Case and Point on Cuba's Labor Violations

Thursday, October 3, 2013
An excerpt from Professor Archibald Ritter's analysis of Castro's new Mariel "Export Processing Zone" (EPZ) in Cuba Standard:

[T]he major earner of foreign exchange for the government will be the hidden taxation involved in the hiring of labor. EPZ enterprises, like those in joint ventures will have to pay hard currency to a state company to cover the wages and salaries of Cuban workers at a rate around US$1:1 peso (CUP, non-convertible peso), while the relevant rate for Cuban citizens is 1:26. The government can then sell the hard currency (CUC, convertible pesos) at the rate of 1 CUC : 26CUP, meaning a profit on each CUC of 25 CUP. This profit to the government is in effect a 96-percent tax rate. This counterbalances to some extent the generosity of the rest of the tax regime for the EPZ firms.

In the words of Reuters correspondent Marc Frank: “However, one of the main complaints of foreign investors in Cuba has not changed: that they must hire and fire through a state-run labor company which pays employees in near worthless pesos while investors pay the company in hard currency. Investors complain they have little control over their labor force and must find ways to stimulate their workers, who often receive the equivalent of around $20 a month for services that the labor company charges up to 20 times more for.”

CHC EDITOR'S NOTE: This in clear violation of the International Labor Organization's Protection of Wages Convention (No. 95), which strictly prohibits the use of worthless legal tender, restrictions on a worker's freedom to dispose of wages and deductions made by any intermediary.