A Policy Towards Cuba That Serves U.S. Interests

No. 384 November 2, 2000

A Policy toward Cuba That Serves U.S. Interests by Philip Peters

Executive Summary

More than a decade after the fall of the Berlin those sectors have gained experience with mar- Wall, Fidel Castro remains in charge in Havana, kets and augmented their earnings. despising capitalism, taunting the Cuban- Cuban Americans have increasingly joined American community in Miami, theorizing this discussion, as a younger generation of exiles about the evils of globalization, and keeping up values contact with the island and some first- with every imaginable statistic about Cuba. He generation exiles begin to question the effective- has been in power for 41 years, outlasting U.S. ness of the trade embargo. The Elián González strategies from the Bay of Pigs in the early 1960s crisis fueled doubts about the embargo when the to the tightened economic sanctions of the young boy’s plight captured American attention 1990s. and weakened the pro-embargo hard-line posi- As Castro remains in control, new conditions tion in public and congressional opinion. have led to a reexamination of U.S. policy. Cuba’s The wide array of U.S. sanctions has failed to threat to hemispheric security ended when the promote change in Cuba and has allowed Castro Soviet Union dissolved, Soviet military support to reinforce his arguments that the United States disappeared, and Cuban support for revolution- promotes economic deprivation in Cuba and ary movements in Latin America ended. As seeks to abridge Cuban sovereignty. It is time for American sanctions have increased, Cuban dissi- the United States to turn to economic engage- dents and religious authorities have increasingly ment. Whether or not the embargo is lifted com- voiced their opposition to the embargo and to pletely, a policy that respects the rights of policies that seek to isolate Cuba. Economic Americans to trade with, invest in, and travel to reforms in Cuba are still incipient, but small Cuba would more effectively serve U.S. interests enterprise, foreign investment, incentive-based in post-Soviet Cuba: defending human rights, agriculture, and other changes have had impor- helping the Cuban people, and connecting with tant impacts: they helped the economy survive the generation of Cubans that will govern that its post-Soviet crisis, and Cubans working in country in the early 21st century.

______Philip Peters is vice president of the Lexington Institute, where he publishes field research on the Cuban economy. He served in the State Department during the Reagan and Bush administrations. The virtual Castro, Fidel’s father, died in 1956 at age 80, collapse of Why Has Socialism after a rural life that was surely harder than Survived? that of his son. Latin America’s There are other reasons why Cuban radical left in the When Soviet communism fell, it was socialism survived its post-Soviet crisis and widely predicted that Cuba’s island socialism seems stable today in spite of persistent 1990s limited would soon follow. The CIA prepared for economic hardships. Castro’s political Cuba’s capacity high-level defections. Analysts pored over opposition does not begin to compare with for “inter- Cuba’s trade and financial accounts looking the Solidarity movement in Poland or the for signs the economy would hit rock bot- Charter 77 movement in Czechoslovakia. nationalism.” tom. By 1992 power blackouts were wide- Cuba’s dissident community is small and spread, fuel shortages were making Havana’s not well-known inside Cuba; its ranks of streets almost devoid of vehicular traffic, and current and potential activists are thinned production in all sectors was in a nosedive. regularly by emigration; and it is not sup- Cuban data show a 37 percent drop in gross ported by the kind of large public demon- domestic product per capita between 1989 strations that occurred in Eastern Europe. and 1993. Shiploads of heavy Chinese bicy- Castro’s government, unlike the postwar cles with brand names such as “Forever” and governments in Eastern Europe, was not “Flying Pigeon” (which Cubans call chivos,or imposed by the Soviets; Castro’s revolu- goats) were arriving, soon to become a com- tionary movement replaced a regime that mon mode of transportation. Cubans generally repudiated. This still Cuba’s destiny seemed a matter of simple earns Castro a measure of deference, if not arithmetic: the loss of a Soviet subsidy that genuine political support, even among amounted to one-fourth of Cuba’s national Cubans who oppose his policies. “He’s like income, the loss of Eastern bloc trading part- a grandfather,” a Cuban professional told ners that had accounted for three-fourths of me. “He may be wrong, but he still deserves Cuba’s imports and exports, and the ineffi- respect.” ciencies and perverse incentives of the social- Since the early 1990s Cuba has adjusted ist economic structure seemed sure to add up domestic policies to ease social and political to economic collapse and a change of gov- pressures. The Catholic Church has been ernment. given slightly greater space in which to con- Washington tried to accelerate this process duct its pastoral and charitable work, leading in 1992 and 1996 by twice enacting new laws to to higher attendance at masses and a vastly tighten the embargo. Rep. Dan Burton of expanded capacity to deliver food and social Indiana predicted in 1996 that, “in a few short services throughout Cuba. A series of limited years, there will be freedom, democracy, and market-based reforms—mainly in small enter- human rights in Cuba, and we’ll all go down prise, agriculture, and foreign investment— there and have a good time.”1 has produced a modest recovery that is But the collapse never came. For the first improving living standards and beginning to time, Cuba’s communists, isolated from the erode the state’s dominance in the economy. political contagion that swept Eastern Finally, as will be discussed below, hard- Europe, seemed to benefit from being so far line U.S. policies designed to bring Fidel from their socialist allies and so close to the Castro down have backfired. Those policies United States. Economic hardship produced place him in the world political limelight, migrants but sparked no revolt. The nomen- renew his claim to victimhood, reinforce klatura has remained cohesive. Castro him- many of his favorite nationalist arguments, self, reported by Dan Rather in 1996 to be “in and miss opportunities to influence Cuba’s visibly poor health,” seems as healthy today future by blocking free interaction with as any 74 year old.2It bears noting that Angel American society.

2 made do without live ammunition, and The End of the infantry units began to cultivate crops for Cuban Threat their own consumption. In 1998 a Pentagon report described the capabilities of the Immediately following the fall of the Revolutionary Armed Forces as “residual” Berlin Wall, the United States focused not on and “defensive” and judged that Cuba did Cuba but on Eastern Europe and the disinte- not represent a national security threat.3 grating Soviet Union, where sweeping change The virtual collapse of Latin America’s commanded attention and the stakes were radical left in the 1990s also limited Cuba’s high. At the time, Havana was making no sig- capacity for “internationalism.” Left-of-cen- nificant overtures to Washington or to the ter parties dreamed no longer of building world at large. The Cuban-American voices socialism but of carving out areas of influ- that had long shaped a bipartisan policy con- ence in the region’s new economic policy sensus were urging a steady course. Those consensus, which is built on a smaller state conditions combined to keep in place the and market reforms. El Salvador’s FMLN policies the United States had pursued guerrillas signed a peace treaty, formed a toward Cuba during the Cold War. political party, and won seats in the legisla- The centerpiece of those policies, the ture. Since losing power in a 1990 election, Castro claimed to trade embargo, was instituted by President the leaders of Nicaragua’s Frente Sandinista be carrying on John F. Kennedy in 1962 in response to the have dedicated themselves to venality and the “unfinished mass expropriation of U.S.-owned properties infighting but have not talked of a return to by the revolutionary government. Over time, armed struggle. The guerrillas wreaking revolution” the embargo’s core purpose was to exact a havoc in Colombia have their origins in the begun by José price for Cuba’s “socialist international- Marxist left but are funded by drug traffick- Martí and other ism”—Havana’s alliance with the Soviet ers and articulate no clear ideology. To the Union, its decades of political and military extent that Venezuela’s president Hugo heroes of the support for Marxist revolutionary move- Chávez threatens democracy, it is as a pop- 19th-century ments in the Americas, and its sending ulist caudillo at home, not as a Marxist with troops to Africa. cross-border military ambitions. independence Hence, the embargo was an understand- It may be that Castro still wishes that he movement. able response to Cuba’s threat to hemispher- could find and support serious Marxist revo- ic security. Aimed equally at the Soviet Union lutionaries in the Americas. Yet the change in and Cuba, the embargo was designed to Cuba’s international conduct constitutes a make this Soviet satellite as expensive as pos- sizable benefit for U.S. security interests and sible for Moscow to maintain by denying a fundamental change in the equation that Cuba an economic relationship with the long guided U.S. policy. Today Washington United States. Any hardship inflicted by the still has grievances with Cuba—human rights embargo on the Cuban people was seen as an is at the top of the list4—but the remaining unfortunate but unavoidable result of security issues are mainly possibilities, such American security concerns. as a migration crisis that could overwhelm Security factors began to change in the Florida or the potential use of Cuban territo- early 1990s. Havana’s link to the Soviet mili- ry, by Cubans or others, to advance the drug tary and the flow of military aid came to an trade. This new context calls for a reexamina- end. Cuba’s support for Latin American tion of U.S. policy toward Cuba—not out of guerrilla movements withered away. Cuba’s regret or to prepare Clintonesque apologies military forces, starved for resources, went for past American actions but simply to into decline. Officers and enlisted personnel determine how best to advance American were discharged, those who remained on interests in the altered landscape of post- active duty were trained less frequently and Soviet Cuba.

3 by economic interest, security concerns, and The David-and-Goliath pure paternalism, the Platt Amendment lim- Factor ited Havana’s economic and foreign policy powers and gave Washington an open-ended Any attempt to envision a future for U.S.- “right to intervene” in the newly independent Cuban relations should begin with a glance at nation to maintain a government it deemed the past. On the positive side, Cubans and “adequate for the protection of life, property, Americans have long had a mutual affinity, and individual liberty.”6 and both cultures have been enriched by expo- The purpose here is not to apply 21st- sure to the other. Today, especially through century judgments to 19th-century attitudes popular culture, that affinity seems to be or to a 1901 act of Congress; rather, it is to growing. In contrast, political relations identify a searing historical experience that between the two states have been rocky at best, still resonates in Cuba—the loss of national and a David-and-Goliath pattern of U.S.- independence at the very moment when it Cuban relations over the past century has col- seemed to have been won. ored Cuban perceptions of the United States. Castro’s Appeal The 19th Century From his beginnings as a revolutionary During the 19th century, America was leader, Castro claimed the mantle of indepen- ambivalent toward Cuba. Cuba was seen as a dence fighter both to invoke this historical commercial opportunity and, as long as it grievance and to add historical symbolism to remained in Spain’s hands, a potential threat. his argument that the Batista government had To John Quincy Adams Cuba was “indis- ceded part of Cuba’s sovereignty to foreign pensable to the continuance and integrity of economic interests. In July 1953, when his the Union itself.” In 1854 Secretary of State guerrilla force first attacked government William Marcy said, “The acquisition of forces at the Moncada military barracks in Cuba by the United States would be preemi- eastern Cuba, Castro claimed to be carrying nently advantageous in itself, and of the on the “unfinished revolution” begun by José highest importance as a precautionary mea- Martí and other heroes of the 19th-century sure of security.”5 independence movement. In his victory At century’s end, as Cubans were nearing speech at Santiago de Cuba in January 1959, The United States victory in their costly, decades-long struggle Castro portrayed the revolution as the culmi- to achieve independence from Spain, nation of the 19th-century struggle led by has little to lose Congress supported U.S. intervention in Cubans who had “initiated the war for inde- by experimenting Cuba but was divided between those who pendence that we have completed.”7To this wanted Cuba to become independent and day, he claims to defend Cuba not simply as a with different those who wanted Cuba to become part of communist resisting capitalism but as a approaches the United States. There was ambivalence too patriot determined to keep an overbearing to Cuba. in the Cuban independence movement— neighbor from once again imposing its will some wanted full independence, while oth- on Cuba. ers, including sugar interests, wanted Cuba None of this means that Castro’s appeal to leave the Spanish empire and be annexed to nationalism has made him an overwhelm- by the United States. When Spain was defeat- ingly popular figure. But, to the extent that ed, U.S. troops remained in Cuba, the Stars Castro is perceived as a defender of indepen- and Stripes were raised over Havana’s El dence, he stands to win support even from Morro fortress, and Congress enacted the noncommunists—an intangible but impor- Platt Amendment, a provision of a 1901 mil- tant factor that helps explain Castro’s politi- itary appropriations act that was to be incor- cal longevity. When Cubans, even those who porated into the Cuban constitution. Driven oppose socialism, hear of foreign powers

4 offering “assistance,” their experience with act in solidarity with Cuba, should always The sanctions Spain, the United States, and the Soviets demand both the end of the embargo and a violate the rights gives them reason to be wary. If U.S. actions democratic opening in Cuba.”9 Oswaldo today raise the specter of new Platt amend- Payá, leader of the Christian Liberation of the American ments, the result will be support for Castro Movement, directed a message to Congress people to trade and increased resistance to change. It is no in 1996: “The U.S. economic embargo accident that, among the many epithets against Cuba, in all its expressions, goes and travel. Castro hurls at his opponents in Miami, la against the will and the needs of Cubans, and mafia anexionistais a prominent one. for that reason it should end. . . . We request that you take a first step, above all for justice and also in good faith toward the people of Reevaluating U.S. Policy Cuba by lifting, unconditionally, the embargo against Cuba in food and medicines.”10 The economic and political isolation of Another dissident group, the Democratic Cuba was America’s goal in the early 1960s, Socialist Current, says that the embargo has and, in spite of periodic tinkering, it remains “allowed the Cuban government to present the goal of policy today. With limited excep- itself as the only defender of the interests of a tions, the embargo bans trade, travel, and threatened nation.”11It only stands to reason investment. Contacts between officials are that Cubans would hold this opinion; kept to relatively low levels. The economic Cubans like America, and people who have objective is to block hard currency flows that lived under communism have generally could benefit the Cuban government. The wanted to be connected to, not isolated from, political aim has been to deny Cuba’s govern- the United States. It may be that there are ment any prestige or “political victory” that Cubans who support the embargo but are might accompany improved relations. afraid to voice that opinion, but in hundreds To reexamine this policy framework of my own private conversations across that today, it is useful to bear in mind five factors. island, I have never heard a Cuban express First, any credible U.S. policy toward Cuba support for the embargo. Typically, Cubans must place human rights at the forefront not associate relations with the United States simply to be true to American values but to with economic improvement, and they ask keep faith with Cuban citizens who have when relations might resume. stood up for human rights and who see dis- Third, the policy of denying hard currency sent and free speech not as threats but as vital earnings to the Cuban government carries a attributes of a strong, self-critical society. tradeoff: reduced American influence. It is Second, current American policy finds lit- impossible to isolate Cuba without also erect- tle to no support in Cuba. In 1992 a pastoral ing barriers between Americans and Cubans, letter from Cuba’s Catholic bishops said that cutting off a free flow of people, activities, and the U.S. embargo “directly affects the people ideas that could constitute a powerful source who suffer the consequences in hunger and of American influence in Cuba. illness. If what is intended by this approach is Fourth, the United States has little to lose to destabilize the government by using by experimenting with different approaches hunger and want to pressure civic society to to Cuba. It is now clear that the pressure of revolt, then the strategy is also cruel.”8 In U.S. economic sanctions will not bring down November 1999 a statement issued at the Cuban government—and, if that policy “Encounter of Cuban Non-Government had indeed “worked,” it could have produced Organizations” said: “We do not support nor a social collapse and a migration crisis that do we seek actions from abroad that isolate would have been costly for both nations. Cuba. Whoever wishes to act with moral Unless one views U.S. sanctions merely as a integrity, to respect our sovereignty, and to means of expressing disapproval of the

5 Cuban government, the policy has yielded the debate. Hit by a market slump and recall- very few measurable results, and the oppor- ing pre-1959 agricultural sales to Cuba, farm- tunity cost of change is negligible. Finally, ers pressed the Republican Congress to make the sanctions violate the rights of the good on its pledge to open markets overseas American people to trade and travel—rights and pushed for a relaxation of sanctions that Americans enjoy in parts of the world against Cuba and other nations. that are not considered national security threats and that hardly have enviable human The Changing Politics of Cuban rights records. Americans Openness to change also began to come from an unexpected quarter: the Cuban- Conservatives, Farmers, American community. The generation of Cuban Americans—and the Cubans who fled to Florida in the early years of the revolution expected that Castro’s gov- Elián Effect ernment would not last and that they would When the Cold War ended, those factors return before long to Cuba. Family stories led many conservatives to join liberal activists abound: the grandmother who postponed Increasingly, the and foreign policy analysts in questioning buying an air conditioner in the early 1960s hard-line view the efficacy of the U.S. policy toward Cuba. because “next year we’ll be back in Cuba,” or has met with Richard Nixon called for an end to the the roundtrip PanAm tickets that the family embargo in his last book.12 William F. of Rep. Ileana Ros-Lehtinen (R-Fla.) bought Cuban-American Buckley Jr. followed suit in 1994,13 and in when leaving Cuba in 1959. “Little did we resistance. 1995 a Wall Street Journaleditorial said it know that Castro would outlive the airline,” “somehow seems a failure of imagination” the congresswoman said in 1995.16Although merely to keep the embargo in place.14 there are exceptions, the majority of that gen- As the 1990s wore on, this reexamination eration holds views derived from the bitter gained momentum and spread to congres- experience of being driven into exile. Not sional Republicans. In October 1998 Virginia only do those exiles reject Castro, but they senator John Warner and a group of 24 sena- want no contact with Cuba as long as he tors asked President Clinton to name a bipar- remains in power. tisan commission to reexamine Cuba policy. Younger Cuban Americans think different- Former secretary of state George Shultz ly. In a 1997 Miami Heraldpoll, a majority of endorsed that idea. After a 1998 visit to Cuba, Cuban Americans under age 45 supported Sen. Arlen Specter of Pennsylvania called for “establishing a national dialogue with Cuba,” U.S.-Cuban cooperation on medical research while their elders opposed it.17This genera- and drug enforcement. In December 1999 tional divide is reflected in the periodic con- Rep. Mark Sanford, a conservative South troversies that erupt when Cuban entertainers Carolina Republican, traveled to Cuba and perform in Miami. Those disputes, which returned to introduce legislation to end the serve as proxies for the larger debate about travel ban for all U.S. citizens. Last September, relations with Cuba, are becoming more fre- eight senior Republicans, including Reagan quent as interest in Cuban popular culture national security advisers Frank Carlucci and grows. Opponents of resuming relations with William P. Clark, called for major revisions to Cuba view the artists as extensions of the U.S. Cuba policy, including the sunsetting of Castro government, while supporters, driven the 1996 Helms-Burton law, which tightened by the First Amendment or nostalgia, view the the embargo against Cuba, to give the next artists as independent Cubans whose works president and Congress an “unfettered oppor- carry no official message. tunity” to start a new debate on Cuba.15 Increasingly, the hard-line view has met with American farm interests further spurred Cuban-American resistance. Last fall, a Miami

6 concert by Los Van Van, a popular Cuban dance survival story, the family tug of war, the band, was preceded by weeks of debate and machinations of Miami’s Cuban Americans protest. A poll showed that a majority of Cuban and the Cuban government, and the Justice Americans over age 50 opposed the concert, Department’s handling of the case all com- while those under 50 favored it. Miami mayor bined to create a long, compelling drama. Joe Carollo vilified the concert promoter, call- Suddenly, Cuba had the public’s full atten- ing her “Havana Debbie,”18and city attorneys tion, and the focus was on a bereaved boy and tried to stop the performance. The concert pro- his father, not Fidel Castro. ceeded, and thousands attended—but a mob The saga proved a disaster for the pro- outside assaulted concertgoers with eggs, rocks, embargo Miami exiles. In their hearts they and obscenities. The protesters were criticized were fighting Castro—“This boy cannot by the Miami Herald and Cuban-American become a trophy for Fidel,” one leader groups. said20—but in public opinion they were seen Signs of change are appearing even as fighting the bedrock presumption in among first-generation Cuban Americans. American family law that a fit natural parent Luis Aguilar, a respected historian who was a is entitled to the custody of his child. The tac- university classmate of Fidel Castro and now tics of the Miami relatives and their legal hosts a program on the Voice of America’s team, and Miami demonstrations that Radio Martí, has long supported the embar- included disrespectful displays of the go, but he recently questioned its rationale. American flag, only compounded the dam- Noting that lifting the embargo might “give age in U.S. public opinion, to say nothing of Castro a victory, give him greater economic perceptions in Cuba itself of the exiles. resources, and betray those who fight the dic- The case also accelerated a congressional tatorship on the island,” Aguilar nevertheless movement to reduce economic sanctions. called for an inquiry to determine how This movement began in August 1999 when Cubans independent of the government view the Senate voted 70 to 28 to approve Sen. John the embargo and how it affects the Cuban Ashcroft’s (R-Mo.) amendment to end all people. Aguilar then used an analogy to restrictions on food and medical trade with imply that the embargo has lost its practical Cuba. Last July the House agreed by a 301-116 and moral justification: margin and went on to vote 232 to 186 to end the ban on travel to Cuba. However, the final It is possible to defend the bombing results sent to the president’s desk were weak of a town, if this hard punishment or contrary to the clear expression of those succeeds in weakening or defeating votes: food and medicine sales are to be Cuban domestic an enemy. But if it is demonstrated allowed but private U.S. financing of such that the bombardment, or any such sales is banned and travel restrictions are cod- policy is the main action, is hurting the people but is ified into law by taking away the president’s determinant of far from weakening the military regulatory authority to expand categories of Cuba’s economic power of the enemy, it would be nec- permitted travel. This result can be attributed essary to stop the attack and resort to deft maneuvers by Cuban-American repre- well-being. to other methods.19 sentatives, their strong and determined core of support in the House Republican leadership, The Shift in Public and Congressional and passivity on the part of President Clinton Sentiments and his administration. This result came Such sentiments were surely leading about not by overturning previous votes but toward reevaluations of Cuba policy when by overriding them in a House-Senate confer- they were fueled by the phenomenon of Elián ence committee—a formidable play by embar- González, the shipwrecked boy rescued at sea go proponents, but one that indicates that during Thanksgiving weekend 1999. Elián’s their position is not sustainable over time.

7 The travel ban American citizens’ freedom and carries a cost: restricts contacts Economic Sanctions Have it restricts contacts with American society that Run Their Course would exercise a positive influence on Cuba. with American “If we have a million Americans walking on society that would Is the embargo indeed hurting the Cuban the streets of Havana, you will have something people, as Aguilar suggests? Clearly, Cuban like the Pope’s visit multiplied by ten,” said exercise a positive domestic policy is the main determinant of Manuel David Orrio, an independent journal- influence on Cuba’s economic well-being. Socialist policies, ist in Havana, last year.21 Cuba. in Cuba as elsewhere, stifle initiative, slow an The Clinton administration relaxed travel economy’s ability to adapt, and suppress out- restrictions in 1999, but the entire system of put. The absence of economic relations with federal licensing of travel to Cuba should be the United States is only a secondary factor in ended for all Americans, not just for Cuban explaining the state of Cuba’s economy today. Americans and the few other categories of Still, it is clear that trade, travel, and U.S. citizens permitted to travel with mini- investment from other countries are improv- mal restrictions. American citizens’ contacts ing Cubans’ living standards, helping with Cuban citizens and institutions repre- Cubans learn about capitalism and the inter- sent opportunity, not risk. national economy, and expanding the Cuban private sector that emerged from the eco- Economic Engagement and Limited nomic reforms of 1993 and 1994. An end to Reforms the U.S. embargo would have the same Washington should go beyond those mea- effects but on a greater scale because of our sures to allow greater economic engagement nation’s size and proximity. If, as it appears in Cuba. In addition to lifting the travel ban, from recent actions in Congress, the United sectors such as agriculture, housing, and States begins with limited forms of econom- telecommunications should be freed of all ic engagement, the economic impact and embargo-related restrictions so that full increased American influence in Cuba will trade and investment could take place. nonetheless be substantial. An economic opening of this type would Ending restrictions on food and medicine support the market-based sector that has sales is a minimal first step, even if it has no developed in Cuba’s economy in response to impact on the cost and availability of the food the limited economic reforms in 1993 and and medicine that reach the Cuban popula- 1994. Those reforms are slowly and quietly tion. This part of the embargo has needlessly bringing about an economic transition in alienated the church and the Cuban people, Cuba—a development that serves the U.S. provided endless fodder for the argument that humanitarian interest in the well-being of the United States wishes to promote depriva- the Cuban people, our interest in a Cuba that tion, protected America from no conceivable is capable of functioning in a capitalist danger, and achieved no discernible positive world, and our interest in avoidance of eco- result. Cuba’s dissidents have repeatedly called nomic misery that could provoke a migra- for its removal, and it is wise that Congress has tion crisis. begun to heed their call. Small enterprise was legalized in Cuba in The travel ban is a classic case of a policy 1993 in selected occupations. About 160,000 that had a plausible rationale during the Cold Cubans, or 4 percent of the labor force, have War but cries out for repeal today. There is no created a small service economy of taxi drivers, longer a reason for U.S. policy to focus so messengers, repairmen, family restaurateurs, heavily on restricting the flow of hard curren- seamstresses, tutors, and the like. Those entre- cy to a government that no longer threatens preneurs cope with tax and regulatory bur- U.S. security. Absent a security threat, the trav- dens, which are at times heavy and arbitrary, el ban amounts to a needless restriction on but still have had an important impact. The

8 entrepreneurs brought commerce back to slow and limited. But, after three decades of a streets that had lacked it for three decades and command economy joined at the hip to the have made it possible for tens of thousands of Soviet bloc, even small moves toward capital- Cubans to learn the skills of small enterprise. ism are like rain in a desert—their impact is Those entrepreneurs relish their autonomy rapid and visible. Compensation is being tied to and want more of it. In a survey I conducted output. Workers are learning to operate in mar- with Joseph Scarpaci of Virginia Tech, their ket settings. Young Cubans entering the work- average income was found to be more than force have options other than state employ- triple the average Cuban salary.22 ment. The most dedicated entrepreneurs I met In agriculture, market incentives were are young: a discharged soldier who hawks introduced to increase the supply of food. All pizza, a former secretary who runs a lunch producers—state farms, cooperatives, and pri- stand, and a former government worker who is vate farmers—are now permitted to sell “sur- a neighborhood locksmith and is coping with plus produce” (i.e., food produced in excess of customer relations for the first time. the government-set quotas) on the open mar- The reforms bring considerable material ket. Farmers markets were created to bring benefit to workers and their families. An aver- that surplus to consumers. The result is that, age government worker pays one-fifth of his in addition to the state’s heavily subsidized monthly salary to buy a pound of rice, a By any standards, food distribution, a second legal source of pound of black beans, a pound of pork chops, Cuba’s reforms food supply has been created on the basis of two pounds of tomatoes, three limes, and a have been slow market incentives instead of state planning. head of garlic at a Havana farmers market. A Forty-nine farmers markets operate in Havana cleaning woman in a tourist hotel would pay 8 and limited. alone, and 304 operate throughout Cuba, giv- percent of her monthly earnings for that same ing consumers (especially those who receive market basket, the average entrepreneur 6 per- family remittances or bonus pay in dollars cent, a self-employed produce vendor 4 per- from state enterprises or joint ventures) a cent, and a 33-year-old manager in a Canadian chance to improve their diet and giving farm- joint venture 2 percent.24 ers an opportunity to benefit from the disposable income in Cuba’s growing dollar sector. After three decades of shunning capitalist The Benefits of Economic investments, Cuba made a selective opening Engagement to joint ventures with foreign corporations in 1993. The amount of foreign capital invested Travel to date—about $2 billion—is low by regional How would American engagement sup- standards, but it has helped revive tourism, port this market-based sector? American trav- oil and mineral exploration, telecommunica- el would undoubtedly boost Cuba’s tourism tions, and other sectors. On the basis of inter- sector, now the country’s top foreign exchange views I conducted from western Cuba to the earner. Tourism would thus expand the stock dusty mining town of Moa near the island’s of jobs that an independent journalist in eastern tip, joint-venture workers are among Havana calls Cuba’s “most coveted,” as evi- the best paid in Cuba, in spite of a bureauc- denced by the 20 thousand applicants who, racy that stands between workers and their according to his report, responded to a call for employers and exacts a heavy labor tax.23 tourism industry employees in August 1999.25 Many of those joint-venture workers speak of This industry’s salaries, tips, and bonuses superior “conditions,” referring to modern would benefit thousands of Cuban workers equipment, training, and benefits. and families. It is often said that income from tourism Expanded Options goes almost entirely to the Cuban state, By any standards, Cuba’s reforms have been because tourists go to enclave resorts and see

9 nothing of Cuban society. Yet, observations undefined legal area before the government in cities across Cuba show that large num- made them legal in 1993. Those restaurateurs bers of visitors spend their time not in isolat- and other small entrepreneurs find ways to ed resorts but in places where they can obtain supplies that they cannot find or can- explore Cuban history and culture and mix not afford through strictly legal channels. It is with Cuban citizens. Those travelers leave an open secret that, for every entrepreneur tips, purchase goods from small-business who is properly licensed, one or two operate entrepreneurs, and patronize private taxis without a license; many of those provide the and restaurants. Considering that the aver- transportation services that enable farmers to age Cuban monthly salary is about $11, rela- deliver produce to markets and families to tively small purchases by foreign travelers can move from one apartment to another. Foreign significantly increase the earnings of an enterprises that operate joint ventures find entrepreneur or make the difference between dozens of ways to increase their employees’ profit and loss. compensation by providing extra cash, food, Moreover, although some tourists might or goods—those practices are not always legal, remain in enclaves, workers’ earnings do not. but they are widely known, and, as a Cuban I interviewed a musician who works at the analyst told me, without them Cuban employ- Superclubs beach resort (a Cuban-Jamaican ees “would not work.” venture) and earns a $40 monthly pay sup- Such are the natural results of a hybrid plement, which brings his total earnings to economy, in which elements of markets and four times the average Cuban salary. He capitalism are introduced into the frame- spends part of his pay in the local economy work of a state-dominated socialist economy. near Varadero and sends part to his daughter This inconsistent policy setting makes Cuba across the island in Santiago.26 a difficult place in which to do business and Tourist spending also reaches parts of the provides a less-than-ideal climate for foreign economy that have no link to tourism. When investment, but over the past decade the jux- a hotel worker earns $25 in tips, a private taposition of the two systems has pushed restaurant earns a $50 profit from foreign Cuba toward a more market-based economy. customers, and an artist sells a $100 oil That situation is not to suggest that painting, those funds become disposable American companies should enter Cuba to income that buys the goods and services of break the law or that Cuban laws should not self-employed plumbers, tutors, repairmen, be improved to permit market mechanisms barbers, food vendors, and seamstresses. to function more freely and more extensively. Large numbers of Those earnings are in turn spent at farmers It is clear that the law only partially explains markets, increasing the income of market what is occurring in the Cuban economy and visitors spend vendors and generating demand that permits would provide an imperfect means of gaug- their time in greater numbers of farmers to profit from ing the influence that an influx of new busi- places where they open-market sales. ness activity would have. American engagement would expand Cuba’s incipient private can explore How Cubans Live, in Spite of the Law sector and add to its growth. Cuban history Cuba’s laws restrict enterprise in myriad ways, and it is common to cite those laws to and culture and argue against greater engagement. That is a More Than an Economic mix with Cuban mistake. The past decade of economic Opening Is Needed citizens. change in Cuba has been shaped not only by the law but also by what occurs every day, out U.S. policy should also avoid sending sig- in the open, in spite of the law. nals that America hopes to use economic For example, paladares,Cuba’s famous pri- deprivation to promote political change and vate family restaurants, existed for years in an seeks to encroach on decisions that should

10 be made by Cubans. The embargo has long power plant before deciding on a course of Foreign enter- banned U.S. trade and investment, but the action, the Helms-Burton law virtually rejects prises that oper- 1992 Cuban Democracy Act created a barrier the idea that Cuba be permitted to generate to other nations’ trade with Cuba by provid- electrical power through nuclear energy. The ate joint ventures ing that any ship that calls on a Cuban port— law states, “In view of the threat to [U.S.] find dozens of even if it delivers humanitarian cargo only—is national security posed by the operation of barred from U.S. ports for six months. A pro- any nuclear facility [in Cuba] . . . the comple- ways to increase vision of the 1996 Helms-Burton law urges tion and operation of any nuclear power their employees’ the president to “propose and seek” in the facility . . . will be considered an act of aggres- compensation. UN Security Council a “mandatory interna- sion” against the United States. If the law’s tional embargo against the totalitarian assumption is correct, and Cubans are Cuban government.”27 Those measures, indeed incapable of the safe operation of any clearly targeted at the Cuban economy and nuclear reactor, then the law’s taunting for- intended to affect ordinary Cubans, make mulation seems almost designed to provoke U.S. assurances that sanctions are aimed only Cuba to complete a reactor for reasons of at the government ring hollow. pride—bringing about the very danger the law sought to avoid. The Helms-Burton Vision The Helms-Burton law, also known as Expropriated Property “LIBERTAD,” calls for a transition to democ- Where Helms-Burton broke the most sig- racy. The law lists the traits of a democratic nificant new ground was in its use of proper- transition—free organization of new political ty claims to deter new foreign investment in parties, free and fair elections, freed political Cuba. Helms-Burton declares that foreign prisoners, free press, and independent trade companies that invest in expropriated prop- unions—at the end of which Washington erties in Cuba are guilty of “trafficking” in would end sanctions and provide aid. those properties. Executives of “trafficking” However, the law provides that, even if all the companies may be barred from entering the conditions were satisfied but the election United States, and Cuban Americans whose were to result in a government that included properties had been confiscated gain a right Fidel Castro or his brother Raúl, the elected of action in U.S. courts to assert their claims. government would not be considered “demo- Those measures have drawn a sharp cratically elected,” and sanctions would response, including challenges in the World remain in place. This allows the Cuban gov- Trade Organization from America’s principal ernment to argue that the United States is trading partners who see the measures as concerned not with a democratic process but extraterritorial applications of U.S. law. The with telling Cubans whom they may and may legal novelty of the measures has sparked not elect. debate among international law scholars and With Soviet support, a nuclear power deserves attention from a domestic perspec- plant was under construction in Juragua, tive as well. The measures burden U.S. courts Cuba, but before the reactors and nuclear with cases of property confiscated from for- materials were installed, construction was eign nationals by a foreign government four suspended when Soviet funding ended in decades ago; the only connection to the 1992. There have been reports of construc- United States is that some who lost property tion defects and conflicting claims about the have since become U.S. residents or citizens. safety of the plant’s design. Should construc- Legal considerations aside, the Helms- tion resume, other safety issues might arise Burton property initiative is fraught with out of concerns that the project has been political risk. Any legislation affecting prop- mothballed for nearly a decade. Instead of erty matters can easily raise fears among assessing the risks posed by the nuclear Cubans that political change will make them

11 lose what little they possess. What is known four decades, safe but never comfortable in for sure is that Castro saw the Helms-Burton Miami exile. property provisions as a political plus. The Proponents of U.S. sanctions want to text of the law was widely distributed and dis- deny Castro the political victory they think cussed in Cuban media and educational he would win if sanctions were lifted. But to institutions. pursue that objective is to defeat it. To place The settlement of property claims Castro at the center of American decisions is deserves more serious attention than the to elevate him, giving him a steady claim on Helms-Burton law gives it.28 Cuban- the world’s attention when—bereft of youth, American claims should be left for future set- resources, allies, and historical enemies—he tlement in Cuban courts. The U.S. govern- would otherwise have very little. ment should focus on U.S. claims and begin American strategic interests are not in talks to seek compensation for American play in Cuba, and regardless of Cuba’s future properties expropriated in the early 1960s. If it is likely that America would be unscathed Cuba cooperates, this could result in a partial by a decade or more of low-level tension and payment for all the 5,911 certified U.S. competition with an aging Castro. But a pas- claimants and would be similar to the settle- sive posture with regard to Cuba’s future ill To place Castro at ments reached between the United States suits a nation that has long strived to help the center of and other communist countries. A more cre- build a democratic hemisphere. American deci- ative approach would be to give claimants The generation that won Cuba’s revolu- permission to do business in Cuba. tion, takes pride in its frayed social welfare sions is to elevate Conceivably, some claimants might agree on system, and managed to survive the cata- him, giving him a joint ventures that would satisfy claims not strophic loss of Soviet support will soon pass. by drawing down Cuba’s capital stock but Cuba’s future is now being built by a genera- steady claim on through revenues of the new joint ventures. tion with a different set of expectations and the world’s This step could be taken immediately, even emotional investments. These Cubans didn’t attention. as the larger debate about U.S. sanctions conduct the revolution but were fated to proceeds. grow up in it. They have seen their material well-being drop precipitously in the past decade and know that new doses of socialism Looking to Cuba’s Future will not restore it. Some want to see radical changes in their country, even while preserv- The most notable feature of post–Cold ing the government-run health and educa- War Cuba policy is its sharp divergence from tion systems. Others seem turned off to all the approach the United States has taken politics. To this generation the capitalist toward other communist countries in the world is more inviting than threatening. last quarter century. Except where security A new policy that relies less on isolation issues were in play—or, in Vietnam’s case, and more on the magnetism of American the legacy of war—there has been little hesi- society would play to America’s strength, and tation to allow flows of people, ideas, and it would serve both nations’ interests by commerce to advance American values and building bridges to Cuba’s next generation. It influence. would also end a historical error in the mak- Cuba has been the exception because ing: the sad fact that, one century after Cuba Fidel Castro has been exceptional—in his threw off the Spanish empire and one decade symbolism, his relentless ideological com- after the Soviet Union vanished, the United mitment, his leveraging of Cuban power to States is keeping the Cuban people at arm’s oppose the United States and to fight small length and delaying their move, in a post- nations’ democratic aspirations, and his hold communist world, toward a future that the on his countrymen who have kept watch for tide of history can only make more free.

12 www.lexingtoninstitute.org.

Notes 16. Quoted in Craig Karmin, “Fiery Cuban- 1. Quoted in “Clinton OKs Trade Sanctions As American Favors Strong Coffee, Weak Castro,” Cuba Condemns Fascist Law,” Raleigh News and The Hill, November 1, 1995, p. 39. Observer, March 13, 1996, p. A2. 17. Poll results reported in Cynthia Corzo and 2. “Castro Looks Frail and in Poor Health,” Fabiola Santiago, “Optimism for Cuba’s Future Reuters, June 27, 1996. Fades for Exiles,” Miami Herald, June 29, 1997, p. 16A. 3. Defense Intelligence Agency, “The Cuban Threat to U.S. National Security,” 1998, 18. Brett Sokol, “Another Round of Los Van Van www.defenselink.mil/cubarpt.htm. Insanity,” Miami New Times, October 7–13, 1999.

4. For a report on human rights abuses in Cuba, see 19. Luis Aguilar León, “Reevaluando el Embargo,” Human Rights Watch,Cuba’s Repressive Machinery: El Nuevo Herald, October 29, 1999. Human Rights Forty Years after the Revolution (New York: Human Rights Watch, 1999). 20. Jorge Mas Santos, Cuban American National Foundation, quoted in Carl Hiaasen, “Pity 5. Louis A. Pérez Jr., The War of 1898 (Chapel Hill: Young Elián, the Trophy Child,” Miami Herald, University of North Carolina Press, 1998), from January 9, 2000. which these quotes are drawn, contains in its first two chapters a fine, brief rendition of this phase 21. Quoted in Laurie Goering and Rick Pearson, of Cuba’s history. “Ryan Has Harsh Words for Castro,” Chicago Tribune, October 26, 1999. 6. Ibid., p. 33. 22. Philip Peters and Joseph L. Scarpaci, “Cuba’s 7. “Moncada Manifesto,” on display in Havana’s New Entrepreneurs: Five Years of Small Scale Museum of the Revolution, Santiago de Cuba, Capitalism,” Alexis de Tocqueville Institution, www.lanic.utexas.edu. August 1998.

8. Statement of Cuba’s Catholic bishops, October 23. Philip Peters, “A Different Kind of Workplace: 2, 1992. Foreign Investment in Cuba,” Alexis de Tocqueville Institution, March 1999. 9. “Fragmentos del Documento Firmado durante el Encuentro de Organizaciones No Gubernamentales 24. Based on salary and food price data gathered Cubanas,” El Nuevo Herald, November 15, 1999. regularly in Cuba by the author.

10. Oswaldo Payá, “Message to the Government 25. Vicente Escobal, “Veinte Mil Personas and Congress of the United States of America,” Prefieren Plazas en el Turismo,” CubaNet, August Havana, Cuba, November 23, 1996. 10, 1999, www.cubanet.org.

11. Statement, Democratic Socialist Current, 26. See Peters. Associated Press, April 13, 1994. 27. Title I, § 101, para. 2. 12. Richard Nixon, Beyond Peace (New York: Random House, 1994). 28. Helms-Burton is designed to use property claims and related sanctions to discourage new 13. William F. Buckley Jr., “It’s a Matter of Pride,” foreign investment in Cuba. It did, however, result Miami Herald, September 4, 1994. in partial payment on one U.S. claim. When the Italian phone company STET invested in Cuba’s 14. “Cuba’s Future,” Editorial, Wall Street Journal, national carrier ETECSA, it relieved itself of lia- May 16, 1995, p. A18. bility under Helms-Burton by making a payment to ITT, which holds a claim on the ETECSA pre- 15. John Block et al., Statement released by the cursor. See “ITT in Deal for Property Cuba Seized Lexington Institute, September 27, 2000, in ’61,” New York Times,July 24, 1997.

13 Published by the Cato Institute, Policy Analysis is a regular series evaluating government policies and offering proposals for reform. Nothing in Policy Analysis should be construed as necessarily reflecting the views of the Cato Institute or as an attempt to aid or hinder the passage of any bill before congress. Contact the Cato Institute for reprint permission. Additional copies of Policy Analysis are $6.00 each ($3.00 each for five or more). To order, or for a complete listing of available studies, write the Cato Institute, 1000 Massachusetts Ave., N.W., Washington, D.C. 20001, call toll free 1-800-767-1241 (noon - 9 p.m. eastern time), fax (202) 842-3490, or visit our website at www.cato.org.