WaPo Editorial: Cubans Don’t Benefit From American Business — Castro Does

Saturday, September 17, 2016
From The Washington Post's Editorial Board:

Cubans don’t benefit from American business — Castro does

AS YOU ponder the impact on political and economic freedom in Cuba of the Obama administration’s diplomatic opening to that Communist-ruled country, keep this figure in mind: $50. That’s how much every American visitor has to pay the Castro regime for a tourist visa each time he or she travels to the island, as the administration is aggressively encouraging people to do. Last year, 160,000 people visited Cuba from the United States, which translates into $8 million, not chump change for the financially troubled regime. Those numbers are on course to double in 2016.

We make this point to place the latest celebratory headlines about the renewal of scheduled air travel from the United States to Cuba in a broader perspective. If you think the president’s policy will “empower” the fledgling Cuban private sector, as opposed to the overbearing state, think again. Easy money from expensive visas is a relatively minor example of the regime’s so-far successful efforts to reap direct benefit from the new relationship with the United States. Even more important is the fact that the Cuban armed forces own the country’s dominant tourism companies, and those firms are expanding their role in anticipation of an American influx.

As the Associated Press recently reported, the Cuban military has taken over a previously autonomous office that controlled Old Havana, a major tourist attraction, as well as a bank responsible for most of Cuba’s international financial transactions. Gaviota, a military-owned tourism company, is in the midst of what the AP calls “a hotel building spree,” which Cuba needs because its existing hotels lack sufficient capacity, by far, to accommodate hundreds of thousands of additional visitors from the United States. To date, Cuban private operators had been filling the gap by renting rooms in their homes. The military’s activities show that the regime has no intention of sharing the market with these cuentapropistas, as Cuban small businesses are known in Spanish. The Obama administration claims that support for these entrepreneurs is a major aim of its policy; it sees them as a potential source of middle-class pressure in favor of democracy. Meanwhile, it authorizes Starwood Hotels, a giant U.S. firm, to join forces with the Cuban state in operating government-run hotels.

Stripped of the high-minded rhetoric, the fundamental tendency of the new dispensation in U.S.-Cuban relations is toward collaboration between U.S. corporations and military gatekeepers on the island, in which profits take priority over the basic human rights of the Cuban people. If this sounds familiar, it’s because it’s very much like the arrangement that once existed between Washington and the kleptocratic Batista regime Fidel Castro overthrew in 1959.

Rubio Calls for Suspension of Cuba Flights Pursuant to Obama's Lie About Federal Air Marshals

Friday, September 16, 2016
On Senate Floor, Rubio Calls for Suspension of Cuba Flights after Obama Administration Lie about Federal Air Marshals is Exposed

U.S. Senator Marco Rubio (R-FL) took to the Senate floor today to blast the Obama Administration after the Transportation Security Administration’s (TSA) admission that, contrary to earlier claims, U.S. federal air marshals are not present on commercial flights to and from Cuba because the Obama Administration and Castro regime have actually not finalized an agreement the U.S. announced last month.

In his remarks, Rubio highlighted the potential for terrorists to hijack these flights to attack the United States, and he called for a suspension of these flights at least until adequate security measures are in place.

Last week, Rubio introduced the Cuban Airport Security Act, a bipartisan bill that would strengthen American security at airports in Cuba and on commercial flights between the two countries, and pause all commercial flights until a proper security assessment has been completed

Below is a full transcript of Rubio’s remarks:

"Back in May, the Assistant Secretary for Policy, at the Department of Homeland Security told the House Homeland Security Committee that new scheduled air service from the United States to Cuba and vice versa was not going to start until air marshals were allowed to be on board those flights. In August, the TSA provided the U.S.-Cuba Trade and Economic Council as well as reporters a statement, and they said that the United States and Cuba had entered into an aviation security agreement that sets forth the legal framework for the deployment of air marshals on board certain flights to and from Cuba.

Well, today at a hearing in the house, a top TSA official divulged for the first time that Cuba has yet to agree to allow air marshals aboard scheduled airline flights between the two countries, meaning there have been no air marshals on board thus far despite the fact that the administration said there would be.

So basically what we have here is an outright lie.

Last month, to great fanfare the administration announced that the agreement had been reached that there was going to be air marshals on the flights to and from Cuba, on the commercial flights. And today, they confirmed that they weren't telling the truth. There was no agreement finalized. On most if not all of these flights there are no air marshals, and this is endangering U.S. passengers. 

This is a startling admission from the administration; it's a startling admission by the TSA, and to the American people that they lied. They told us these flights would not begin until they had reached an agreement with the Cuban government to have air marshals and other security measures in place. And today only because they were asked -- only because they were asked -- did they admit that this is not happening.

It’s incumbent upon the TSA to lock down a federal air marshal agreement before these flights started taking off to begin with. That’s what they told us they were going to do. That’s what they said or implied was happening. And unless that question had been specifically asked today at that hearing, we would not have known about this.

And my friends, this is the latest example of an administration that is so intent on burnishing its legacy, on getting credit for this opening that they're willing to throw everything else out the window. They already are ignoring the human rights violations. We had one of the leading dissidents in Cuba on the verge of death because of a hunger strike and this administration hasn’t said a word about it. They don’t do anything about it. They don’t highlight that case.

Instead they're celebrating and popping corks of champagne on these new flights that they told us we’re going to be safe because they were going to have air marshals and today because they were specifically asked we find out it's not true. This is outrageous.

The TSA, under the Obama administration, has lied to us about the status of the security.

Last week I filed a bill that would stop all flights to Cuba, commercial flights, until this agreement was in place, until adequate security is in place. And now we know for a fact that adequate security is not in place. These flights should be suspended until such time as this agreement is signed. And I want you to think about what this means if it doesn’t happen. What it means is that these are now flights that are vulnerable. There’s a reason why we have air marshals on flights, because of the experience of 9/11 that we just commemorated the anniversary of on Sunday.

And you now have flights 90 miles from our shores that could theoretically be commandeered and you could have a repeat of that, particularly South Florida which is just minutes away from the airport in Havana. This is just unacceptable.

Forget how you feel about Cuba policy for a moment. They have lied to the American people and congress and they were only caught today because they were specifically asked about the status of this. This puts us in incredible danger. And by the way it is important for everyone to remember years ago there were no metal detectors even at airports. You know why they started putting metal detectors at airports 35, 30 years ago? Because of hijackings to Cuba. There's a reason.

And so now here you have this situation where theoretically some terrorist can travel from any country in the world into Cuba and then try to come into the United States, commandeer an aircraft and I don't need to tell you what can happen next. This is an incredibly dangerous situation.

I think we need to unite across the aisle and basically say no matter how you feel about Cuba policy, we all agree that travel to Cuba should be safe, no less safe than travel to the Bahamas, no less safe than travel to the Dominican Republic, no less safe than travel to Mexico. Why does the Cuban government and why are we allowing them to conduct flights without the same conditions that we have on allies of the United States? Cuba is not an ally of the United States. The Cuban government hosts intelligence facilities for both the Chinese and Russians. The Cuban government harbors fugitives of the American justice. The Cuban government helped North Korea evade U.N. sanctions on missile technology and weapons. And yet we have allies in this hemisphere who have to comply with all of this, but not Cuba? This is absurd.

The TSA has lied. It leaves this nation vulnerable and those commercial flights need to be immediately suspended until such time as these security measures are put in place. And I hope that – this is something that just broke hours ago – and I hope that we can come together here and actually deal with it irrespective of how you may feel about the issue of Cuba."

Click below (or here) to watch a video of Rubio's floor remarks:

Obama Administration Lied About Federal Air Marshals on Cuba Flights

Click here and here to understand why these commercial flights to Cuba pose a security risk and why the Obama Administration's lie about the presence of federal air marshals adds gravity to these concerns.

From USA Today:

TSA admits scheduled Cuba flights lack air marshals

The Transportation Security Administration acknowledged Wednesday that officials misspoke when they said scheduled flights to Cuba, which resumed for the first time in 50 years, would have air marshals aboard who travel armed and undercover to thwart terrorists.

JetBlue made the first scheduled flight to Cuba since 1961 on Aug. 31, as part of President Obama's initiative to restore relations with the Communist country 90 miles from Florida. American Airlines has also begun scheduled flights that could total 110 per day to 10 cities on the island.

But while charter flights have visited the island for decades, lawmakers have repeatedly raised security concerns about the regularly scheduled flights.

TSA officials said scheduled flights wouldn’t begin unless air marshals could be on board. Seth Stodder, assistant secretary of Homeland Security for border and trade policy, told the Homeland Security subcommittee on transportation in May that TSA was negotiating an air-marshal agreement, but that flights wouldn't begin without an agreement.

“The initial arrangement will apply only to public charter flights,” Stodder said. “Once scheduled flights begin later this year, a new (air marshal) arrangement will be necessary to cover those flights.”

TSA released a statement Aug. 9 stating that the U.S. and Cuba entered an agreement for air marshals “on board certain flights to and from Cuba.”

But Rep. John Katko, R-N.Y., who heads the subcommittee, said Wednesday that the agreement covered only charter flights and not the new scheduled flights.

“You misled the American public when you issued that press release saying it was going to be on select commercial flights,” Katko told Department of Homeland Security officials.

“Not having air marshals on flights is not a good idea," Katko said, arguing for "more collaboration instead of obfuscation" from TSA.

Huban Gowadia, deputy administrator at TSA, told Katko that talks are continuing to place air marshals on Cuba flights, but haven’t been finalized yet. A draft agreement approved by the State Department has been sent to Cuba.

“We will continue to work to get that memorandum in place,” Gowadia said. “We will continue to attempt get as many (air marshals) on as many flights from as many last points of departure as possible.”

Gowadia said Stodder was wrong.

“He did misspeak,” she said.

New Cuba Flights Lead American Airlines to Discriminate Against Cuban-Americans

By Fabiola Santiago in The Miami Herald:

Cuba won’t allow Cuban-Americans flight crews to stay overnight, so an airline grounded them

When American Airlines launched the first of an unprecedented 12 daily commercial flights from Miami to six cities in Cuba, the company rolled out the Cuban-American brass to mark the milestone at Miami International Airport.

At a pre-flight ceremony, the executives evoked their emotional connection to the business at hand — winning the bid to fly the largest number of commercial flights to Cuba.

“Today is historic not only for American Airlines, but also for Miami, the heart and soul of the Cuban-American community in the United States,” said Ralph Lopez, American vice president of Miami hub operations, before the Sept. 7 departure to the city of Cienfuegos on the southern coast of the island.

Fernand Fernandez, American’s vice president of global marketing, spoke of the “pride and excitement” he felt.

“This flight is not only important to our airline, to our 12,000 employees here in Miami — many of them Cuban-American — but also… this is of huge importance for Miami-Dade County, home to so many Cuban Americans like my parents."

Behind the scenes, however, another story was playing out.

When doing business with Cuba, all those American Airlines employees of Cuban origin Fernandez heralded in his speech don’t have the same rights as their U.S.-born counterparts, or their Latin-American counterparts, or their counterparts born anywhere else in the world for that matter.

The first “historic” flight to Varadero brought home the point.

A Cuban-born crew member arrived without a Cuban passport — required for anyone born there who left the country after 1970, even as babies — and a brouhaha ensued with Cuban authorities on the ground. The crew member was not allowed entry, much less the required overnight rest stop after a crew member flies 12 hours.

Questions were posed by AA to authorities: What happens in the future if there’s a flight with a mechanical delay and the crew that includes a Cuban American is grounded overnight? What will happen, routinely, with the two Varadero flights that require the overnight stay of the crew?

The answer: Only in the most “extenuating circumstances” would Cuba allow an exception to its separate set of archaic travel requirements for Cuban Americans. No overnights for Cuban-American crew members. Period.

Now the Dallas-based airline, which makes its schedules far from Cuban politics in Texas, had to identify Cuban-American employees and take them off Cuba flights that required an overnight stay.

“Please remember that those who are Cuban born should be removed with pay from Cuba flights until we can verify what requirements the Cuban government has for these crewmembers,” says an AA memo to managers that a source shared with me.

And I have to ask: Can you imagine in your company a staffing memo that says, “Please remember that those who are Israeli born should be removed?”

Or, please remember that those who are (fill in the blank any other place of origin) should be removed?

The Cuban government’s long arm is cherry-picking the assignments of employees of an American company. How is that for a historic development?

Sounds as outrageous as when Miami-based Carnival Corp. denied bookings to Cuban Americans on its cruises to the island because of an archaic Cuban maritime law that said Cuban Americans could not arrive by sea.

Now with commercial flights, an American company once again finds itself in the position of having to discriminate against a class of people — their employees of Cuban origin.

“No crew member born in Cuba is allowed to enter Cuba unless they meet immigration requirements,” American spokeswoman Alexis Aran Coello confirmed. “That’s a Cuban government demand. That’s not something we’re saying. We are abiding by the laws of the Cuban government.”

Cuba’s discriminatory rules also apply, of course, to the flight crews of JetBlue and Spirit, which also recently began commercial flights, and to the others that will soon follow them.

This is the price of doing business with the still-repressive and antiquated Cuban government: Giving up American ethics for a piece of the action.

Complying with the Cuban government’s discriminatory policies against Cuban Americans — spelled out in the U.S. Embassy’s website as a warning to travelers — is a choice. Airlines need to negotiate harder. Enough of an uproar from the traveling public convinced Cuba to change its maritime rule and allow Cuban Americans to travel there on cruise ships.

On the American side, strides have been made in the last 18 months since President Barack Obama announced an end to hostilities between the two countries. But the Cuban government remains stuck in anti-exile, anti-American bellicose mode despite documented evidence that a growing number of Cuban Americans strongly support President Obama’s engagement policy and the reestablishment of relations. For the first time since 1991 Florida International University began surveying Cuban Americans, a new poll shows that a majority — 54 percent — said support the lifting of the Cuban embargo.

Cuba, however, has a long way to go to show it is seriously interested in being a travel destination for all Americans.

Perhaps customer response, if not companies, might help move the needle: Saturday’s flight on American to Cienfuegos had 53 out of 120 seats empty as of this writing. It may be the slow season, but were it not for Cuba’s restrictive policies, there might not be a single seat left.

As Americans know well, discrimination is bad for business.

Testimony House Agriculture Committee: 'American Agricultural Trade With Cuba'

Wednesday, September 14, 2016
The following is today's testimony by Mauricio Claver-Carone during a hearing of the House Agriculture Committee on 'American Agricultural Trade With Cuba':

Thank you, Mr. Chairman, Ranking Member and Members of the Committee.

It's truly a privilege to join you here today to discuss important and consequential issues surrounding U.S. agricultural trade with Cuba. I commend you for including a dissenting voice on this panel.

My name is Mauricio Claver-Carone and I'm the Executive Director of Cuba Democracy Advocates, a non-profit, non-partisan organization dedicated to the promotion of human rights, democracy and the rule of law in Cuba.

My testimony will be divided into two parts. First, I would like to present key facts regarding agricultural trade with Cuba and highlight the counter-productive trends we are seeing since President Obama announced a new policy of unconditional engagement with the Castro regime on December 17th, 2014. Second, I would like to focus on the issue of financing agricultural sales to Cuba, which I understand is a priority for my fellow panelists, with the good faith and disposition to find common ground.

The Reality of Trade With Cuba

As you are surely aware, pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (‘TSREEA’), the sale of agricultural commodities, medicine and medical devices to the Castro regime in Cuba was authorized by Congress, with one important caveat – these sales must be for “cash-in-advance.” Prior to that, the export of food, medicine and medical devices to the Cuban people had already been authorized under the Cuban Democracy Act of 1992 (‘CDA’).

This is an important distinction that needs to be made, for in order to have a productive discussion about agricultural trade with Cuba, one should understand how the island’s totalitarian regime conducts business.

In most of the world, trade 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, namely the Castro regime. There are no "exceptions."

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

Since the passage of TSREEA in 2000, over $5 billion in U.S. agricultural products have been sold to Cuba. It is an unpleasant fact, however, that all of those sales by more than 250 privately-owned U.S. companies were made to only one Cuban buyer – the Castro regime.

As the U.S. Department of Agriculture’s (‘USDA’) own report on Cuba notes, “The key difference in exporting to Cuba, compared to other countries in the region, is that all U.S. agricultural exports must be channeled through one Cuban government agency, ALIMPORT."

ALIMPORT is an acronym for Empresa Cubana Importadora de Alimentos, S.A. It is a subsidiary of Cuba's Ministry of Foreign Trade and serves as the sole procurement agency for U.S. agricultural products. Throughout the years, the Castro regime has ensured the Ministry of Foreign Trade is run by senior officials from Cuba's intelligence services (known as Directorio General de Inteligencia, or ‘DGI’). The current Minister of Foreign Trade is a DGI official, Rodrigo Malmierca Diaz, who is the son of Isidoro Malmierca Peoli, a historic Castro family confidant and founder of Cuba's counter-intelligence and state-security services.

Hence another unpleasant fact: All business decisions in Cuba are based on the political and control-based calculations of the Castro regime -- not on market forces. If the Cuban people enjoyed property rights to establish their businesses and were allowed to freely partake in foreign trade and investment – my testimony today would be very different.

ALIMPORT primarily supplies government institutions, and the Cuban military's hard currency retail stores (known as Tiendas de Recuperacion de Divisas, ‘TRDs’), hotels and other facilities that cater to tourists and other foreigners.

So let’s immediately debunk a myth: Financing agricultural transactions with Cuba is not about assisting small and midsize farmers on the island, but about financing a monopoly of the Castro regime.

Again, as the USDA itself recognizes: “U.S. food products will be sold and delivered to Alimport, which will take control of the imports at the Cuban point of entry, manage distribution throughout Cuba and coordinate payments. Consequently, U.S. agricultural firms planning on doing business with Cuba need to learn to negotiate and transact business with the Cuban government through Alimport.”

As a result, we already know what any further lifting sanctions towards Cuba would look like. TSREEA sales from the U.S. and business ventures with other nations exhibit the model: A mercantilist system whereby commerce is simply a tool to benefit and strengthen its totalitarian regime.

President Obama’s Policy Changes Have Proven Counter-Productive

President Obama’s policy of unilaterally easing sanctions has proven to be counter-productive for agricultural sales to Cuba. But before focusing on those figures, it’s important to note how President Obama’s new policy has broadly proven to yield counter-productive results.

For example, since December 17th, 2014:

· Political arrests have intensified. Throughout 2015, there were more than 8,616 documented political arrests in Cuba. Thus far, there have already been over 7,935 political arrests during the first eight months of 2016. This represents the highest rate of political arrests in decades and nearly quadruples the tally of political arrests throughout all of 2010 (2,074), early in Obama’s presidency.

· A new Cuban migration crisis has unfolded. The United States is faced with the largest migration of Cuban nationals since the rafters of 1994. The number of Cubans fleeing to the United States in 2015 was nearly twice that of 2014. Some 51,000 Cubans last year entered the United States and this year’s figures will easily surpass that. The numbers of Cuban nationals fleeing the island have now quintupled since President Obama took office, when it was less than 7,000 annually.

· Castro’s military monopolies are displacing "self-employed" workers. There are fewer licensed "self-employed" workers in Cuba today than in 2014. In contrast, Castro's military monopolies are expanding at record pace. The Cuban military-owned tourism company, Gaviota S.A., announced 12% growth in 2015 and expects to double its hotel business this year. Even the limited spaces in which “self-employed” workers previously operated are being squeezed as the Cuban military expands its control of the island's travel, retail and financial sectors of the economy.

· Internet "connectivity ranking" has dropped. The International Telecommunication Union's (ITU) Measuring the Information Society Report for 2015, the world's most reliable source of data and analysis on global access to information and communication. ITU has dropped Cuba's ranking to 129 from 119. The island fares much worse than some of the world's most infamous suppressors of the Internet suppressors, including Zimbabwe (127), Syria (117), Iran (91), China (82) and Venezuela (72).

· Religious freedom violations have increased tenfold. According to the London-based NGO, Christian Solidarity Worldwide (‘CSW’), last year 2,000 churches were declared illegal and 100 were designated for demolition by the Castro regime. Altogether, CSW documented 2,300 separate violations of religious freedom in 2015 compared to 220 in 2014. In the first half of 2016, there have already been 1,606 separate violations of religious freedom.

· Democracy’s regional foes have been emboldened. President Obama’s unconditional recognition and engagement of the sole remaining dictatorship in the Western Hemisphere has sent a message to Castro’s allies in the region that there are no consequences for rogue and undemocratic behavior. Hence the recent militarization (with Cuba’s support) of Venezuela's regime and the parliamentary coup in Nicaragua.

Agricultural sales have not escaped this downward trend.

Over the years, in this same Committee room, I have heard testimony professing that an easing of sanctions; re-defining of “cash-in advance”; improving U.S.-Cuba relations; and an increase in travel to the island, would benefit U.S. farmers. And, as we all know, since December 17th, 2014, the Obama Administration has engaged the Castro regime and extended a litany of unilateral concessions.

As part of these concessions, the Obama Administration has redefined “cash-in-advance”; eased payment terms for agricultural sales; American travel to Cuba has increased by over 50%; Cuba’s GDP grew last year by over 4%; diplomatic relations were established; and endless U.S. business and trade delegations have visited Havana.

Yet, U.S. agricultural exports to Cuba plummeted by nearly 40% in 2015. During the first quarter of 2016, the slide continued, as ALIMPORT purchased only $63 million in U.S. agricultural products. That is an additional 21% percent drop from the same period in 2015. These are the lowest numbers since the United States authorized agricultural exports to the Castro regime in 2000.

Of course, those who understand how the Castro regime operates are not surprised -- for it has long used agricultural sales as a tool of political influence.

As a 2007 report of the U.S. International Trade Commission (‘ITC’) confirmed: "Alimport reportedly initiated a policy in 2003 that limited or ceased purchases from U.S. companies that did not actively lobby the U.S. government for changes to laws and regulations regarding trade with Cuba. Purchases are also allegedly geared to particular U.S. States or Congressional districts in an effort to heighten local interests in pressing the Administration to normalize trade with Cuba."

Today is no different. The Castro regime wants the U.S. Congress to lift tourism, financing and investment sanctions that would overwhelmingly benefit its military monopolies, so it is putting on the squeeze.

Financing Agricultural Sales to Cuba

We will surely hear testimony today about Cuba being one of the U.S.’s largest export markets pre-1959 and how we need to “recapture” it. Politics aside, I would caution that Cuba’s economy is nowhere near the same today as it was throughout its pre-1959 history, when it was free-market oriented, with a dynamic private sector, property rights, and among the largest middle class and highest per capita income in Latin America at the time. Today, Cuba is a totalitarian dictatorship, with a centralized control economy and the lowest per capita income in Latin America.

We will also surely hear testimony about Cuba purchasing rice from Brazil and Vietnam, instead of from the United States, as a result of the prohibition on U.S. financing for agricultural sales. But I would caution that Brazil and Vietnam’s rice sales to the Castro regime are heavily state-subsidized and made pursuant to political arrangements. They are not based on competitive terms and rates. I would further argue that the recent downfall of the socialist government in Brazil -- and its shady financing deals with the Castro regime that are currently under investigation by the Brazilian authorities -- may lead to a bigger increase in U.S. rice sales to Cuba than anything the U.S. Congress could do.

Finally, we will surely hear many theories and estimates about how much more money one commodity sector or another -- or one state or another -- can make from exports to the Cuba, if U.S. sanctions were further eased or lifted. However, as we’ve learned from the dramatic decline in agricultural sales figures over the last year -- despite the Obama Administration easing of sanctions and establishing diplomatic relations with the Castro regime -- that is hardly guaranteed.

Let me be absolutely clear. Those of us who support sanctions and oppose the financing of transactions with the Castro regime do not do so with the intent of harming American farmers. Conversely, I know that American farmers do not seek to sell their products with the intent of supporting or subsidizing the Castro regime.

American farmers are the best in the world and we all share their desire to establish and expand markets. As a matter of fact, I’m sure Cuban-Americans in Florida consume more rice than any amount ever sold to Cuba pre- or post-1959. However, the agricultural groups represented here today remain steadfast in their desire for the financing of agricultural sales to Cuba and there is even legislation before this Committee to that end.

But any such proposition must be weighed by serious factual considerations regarding the troubling structure of Cuba’s business entities (military-run monopolies), its beneficiaries (the Castro family and regime cronies), the rights of its victims (both Cubans and Americans), and whether such practices are in the U.S.’s security interests.

Thus, the question comes down to: How to authorize private financing for U.S. agricultural sales to Cuba without subsidizing its derelict regime and in a manner consistent with U.S. security interests and the rights of victims?

We are obviously not going to resolve this challenge today. But hopefully, this discussion can be helpful in understanding each other’s concerns and in highlighting important safeguards that could address broader policy implications.

These safeguards fall into three categories:

1. Protect American Taxpayers.

Cuba ranks among the world's worst credit-risks and debtor nations. Moody's Investors Service gives Cuba's sovereign debt a Caa2 rating, which translates into "very high credit risk."

Despite highly publicized (and politicized) debt forgiveness concessions from Russia and the Paris Club, Cuba still owes upward of $75 billion to a long international list of creditors. As recently as 2010, Reuters reported how Cuba “failed to make some debt payments on schedule beginning in 2008, and then froze up to $1 billion in the accounts of foreign suppliers by the start of 2009." That should make anyone unwise enough to leave money sitting in a Cuban bank account reconsider.

And just a few months ago, on July 8th, 2016, General Raul Castro stated, in his own words: "I should recognize that there have been some delays in current payments to creditors."

I am confident we all agree that American taxpayers must not be exposed to any direct bailout of the Castro regime. It is for this reason that TSREEA includes a prohibition (Sec. 7207(a)) on United States assistance, which reads:

No United States Government assistance, including United States foreign assistance, United States export assistance, and any United States credit or guarantees shall be available for exports to Cuba.”

But American taxpayers should also not be exposed to any indirect bailout of the Castro regime. Thus, TSREEA should further be supplemented by a prohibition in the Internal Revenue Code that would prevent any losses stemming from commercial transactions with Cuba’s regime -- pursuant to Obama’s policy changes -- from being deducted when calculating business taxes.

2. Protect American Victims of Stolen Property.

According to the Inter-American Law Review, the Castro regime’s confiscation of U.S. assets was the “largest uncompensated taking of American property by a foreign government in history.” Unfortunately, President Obama's policy of expanding business transactions with the Castro regime is already encouraging American companies to traffic and exploit properties stolen from other fellow Americans. Any expansion of such transactions by the U.S. Congress would further expose American victims.

There are nearly 6,000 unpaid, certified claims, worth nearly $7 billion arising from the Castro regime’s confiscation of American-owned business and properties. They include many of the ports and other infrastructure used for agricultural exports to Cuba.

American farmers understand the importance of property rights. Property is the very core of farming. As such, it is easy for farmers to appreciate the injustice of having your property stolen, and then coopted, exploited and marketed to someone else to the benefit of the thief. This injustice must be corrected and resolved for the victims. Part of that solution will involve restitution from those collaborators who have knowingly benefited from the theft. The injustices occurring today in Cuba regarding confiscated property must be resolved; U.S. law promises that it will, and it is not just the Castro regime that is on the hook.

It is for this reason that Section 103 of the 1996 Cuban Liberty and Democratic Solidarity Act (‘Libertad Act’) contains a prohibition on the indirect financing of Cuba, which states:

“No loan, credit, or other financing may be extended knowingly by a United States national, a permanent resident alien, or a United States agency to any person for the purpose of financing transactions involving any confiscated property the claim to which is owned by a United States national.”

The American victims of stolen property in Cuba must not only remain protected from any financing involving their property, but they should be provided recourse.

Unfortunately, President Obama is denying any recourse -- through his waiver of Title III of the Libertad Act -- to Americans who are now seeing their property rights trampled upon by other fellow Americans. That used to be unimaginable. If the Obama Administration is unwilling to protect the rights of grieved Americans, then a private right of action should allow for the victims to do so directly through the rule of law.

As such, the U.S. Congress should pass legislation to end the President’s waiver authority over Title III of the Libertad Act and grant Americans the legal standing to pursue justice.

3. Prevent Support for Cuban Military Entities.

Today, the Cuban military owns and operates one of the largest conglomerates in Latin America, known as the Grupo de AdministraciĆ³n Empresarial, S.A., or GAESA. Its portfolio includes companies that dominate ports, trade zones, tourist attractions, restaurants, hotels, real estate, retail stores, currency exchanges, gas stations, airlines, and other transportation services. Its head, Gen. Luis Alberto Rodriguez Lopez-Callejas, is Raul's son-in-law.

Far from empowering Cuba’s small sector of "self-employed" residents, the Castro regime is taking full advantage of President Obama's new policy to accelerate the military's holdings of every entity poised to benefit from current U.S.-Cuba relations.

As an Associated Press report this weekend confirmed: “the [Cuban] military's long-standing business wing, GAESA, assumed a higher profile after Gen. Raul Castro became president in 2008, positioning the armed forces as perhaps the prime beneficiary of a post-detente boom in tourism. Gaviota, the military's tourism arm, is in the midst of a hotel building spree that outpaces projects under control of nominally civilian agencies like the Ministry of Tourism. The military-run Mariel port west of Havana has seen double-digit growth fueled largely by demand in the tourism sector. The armed forces this year took over the bank that does business with foreign companies, assuming control of most of Cuba's day-to-day international financial transactions, according to a bank official.”

Let there be no doubt, the Cuban military is already encroaching into the U.S. agricultural trade sphere, which is currently under the direction of the nominally-civilian Ministry of Foreign Trade. However, if Congress were to authorize any financing for agricultural sales to Cuba, I guarantee that GAESA would absorb ALIMPORT as swiftly -- with no legal process and lack of transparency -- as it recently did Habaguanex, S.A. and Banco Financiero Internacional. (Both were the focus of the AP story referenced in the prior paragraph).

With great foresight, just a few months after President Obama announced his new Cuba policy, the Chairman of the House Intelligence Committee, U.S. Rep. Devin Nunes (Cal.), and the Chairman of the House Armed Services Committee, U.S. Rep. Mac Thornberry (Tex.), anticipated this trend and introduced the Cuban Military Transparency Act (H.R. 2937), which seeks to ensure that any increase in resources to Cuba -- pursuant the Obama Administration's recent policy changes -- truly reach the Cuban people and are not funneled through the Castro regime's armed forces.

After all, these are the same Cuban armed forces that recently held a stolen U.S. Hellfire missile for nearly two years; that have been caught twice internationally-smuggling heavy weaponry, including the worst sanctions violations ever to North Korea; that oversee the most egregious abuses of human rights in the Western Hemisphere; that are subverting democracy in Venezuela and exporting surveillance systems and technology to other countries in the region; that welcome Russian military intelligence ships to dock in their ports; that share 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 Americans.

As such, I would urge that this important piece of legislation, introduced by your national security counterparts, remain the priority of any Cuba policy consideration by the U.S. Congress.

Mr. Chairman, this concludes my testimony. Again, I thank you for the opportunity to testify today. I look forward to continuing this important discussion and working in furtherance of our common interests.

House Committee Advances Bill to Halt Cuba Flights

From The Hill:

A House panel advanced legislation on Tuesday that would halt commercial flights to Cuba until a thorough security review is conducted at the country’s 10 airports, fueling an ongoing debate about whether the U.S. should have resumed air service with the island nation.

By voice vote, the House Homeland Security Committee backed an amended bill from Rep. John Katko (R-N.Y.), chairman of the Transportation Security Subcommittee, to pause Cuba flights until lawmakers receive assurances that the country’s airport security procedures are up to snuff.
The markup comes two weeks after scheduled air service between the U.S. and Cuba resumed for the first time in 50 years. The commercial flights are a cornerstone of President Obama’s efforts to restore relations with the former Cold War rival.

Katko’s measure would require the Transportation Security Administration (TSA) to complete a report assessing Cuba’s airport security protocols and secure an agreement that gives TSA agents access to the country’s airports.

Lawmakers adopted, 14-10, a substitute amendment that would also require all air carrier contracts with the Cuban government to be made public.

The underlying legislation requires an agreement permitting federal air marshals on flights to and from Cuba, though the TSA said it already reached such an agreement this summer.

Bill sponsors still want to know whether the country has adequate body scanners, explosive detection systems, technology for detecting fake passports and a strong employee vetting process.

A group of committee members said they wanted to travel to Cuba themselves and investigate some of these concerns, but were denied travel visas.

“We know that this sector is still under threat from terrorists,” said Rep. Michael McCaul (R-Texas), chairman of the full panel. “I want to make sure that this committee is doing everything in its power to ensure the security of America on these flights.”

Iran's Rouhani to Visit Cuba This Week

From Iran's state media:

After attending a Non-Aligned Movement (NAM) summit in Venezuela this week, Iranian President Hassan Rouhani will travel to Cuba for an official visit before heading to New York to take part in an annual session of the UN General Assembly, an Iranian official announced.
 
Parviz Esmaili, the deputy for communications and information at the president's office, said on Monday that President Rouhani will leave for Venezuela on September 16 to attend the NAM summit, due to be held on Margarita Island.

Apart from meetings with a number of world leaders on the sidelines of the summit, President Rouhani will hand over Iran’s rotating presidency of the NAM to Venezuela, he added.

Moreover, Iranian officials in the president’s entourage will actively take part in a number of specialized gatherings at the summit, Esmaili noted.

At the conclusion of the Venezuela visit, President Rouhani will travel to Havana at the formal invitation of his Cuban counterpart Raul Castro.

During his stay in the Caribbean island nation, President Rouhani will meet with his Cuban counterpart and also Fidel Castro, while high-ranking delegations from the two countries are expected to hold negotiations and sign multiple cooperation agreements, Esmaili added.

Cuba Seek Oil Imports From Russia, Iran

From Argus Media:

Cuba is looking to Russia and Iran to make up for dwindling oil supplies from close ally Venezuela.

The island is keen to replenish oil supplies as it works to revive foreign tourism following the recent resumption of commercial flights from the US.

An official of Cuba's state-run oil company Cupet tells Argus that the Cuban government is preparing to start negotiations with Russia for the supply of crude and refined oil products "to counter possible disruptions in imports from current sources."

Cuba also plans to discuss oil supply with Iran, the official said.

Havana currently relies on Venezuela for crude and products which are effectively supplied for free. Under the formal terms of the preferential arrangement dating back to 2000, Venezuelan state-owned oil company PdV supplies the oil in exchange for Cuba's deployment of experts in the fields of medicine, security, sports and other areas. Cuba quietly resells part of the crude for cash.

Cuba's president Raul Castro told parliament on 8 July 2016 that the island's economy is under "stress" because of diminishing Venezuelan oil supplies "despite the firm will of President Nicolas Maduro and his government to fulfill these supplies."

Venezuela had been supplying around 80,000 b/d of oil to Cuba in 2015. More recent data is unavailable.

The likely quantities to be imported from Russia "will be the subject of the planned negotiations," the Cupet official said, adding that the foreign affairs and foreign trade ministries are carrying out the discussions with Moscow.

Cuba's foreign affairs ministry has not responded to a request from Argus for details.

Moscow had been the prevailing source of Cuba's oil imports until the collapse of the Soviet Union in 1991. Under that arrangement, Cuba bartered sugar for the oil.

"There is uncertainty about the political and economic situation in our traditional source of oil, and the government's intention is to diversify sources so the country is not dependent on one source," the Cupet official said.

Iran and Cuba discussed cooperation in several areas including oil supply during a visit to Havana last month by foreign minister Mohammad Javad Zarif, an official Cuban government statement said at the time.

AP: Cuban Military is Biggest Winner of Obama's Policy

Monday, September 12, 2016
We have warned (again, and again, and again, and again, and again) how the Cuban military would become the biggest beneficiary of the Obama Administration's sanctions relief.

Now, even the Associated Press has had to recognize it.

Obama's supporters can spin it however they'd like -- but this is not a good thing by any stretch of the imagination.

The Obama Administration should set legacy aside, tap the brakes and process this negative trend rationally.

From AP:

Cuban military expands its economic empire under detente

At the height of Cuba's post-Soviet economic crisis, a man with the obscure title of city historian began transforming Havana's crumbling historic center block by block, polishing stone facades, replacing broken stained glass and repairing potholed streets.

Over a quarter century, Eusebio Leal turned Old Havana into a painstakingly restored colonial jewel, a tourist draw that brings in more than $170 million a year, according to the most recent available figures. His office became a center of power with unprecedented budgetary freedom from the island's communist central government.

That independence is gone. Last month, the Cuban military took over the business operations of Leal's City Historian's Office, absorbing them into a business empire that has grown dramatically since the declaration of detente between the U.S. and Cuba on Dec. 17, 2014.

The military's long-standing business wing, GAESA, assumed a higher profile after Gen. Raul Castro became president in 2008, positioning the armed forces as perhaps the prime beneficiary of a post-detente boom in tourism. Gaviota, the military's tourism arm, is in the midst of a hotel building spree that outpaces projects under control of nominally civilian agencies like the Ministry of Tourism. The military-run Mariel port west of Havana has seen double-digit growth fueled largely by demand in the tourism sector. The armed forces this year took over the bank that does business with foreign companies, assuming control of most of Cuba's day-to-day international financial transactions, according to a bank official.

Castro has never publicly explained his reasoning for giving so much economic power to the military, but the armed forces are widely seen in Cuba as efficient, fast-moving and relatively unscathed by the low-level payoffs and pilferage that plague so much of the government. Economic disruption also is viewed as a crucial national security issue while the government slowly loosens its once-total hold on economic activity and renews ties with its former Cold War enemy 90 miles to the north.

While U.S. President Barack Obama has said detente was meant partly to help ordinary Cubans develop economic independence from a centrally planned government that employs most of the island's workers, the Cuban government says the U.S. should expect no change in Cuba because of normalization with the U.S.

The takeover of Old Havana shows how the Cuban government is, so far, successfully steering much of the peace dividend into military coffers.

The announcement nearly two years ago that the U.S. and Cuba were restoring diplomatic relations set off a tourism boom with Old Havana at its epicenter. The cobblestone streets are packed with tourists browsing souvenir stands, visiting museums and dining in trendy private restaurants. World figures and celebrities from Madonna to Mick Jagger to Pope Francis and Obama have all visited. Hotels are booked well through next year.

The largest business arm of the historian's office, Habaguanex, named for a pre-Columbian indigenous chief, directly runs some 20 hotels and 30 stores and more than 25 restaurants in Old Havana.

Under a special exemption by the ruling Council of State, the office has been allowed to use its revenues as it sees fit rather than returning them to the national treasury and receiving a yearly budget allocation from the central government. That 1993 measure is widely credited for giving Leal the power and flexibility to restore Old Havana to international standards while much of the rest of Havana suffers from neglect that has left buildings collapsing and streets rutted with big potholes.

Through its economic wing, the blandly named Business Administration Group, the Cuban armed forces have become the nation's biggest retailer, importer and hotelier. The military corporation Cimex, created two decades ago, counts retail stories, auto-rental businesses and even a recording studio among its holdings. The military retail chain TRD has hundreds of shops across Cuba that sell everything from soap to home electronics at prices often several times those in nearby countries. Gaviota has 62 hotels with 26,752 rooms across Cuba, pulling in some $700 million a year from more than 40 percent of the tourists who visit Cuba.

The Cuban government did not respond to a request for comment on the military's business operations.

The Business Administration Group, known by its Spanish acronym GAESA, formally took over the city historian's office on Aug. 1, according to three employees with the office who spoke on condition of anonymity because they were not authorized to talk with the press.

"They're going to carve everything up and it'll be absorbed by military businesses that are already operating. The hotels go to Gaviota, the restaurants to Cimex and the stores to TRD," said one of the officials.

On Cuba Travel, Breaking the Law Has Consequences

Lately, anti-sanctions advocates and even some journalists have been encouraging Americans to play fast-and-loose with the law.

To do so, is a risky proposition -- for the law remains, it has a long memory and will far outlast the Obama Administration.

From The Miami Herald:

OFAC issues stiff fines against pro-Cuba activist

In a case that appears to represent a shift in policy, the U.S. Treasury Department’s Office of Foreign Assets Control has opened legal proceedings against a longtime pro-Cuba activist based in Tampa.

Albert A. Fox Jr., who has extensive ties with the Cuban government, faces a $100,000 fine for alleged violations of the U.S. embargo during two trips to the island over the past six years.

The sanctions are the first issued by OFAC to an individual at least since 2013.

According to official documents obtained by el Nuevo Herald, OFAC accuses Fox, president of the Alliance for Responsible Cuba Policy Foundation, of illegal transactions tied to two trips to Cuba. The alleged prohibited transactions include providing unauthorized travel services to five members of the International Association of Drilling Contractors of Houston — who traveled to the island in August 2010 — and engaging in unauthorized business activities, including meetings with Cuban government officials.

OFAC also presented more detailed charges against Fox tied to a second trip in September 2011 with a delegation of 15 people who traveled on an inaugural Tampa-Havana flight. The delegation was led by the late Steve Burton, former head of the Hillsborough Aviation Authority, and Mary Mulherm, former Tampa city commissioner. OFAC claims that Fox covered the cost for the delegation’s lodging at the Hotel Nacional, plane tickets with Xael Charters, transportation on the island with Havanatur, meals and visas for some members of the delegation.

A spokesman for the Treasury Department declined to comment on the pending case but reiterated that, “All U.S. persons, individuals and entities, must comply with the laws and regulations administered by the Office of Foreign Assets Control. OFAC investigates apparent violations as appropriate and consistent with U.S. government laws and regulations.”

“OFAC has taken various different types of enforcement actions in recent years, but these cases take time. You’ll note most of Fox’s travel infractions took place from 2010-2011, just as recent actions against banks took place as far back as 2004-2007,” said Mauricio Claver-Carone, director of the U.S.-Cuba Democracy PAC and observer of Cuban issues from Washington. “Thus, the biggest lesson (and warning) to those being encouraged by the new policy to play fast-and-loose with the law is that the statute of limitations does not run out when President Obama leaves office in January.”

Female Activists Stripped, Beaten and Arrested by Castro Regime

Yesterday, over 40 members of Cuba's Ladies in White were beaten and arrested as they tried to attend Sunday Mass.

The Ladies in White is a renowned pro-democracy group composed of the wives, daughters, mothers and other relatives of Cuban political prisoners.

To add further sadism to the Castro regime's repression, in the eastern province of Santiago de Cuba, three females activists of the opposition Progressive Arch, were stripped of their clothing and beaten on the street.

They were wearing t-shirts promoting the opposition campaign #Otro18 (#Another18), which demands non-Communist Party candidates be allowed to participate in the regime's sham National Assembly "elections" in 2018.

The three activists, Doraisa Correoso Pozo, Maria Mercedes Benitez Rodriguez and Vismaika Amelo Jardines, were left shirtless and beaten on the street.

Castro's New Crackdown on 'Cuentapropistas'

As we have long warned, Obama's new policy would not "empower" Cuba's "cuentapropistas".

To the contrary, it would (again) deem them unnecessary.

Click here to understand why.

From Diario de Cuba:

Cuba's small merchants denounce a "crusade" against their businesses

Actions that many see as a crusade against small merchants continue in Havana. The constant surveillance of small business stands has spurred many sellers to close them, temporarily or permanently. Others have been forced to do so after receiving visits by inspectors.

Aleyda, who sold housewares, closed her stand after receiving a Warning Notice in which she was advised that she would lose her license if she offered customers an unauthorized product or service.

"I thought about it, did the numbers, and decided to return the license," she says. "The items I was not allowed to sell, like cables and outlets, were those that sold best and allowed me to pay for it."

According to Aleyda, inspectors began to constantly visit her business. "It was no longer enough to pick the things up when they came, because they showed up at random, and they were no longer municipal inspectors, but provincial ones, who did not even identify themselves, and came and took photos of the merchandise. We only learned that they were inspectors afterwards, when they arrived in clothing identifying themselves as such, and their IDs."

Raydel, who was also licensed to sell housewares, but in another municipality, shares a story similar to Aleyda's.

"They started to come almost every day, some without identifying themselves as inspectors, to catch us off guard," he says.

"The problem with provincial inspectors is that we do not know who they are," he adds. "The small merchants usually have arrangements with the municipal inspectors. In some places they even warm them when an inspection is coming, so they can pick up everything illegal before they arrive."

Some vendors did not even receive the Warning Notice.

"Nobody gave me anything. They didn't even warn me," says Raydel. "When they came it was to seize my goods and confiscate my license."

The permit for the sale of household goods is not covered by the simplified system of self-employment. Those who have this license pay monthly and social security taxes, and have to file a sworn return at the end of the year.

"We pay a fortune," says Aleyda. "And we can't make that selling hangers and clotheslines, which is what we have permission to sell."

"They know that very well," says Raydel. "Anyone can see that it is the other things - cables, paint - that allow us to pay for the licenses. Nobody makes that much selling kitchen towels."

Raydel was slapped with a fine of 1,500 Cuban pesos, and had goods confiscated from him worth about 2,000 CUC.

“I watched them as they were writing the seizure record, and they took merchandise for themselves," says Raydel. "They recorded five brushes instead of six, or three wires, instead of four, which was what they were actually taking from me. They did the same thing with almost all the products, especially the illegal ones.”

During inspections and confiscations neighbors and bystanders tend to protest against the inspectors.

"They call them "abusive" and "shameless," says Aleyda.

Raydel says something similar also happened when his goods were seized. "A passerby told them that they were corrupt, and that if they wanted us to stop selling illegal things, they should sell them in stores at a price people could afford."

"They ought to be inspecting themselves," he added. "If they take away your license, in theory you cannot get it back, and you have to get a different one. But I've seen people who have had the same license three times, and that wouldn't happen if there weren't corruption in the Government, which is approving them."

"Here there is illegal business and corruption in many state institutions. It’s already widespread in Cuba," says Aleyda. "But there are many Party members living off it, so nobody steps in. Instead they go after the people, who have nothing else to offer them, those of us who are not members of the Party."

"The solution is always to "throw the baby out with the bathwater," especially because they don't like the ‘babies,’" says Raydel. "Instead of solving the shortages at the shops, and the extremely high prices of things, they come after us. And you know what they're going to tell you: the stores are empty because of us, who buy to resell. That’s not true, but they have to blame us, so they will continue to say that.

Despite the pressure, both Aleyda and Raydel plan to get other small business licenses in the near future.

"You've got to work," says Aleyda, "but not for the State. For the State... I'd rather die."