Crony Capitalism and Cuba's Marxist Generals

Thursday, February 5, 2015
By former U.S. Senator Jim Demint (R-SC) in The Miami Herald:

Crony capitalism and Marxist generals

As Congress holds hearings on President Obama’s change in Cuba policy, we are seeing the question of who in Havana will benefit from U.S. trade come up repeatedly. This focus is right on point. Unless Congress acts to stop it, the normalization of ties with Cuba would soon see crony capitalists here striking deals with Marxist generals there — all financed by the U.S. taxpayer.

Cubans will pay, too — by seeing their nightmare prolonged for many years. Some of the generals involved are members of the Castro family, which means that U.S. consumers and taxpayers could end up helping the regime transition into a North Korean-style communist dynasty just 90 miles from our shores.

Americans who use Cuban golf courses will meanwhile be dealing with a state entity called CubaGolf. It belongs to the Palmares holding company, which in turn is owned by the Interior Ministry. The ministry runs the repressive state security apparatus that keeps millions of Cubans in fear.

Lobbyists, of course, will make a killing. Large corporations like Cargill are poised to spend millions of dollars lobbying Congress to drop the embargo. One thing this will accomplish is to force U.S. taxpayers to subsidize their exports via the Export-Import Bank, the federal agency that “facilitates” U.S. exports by doling out loans and loan guarantees.

The mega-corporations have joined with a host of trade associations such as the American Farm Bureau Federation and the National Corn Growers Association to form a mega-lobbyist group named the U.S. Agriculture Coalition for Cuba.

But is Cuba a fit business partner for the American taxpayer?

A half century of communism has bankrupted Cuba. While members of the Castros’ military oligarchy are personally rich, the state has no money. To exploit American trading opportunities, the regime needs to get financing in advance, use the money to make purchases from U.S. companies, and then resell the products to repay the bank. If the generals renege on paying, the bank will be left holding the bag. In the case of Ex-Im, that would be the taxpayer.

The Castros are well-known deadbeat borrowers who routinely get out of paying what they owe. Put aside the $7 billion in U.S. assets they expropriated in the 1960s — still the largest theft of U.S. property in history. Let’s look at more recent history.

Just last year, Russia had to write off 90 percent of its $32 billion debt to Cuba. Within the last five years, Cuba has also defaulted on billions owed to Mexico, China and Japan. Before that it defaulted to practically all of Western Europe. Now this lending disaster may be headed our way, courtesy of Barack Obama.

The decision to normalize relations with this abnormal regime is purely ideological. The Castros and their hand-picked elite have not changed their spots.

That’s made clear even in November’s Portfolio of Opportunities for Foreign Investment — the Cuban government’s appeal for $8 billion in international investment — that was so ballyhooed by the regime’s overseas cheerleaders. The portfolio makes clear that state enterprises will not be privatized and there will be no deals with Cuba’s very small “self-employed” sector. Translation: This is still a classic Marxist-Leninist regime intent on owning the means of production.

Public companies that must abide by our laws would have to explain to their shareholders and boards — and to a future administration — why they are doing business with the likes of Generals Alejandro Castro and Luis Alberto Rodríguez, Raúl Castro’s son and son-in-law respectively. They control GAESA, the Ministry of Defense holding company that owns most major sectors of the economy.

They will have to explain, too, why its Cuban workers will receive only 10 percent of their wages. Answer: In Cuba’s system, the generals and their children — the “juniors” — keep the rest. They will also have to explain why they are complicit in repressive tactics such as installing surveillance cameras in tourist destinations and selling the generals the IT infrastructure they will need to raise firewalls and spy on Cubans.

We don’t need to soil our hands this way, as Sen. Marco Rubio has made clear in the congressional hearings that began this week. President Obama may delight in calling Raúl Castro “Mr. President,” a deferential practice he has recently adopted. But in reality, Raúl remains a bloody military dictator running a corrupt, failed economy. We should want nothing to do with him or it.

Demint is president of The Heritage Foundation.