Lifting Sanctions Towards Cuba Would Be a Bad Investment

Thursday, April 28, 2016
By Mauricio Claver-Carone in SAGE Business Research:

Lifting Sanctions Towards Cuba Would Be a Bad Investment

In order to have an honest debate about trade and tourism sanctions on Cuba, it’s important to understand how that totalitarian regime conducts business.

First, the very concept of trade and investment in Cuba is grounded in a misconception about how "business" takes place on the island. In most of the world, trade and investment means dealing with privately-owned or operated corporations. That's not the case in Cuba. In Cuba, foreign trade and investment is the exclusive domain of the state, i.e. the Castros. There are no "exceptions."

Here's a fact: In the last five decades, every single "foreign trade" transaction with Cuba has been with a state entity. The state's exclusivity regarding trade and investment was enshrined in Article 18 of Castro's 1976 Constitution.

The state's exclusivity even extends to "humanitarian" transactions. Since passage of the 2000 Trade Sanctions Reform and Export Enhancement Act ("TSREEA"), nearly $5 billion in U.S. agricultural and medical products have been sold to Cuba. It is an unpleasant fact, however, that all those sales by more than 250 privately-owned U.S. companies were made to only one Cuban buyer, the Castro regime.

The dominant force in Cuba's economy is the military's holding company, called GAESA. Founded by Raul Castro in the 1990s, GAESA controls a wide array of companies, ranging from the very profitable Gaviota S.A., which runs the island's tourist hotels, restaurants, car rentals and nightclubs, to TRD Caribe S.A., which runs all retail operations. In plain words: GAESA controls virtually every economic transaction in Cuba. It is run by Raul's son-in-law, General Luis Alberto Rodríguez Lopez- Callejas.

Foreign tourists have made GAESA the largest hotel company in Latin America. It controls more hotel rooms than The Walt Disney Company. Thus, every tourist that stays at Cuba's Hotel Nacional, has a daiquiri at El Floridita and catches a show at The Tropicana, shares one thing in common -- contributing to the Cuban military’s bottom line.

This is the same Cuban military that took possession of a stolen U.S. Hellfire missile for nearly two-years; has been caught twice internationally-smuggling heavy weaponry, including the worst sanctions violations ever to North Korea; that oversees the most egregious abuses of human rights in the Western Hemisphere; that allows Russian military intelligence ships to dock in its ports; that shares intelligence with the world's most dangerous anti-American regimes; and of which three senior Cuban military officers remain indicted in the United States for the murder of four Floridians.

Not a good investment for America’s interests.