PRELIMINARY STUDY OF THE IMPACT OF THE PRIVATIZATION OF STATE-OWNED ENTERPRISES IN

Teo A. Babún, Jr.

With the prospects of limited trade relations between its underdeveloped and plentiful mineral resources, the United States and Cuba looming closer, the most its educated work force, its top-rated natural attrac- important issue for Cuba is the future of its econo- tions, as well as other characteristics, have a positive my, which has been devastated by socialism, trade impact on potential foreign investors. embargoes, and the cutoff of Russian welfare. This paper summarizes the results of a mayor study Without question, once Cuba moves unequivocally conducted by Cuba-Caribbean Development Com- towards a free market economy, financing institu- pany, a corporation headquartered in Miami that tions will be available to provide funding to promote provides international business services for compa- economic growth in a new Cuba. Financing for nies and individual investors seeking to establish or projects through direct loans and other financial in- expand business ventures in the Caribbean region, struments will be available for improvement of water regarding state-owned enterprises in Cuba available supply and sanitation, support and development of to possible privatization. The paper is divided into small business, modernization efforts, infrastructure two sections: the first section presents the results of repairs and maintenance, environmental clean-up ef- the study with respect to potential privatization tar- forts, from a plethora of public financial agencies, in- gets in the island. The second section discusses some cluding the Inter-American Development Bank ideas on a national privatization strategy in a post- (IDB), the World Bank, the Canadian International Castro Cuba. Development Agency (CIDA), and others. PRIVATIZATION RESOURCES As with Eastern Europe and Russia, it is for Cuba to Based on a variety of information sources—the take the painful reform steps necessary to put its Cuba data bank of the T. Babún Group, publica- economy back on track. However, as was the case in tions, interviews with experts in the business com- Eastern Europe, the largest and most important in- munity, government and academia, information pro- vestments will come from the private sector. Most of vided by scholars, and consultations with officials in these investments will be made for privatization of the U.S. Departments of State and Defense—the state-owned assets, and will come from private com- study identified state-owned resources in Cuba avail- panies, with specific objectives, and from capital able for possible privatization. The authors analyzed markets. On the one hand, unlike Eastern Europe, the pricing strategy employed by Poland, Czechoslo- Cuba is less developed, and has experienced a lengthy vakia, Hungary and , in the privatiza- economic crisis, which has taken a toll on both the tion of many of their state-owned enterprises, and physical and the human resources, making Cuba then applied similar ratios to Cuba’s assets. We fur- even a harder “sell” for private investors. On the oth- ther evaluated the potential for privatization in infra- er hand, Cuba’s close proximity to the United States, structure concessions to construct and operate toll

425 Cuba in Transition · ASCE 1999 roads and ports, as well as in contracting-out and Plastic and Paper Trust; and Chemical and Fertilizer other private involvement in water and sewage sys- Industries Trust); the Ministry of Steel and Mechanic tems, refuse collection and waste management, etc. Industries (ACINOX, S.A., and Metal Processing We believe that the total value of about 1,500 state- Trust); and the Ministry of Construction Materials owned target projects, when transferred to the pri- (Construction Aggregates Trust and Cement Trust). vate sector, will be between $21 to $39 billion (see Table 3 identifies specific privatization targets within Table 1). This amount does not include potential these larger groups of enterprises (trusts). private assistance and loans, grants and grant guaran- tees from international financial institutions, multi- Cuba can not afford the luxury of a lengthy and pro- lateral organizations, and individual countries. For tracted privatization process. Once a national privati- instance, in January 1997, President Bill Clinton zation program is introduced, it will be very impor- predicted that Cuba could receive from $4 billion to tant that it remain as consistent as possible. Perhaps, a new Cuba could first conduct the privatization of $8 billion from these sources. small-scale businesses, followed by high export-po- Table 1. Summary of Possible Projects tential enterprises (and projects), while the govern- Available for Privatization ment creates the optimum conditions for a full na- tional privatization strategy. Potential Number Privatization Sector of Projects Investments Cuba is well ahead of the former Soviet Bloc coun- Mining 24 $4-$5 billion tries in preparing a base for privatizing its state- Electric power 20 $4-$5 billion owned enterprises. For instance, on August 24, 1998, Other utilities 13 $600 million-$1.3 billion the government approved a new law to decentralize Transportation 59 $5-$7 billion Construction and 95 firms from the control of the Basic Industry Min- construction materials 24 $2-$3 billion istry. The companies planned to be spun off employ Food processing, fishing over 115,000 workers. & beverages 29 $1.5-$2 billion Other light industry 15 $600 million-$1.0 billion Other specialized But privatization of Cuba’s existing state-owned en- industries 33 $600 million-$1.0 billion terprises will not be an easy task. Cuba’s factories are High technology industry 22 $1.5-$2.0 billion large, cumbersome and inefficient. In fact, 88 per- Wholesale and retail facilities 7 $500 million-$700 million cent of Cuba’s industrial plants are considered Sugar and sugar-related “large” by World Bank standards. The study identi- industry 166 $1.2 billion fies 170 state-owned enterprises (not sugar mills), Banking and insurance 16 $1.9-$2.4 billion with 500 or more workers, built or enlarged after Tourism, tourism-related and entertainment 750 $2.5-$3.1 billion 1959, as compared to only 14 plants (not sugar Military enterprises 121 $2.65-$3.2 billion mills), with 500 or more workers existing in 1959. Telecommunications & media 180 $500-$800 million In addition, before large volumes of foreign capital Miscellaneous enterprises 11 $450-$500 million and aid assistance would flow to the island, a new Total potential Cuba will need to deal with issues such as a large ex- investments 1490 $20.77-$39.2 billion ternal debt, and a plethora of individual claims for confiscated properties. An analysis of these and many Table 2 reports on the strong and weak points of po- other critical pre-privatization issues are given in the tential privatization targets within Cuba’s basic in- next section of the study. dustry sector. This sector is composed of enterprises within the Ministry of Basic Industries (Geology and A NATIONAL PRIVATIZATION STRATEGY Mining Trust; Electric Industry Trust; Rubber and The following ideas and proven concepts merit seri- Tires Trust; Nickel Industry Trust; Oil and Gas Ex- ous consideration in designing a national privatiza- traction Trust; Oil Refining and Distribution Trust; tion program of state-owned assets.

426 Privatization of State-Owned Enterprises in Cuba

Table 2. Privatization of Cuba’s Basic Industry Sector—Strong and Weak Points

A. Chemical and Fertilizer Industries Trust, Partner for Foreign Investors: CEPIQ, S.A. Strong Points Weak Points • Large facilities at Nuevitas, Cienfuegos, Regla, Felton, • The vast majority of the raw materials need to be imported. and Santa Lucia, generally in good shape. • High environmental impact, some clean-up works to be • Claims are not a major issue (except at Regla). done by investors • Ethical and well-trained technicians and workers. • Very poor wholesale and retail distribution network. • Fair transportation and port infrastructure. B. Metal Processing Trust, Partner for Foreign Investors: Planta Mecánica de Santa Clara Strong Points Weak Points • Two large plants, producing parts for the sugar cane • Power intensive operations. Some inputs needs to be industry. Fair quality. imported. • The products are competitive in the international market • Substantial maintenance troubles. The organization of work and can be exported. is poor. • The skill of technicians and workers is fair. Reasonable • Intensive political and governmental interference. work ethic. C. Paper Trust, Partner for Foreign Investors: Unión del Papel Strong Points Weak Points • Availability of large quantities of sugar cane bagasse as a • Eleven plants need to be completely reconstructed, with a raw material. significant capital expenditure. • Reasonable training of workers and technicians. • Sensitive environmental impact, the investors need to meet • Two modern plants (paper and cardboard) and one up to some clean-up works. date plant for plastics. • Fuel and power intensive industry, but capable to be energetically improved (cogeneration) D. Rubber and Tires Trust, Partner for Foreign Investors: Empresa de la Goma Strong Points Weak Points • Very large demand, they could allocate more than the • The industry is poorly managed and the labor force is not installed capacity allows. very skilled. • Export potential, despite the current limitations (they need • A second rate operation within the Ministry of Basic hard currency). Industry. • Several facilities are in good shape and are moderately • Some of the most important facilities were confiscated in advanced from technological point of view. 1960 and subject to claims. E. ACINOX, S.A., Partner for Foreign Investors: ACINOX, S.A. Strong Points Weak Points • The largest steel and alloys producer in the Caribbean. • Fuel and power intensive operations. Also produces stainless steel. • Some environmental impact and cumulative damage. • Satisfactory technological level; availability of ores and • The transportation of inputs and finished products is scrap; fairly well-trained workers. difficult. • An exception in Cuba, management understands well the business environment. F. Cement Industry Trust, Partner for Foreign Investors: Unión de Empresas del Cemento Strong Points Weak Points • Substantial installed capacity, for Portland (5.5 million • Miserably neglected environmental care. metric tons) and whites (0.1 million metric tons). • Fuel intensive operations in four (wet system) out of six • Very large reserves of raw materials averaging 50 years of plants. life for the six plants. • The quality of the product is somewhat irregular, except • Comparatively good infrastructure for distribution/export the whites (excellent) (bulk and bagged). G. Construction Aggregates Trust, Partner for Foreign Investors: Empresa Nacional de Canteras Strong Points Weak Points • There are eight first class facilities producing limestone, • The quality of the products is highly irregular. zeolites and other products. Competitive. • The maintenance of the facilities is poor. • Well studied reserves of mineral, capable to sustain large • Comparatively large environmental remediation. increases of production. • Free of claims; the majority of the facilities were built during the 1970s and 1980s.

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Table 2. Privatization of Cuba’s Basic Industry Sector—Strong and Weak Points (continued)

H. Electric Industry Trust, Partner for Foreign Investors: Cubaeléctrica, S.A. Strong Points Weak Points • Reasonable amount of facilities and generation capacities, • Utility, only for domestic market, very little hard currency good transmission network and substations. revenues. • Reasonably well-trained personnel, including repair and • Significant claims against properties confiscated in the maintenance teams. 1960s. • Very large, undoubtedly growing demand. • The distribution and billing systems are in full chaos. • Strong governmental and political interference. • Controls the very contested nuclear plant at Cienfuegos bay. I. Geology and Mining Trust, Partner for Foreign Investors: Geominera, S.A. Strong Points Weak Points • Substantial opportunities in copper, zinc, lead, gold, • Extremely poor knowledge of current business and manganese, chromite, marbles, and mineral waters. worldwide practices in mining. • Large export opportunities at competitive rates. • Slow and bureaucratic procedures. • Most mining targets discovered after 1959 and not subject • They want capital, but not capitalists or capitalism. to claims. • Very large and expensive information is fully available. J. Nickel Industry Trust, Partner for Foreign Investors: Cia. General del Níquel Strong Points Weak Points • World class mineral reserves and a comparatively well- • Two out of three plants are subject to large claims. developed infrastructure. • High environmental impact; the investors needs to meet • Strong export market worth several hundred millions U.S. significant remediation work. dollar per year. Competitive products. • Very high political interference and governmental scrutiny. • Well-trained technicians and workers. K. Oil Refining and Distribution Trust, Partner for Foreign Investors: CUPET, S.A. Strong Points Weak Points • Three large and one small refining plants at , • The plants at Havana and are claimed Cienfuegos, Santiago de Cuba and Cabaiguán. by large western oil companies. • Relatively well-trained technician and workers. • The refining plants need to be technologically improved. • Excellent maritime facilities for supertankers at Matanzas • Distribution network is a disgrace—only 800 gas stations bay. Pipeline Matanzas-Cienfuegos. in the whole country, of which only 250 are fully operational. L. Oil and Gas Extraction Trust, Partner for Foreign Investors: CUPET S.A. Strong Points Weak Points • Very large geological information, seismical test and other • The skill of workers and technicians needs to be improved. data, fully available. More work incentives needed. • Highly prioritized task by the government, softening its • The geology of Cuba is not very favorable for commercial negotiation structures. scale oil production. • Fair transportation infrastructure for oil & gas, tanking • The quality of the crudes is very poor. farms and coastal facilities. • Very few serious claims.

Claims Against the State cles to the privatization of enterprises are interposed by the existence of unresolved property claims Economic stabilization, law and order, food, medi- against them. cines, the establishment of workable institutions for policy implementation and establishment of property Therefore, while there is general agreement on the rights are critical to Cuba’s reconstruction and with- need to privatize state-owned enterprises and attract out doubt need to be addressed early on. Based on foreign investment to Cuba as rapidly as possible, the widely differing experiences of Czechoslovakia, there must first be a determination regarding the is- Hungary, Poland, East Germany and Russia, whatev- sue of property rights. Moreover, unless clear and er process is followed must provide an unequivocal transparent “rules of the game” are established and adjudication of property rights so that no legal obsta- implemented, the amount and quality of investment

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Table 3. Potential Privatization Targets Within Selected Cuban State-Owned Enterprises Banking • Empresa de Contratación de Asistencia Técnica • Banco Financiero Internacional. Commercial bank, (Cubatécnica). Imports and exports technical assistance. handling export revenues and international banking • Empresa Cubana Importadora de Fibras, Tejidos y relations. Cueros (Cubatex). Imports fibers, textiles and hides; • Banco Popular de Ahorro. Savings bank with branches exports textiles and apparel. throughout the country. • Empresa Cubana Exportadora de Azúcar y Sus Insurance Derivados (Cubazucar). Exports sugar, molasses and • Intermar, .S.A. Handles inspection of goods, as well as alcohol. insuring against ship and aircraft damages. • Empresa Comercial de Industrias de Materiales, • Empresa del Seguro Estatal Nacional (ESEN). Takes care Construcción y Turismo (Ecimact). Imports and exports of vehicle and agricultural insurance. engineering services. • Seguros Internacionales de Cuba (Esicuba). Issues all • Empresa Comercial para la Industria Metalúrgica y types of coverage except life insurance. Metalmecánica (Ecimetal). Imports metal milling and • Import/Export shaping equipment. • Empresa Cubana Importadora de Alimentos (Alimport). • Empresa de Comercio Exterior de Publicaciones Imports food and liquor. (Ediciones Cubanas). Imports and exports publications (i.e., books, magazines, newspapers). • Empresa Central de Abastecimiento y Venta de Equipos de Transporte Ligero. Imports light-weight vehicles, • Empresa de Grabaciones y Ediciones Musicales motorcycles and spare parts. (Egrem). Imports and exports musical recordings and instruments. • Empresa Cubana Importadora y Exportadora de Aviación (Aviaimport). Imports aircraft and parts. • Empresa Exportadora de la Construcción (Emexcon). Imports and exports consulting and engineering • Empresa Exportadora del Caribe (Caribex). Imports and services; imports and exports building equipment and exports seafood and marine products. materials. • Empresa Central de Abastecimiento y Venta de Equipos • Empresa Importadora y Exportadora de Suministros de Construcción y sus Piezas (Construimport). Imports Técnicos (Emiat). Imports technical equipment; exports and exports construction equipment and machinery. furniture and housewares. • Empresa Cubana Importadora de Artículos de Consumo • Empresa Especializada Importadora, Exportadora y General (Comsumimport). Imports and exports consumer Distribuidora para la Ciencia y la Técnica (Emidict). goods. Imports and exports scientific/technical products and • Contex. Imports and exports items such as textiles, equipment, as well as ornamental fish and other live apparel, accessories, footwear and handicrafts. animals. • Corporación Productora y Exportadora de Tecnología • Empresa Operadora de Fuerza de Trabajo-UNECA Electrónica (Copextel). Exports computer software. (Empoft). Imports and exports personnel management • Empresa Comercial y de Producciones Filatélicas services for construction projects. (Coprefil). Imports and exports philatelic items, as well as • Empresa Cubana de Acuñaciones. Exports coins and handicrafts, electronics, communications equipment precious metals. and time pieces. • Empresa Importadora de Equipos Electroenergéticos • Unión de Empresas Constructoras Caribe (Corporación (Energoimport). Imports electrical generation equipment. Uneca). Imports and exports construction work services. • Empresa de Proyectos para la Industria Básica (Eprob). • Empresa Importadora y Exportadora de Productos de la Exports engineering consulting services, industrial plants Electrónica (Cubaelectrónica). Imports and exports and turnkey projects. electronics equipment. • Empresa de Proyectos para Industrias Varias (Eproyiv). • Empresa Cubana Importadora de Productos Mecánicos Exports consulting services for industrial facilities and y Equipos Variados (Cubaequipos). Imports mechanical design. equipment. • Empresa de Suministros Industriales (ESI). Imports • Empresa Cubana Exportadora de Alimentos y Productos machinery and parts for industry. Varios (Cubaexport). Exports foodstuffs. • Empresa Cubana Importadora y Exportadora de • Empresa Cubana Exportadora de Productos Industriales Ferrocarriles (Fecuimport). Imports and exports railway (Cubaindustria). Exports industrial goods. equipment. • Empresa Cubana Importadora de Metales, Combustibles • Empresa Cubana Importadora de Artículos de Ferretería y Lubricantes (Cubametales). Imports and exports (Ferrimport). Imports hardware. metals, crude oil and petroleum, as well as metal • Fondo Cubano de Bienes Culturales. Exports fine arts byproducts. and crafts. • Corporación de Turismo y Comercio Internacional • Instituto Cubano del Arte e Industria Cinematográfica (Cubanacán). Imports and exports materials and inputs (Icaic). Produces, imports and exports movies, for development of the tourism industry. • videos and filmstrips. • Empresa Cubana Exportadora de Minerales y Metales (Cubaniquel). The country’s sole exporter of minerals. • Empresa Importadora y Exportadora de Infraestructura (Imexin). Imports and exports infrastructure. • Empresa Cubana del Tabaco (Cubatabaco). Exports tobacco, cigars and cigarettes.

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Table 3. Potential Privatization Targets Within Selected Cuban State-Owned Enterprises (cont.) • Empresa Importadora y Exportadora de Plantas Railways Alimentarias, sus Completamientos y Derivados • . Public rail services. Controlled by (Imexpal). Imports and exports food processing plants the Ministry of Transportation, the country’s railway and parts. system is divided into the following five lines: • Empresa Cubana Importadora y Exportadora de Materias • Western division: Serves Pinar del Río, Havana city, Primas y Productos Intermedios (Maprinter). Imports and Havana province and Matanzas. exports raw materials and intermediate goods. • Central division: Serves Villa Clara, Cienfuegos and • Empresa Cubana Importadora de Maquinarias y Equipos Sancti Spíritus. (Maquimport). Imports machinery and industrial • Center-West division: Serves Camagüey, Ciego de Avila equipment. and Las Tunas. • Empresa Cubana Importadora y Exportadora de Buques • Eastern division: Serves Santiago de Cuba, Granma, Mercantes y de Pesca (Marpesca). Imports and exports Guantánamo and Holguín. ships, as well as port facilities and fishing equipment. • Camilo Cienfuegos division: Serves part of Havana • Empresa Cubana Importadora y Exportadora de province and Matanzas. Productos Médicos (Medicuba). Imports and exports Shipping pharmaceuticals and medical goods. • Empresa Consignataria Mambisa. Shipping agent, ship • Empresa Central de Abastecimiento y Venta de chandlers, bunker supplies. Productos Químicos y de la Goma (Produimport). Imports • Empresa Cubana de Fletes (Cuflet). Freight agents for and exports automotive products and spare parts for Cuban cargo. motor vehicles. • Empresa de Navegación Caribe (Navecaribe). Operates • Empresa Cubana Importadora de Productos Químicos Cuba’s coastal shipping fleet. (Quimimport). Imports chemical products. • Empresa de Navegación Mambisa. Operates dry cargo, • Empresa de Jabonería (Suchel). Imports raw materials for reefer and bulk carrier vessels. detergents and perfumes; exports perfume and • Flota Cubana de Pesca. Operates the county’s fishing cosmetics. fleet. • Empresa de Servicios Técnicos e Ingeniería para la Airlines Industria Azucarera (Tecnoazucar). Imports equipment • Empresa Consolidada Cubana de Aviación (Cubana). for sugar industry; conducts feasibility studies. Provides domestic service between Havana and 12 • Empresa Cubana Importadora y Exportadora de other cities. International service includes routes to Productos Técnicos (Tecnoimport). Imports technical Angola, Argentina, Barbados, Belgium, Canada, goods. Czechoslovakia, Dominican Republic, France, Grenada, • Empresa Cubana Exportadora e Importadora de Guinea-Bissau, Guyana, Jamaica, Mexico, Servicios, Artículos y Productos Técnicos Especializados Mozambique, Nicaragua, Panama, Peru, Spain, (Tecnotex). Imports technical and communications Switzerland and Russia, among other destinations. equipment; exports geodetic networks. • Aerocaribbean SA. International and domestic charter • Empresa Central de Abastecimiento y Venta de service. Maquinaria Agrícola y sus Piezas (Tractoimport). Imports Tourism tractors and farm equipment; exports agricultural • Empresa de Turismo Internacional (Cubatur). implements. International tour operator. • Empresa Central de Abastecimiento y Venta de Equipos • Empresa de Turismo Nacional (Viajes Cuba). Domestic de Transporte Pesados y sus Piezas tour operator. • Instituto Nacional de Turismo (Intur). International and • (Transimport). Imports and exports transportation domestic tourism promoter. equipment. Television • Unión de Empresas de Camiones y de Motores • Televisión Cubana. Operates the Cubavision and Tele- (Unecamoto). Imports vehicle accessories and auto Rebelde networks. parts. • CRTV. A subsidiary of Tele-Rebelde. taking place will be less than what is needed to put General Considerations Cuba on a sustainable and high growth rate. Some groups take the position that claims against the Cuban state should not be limited to property For these, and many other reasons, the most relevant example for Cuba is East Germany, where its Treu- claims, but should include all manner of torts — ad- hand Agency (Treuhandanstalt) was able to resolve dressing involuntary or uncompensated work, unjust most of the problems dealing with property claims, imprisonment, loss of life or limb, loss of loved ones, clear title and pricing. physical or psychological abuse and harassment by

430 Privatization of State-Owned Enterprises in Cuba agents of the state, discontinuance of pension pay- Over 8,000 Cuban claims were filed, and 5,911 were ments, etc.—whose aggregate value defies imagina- allowed for a total of approximately $1.8 billion in tion. Indeed, we doubt there is any legal or moral ba- claims. Among the largest claimants are the Cuban sis for assigning priority to settling claims against Electric Co. ($267.6 million), ITT ($130.7 million), physical property over those claiming civil damages and North American Sugar Industries ($109 mil- such as those suggested above. Moreover, precedents lion). Among the smallest corporate claimants are of various forms of compensation in ex-Socialist Sears, Roebuck ($3.7 million), Pepsico ($1.9 mil- states such as East Germany, Czechoslovakia, Roma- lion), and General Dynamics ($1 million). nia, and Hungary notwithstanding, the magnitude of The FCSC has concluded that, in accordance with the disaster in Cuba and the requirements to set the principles of international law, interest on approved country back on track socially, politically and eco- claims should be computed at six percent from the nomically leads one to conclude that attempting to date of loss to the date of settlement. This seems eq- set up a process of claims adjudication in Cuba, at uitable given that most funds and credit balances be- least during what will no doubt be an extremely diffi- longing to the Cuban government which were cult transition period, would be pure folly. blocked by the U.S. under the Cuban Assets Control Regulations, are held in interest-bearing accounts. One essential question to be answered is whether at- tempting to arrange some form of non-cash compen- The Cuban Government continues to maintain a sation for property and tort claims will be more con- strong position against the payment and settlement ductive to reconciliation than adopting a no- of such claims. Accordingly, the U.S. Government compensation policy. For example, in Romania it declared and implemented the Cuban Embargo. was felt that, like many of its citizens, the country There is little doubt that a prerequisite for the lifting was suffering from post-traumatic stress syndrome, of the total embargo and the full normalization of re- for which it had to undergo a difficult process of crit- lations between Cuba and the United States will be, among other matters, the eventual settlement of the ical self-examination, healing, and reconstruction. Cuban claims. Under a victim compensation law, more than 100,000 Romanians claimed compensation which, Restitution aside from cash, was granted in the form of benefits Various arguments have been advanced in favor of such as free public transportation and preservation of the return of confiscated property to its former own- job seniority. ers. These arguments fall into the following catego- ries: U.S. Claims • Property rights were protected against confisca- The U.S. Foreign Claims Settlement Commission tion by the Cuban Constitution of 1940; they (FCSC) was created as an independent U.S. federal should therefore be returned. agency with the directive to determine and render fi- nal decisions concerning the claims of U.S. nationals • Since the government of Cuba does not have (and will not soon have) the means to compen- for loss of property in certain foreign countries. In re- sate promptly, adequately and fairly, restitution sponse to the Cuban Government’s nationalization is the best (only) workable alternative. and expropriation of billions of dollars in property belonging to U.S. nationals, the FCSC was given the • Restitution is the best way to implement rapid authority to negotiate and settle Cuban claims. Un- privatization and encourage recapitalization of der the International Claims Act of May 31, 1967, a the economy. deadline was established for filing Cuban claims, af- • In the case of corporate claims, former owners ter which, all potential claimants were barred from have the managerial talent necessary for rapid de- presenting their claims. velopment of the enterprise.

431 Cuba in Transition · ASCE 1999

• Other formerly socialist countries (Eastern Eu- disingenuous in arguing that restitution could be ac- rope, Nicaragua) have implemented restitution complished quickly. Ruling out restitution simply policies. means that any litigation would be limited to chal- Fortunately, most Cuban expatriate groups have rec- lenges concerning the validity and quantification of ognized that restitution of dwellings or residential the value of losses, and the compensation, if any. By property is not advisable. The discussion can then be ruling out restitution, a future government of Cuba restricted to non-residential property. could proceed immediately to privatize all small and Accepting the possibility of restitution in resolving medium-size businesses, and take steps to improve claims also means accepting legal encumbrance on their financial footing prior to a full privatization property. Lawyers representing claimants are being program.

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