixed economy with a more pluralist and participatory polity, and the reconstruction of a welfare state: a negotiated process towards some kind of social democratic system.

As shown in Figure 1, we hold that a series of strategic decisions by the post-Castro generation of leaders in favour of more market-oriented economy is what might take Cuba in a less authoritarian direction, while simultaneously helping to rebuild the welfare state.

Vegard Bye

 

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CUBA STUDY GROUP Press Release: STATEMENT ON THE NEW CUBA REGULATIONS

Original Here: THE NEW CUBA REGULATIONS

November 9, 2017

The regulations announced on November 8 2017 are highly counterproductive.

Instead of supporting the Cuban private sector, as the administration has stated, new travel rules harm Cuban entrepreneurs and their employees by making it more difficult for individual Americans to visit the island and patronize their businesses. Rather than deal a lasting blow to the Cuban military, the ban on U.S. interaction with 180 Cuban state enterprises imposes unwieldly, and arguably unenforceable, regulatory burdens on U.S. citizens. More generally, these measures represent a setback to the broader process of normalization, which continues to be overwhelmingly popular with both the U.S. and Cuban people.

The Cuba Study Group disagrees, in particular, with the Trump administration’s decision to ban non-academic educational and individual people-to-people travel. The free flow of people, ideas, information, and goods helps, rather than hinders, the cause of meaningful reform on the island. Moreover, U.S. travelers frequent privately-owned rooms and other small businesses at a higher rate than visitors from any other country. President Trump’s measures will therefore hit the island’s private sector hardest, not the government, as tourists from other countries will continue to patronize state-owned companies and hotels.

Raúl Castro is slated to step down from the presidency in early 2018. At the same time, the country’s internal economic agenda has stagnated, and Hurricane Irma just devastated wide swaths of the island’s northern coast.

At this juncture of uncertainty and transition, it is in the best interest of the United States to remain engaged as the island confronts multiple challenges. By providing the Cuban government an excuse to revive a siege mentality, the Trump administration’s policies ultimately favor those in Cuba in a position to benefit most from the status quo where essential economic and political reforms continue to be neglected. As in the pre-normalization era, the Cuban people, and not the Cuban government, will most keenly feel the results.

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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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IS TRUMP USING ‘HEALTH ATTACKS’ ON US DIPLOMATS IN HAVANA AS AN EXCUSE TO PUNISH CUBA?

Published in The Conversation, October 4, 2017

Original article: An excuse to punish Cuba?

By William M. LeoCrande

In a blow to diplomatic relations with Cuba, U.S. Secretary of State Rex Tillerson on Oct. 3 ejected 15 Cuban diplomats from the United States. The expulsion follows his withdrawal of most U.S. personnel from the embassy in Havana after 22 American diplomats and family members there suffered unexplained health problems.

Last November, some U.S. personnel in Havana began experiencing a range of symptoms, including hearing impairment, nausea, dizziness and mild cognitive impairment. The people affected first and most severely were intelligence officers, but later victims held a variety of positions in the U.S. Embassy. Several Canadian diplomats were also affected.

The United States informed the Cuban government of these incidents on Feb. 17, 2017. Four days later, Cuban President Raúl Castro met with then U.S. Charge d’Affaires Jeffrey DeLaurentis and, pledging full cooperation, invited the FBI to investigate.

So far, though, the investigation has been unable to determine the perpetrator or motivebehind the mysterious attacks. Nearly a year after the first incidents, nobody even knows how the attacks were carried out. U.S. officials initially blamed some sort of sophisticated sonic weapon, but scientists have questioned whether sound waves alone could have produced the reported symptoms.

In this context, withdrawing U.S. personnel is arguably a reasonable precaution. But, in my view, expelling Cuban diplomats despite Cuba’s cooperation in the investigation is baseless and counterproductive. During the 40 years I’ve studied U.S.-Cuban relations, domestic politics, rather than foreign policy interests, have often driven U.S. policy, and I believe that’s what is happening now.

Sentence first, trial afterwards

State Department officials doubt that the Cuban government is behind the incidents. No evidence has emerged implicating Cuban officials, and Cuba is cooperating with the investigation.

Nevertheless, opponents of President Barack Obama’s 2014-2016 rapprochement with Cubahave successfully seized upon the mysterious injuries as an excuse to punish Cuba, wreaking havoc on relations that had been improving. As the Red Queen said to Alice in Wonderland, “Sentence first, trial afterwards.”

When the diplomats’ health problems were first reported publicly in August 2017, Sen. Marco Rubio, Republican of Florida and a vociferous opponent of normalizing relations, demanded that President Trump close the U.S. Embassy and expel all Cuban diplomats from the United States.

Instead, on Friday, Sept. 29, Tillerson announced the withdrawal of nonessential personnel, suspended visa processing for Cubans seeking to enter the U.S. and issued a travel warning advising Americans not to travel to Cuba. In a press release, Rubio denounced his actions as “weak, unacceptable and outrageous,” and took to Twitter to demand that Cuban envoys be expelled.

Marco Rubio  ✔@marcorubio
Some at @StateDept want massive drawdown of Americans at @USEmbCuba but allow Castro to keep regime embassy in DC virtually the same 1/2 Marco Rubio ✔@marcorubio
So Castro regime allows attacks on Americans forcing us to drawdown to keep them safe but he gets to keep about same # of people here? 2/2  9:20 AM – Sep 29, 2017

A few days later, on Oct. 3, Tillerson finally did what Rubio demanded. Cuban American U.S. Rep. Ileana Ros-Lehtinen, also a Republican of Florida and an opponent of Obama’s normalization process, pronounced herself “pleased as punch” at the expulsions.

Denormalization

This was not what U.S. diplomats wanted. The American Foreign Service Association, the union representing Foreign Service officers, opposed the withdrawal from Havana as contrary to U.S. interests. “We have a mission to do and we’re used to operating around the globe with serious health risks,” association president Barbara Stephenson told the news network CNN.

The expulsion of its diplomats isn’t the only punishment Washington has inflicted on Cuba. Some half a million Cubans depend on tourism for their livelihood, and it contributes about 10 percent to Cuba’s gross domestic product. The travel warning will deter U.S. visitors from going to the island, hurting the economy at a time when it is already suffering from the damage done by Hurricane Irma.

The sweeping and categorical nature of the travel warning is also unwarranted, considering that the State Department believes U.S. diplomats were the targets of “specific attacks” and no U.S. visitors have suffered any injury.

Canada, by contrast, issued no travel advisory after its personnel were injured, nor did its government withdraw Canadian diplomats from Havana or expel their Cuban counterparts from Ottawa.

Finally, by temporarily suspending visa processing for Cubans seeking to enter the United States, Washington risks violating the 1994 migration accord, which commits the United States to accept a minimum of 20,000 Cuban immigrants annually. That commitment will be almost impossible to meet now.

Predictably, as the United States has ratcheted up these punishments, the tone of Cuba’s response has become defiant. In Granma, Cuba’s Communist Party newspaper, the Foreign Ministry on Oct. 3 condemned the expulsion of its diplomats as “unfounded and unacceptable,” and rejected “categorically” any Cuban responsibility for the incidents.

Noting the absence of evidence as to perpetrator or means, Cuba for the first time questioned whether any attacks had even occurred.

The Trump administration has let a legitimate concern over the safety of U.S. diplomats become an excuse for reversing key elements of Obama’s policy of engagement, caving in to the political demands of those who, like Rubio and Ros-Lehtinen, opposed normalizing relations with Cuba from the outset.

By so doing, I think the administration has fallen into a trap. Whoever is responsible for the attacks on U.S. diplomats in Havana almost certainly did it to disrupt the rapprochement between the United States and Cuba. The U.S. response is handing that shadowy adversary a victory.

Lineup to enter the Consular Service at dawn at the US Embassy in Cuba, March 2011. Presumably the withdrawal of US diplomats will damage the consular service for Cubans wishing to travel to or migrate to the United States. (Photo by Arch Ritter)

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WILL TRUMP OPEN A PANDORA’S BOX OF LITIGATION OVER CUBAN PROPERTY?

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,  Professor of Government at American University

Huffington Post, 07/10/2017 02:34 pm ET |

Original Article: Pandora’s Box of Litigation?

Signing the “Helms-Burton Bill”

Long before the Departments of State, Treasury, and Commerce finish writing the new regulations that President Trump ordered to restrict trade and travel to Cuba, the president will face another decision on relations with Havana that could be far more consequential for U.S. businesses. By July 16, he will have to decide whether to continue suspending certain provisions of Title III of the Cuban Liberty and Democratic Solidarity Act of 1996 (also known as Helms-Burton, after its sponsors).

If he allows Title III to go fully into effect, he will open the door to as many as 200,0000 lawsuits by U.S. nationals 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. The tangle of resulting litigation would take years to unwind.

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 assuming an equity stake in it or profiting from it. 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 and the United States 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, angry opposition from U.S. allies Canada, Mexico, and Western Europe, 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 when Congress was debating the law. 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.

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If President Trump does not renew the suspension by July 16, however, claimants will be free to file Title III law suits by the tens of thousands. Once the suits have been filed, there will be no way to undo the resulting legal chaos.

When the Cuban Liberty and Democratic Solidarity Act was passed, U.S. allies in the Americas and Europe denounced its extraterritorial reach. Mexico, Canada, and the United Kingdom passed laws prohibiting compliance with it. The European Union filed a complaint with the World Trade Organization, which it dropped 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.

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 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. 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.

Explaining the new trade and travel regulations that President Trump announced on June 16, 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.

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DOES THE CUBAN MILITARY REALLY CONTROL SIXTY PERCENT OF THE ECONOMY? ANATOMY OF A FAKE FACT

William M. LeoGrande, Contributor, Professor of Government at American University

Huffington Post, 06/28/2017 11:39 am ET

Original Article: Fake Fact

President Donald Trump’s decision to prohibit U.S. transactions with Cuban enterprises controlled by the military has thrown a spotlight on the role of the armed forces in Cuba’s economy. That role is extensive, reaching across a number of different sectors, and it has grown in recent years along with Cuba’s tourism industry, where military-controlled firms are concentrated. These enterprises are managed by the holding company Grupo de Administración Empresarial S.A., GAESA, which reports to the Ministry of the Revolutionary Armed Forces (MINFAR).

The sudden spurt of media interest has produced widespread repetition of the spurious “fact” that the Cuban military controls 60% of the economy. “GAESA is the business arm of the Cuban Revolutionary Armed Forces and controls 60 percent of the island’s economy,” the Miami Herald reported shortly after Trump’s speech and repeated several times thereafter. The EconomistPoliticoThe GuardianThe Times of London, Business Insider, and others repeated it.

Even a cursory review of the composition of Cuba’s Gross Domestic Product demonstrates that this “fact” is ludicrous. Sectors in which the military has little or no participation easily comprise more than half of GDP, and in the other sectors, there are civilian as well as military-controlled firms (Anuario Estadístico 2015).

So how much of the economy do military enterprises really control and where did the 60% claim come from?

The Cuban government does not routinely report the revenue from individual enterprises, but we have a few data points for the largest military holding companies from which we can make reasonable projections.

Total revenue from enterprises managed by the military was reported as $970 million in 1997. Since a large portion of their revenue comes from tourism, let’s suppose that their revenue has increased in tandem with the rapid growth of that sector. In 1997, Cuba had 1.2 million foreign visitors (according to Cuba’s 2004 statistical year book, Anuario Estadístico). In 2016, Cuba had 4.1 million — a 249% increase. At that same rate of increase, projected revenue from military-linked firms in 2016 would be $3.4 billion.

We can check the reliability of this estimate with data from the three main military companies, Gaviota, Cimex, and TRD. Gaviota, the largest military-controlled conglomerate, is concentrated in tourism. Total revenue from the tourism sector was $2.8 billion in 2015 (Anuario Estadístico 2015). While Gaviota is the largest player, it does not hold a monopoly; it controls 40% of all available hotel rooms (though it has a higher proportion of the better ones), plus car rentals, tourist taxis, and restaurants. It is plausible, then, that Gaviota may generate as much as 60 percent of the earnings from tourism, or approximately $1.7 billion.

Cimex had 2004 revenue of $740 million. Using the same projection method based on the growth of tourism, Cimex’s estimated 2016 revenue would have been about $1.3 billion. The Havana Consulting Group, whose President Emilio Morales was formerly an executive at Cimex, estimates its revenue as $1.2 billion.

TRD, a chain of retail stores created to capture hard currency, had sales of $250 million in 2004. Using the same projection method, TRD’s estimated 2016 revenue would have been about $442 million.

Thus we estimate that the three largest GAESA companies taken together would have had 2016 revenue of about $3.45 billion, very close to the $3.4 billion initially estimated from the data on total MINFAR revenue. Emilio Morales at the Havana Consulting Group, using data he has collected over the past 15 years, estimates GAESA’s total current revenue at $3.8 billion.  Using Morales’ estimate, GAESA’s revenue constitutes 21% of total hard currency income from both state enterprises and the private sector, 8% of total state revenue, and just 4% of GDP (Anuario Estadístico 2015). That’s a long way from 60% of the economy, no matter what metric you use.

Where Did It Come From?

So where did the wildly inaccurate claim of 60% come from?

It first appeared in a February 2004 story in the Miami Herald about the head of Gaviota, Manuel Marrero Cruz, being named Minister of Tourism. “Cuba’s armed forces have taken over up to 60 percent of the island’s economy,” the Herald reported, citing the Cuba Transition Project (CTP), a U.S. government-funded project of the University of Miami’s Institute for Cuban and Cuban-American Studies.

In subsequent months, Institute Director Jaime Suchlicki regularly repeated the claim. In the proceedings of a November 2004 CTP conference, he wrote, “Today, more than 65 percent of major industries and enterprises are in the hands of current or former military officers.” In August 2006, he told the Associated Press, “They’re running 60 percent of the Cuban economy. All major industries are in the hands of the military’s active duty or former military people.”

Although no data or evidence was ever produced to support that claim, Suchlicki’s formulation was at least plausible, though misleading, because he included not just enterprises managed by the armed forces, but civilian enterprises and whole ministries led by active or retired military officers. The implication was that these entities were controlled by the armed forces, although there was no basis for such a conclusion. On the contrary, because the military has always been among the most efficient Cuban institutions, it has a long history of exporting managers to the civilian sector, going back to the 1970s.

Before long, the claim of military control devolved into a claim that MINFAR enterprises themselves constituted 60% of the economy. “The University of Miami’s Institute for Cuban and Cuban-American Studies estimates that soldiers control more than 60% of the island’s economy,” the Wall Street Journal reported in November 2006.

Other conservatives picked up the theme. “The military… controls about 60 percent of the economy through the management of hundreds of enterprises in key economic sectors,” wrote Carl Gershman, President of the National Endowment for Democracy (which also received U.S. government funding for “democracy promotion” in Cuba), and Orlando Gutierrez, national secretary of the exile organization Cuban Democratic Directorate. A 2008 Heritage Foundation report declared, “Serving or former military officers direct an estimated 60 percent of Cuba’s business and industry.”

By 2016, Suchlicki himself, who had originally been careful to specify that he was talking about major industries and enterprises run by military officers and former officers, had lapsed into the broad, unqualified claim that “more than 60% of the economy is under military control.”

Various newspapers and web sites repeated the claim over the years, setting the stage for this oft-repeated “fact” to be widely circulated when President Trump’s announcement made the Cuban military’s role in the economy a news story, as exemplified by the Miami Herald’s declaration, “GAESA…controls 60 percent of the island’s economy.”

It’s a case study in how fake facts become legitimated and spread, even without the boost of social media. Promulgated by a university-based center, which gave the claim credibility, it began as an exaggeration of the military’s control, lumping together military enterprises and civilian enterprises run by officers and former officers.

Gradually, those details fell away, perhaps because the flat statement of 60% control was more dramatic, or a better sound-bite, or perhaps because journalists failed to understand the nuances of the claim. As more and more sources quoted it, it gained credibility. By the time of President Trump’s June 16 policy announcement in Miami, it had become conventional wisdom that Cuban military enterprises controlled 60% of the economy, even though that “fact” was spectacularly wrong.

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CAN TRUMP COMPETE WITH OBAMA ON CUBA?

LEER EN ESPAÑOL

By JORGE I. DOMÍNGUEZ,  New York Times, JUNE 27, 2017

Original Article: TRUMP ON CUBA

CAMBRIDGE, Mass. — “Effective immediately, I am canceling the last administration’s completely one-sided deal with Cuba.” Thus said President Trump on June 16 in Miami to wildly enthusiastic applause from the remaining veterans of the failed 1961 Bay of Pigs invasion of Cuba. Yet, in practice, Obama administration policies toward Cuba remain in effect. President Trump has set up political, bureaucratic and diplomatic bargaining for months to come.

Through its actions since Jan. 20 and its policy announcements on June 16, the Trump administration has ratified bipartisan policies of engagement with Cuba. These include United States-Cuban military collaboration on the perimeter of the Guantánamo base, collaboration by air and sea to interdict and punish drug trafficking, Coast Guard and military all-purpose collaboration on the Straits of Florida, and security collaboration to stop undocumented migration, expanded in January consistent with President Trump’s preferences.

The Trump administration has ratified Obama administration immigration policy toward Cuba, which ended privileged status for undocumented Cuban migrants who are to be treated now like all similarly situated migrants. It has also left intact diplomatic relations, United States commercial flights to Cuba, 12 Obama administration categories of authorized group travel to Cuba — even cruise ships — as well as unfettered financial remittances from the United States to Cuba and agricultural exports to Cuba, worth well over $5 billion since President George W. Bush authorized them in 2001.

So, what changed on June 16? Check the Treasury Department’s website. The most common refrain in the frequently-asked-questions section related to the announcement is, “The announced changes do not take effect until new regulations are issued.” In other words, right now nothing has changed. A White House fact sheet reports that the issuance of the regulatory amendments is a “process that may take several months,” an opportunity to relive bureaucratic and political battles over Cuba policy.

The most likely eventual regulatory change is to cancel “self-directed, individual travel” and require more paperwork for those authorized to engage with Cuba; the administration will also stop attempting to undo United States sanctions on Cuba. The most intriguing topic is how to carry out the intended blocking of funds for Cuban state tourism and other agencies associated with the Cuban military. If taken literally, lawfully authorized United States travelers will not be able to contract tour services or stay at good hotels, but the delayed enforcement and the president’s own speech imply an openness to negotiate with Cuba.

The core of the president’s speech asks Cuban leaders, in effect, for unconditional surrender. Yet the president also said, “We challenge Cuba to come to the table with a new agreement”, and detailed possible deals: returning “the cop-killer Joanne Chesimard,” which requires a decision on just one person; “release the political prisoners” — the number of whom would be one-digit, according to the Amnesty International definition, but in the three digits according to the organized Cuban opposition definition. The White House fact sheet also refers to possible “further improvements” in United States-Cuban relations depending on Cuba’s “concrete steps.”

Is such a negotiation likely? Mr. Trump’s Cold War rhetoric and his audience of Bay of Pigs invasion veterans tell Cuban leaders what the president wants them to relinquish. The president’s words may have undermined his negotiating objectives. Cuba negotiates best under different circumstances. On Dec. 17, 2014, when the two governments broadcast a shift in their relationship, President Raúl Castro also announced his government’s “unilateral” decision under “Cuban law” to free dozens of prisoners “about whom the United States government had shown an interest.” Concessions? No. Parallel gestures in the context of cooperation? Yes.

The Cuban government’s first response to President Trump’s speech displayed expected indignation. Yet in context, it was moderate: “The government of Cuba reiterates its will to continue with a respectful dialogue and cooperation on topics of mutual interest, as well as the negotiation of bilateral issues still pending with the United States government.” It affirms that the last two years showed that the two countries “can cooperate and coexist in civilized fashion, acknowledging differences yet fostering everything that would benefit both countries and peoples.” Alas, it warned, do not ask for concessions.

Cuba’s foreign minister denounced the tone and content of the president’s speech but blamed “bad advisers,” not the president. The minister confirmed that Cuba will “honor the agreements that have been signed” and be open to negotiate others regarding bilateral relations, but not Cuba’s domestic circumstances. He noted that Cuba has granted political asylum to some who have fled the United States, but he also picked up one specific issue raised by the president. The minister recalled that in recent years Cuba has turned over to United States authorities 12 American fugitives. Both the asylum grants and the repatriation of criminals were “unilateral,” good-will acts in accord, he said, with Cuban and international law.

Could President Trump understand not just how to pressure but also how to negotiate successfully with a Cuban leadership that has outlasted his 11 presidential predecessors and resisted the kind of sanctions that his administration has just revived? Will Mr. Trump the negotiator negotiate? President Obama got dozens of political prisoners freed from Cuban prisons and a dozen criminal fugitives repatriated to the United States. The score thus far for President Trump is zero. Will Mr. Trump be able to compete with Mr. Obama on the terms he has set out?

Jorge I. Domínguez is a professor of government at Harvard.

 

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WHAT TRUMP’S NEW CUBA POLICY MEANS FOR AMERICAN BUSINESS

By Mimi Whitefield

Miami Herald, June 23 2017

Some U.S. executives that do business with Cuba breathed a sigh of relief after President Donald Trump outlined his new Cuba policy in Miami because it won’t have much impact on their companies. But others have pressed the pause button until they see how the new regulations implementing the changes are written.

Lawyers who help firms navigate the thicket of laws and regulations governing the embargo and dealings with the island have been combing through a memorandum that Trump signed on June 16 as well as three pages of frequently-asked questions issued by Treasury’s Office of Foreign Assets Control (OFAC) and a White House fact sheet to get a sense of the new policy.

Until the regulations are written, that’s all they have to go on. Trump has mandated that the regulation-writing must begin by mid-July.

“Until the regulations change, everything is status quo,” said Yosbel Ibarra, a Miami lawyer on Greenberg Traurig’s Cuba practice team.

How long it will take to write new rules is anybody’s guess, but it isn’t an easy task because multiple agencies and departments will be involved. Some key posts that would have oversight over the new policy also have yet to be filled by the Trump administration, according to lawyers.

Don’t expect a rush by U.S. companies that have proposals pending before the Cuban government to get deals inked before the new rules go into effect, say lawyers and business consultants.

“The way corporations are, when they know rule-making is underway, they are always going to hold up until the regulations are written,” said Robert Muse, a Washington lawyer who specializes in U.S.-Cuba law. “They are not going to set themselves at the far end of the branch based on a Q&A from OFAC.”

There will be important changes in the new policy: it bars most business by U.S. companies with Cuban entities owned or controlled by the military or intelligence services and cuts out people-to-people trips to Cuba by individuals. Group travel in that category is still OK – although there is expected to be more scrutiny of all Cuba travelers to make sure the purpose of their trips isn’t tourism.

The prohibition on doing business with the military is significant because since the 1990s, the Cuban military has been taking control of ever larger chunks of the economy, partly because military managers are viewed as more efficient. Many officers have been sent abroad for business training.

Now the military conglomerate GAESA controls an estimated 40 to 60 percent of the economy, with heavy involvement in the tourism industry, logistics and retail operations.  The military’s Gaviota Tourism Group, for example, controls or has joint ventures with foreign partners in 64 hotels and villas, including many resort hotels as well as the Saratoga, a favorite of visiting Congressional and business delegations, and the new luxury Gran Hotel Manzana Kempinski in Havana.

Even though former President Barack Obama opened up more opportunities for U.S. companies to do business in Cuba, not that many agreements have been finalized. Most are in the transportation sector, the telecommunications industry (notably roaming agreements and Google’s deal to install its servers on the island) and in the hospitality sector.

Some of the U.S. companies have inked deals with military entities. Telecommunications projects, for example, go through ETECSA, the state communications company that is controlled by the military, and Starwood Hotels & Resorts, now a part of Marriott International, has signed an agreement with Gaviota, the military tourism company, to manage a Cuban hotel as a Four Points by Sheraton.

But the administration has said it doesn’t want to hurt American businesses that have engaged in lawful commercial opportunities with Cuba and those agreements will be grandfathered into the new Cuba policy. That’s also true of any other projects that are in place prior to issuance of the new regulations.

Meanwhile, the coming prohibition on doing business with the Cuban military has prompted calls from clients who want to make sure exactly who their Cuban counterparts and business partners are, said Ibarra.

But even companies looking at business that seemingly have nothing to do with the Cuban military are wary.      “I’ve already had a client from New York call and say I guess I’m not going forward [in Cuba],” said Charles Serrano, a Chicago business and travel consultant who has taken clients on more than 130 trips to Cuba.

He is helping four other companies that have signed agreements, have submitted proposals or are in negotiations. But Serrano, managing director of The Antilles Strategy Group, said: “This will slow the interest of American businesses in exploring opportunities in Cuba. They calculate risk based on real things.”

The next battleground is how the new regulations are written.   “After the announcement there was a little sense of relief because companies now know more or less what the landscape will look like and the direction policy is going,” said Pedro Freyre, chairman of Akerman’s international practice, which includes clients doing business or trying to do business in Cuba. “But now the next level of anxiety is about what the regulations will look like. Depending on how they are crafted, they could shut down a lot of business activity.”

Hardliners can be expected to make the case that the rules should be written so as much U.S. business activity as possible is precluded. But the Cuban Study Group, which includes executives and professionals who favor engagement, wants the administration to narrowly interpret what it means to do business with the Cuban military.

“There is a vast difference between a Fortune 500 company forming a joint venture with the Cuban military and a U.S. humanitarian worker buying a water bottle at a government-run store,” said the group in a statement. Among the military’s holdings are retail stores where visitors often buy bottled water.

“Nothing stops business like uncertainty,” said Ibarra. “The more clear and transparent the new regulations are, the better.”

Eventually, the State Department is expected to publish a list of military concerns that are off limits for U.S. companies.

Despite military links to airport and seaport operations in Cuba, the new policy allows cruise lines from the United States to continue to call at Cuban ports, U.S .airlines to keep on flying and limited legal trade, under exceptions to the embargo, to keep flowing.  “Carnival Corp. is pleased that the policy changes announced by the Trump administration will allow our ships to continue to sail to Cuba,” said spokesman Roger Frizzell. He said Carnival plans to review how the tightening of travel rules potentially might affect its passengers.  But he said all cruise passengers since Carnival’s social impact line Fathom inaugurated the first regular cruise service by a U.S. line to Cuba in March 2016 have been traveling under permissible categories for travel to Cuba.  Carnival Corp. has discontinued its Fathom service to Cuba, but its Carnival Cruise Line currently calls in Cuba and its Holland American Line plans to begin sailing there in December.

Other cruise lines also have jumped into the Cuban cruise market. With current sailings and service that is planned, nearly 200,000 travelers are expected to sail from the United States to Cuba this year.

American Airlines, which offers 70 flights weekly to six Cuban cities, doesn’t expect too much impact from the new Cuba policy. Because all but one of its flights — a Charlotte-Havana route — depart from Miami, they have proved popular with Cuban Americans whose travel is not restricted by the new policy.  “Because Miami is the heartland of Cuban exiles, we have a strong market of passengers visiting family and friends in Cuba,” said Martha Pantin, an American spokeswoman.  Since it began regular scheduled flights to Cuba last year, American has opened a ticket office in Havana, begun selling tickets at the Havana airport and installed self-service kiosks there too. “By July, we expect to have self-service check-in at all the airports we serve in Cuba,” said Pantin.

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TRUMP’S HARD LINE ON CUBA IS A BLUFF, AND HAVANA KNOWS IT

William M. LeoGrande | Tuesday, June 20, 2017, World Politics Review

Original Article here:       World Politics Review


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TRUMP POLICY COULD CUT REMITTANCES TO A MILLION CUBAN FAMILIES

Huffington Post, 06/20/2017 12:45 pm ET

William M. LeoGrande and Marguerite Rose Jiménez

There is a poison pill hidden in President Donald Trump’s National Security Presidential Memorandum (NSPM) on Cuba that could deprive over a million Cuban families of access to remittances from their relatives abroad—a declaration of economic war on the very people that Trump claims his policy will empower.

Section 3(d) of the NSPM redefines “prohibited officials of the Government of Cuba” expansively, potentially including almost a quarter of Cuba’s entire labor force. The significance: Cubans who are “prohibited” are not allowed to receive payments from U.S. persons, and that includes remittances (Cuban Assets Control Regulations, §515.570).

The previous regulatory definition of prohibited officials was very narrow, limited to members of the Council of Ministers and flag officers of the Revolutionary Armed Forces. The new definition proposed by President Trump includes hundreds of senior officials in every government agency, thousands of ordinary Cubans who volunteer as leaders of their local Committees for the Defense of the Revolution, and—most importantly— every employee of the Ministry of the Revolutionary Armed Forces (MINFAR) and Ministry of the Interior (MININT).

Bottom of Form

MINFAR has some 60,000 active duty troops and MININT has some 35,000 police and Border Guards, and that’s not counting their civilian employees. Military service is compulsory for both men and women, so almost every family on the island will be affected by this new definition at some point.

More importantly, according to the U.S. government’s Cuba Broadcasting service, over a million Cubans are employed by the two big holding companies, GAESA and CIMEX, that report to MINFAR. If all these people are now to be considered “prohibited officials,” then a quarter of the Cuban labor force will no longer be eligible to receive remittances.

For Cuban state employees who are paid an average salary equivalent to about $25 a month, cutting them off from family remittances will have a devastating impact on their standard of living. By what possible logic can a clerk at GAESA, a truck driver at CIMEX, or a private in the Cuban army be defined as an “official” important enough to be prohibited from receiving help from their family abroad?

The alleged premise of Trump’s policy is to empower the Cuban people by directing U.S. funds to them, rather than to the Cuban government. Remittances are the very best way to do that because the dollars go directly to family on the island, at a rate of about $3 billion annually.

President Trump could have imposed limits on remittances directly and openly, as previous presidents have done, but that would have been very unpopular in the Cuban American community, so instead he has disguised a potentially massive cut behind the small print of an obscure regulation. Now it is up to the Treasury Department’s Office of Foreign Assets Control to write the new regulations in a way that averts this travesty.

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