Economic Challenges Facing Cuba’s New President 

According to John Caulfield, a former Chief of Mission of the U.S. Special Interests Section in Cuba (before the 2015 reopening of the U.S. Embassy in Havana), Miguel Diaz-Canel, when he becomes Cuba’s President of the Council of State on April 19, “will face serious challenges from the moment he takes over. Cuba’s Soviet-style economic model is not working. Raul has acknowledged as much and in 2011 began to implement economic reforms that allowed many Cubans to become self-employed and buy and sell residences. These changes have allowed some Cubans to achieve relative prosperity, while the majority is stuck in low-paying jobs.”[1]

Caulfield added, “Their success caused a negative reaction from inside the Communist Party that saw the rise of these non-state workers as a threat to the system. Recognizing these concerns, Raúl [Castro] told the National Assembly last summer that he took personal responsibility for ‘errors’ and froze the concession of most new business and self-employment licenses.”

This will present Diaz-Canel and the Cuban Communist Party with a dilemma:

  • Pull “Cuba from its economic morass” by introducing “urgent reforms to eliminate economic distortions such as the use of two national currencies and inefficient state industries,” by attracting “private foreign investment to generate new exports and rebuild Cuba’s decaying infrastructure” and by allowing “Cuba’s incipient private sector to grow.”
  • Or reject this reform agenda and thereby halt the creation of private wealth and a threat to the Communist Party’s domination of the island.

The case against reform may have been strengthened by the apparent success of the Mariel Special Development Zone, a deep-water port and adjacent land for industry and distribution businesses on the north shore of the island west of Havana. Currently 10 projects are operational, related to several sectors, including industry, biotechnology and pharmaceuticals, logistics, construction, food processing, and real estate, and this year another  six (Richmeat, Profood Service, Devox Caribe, Bouygues Construcción Cuba, Engimov Caribe, and Nescor) will begin operations while another 18 have been approved and await implementation.along with construction of an Agricultural Terminal, a second business center and other infrastructure.[2]

The Mariel Special Development Zone received another foreign investor on March 29 when a Vietnamese entity signed an agreement to develop an industrial park of 156 hectares in the Zone. Another eight agreements with such entities were signed that day at the conclusion of the visit to the island by Nguyen Phu Trong, general secretary of the Communist Party of Vietnam. One of these agreements called for the construction of a 50 megawatt bio-electrical plant and an agricultural development combined with the use of renewable energy to generate electricity.[3]

On the other hand, as noted in a prior post. Secretary-General Trong in a speech at the University of Havana emphasized the need for the incorporation of market economic measures in communist systems.

At the end of last month there was a public debate in Havana about Cuba’s emerging private sector. A survey of the 200 attendees revealed that those with the highest monthly incomes of 20,000 CUC (roughly $20,000) were the owners of rental houses, paladares (restaurants), musicians, small farmers, and, on a smaller scale, scientists, miners, ministers, workers in the sugar industry, lawyers, and doctors. Havana, Ciego de Ávila and Matanzas, were considered the provinces with the highest incomes in the country. On the other hand, at least 25% of the Cuban population lives below the poverty line, and the average monthly salary for State workers in 2018 rose to 740 Cuban pesos (approximately 30 dollars). The audience also discussed what pattern of inequality the population was politically willing to accept and whether this  which could fracture Communist ideology on the Island.[4]

Overriding all of these issues and problems is the recognized need for Cuba to eliminate their dual currency system. According to Pavel Vidal, a Cuban economist,“It is impossible for Cuba to achieve a significant and sustainable improvement in the productivity of its economy so long as it operates with two national currencies, with multiple exchange rates between them and an official exchange rate that is excessively overvalued.”[5]

However, Vidal said “state enterprises that show permanent losses should be closed or merged instead of being allowed to operate in a ‘financial bubble’ where they are sustained by implicit subsidies received every time they pay for imported inputs using an overvalued exchange rate. This bubble must be burst, and the state sector must be restructured. Enormous amounts of financial and human resources have been wasted in supporting state enterprises with no economic value.” Vidal added that if the Cuban government chooses true currency reform, “it should be accompanied by not only a greater opening to foreign investment but also by liberalization of the private sector. An expansion of the private sector, he said, “would allow Cuba to absorb the unemployment that would be produced from enterprises that go bankrupt.”

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[1] Caulfield, Cuba’s next president faces choice between economy and communism, the Hill (April 4, 2018).   Many of these issues have been discussed in posts listed in the “Cuban Economy” section of List of Posts to dwkcommentaries—Topical: CUBA.

[2] Martinez, Promoting development and connecting Cuba to the world (Photos), Granma (April 3, 2018).

[3] Peraza, New accords strengthen strategic relations between Cuba and Vietnam, Granma (April 4, 2018).

[4] Ramirez, Rich “comrades,” Diario de Cuba (April 4, 2018).

[5] Whitefield, Cuba desperately needs to reform currency system, but timing couldn’t be worse, Miami Herald (April 4, 2018).

Raúl Castro To Remain Cuba’s President for At Least Two More Months  

On December 21, 2017, Cuba’s National Assembly determined that Raúl Castro’s term as President would be extended from February 24 to April 19. The stated reason for the extension was the delay in the start of the electoral cycle caused by Hurricane Irma.[1]

Some, however, speculate that the real reason for the extension is trying to cope with Cuba’s many economic and political problems—slower economic growth (if not decline), declining support from struggling Venezuela and increased U.S. hostility. Perhaps a clearer indication of what is happening will be provided by the March meeting of the Central Committee of Cuba’s Communist Party to discuss the results of the economic guidelines, or reforms, introduced under Castro and talk about a strategy for the coming years.[2]

Indeed, during this session of the National Assembly President Castro said, “Next year will also be complicated for the external finances of the nation, however, we will continue credibility of our economy and reiterate to the creditors the fulfillment of the agreed commitments, and we thank support and understanding for the transitory difficulties that we face.” However, Castro did say, “when the National Assembly is constituted, my second and last term [as] . . . the head of the State and the Government [will end] and Cuba will have a new president.”

Simultaneously the Cuban Government announced new regulations on the emerging private and cooperative sectors of the nation’s economy to more closely regulate the income distribution by cooperatives so that no one may earn more than three times of others in the cooperative.  This resulted from investigations revealing that in some non-agricultural cooperatives the president earned fourteen times more than the workers, that this is not a cooperative, but rather a private company and cannot be allowed.

In addition, a cooperative may operate in only one province where it has a legal domicile,  and business licenses will be limited to one per person.

Cuba’s Vice President Marino Murillo, who is also the government’s economy czar, said there will be no new approvals for the time being for non-agricultural cooperatives, while their maximum and minimum earnings will be limited to avoid the existence of de-facto private businesses.

According to Michael Bustamante, an assistant professor of Latin American history at Florida International University, these new regulations “suggest a continued slowing down, if not an undoing, of the economic reforms implemented between 2010 and 2016.”

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[1] Deputies approve extension of the mandate of the provincial assemblies and the National Assembly, Granma (Dec. 21, 2017); Raúl Castro: “Here we are and we will be; free, sovereign and independent, CubaDebate (Dec. 21, 2017); Morales, Evaluates the march of the implementation of the Guidelines, Granma (Dec. 21, 2017); Murillo, The problems we have faced in the Update are more complex and deeper than we had thought, Granma (Dec. 22, 2017); Reuters, Cuba Delays Historic Handover from Castro to New President, N.Y. times (Dec. 21, 2017); Assoc. Press, Castro Confirms He Will Stay Cuba’s President to April, N.Y. Times (Dec. 21, 2017); Londońo, Cuba Delays End of Raúl Castro’s Presidency by Two Months, N.Y. Times (Dec. 21, 2017); Whitefield & Torres, Cuban Leader Raúl Castro will stay in power past February, Miami Herald (Dec. 21, 2107).

[2] As reported in a December 1 comment to a post about Cuba’s elections, Domingo Amuchastegui, a former Cuban intelligence analyst who now lives in Miami, said, “The fatherland is in danger; it is facing very difficult economic circumstances plus the threat of aggression from a historical enemy. Facing difficult circumstances, revolutionary leaders don’t back down. These are not times to enjoy life in Varadero and spend time with the grandchildren.”

 

 

Cuba’s Reaction to U.S. Ordering Removal of Cuban Diplomats 

On October 3, the U.S. ordered the removal of 15 Cuban diplomats from the U.S. as discussed in a prior post. Now we examine Cuba’s reaction to that U.S. decision and order as expressed in the Cuba Foreign Ministry’s lengthy  statement and in press conference remarks by its Foreign Minister, Bruno Gonzalez. A future post will look at other such reactions.

Cuba Foreign Ministry Statement[1]

“The Ministry . . .  strongly protests and condemns this unfounded and unacceptable decision as well as the [false] pretext [purportedly justifying it].”

“The Ministry “categorically rejects any responsibility of the Cuban Government in the alleged incidents and reiterates once again that Cuba has never perpetrated, nor will it ever perpetrate attacks of any sort against diplomatic officials or their relatives, without any exception. Neither has it ever allowed nor will it ever allow its territory to be used by third parties with that purpose.”

“The Ministry emphasizes that the U.S. Government decision to reduce Cuba’s diplomatic staff in Washington without the conclusive results from the investigation and without evidence of the incidents that would be affecting their officials in Cuba has an eminently political character.”

“The Ministry urges the competent authorities of the U.S. Government not to continue politicizing this matter, which can provoke an undesirable escalation and reverse even more bilateral relations, which were already affected by the announcement of a new policy made in June last by President Donald Trump.”

Cuba’s Foreign Minister previously had “warned . . . [the U.S. Secretary of State] against the adoption of hasty decisions that were not supported by evidence; urged him not to politicize a matter of this nature and once again . . . [requested U.S.]  effective cooperation . . . to clarify facts and conclude the investigation.”

“It is the second time, after May 23, 2017, that the State Department ordered two Cuban diplomats in Washington to abandon the country; that the US Government reacts in a hasty, inappropriate and unthinking way, without having evidence of the occurrence of the adduced facts, for which Cuba has no responsibility whatsoever and before the conclusion of the investigation that is still in progress.”

Just as was expressed by the Cuban Foreign Minister to Secretary of State Tillerson on September 26, 2017, “Cuba, whose diplomatic staff members have been victims in the past of attempts . . . [on] their lives, who have been murdered, disappeared, kidnapped or attacked during the performance of their duty, has seriously and strictly observed its obligations under the Geneva Convention on Diplomatic Relations of 1961 referring to the protection and integrity of diplomatic agents accredited in the country, for which it has an impeccable record.”[2]

“Since February 17, 2017, when the U.S. embassy and State Department notified [Cuba of] the alleged occurrence of incidents against some officials of that diplomatic mission and their relatives [starting in] November 2016, arguing that these had caused them injuries and other disorders, the Cuban authorities have acted with utmost seriousness, professionalism and immediacy to clarify this situation and opened an exhaustive and priority investigation following instructions from the top level of the Government. The measures adopted to protect the U.S. diplomatic staff, their relatives and residences were reinforced; new expeditious communication channels were established between the U.S. embassy and Cuba’s Diplomatic Security Department and a Cuban committee of experts made up by law enforcement officials, physicians and scientists was created to make a comprehensive analysis of facts.”

“In the face of the belated, fragmented and insufficient information supplied by the U.S., the Cuban authorities requested further information and clarifications from the US embassy in order to carry out a serious and profound investigation.”

“The U.S. embassy only delivered some data of interest on the alleged incidents after February 21, when President Raúl Castro Ruz personally reiterated to the Chargé d’Affairs of the U.S. diplomatic mission how important it was for the competent authorities from both countries to cooperate and exchange more information. Nevertheless, the data subsequently supplied continued to be lacking in the descriptions or details that would facilitate the characterization of facts or the identification of potential perpetrators, in case there were any.”

“In the weeks that followed, in view of new reports on the alleged incidents and the scarce information that had been delivered, the Cuban authorities reiterated the need to establish an effective cooperation and asked the U.S. authorities for more information and insisted that the occurrence of any new incident should be notified in real time, which would provide for a timely action.”

“The information delivered by the U.S. authorities led the committee of Cuban experts to conclude that this was insufficient and that the main obstacle to clarify the incidents had been the lack of direct access to the injured people and the physicians who examined them; the belated delivery of evidence and their deficient nature; the absence of reliable first-hand  and verifiable information and the inability to exchange with U.S. experts who are knowledgeable about this kind of events and the technology that could have been used, despite having repeatedly stating this as a requirement to be able to move forward in the investigation.”

“Only after repeated requests were conveyed to the U.S. Government, some representatives of U.S. specialized agencies finally traveled to Havana in June, met with their Cuban counterparts and expressed their intention to cooperate in a more substantive way in the investigation of the alleged incidents.  They again visited Cuba in August and September, and for the first time in more than 50 years they were allowed to work on the ground, for which they were granted access to all Cuban facilities, including the possibility of importing equipment, as a gesture of good will that evidenced the great interest of the Cuban government in concluding the investigation.”

“The U.S. specialized agencies recognized the high professional level of the investigation which was started by Cuba and its high technical and scientific capabilities and which preliminarily concluded that, so far, according to the information available and the data supplied by the U.S., there were no evidence of the occurrence of the alleged incidents or the causes and the origin of the health disorders reported by the U.S. diplomats and their relatives.  Neither has it been possible to identify potential perpetrators or persons with motivations, intentions or means to perpetrate this type of actions; nor was it possible to establish the presence of suspicious persons or means at the locations where such facts have been reported or in their vicinity.  The Cuban authorities are not familiar with the equipment or the technology that could be used for that purpose; nor do they have information indicating their presence in the country.”

. Nevertheless, the Ministry reiterates Cuba’s disposition to continue fostering a serious and objective cooperation between the authorities of both countries with the purpose of clarifying these facts and concluding the investigation, for which it will be essential to count on the most effective cooperation of the U.S. competent agencies.”

Cuba Foreign Minister’s Press Conference[3]

Foreign Minister Rodriguez in his lengthy press conference made the following additional points:

  • The decision to expel Cuban diplomats “can only benefit those who intend to reverse the progress [in U.S.-Cuba relations] made in recent years and only follows the interests of a handful of people.”
  • The U.S. decision to expel Cuban diplomats “is clearly a political decision unrelated to the ongoing investigation. It is a reprisal. It is politically motivated and malicious. To date there is no concrete evidence regarding the claims of attacks on U.S. diplomats, with theories being paraded around that can only be described as ‘science fiction.’”
  • The only terrorist attacks to have taken place in Cuba were perpetrated by groups based in the U.S., not by any third country.
  • The incidents were reported by the U.S. Embassy months after they were supposed to have occurred. Cuban experts have not visited diplomatic residences, as the U.S. has refused them entry.
  • The question about the future of the bilateral diplomatic agenda should be put to the U.S. government. That agenda has been adversely affected by the expulsion of the Cuban diplomats; by President Trump’s recent speech to the U.N. General Assembly;[4] and his speech in Miami in June about U.S.-Cuba relations.[5] In short, all of these decisions are rash, and the “U.S. will be responsible for the deterioration of relations between the two countries.”
  • Cuba has not taken any action against the U.S.; it does not discriminate against its companies; it invites U.S. citizens to visit; it favors dialogue and bilateral cooperation; it does not occupy any part of the territory of the U.S. and has not adopted any measures of a bilateral nature. On the contrary, Cuba has favored a respectful course on the basis of sovereign equality, to treat our differences and to live civilly with them for the benefit of both peoples and countries.
  • Since the creation of the Cuban Interests Office in Washington (now our embassy) until this minute, Cuban diplomatic officials have never carried out intelligence activities.

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[1] Cuba Foreign Ministry, Statement (Oct. 3, 2017)

[2] Medical ‘Incidents’ Affecting U.S. Diplomats in Cuba Prompts U.S. To Close Embassy in Cuba and Urge Americans Not to Travel to Cuba, dwkcommentaries.com (Sept. 30, 32017) (discussion of 9/26/17 Rodriguez-Tillerson meeting).

[3] Minute by Minute: Press conference by Cuban Foreign Minister Bruno Rodríguez Parrilla, Granma (Oct. 3, 2017); Bruno Rodríguez: Cuba has never carried out attacks against diplomats (+ Video), CubaDebate (Oct. 3, 2017).

[4] President Trump Condemns Cuba at United Nations, dwkcommentaries.com (Sept. 21, 2017).

[5] President Trump Announces Reversal of Some U.S.-Cuba Normalization Policies, dwkcommentaries.com (June 19, 2017).

U.S. Continues To Suspend Part of Its Embargo of Cuba 

On July 14 U.S. Under Secretary of State for Political Affairs Thomas Shannon notified appropriate Congressional committees that the Trump Administration would suspend Title III of the Helms-Burton Act (a/k/a the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act) for a six-month period beyond August 1. The law requires Congressional notification at least 15 days before a suspension is to begin.[1]

Title III allows former owners of commercial property expropriated by Cuba to sue foreign companies and the Cuban government for using or “trafficking” in those confiscated holdings.

But ever since the enactment of the Helms-Burton Act, every president has routinely suspended Title III at six-month intervals. Such suspensions have been prompted by U.S. fear of alienating important U.S. trading partners such as Canada, Mexico, and EU countries from the filing of a potential tidal wave of lawsuits in U.S. federal courts brought by persons whose Cuban properties had been expropriated against companies from those U.S. trading partners that use Cuban tourism properties, mining operations, or seaports.[2]

This suspension by the Trump Administration is the first action on Cuba since President Trump announced his new direction on U.S.-Cuba relations during a June 16 speech in Miami. It is the latest sign that President Trump is not fully reversing President Barack Obama’s opening of relations with Cuba.[3]

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[1] U.S. State Dep’t, U.S. Determination of Six-Month Suspension Under Title III of LIBERTAD (July 14, 2017); Whitefield, Trump to suspend lawsuit provision of Helms-Burton in August, Miami Herald (July 17, 2017); Assoc. Press, Trump Administration Again Suspends a Part of Cuba Embargo, N.Y. Times (July 14, 2017).

[2] After the December 17, 2014, announcement by President Obama and Castro that the two countries were embarking on a path of normalization, they have engaged in discussions or negotiations about obtaining Cuban payment of U.S. persons’ claims for expropriation, now believed, with interest, to total at least $ 8 billion. Although Cuba has recognized that it has an international legal obligation to pay such claims and has paid expropriation claims from other countries and although Cuba has an economic and political interest in paying these U.S. claims, Cuba does not have the cash to do so and instead has asserted claims against the U.S. for alleged damage from the U.S. embargo and other acts. See these posts to this blog: Resolution of U.S. and Cuba’s Damage Claims (April 4, 2015); Resolving U.S. and Cuba’s Damage Claims (Dec. 13, 2015); U.S. and Cuba Discuss Their Claims Against Each Other (July 30, 2016).

 

[3] President Trump Announces Reversal of Some U.S.-Cuba Normalization Policies, dwkcommentaries.com (June 19, 2017).

 

Economic Problems Bedevil Cuban Government and President Raúl Castro

A prior post reported that Cubans want greater economic growth and opportunity while also expressing pessimism about that happening. The grounds for that pessimism are highlighted in a Miami-Herald article about the many economic challenges facing President Raúl Castro In the last year of his presidency.[1]

This is the article’s big picture. “Many state enterprises are barely limping along, there are jitters as the economy of Cuba’s Venezuelan benefactor spirals downward, the rules of the road are murky for private businesses, salaries are low, a messy dual currency system still needs to be unified and Cuba is in dire need of much more foreign investment.”

These problems will not be easy to solve. “Many of Cuba’s economic problems are interrelated and the timing may not be good for any drastic moves — especially with Cuba’s relationship with the United States still up in the air.”

Yes, it is true that “Cuban officials are estimating economic growth of around 2 percent this year, but that figure is based on the assumption that oil prices will go up and tourism will keep growing.” According to Cuban economist Omar Everleny Pérez Villanueva, the 2 percent growth objective is “very ambitious.” He could have said “unrealistic” as His model puts the Cuban economy in negative territory with a decline of between .3 percent and 1.4 percent in 2017.”

Here are specifics on some of the economic challenges facing the island:

Maintaining Exports of professional services. Medical services by Cuban health care professionals on foreign medical missions in recent years have provided the Cuban government with a major source of foreign currency. In recent years, however, this source of foreign currency has declined with the implosion of the Venezuelan economy being a major factor.

Coping with Venezuela’s Economic Implosion. Venezuela’s problems for Cuba go beyond the decline in foreign medical mission income for Cuba. Since last July, oil deliveries from Venezuela have dropped as much as 60 percent. Venezuela used to send crude oil to Cuba for blending at the latter’s Cienfuegos refinery, but production at the Cuban refinery has fallen by half with the reduction in shipments from Venezuela.

Eliminating Cuba’s dual currency system. Cuba has two currencies: the Cuban peso (CP), which is generally used by the Cuban population and the Cuban convertible peso (CUC), which used by tourists and foreign companies, and the Cuban government for years has had a goal of eliminating this system. According to Carmelo Mesa-Largo, a Cuban economist and professor emeritus at the University of Pittsburgh, “In 2016, the budget deficit was 7.3 percent of GDP, and because of the already difficult economic situation, they have had to print money. The budget deficit may be even higher this year — perhaps 12 percent — generating even more inflation.”

Increasing public salaries. “There are constant complaints about low public salaries. A private cab driver, for example, can earn more than a physician or other professionals. According to Mesa-Lago, even though salaries went up in 2015, buying power was just 62 percent of what it was in 1989. Nominal salaries could be increased by printing more CP, ”but with inflation, they would have to raise salaries even more to have real wage growth.” And that could set off a further inflationary spiral.

Attracting foreign investment. The Cuban government has made it clear that foreign investment is a cornerstone of Cuban economic development going forward, but so far investment is lagging. “Diplomats, business executives and members of the U.S. Congress who favor lifting the embargo all concur that Cuba needs to reform its legal system to offer foreign investors better legal guarantees, make it easier to sign contracts and allow them to directly hire their Cuban employees.” The Cuban government, however, does not want to do anything that potentially could be destabilizing and cause a weakening of political control.

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[1] Whitefield & Torres, The next year will determine Raúl Castro’s economic legacy, Miami Herald (Mar. 23, 2017)   Previous posts in this blog have discussed many aspects of the Cuban economy as listed in the “Cuban Economy” section of List of Posts to dwkcommentaries—Topical: CUBA.

United Kingdom Promotes Engagement with Cuba

 

The United Kingdom’s Foreign Secretary, Philip Hammond, visited Cuba in late April to celebrate and promote his country’s engagement with Cuba. It was the first visit by a U.K. foreign secretary since the Cuban Revolution of 1959.[1]

Before the trip, the Foreign Secretary said, “Britain and Cuba have outlooks on the world and systems of government that are very different. But as Cuba enters a period of significant social and economic change, I am looking forward to demonstrating to the Cuban government and people that the UK is keen to forge new links across the Atlantic.”

“That is why Cuba and the UK are set to reach new cooperation agreements on energy, financial services, education and culture, to the benefit of both our nations. [This also] is an opportunity to hear for myself what Cuba thinks about its present challenges and where it sees its future.”

Upon his arrival in the island, Hammond said that Britain was “keen to forge new links” with the Caribbean nation.”

During the visit the U.K. and Cuba reached an agreement to restructure Cuba’s medium and long-term debt with the UK, which should contribute to the expansion of economic, commercial and financial ties between the two nations.

On April 30 after meeting with President Raúl Castro, Hammond said Castro ”is espousing a programme of gradual change, embracing the realities of the world we live in. I was very struck by the fact that he described the Internet as the reality of our world, spoke positively about the benefits the Internet could bring.” In addition, “Castro is seeking to position himself in the middle between those who are resisting change and those who want much faster, more radical change.” In particular, Castro said Cuba lacks “management expertise in banking services’ and this is an area where the UK has something very clear to offer.” (Below is a photograph of Castro and Hammond.)

hammond_meets_castro-large_trans++eo_i_u9APj8RuoebjoAHt0k9u7HhRJvuo-ZLenGRumA

British exports to Cuba rose by almost a third last year compared to 2014, and Britain was the second-biggest source of foreign tourists to Cuba after Canada, with 160,000 Britons making the trip in 2015.Education is seen as another growing area of cooperation, with significant numbers of Cuban students interested in higher education in the UK.

One of the problems Britain faces in such engagement is the extraterritorial effects of the U.S. embargo. Hammond commented, “We have also had discussions with the U.S. about the challenges for British and other European banks in doing business with countries that face U.S. sanctions. There are some problems here but we are working through them with the U.S. and hope to make progress in a way that will enable British businesses to do more business with Cuba.

Conclusion

This is but the latest European promotion of engagement with Cuba. For example, earlier this year President Raúl Castro visited France, where he was the official guest for a state dinner hosted by French President François Hollande, who urged U.S. President Obama to fully lift the embargo against Cuba.[2]

France sees strong potential for some of its largest companies to grow their presence in Cuba. Pernod Ricard SA is the biggest investor in Cuba through its ownership of the Havana Club brand of rum, but others are lining up such as hotels group Accor SA and construction group Bouygues SA. France also wants to boost exports to Cuba, which totaled €131 million ($143 million) in the first 11 months of 2015, down from €157 million in 2014. France is well positioned to cash in on Cuban growth after it played a leading role in negotiating debt forgiveness for Cuba at the end of last year and after President Hollande said this February that around half of Cuba’s remaining dues to France will be used to create a €220 million fund to invest in Franco-Cuban projects.

Ahead of the state dinner, French and Cuban officials signed bilateral agreements covering tourism, rail transport and trade. They also signed off on a road map for France’s development agency to begin investing in Cuban infrastructure.

The efforts of the U.K., France and other European countries to expand trade with Cuba are too often ignored in U.S. discussions of ending the U.S. embargo on the implicit and unexamined assumption that the U.S. is Cuba’s only potential trading partner. Eliminating that assumption provides another reason for the U.S. to eliminate the embargo as soon as possible in order to enhance U.S. efforts to expand trade with Cuba.

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[1] U.K. Foreign Ministry, Foreign Secretary Visits Cuba (April 28, 2016); Press Ass’n, Philip Hammond arrives in Cuba to help “forge new links,” Guardian (April 28, 2016); Reuters, Britain Praises Cuba’s Castro for Embracing Realities of Modernity, N.Y. Times (April 30, 2016); Alexander, Philip Hammond Meets Raul Castro during historic visit to Cuba, Telegraph (April 30, 2016); Raúl receives British Foreign Secretary, Granma (May 1, 2016).

[2] Horobin, France Seeks Closer Ties with Cuba During Castro Visit, W.S.J. (Feb. 1, 2016); Assoc. Press, France: Castro Finds Advocates in Paris, N.Y. Times (Feb. 1, 2016).

 

Additional Details About U.S.-Cuba Secret Discussions Leading up to the December 17, 2014, Public Announcement of Rapprochement

A prior post covered the surprising December 17, 2014, announcement of U.S.-Cuba rapprochement while another post discussed the initial public information about the preceding secret U.S.-Cuba negotiations about normalization; yet another post integrated that information into previous public information about U.S.-Cuba relations in President Obama’s second presidential term, 2013-2014.

Now Peter Kornbluh and William LeoGrande. both leading scholars on the relationship between the two countries, have added the following additional details about such previous secret discussions:[1]

  • In response to the January 2010 devastating Haiti earthquake, the U.S. and Cuba engaged in unprecedented cooperative disaster relief in that country.
  • Thereafter in 2010-2012 two top State Department officials—Cheryl Mills, the Chief of Staff for Secretary of State Hillary Clinton, and Julissa Reynoso, the Deputy Assistant Secretary of State for Western Hemisphere Affairs—had secret discussions with Cuban officials that initially focused on Cuba’s releasing U.S. citizen Alan Gross from a Cuban prison and the U.S.’ allowing the wives of two of the Cuban Five to visit their husbands in U.S. prisons.
  • By September 2011, the Cubans had explicitly proposed swapping the Cuban Five for Alan Gross, but the U.S. was not prepared to do so. Instead, as a show of good faith, the U.S. arranged for the wives of two of the Cuban Five to secretly visit their husbands in U.S. prisons while Cuba permitted Judy Gross regular visits with her husband in a military hospital in Havana.
  • In May 2012, Clinton received a memo from her team that stated: “We have to continue negotiating with the Cubans on the release of Alan Gross but cannot allow his situation to block an advance of bilateral relations…The Cubans are not going to budge. We either deal with the Cuban Five or cordon those two issues off.”
  • This May 2012 memo arrived soon after Clinton and President Obama had returned from that April’s Sixth Summit of the Americas where they had been chastised by heads of states furious over the U.S. stance on Cuba. Afterwards Clinton “recommended to President Obama that he take another look at our embargo. It wasn’t achieving its goals and it was holding back our broader agenda across Latin America.”
  • After his reelection in November 2012, President Obama approached Massachusetts Senator John Kerry about replacing Clinton as secretary of state and raising a new approach to Cuba. Kerry was receptive. As Chairman of the Senate Foreign Relations Committee, he had been a vocal critic of the USAID democracy promotion programs that financed Gross’ secret missions to Cuba and also had long opposed the US economic embargo of the island.
  • During the U.S.-Cuba secret discussions in Canada in 2013=2014 that were discussed in a prior post, The U.S. was not willing to talk about the USAID programs or the status of Guantán­amo Bay. Cuba, on the other hand, was not willing to discuss human rights or U.S. fugitives living in their country.
  • In September 2013 Senator Dick Durbin (Dem., IL) suggested to National Security Advisor Susan Rice that the U.S. should see about getting Pope Francis involved in helping the two countries resolve their differences.
  • In February 2014, Senator Patrick Leahy had his staff collaborate with former White House counsel, Greg Craig, to draft a 10-page memo of options “to secure Mr. Gross’ release, and in so doing break the logjam and change the course of U.S. policy towards Cuba, which would be widely acclaimed as a major legacy achievement [for President Obama].” The document, dated February 7, laid out a course of action that would prove to be a close match with the final accord.
  • Apparently also in or about February 2014, Leahy sent a confidential message to Cuban Cardinal Jaime Ortega, asking him to encourage the Pope to help resolve the prisoner issue. Drawing on the close ties between Obama’s Chief of Staff, Denis McDonough, and Cardinal Theodore McCarrick of Washington, D.C., the White House also “got word to the Vatican that the president was eager to discuss” Cuba at the upcoming upcoming March private audience with the Pope.
  • In early March 2014, a small group of Cuba policy advocates, including representatives of a newly formed coalition for changing U.S. policies regarding Cuba, met with Cardinal Seán O’Malley in the rectory of the Cathedral of the Holy Cross in Boston. The advocates of change explained the recent trends, the conversations with President and others in the administration and Congress and indicated this was a historic moment, and a message from the Pope to President Obama would be significant in moving the process forward. A letter from Senator Leahy was given to Cardinal O’Malley urging him to focus the Pope’s attention on the “humanitarian issue” of the prisoner exchange.
  • During this same time period, Leahy personally delivered a similar message to Cardinal McCarrick and arranged for yet another to be sent to Cardinal Ortega in Havana. There now were three cardinals urging the Pope to put Cuba on the agenda with Obama.
  • At the private audience later that month (March 27), Obama told the Pope that the U.S. had something going with Cuba and that it would be useful if the Pope could play a role.” (Other details about the audience were provided in a prior post.) A few days later, Francis summoned Cardinal Ortega to enlist his help.
  • On May 1, 2014, Leahy, along with Senators Carl Levin (Dem., MI) and Dick Durbin (Dem., IL) and Representatives Chris Van Hollen (Dem., MD) and Jim McGovern (Dem., MA) met in the Oval Office with Obama, Vice President Joe Biden, and National Security Advisor Susan Rice. The legislators urged Obama to press for Gross’ release and replace the policy of hostility with one of engagement. “You said you were going to do this,” McGovern reminded the president. “Let’s just do it!” Obama had a non-committal response,”We’re working on it” and gave no hint of the back-channel diplomacy then well underway.
  • On May 19, 2014, the previously mentioned coalition released an open letter to Obama signed by 46 luminaries of the U.S. policy and business world, urging the president to engage with Cuba. The signatories included former diplomats and retired military officers—among them former U.N. Ambassador Thomas Pickering; Cuban-American business leaders like Andres Fanjul, co-owner of a Florida-based multinational sugar company; and John Negroponte, George W. Bush’s director of national intelligence. The same day, not coincidentally, the conservative US Chamber of Commerce announced that its president, Tom Donohue, would lead a delegation to Cuba to “develop a better understanding of the country’s current economic environment and the state of its private sector.”
  • During the summer of 2014 the Pope wrote forceful, confidential letters to Obama and Raúl Castro, imploring the two leaders“to resolve humanitarian questions of common interest, including the situation of certain prisoners, in order to initiate a new phase in relations.”
  • To safeguard his communications, the Pope sent both letters via papal courier to Havana—with instructions to Cardinal Ortega to personally deliver the message into the two presidents’ hands. After delivering the Pope’s letter to Raúl Castro, Ortega then sent his top aide to Washington to advance his clandestine diplomatic mission to deliver the other letter to Obama. But arranging a secret face-to-face meeting with President Obama was easier said than done. Alerted to the problem, Cardinal McCarrick conferred with White House officials, who enlisted his help as a secret back-channel go-between. In early August, McCarrick traveled to Cuba carrying a note from Obama that asked Ortega to entrust McCarrick with delivering the Pope’s letter to the White House. But Ortega’s papal instructions were to deliver the message himself. McCarrick, therefore, left Cuba empty-handed.
  • Back in Washington, McCarrick worked with McDonough at the White House to arrange a secret meeting for Ortega with the President. On the morning of August 18, Ortega gave a talk at Georgetown University—providing a cover story for his presence in Washington—and then quietly went to the White House. (To make sure the meeting did not leak, U.S. officials kept Ortega’s name off the White House visitor logs.) Meeting with the President on the patio adjacent to the Rose Garden, Ortega finally completed his mission of delivering the Pope’s sensitive communication, in which he offered to “help in any way.”
  • In October 2014, at the Pope’s invitation, the two sides met at the Vatican and hammered out their final agreement on the prisoner exchange and restoring diplomatic relations. The U.S. representatives, Rhodes and Zuniga, also noted Obama’s intention to ease regulations on travel and trade, and to allow US telecom companies to help Cuban state enterprises expand internet access. They acknowledged these initiatives were aimed at fostering greater openness in Cuba. Cuban officials said that while they had no intentionof changing their political system to suit the United States, they had reviewed the Americans’ list of prisoners jailed for political activities and would release 53 of them as a goodwill gesture. The Pope agreed to act as guarantor of the final accord.
  • On October 12, the New York Times published an editorial calling for ending the U.S. embargo of Cuba and for a new relationship between the two countries; it turned out to be the first of a series of editorials on various aspects of the relationship.[2] These editorials were the work of Ernesto Londoño, a new member of the Editorial Board and a native of Colombia. He talked to administration officials, Senator Leahy’s office, and the new coalition, but recently said, “There was really no collusion or formal cooperation in what they were doing and what we were doing. The Times simply saw an opportunity to push the policy it advocated forward. We figured it was worthwhile to give it a shot.”
  • On November 6, 2014, Obama’s National Security Council met to sign off on the details. Later that month, the negotiating teams convened one last time in Canada to arrange the logistics of the prisoner exchange.

These additional details about the over two years of previously secret negotiations should be merged with the earlier post about President Obama’s Second Term Record Regarding Cuba, 2013-2014. Together they demonstrate the diplomatic skill of that Administration in achieving this historic breakthrough that will benefit both countries.

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[1] Kornblu & LeoGrande, Inside the Crazy Back-Channel Negotiations That Revolutionized Our Relationship with Cuba, Mother Jones (July 2015)  This information will be incorporated in a new edition of their book: Back Channel to Cuba: The Hidden History of Negotiations Between Washington and Havana that will be published this October by the University of North Carolina Press.

[2] Previous posts covered the other Times editorials that commended Cuba’s foreign medical missions (Oct. 19), recommended normalization (Oct. 26) and prisoner exchanges (Nov. 3) and criticized USAID programs on the island (Nov. 10), the U.S. Cuban medical parole program (Nov. 17) and the U.S. designation of Cuba as a “state sponsor of terrorism” (Dec. 15).