Archibald R.M. Ritter (Carleton University, Ottawa, Canada): “ASSESSING THE GOALS AND IMPACT OF THE CUBAN EMBARGO AFTER 50 YEARS”

Dean Rusk Center for International Law and Policy University of Georgia School of Law

University of Georgia,

March 22, 2013

The Cuban Embargo: Policy Outlook after 50 Years

Agenda:I. Imposition of the Embargo

a. Initially

b. Helms-Burton Complications

II. Impacts of the Embargoa. Impacts on Cuba, Economic and Political

b. Impacts on the United States, Economic and Political

c. Specific Impacts of the Helms-Burton Bill

d. Impacts on Cuba’s Reform Process

III. Probable Impacts of Normalization

IV. Prospects for Change in Cubaa. Reform Process under Raul’s Presidency, 2006-2013b. With the Embargo

c. Without the Embargo

V. Conclusion

I. Imposition of the Embargo

(a) Initially, 1960-1961

Objective:

By damaging the Cuban economy, to somehow promote the overthrowing of the Castro Regime or to somehow promote political change and policy reversal on the part of Fidel Castro.

(Operative mechanisms were never clarified)

Elements:• Cut-off of all economic relations: trade, direct foreign investment,

financial, travel;• Expulsion from international financial institutions;• Diplomatic break (sort of; “Interest Sections” continue) ;

I. (b) The Helms-Burton Complications[Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996]

Objective: “…to assist the Cuban people in regaining their freedom and prosperity as well as joining the community of democratic nations that are flourishing in the Western hemisphere: (Section 3. Purposes.)

To bring about "a peaceful transition to a representative democracy and market economy in Cuba“

How tightening the embargo would achieve these objectives was undefined.

Some Provisions of the Helms Burton Bill• Sanctions against non-U.S. companies dealing with Cuba• Continued opposition to Cuban membership in International

Financial Institutions.• Promotes television broadcasting to Cuba.• Support for Cuban "democratic and human rights groups"• Declares policy towards a "transition government" and a

"democratically elected government" in Cuba.• Protection of property rights of certain United States nationals.• Exclusion of officials of companies operating on property

expropriated from US citizens. • Provides power to the Legislative Branch to override an Executive

Branch cancellation of the embargo.• Prohibits recognition of a transitional government that includes the

Castro brothers• Prohibits recognition of a Cuban government that has not provided

compensation for U.S. certified claims against confiscated property

II. Impacts of the Embargo

(a) Economic Impacts on Cuba:– Hurt living standards of Cuban citizens– Loss of the market in the USfor traditional and new

exports;– Loss of US replacement parts (Cuban’s stock of

machinery and equipment was mainly of US origin)–Major problems in the transport system, (storage

facilities and internal transportation systems were based on the short-haul rather than long-haul shipping

– Imported products from non-US sources were often higher cost, lower quality and higher transport /transactions costs.

– Termination of US tourism– Cut-off of financial relations and trade credits with the

United States – Eviction from the IBRD, IMF and IBD cut access to low

cost development loans and balance of payments support– Cut-off of US DFI (and, by Cuba’s choice, all other DFI

until 1982)– Promoted squandering of scarce resources on the military

to face a credible external threat

Damages were severe but have diminished over time;

Cuba has “learned to live with a disability”

Political Impacts of on Cuba– Contributed to early radicalization of the regime;– Pushed Cuba into a profitable short-term but

economically-absurd long-term relationship with the USSR;

– Pushed Cuba into the Soviet Bloc– Generated a siege mentality and nationalistic

defensive cohesion on the part of the leadership, military and citizenry;

– Permitted Castro and the Communist party of Cuba to portray themselves as the defenders of Cuban sovereignty and independence;

– Provided a credible pretext for economic failures;

• Generated sympathy and support for Cuba as David vs. Goliath in the rest of the world;•No successful promotion of democratization

in Cuba;•No successful promotion of human rights;• Strengthened the position of Fidel Castro

Conclusion: A half-century of failure in achieving its central objectives

II. (b) Economic Impacts on the United States

–Significant but small relative to its size;–Loss of export and import markets;–Loss of Direct Foreign Investment;–Loss of tourism to and from Cuba;

–A major gain from accelerated immigration of well-qualified Cubans; especially for Florida and Miami;

Political Impacts on the United States:

–Strengthensed the Castro Regimes–Diplomatic alienation of Latin and

Developing countries; • Result? Chavez, Morales, ALBA, CELAC,

demise (?) of OAS; etc.

–Aggravation to Friends of the United States;–US policy makers tied up in Gordian Knots re

Cuba;

For Cuba:– Minor economic aggravation;– Further international sympathy and support for Cuba;– Specific fears of some H-B provisions: e.g. return of

housing to original owners;– Further strengthened support for Fidel Castro and the

Regime domestically as heroic defenders on the nation;• New credibility, self-confidence and appeal for Fidel.

– Strengthening of hard-liners; silencing of critics;– Opposition to Regime cast more strongly as anti-patriotic

treason;– Strengthening of pretext for domestic failures

II (c) Specific Impacts of the Helm’s Burton Bill:

“Joke in the streets of Havana in the late 1990s:

“In recognition of their services in support of the Communist Party of Cuba, President Castro will conduct a special mass rally at the Plaza de la Revolucion to award ‘Order of Lenin’ medals to Jesse Helms and Dan Burton.”:

II. (d) Impacts of Embargo On the Reform Process

Economic Reforms of 1993, generated by – loss of subsidization from the USSR– Inadequacies of central planning and command economy– Reform process “contained” by 1996

Not generated by the Embargo

Economic Reforms of 2010, generated by– Inadequacies of centralized planned economy– Pressures from below • underground economy and ubiquitous illegalities• intensifying expectations for economic improvement

Embargo and intensified US hostility strengthened Fidel’s position as defender of the status quo; – Fidel confirmed as champion of sovereignty vs. the

US. – Venezuelan support after 2004 (hardening the

economic status quo) would likely not have occurred;

Normal relations would likely have encouraged reforms a la Eastern Europe;

No political reforms despite economic crisis,

III. Probable Consequences of Normalization

With “Rapprochement” in the next three years:For Cuba:– Expansion of traditional and new exports to the

US;– Availability of more imports of goods and

services from the US;– Financial intermediation and credits from the US;– US Tourism Tsunami (curiosity, beach, snowbird,

retirees, March-breakers etc.)

– Direct foreign investment;

Economic growth; rising incomes

With “Rapprochement” in the next three years:For Cuba, continued:

– Lifting of the “Siege” will lead to a relaxing of the “Siege Mentality”

– Raul as champion of Cuban sovereignty will have no pretext for maintaining political controls and prohibition;

– Expect intensified pressure for political change and further economic change.

For the United States:– Major export market

Note: US exports to Costa Rica, 2008: $5.7 billion; Dominican republic: $6.6 billion

– Direct foreign investment:E.g. food processing, some consumer goods, construction

materials, agriculture, financial business and professional services

– Financial and technological flows– Cuban tourism to the US – in time.

–Major gains for US trading centers in the area,

Miami will become a major portal to Cuba; also New Orleans, Houston, Mobile, Savannah (?)

For the United States continued:– Removal of a major aggravation in its relations

with Latin America in particular and the rest of the world in general

– Rapprochement with citizens of Cuba;

IV. Prospects for Change in Cuba

1995-2006: Policy complacency and paralysis under President Fidel Castro

IV (a) Reform Process under Raul’s Presidency, 2006-2013

• Without the EmbargoWith the Embargo in place:

In the short-run [Raul’s era plus one successor (10 years)]

No political reform; but growing pressures for change

Continuing economic reforms:– Implementation of small enterprise reforms;– Attempts to promote non-agricultural cooperatives;– Continued efforts to promote partial “marketization”

Major Changes began in 2010

“Guidelines for Economic and Social Policy”

Accepted at Sixth Party Congress.

Ambitious Intentions for Economic and Social Policy

(313 guidelines, goals, or recommendations)

I            Economic Management Model (38)

II         Macroeconomic Policies (25)

III        External Economic Policies (44)

IV        Investment Policy (13)

V         Science, Technology and Innovation Policy (7)

VI        Social Policy (36)

VII       Agro-industrial Policy (31)

VIII     Industrial and Energy Policy (37)

IX       Tourism Policy (13)

X         Transport Policy (18)

XI        Construction, Housing, and Water Policy (14)

XII       Commercial Policy (9)

Essential Character:

– Purely economic, no political elements

– Ambitious and comprehensive

– A statement of aspirations; a “Wish-list”• No priorities indicated• No sequencing of policies or investments • No coordination

Does it suggest a “Viet Namese Model” or a “Chinese Model”? Only partially

Recent Policy Initiatives

Major Policy Changes for Small Enterprise

Market for Housing; Market for Cars;

Wholesale Markets for Small Enterprise (2013)

Legislative Framework for the establishment of Non-agricultural Cooperatives, (November 2013)

Relaxed controls on external travel

But many areas are still awaiting change;

To repeat: Minimal Political Change– minor relaxation of controls on freedom of speech

Death of Chavez:

Minimal impact in the short term;

Maduro will win Presidency on sympathy and coat-tails;

Chavez basic policies, domestic and foreign, unlikely to change dramatically; they may harden.

Contribution of Cuban doctors to Venezuelan well-being is too valuable to terminate quickly,– ultimately doctors and will be phased out, and oil trade will

return to a commercial basis

Cuba probably has five more years of Venezuelan support and subsidization

Little relevance for reform process in short term;

More rapid phase-out could accelerate reform process

Is the Reform Process Sustainable?

Yes The “Fidelista Model” is discredited Fidel is irrelevant and discredited; “Fidelistas” are also discredited

By current realities, By the “Proyecto de Linamientos…” By Raul’s statements and speeches regarding the need for a

new economic approach By publicity re the need for a new approach

Fidelista Ministers have been replaced by Raulistas;

Virtually no criticism from the left inside or outside Cuba

– Raul’s military colleagues have moved into management throughout the economy

• Raul and the military: pragmatic since the 1990s• But management militarization is also problematic;

– Raul appears to have emerged from the shadow of his elder brother;

Raul wants his own economic model;

Raul seems to want his own legacy

Could the Reform Process Accelerate??

Improbable as long as Raul is in Charge

– Cautious but deliberate;– Original Revolutionary generation still in command;– Fear of Russian style melt-down;– Fear of loss of political control & Party monopoly;– Political pressures from heightened expectations?

Under what conditions might the reform process accelerate?– If “Generational Change” occurs soon and the

gerontocrats leave the scene;– If Venezuelan support stopped, generating

recession;– If no off-shore petroleum is found;– If other factors led to renewed recession;– If expectations were further heightened but

unrealized

– Maybe, if Cuba becomes a “petro-power” increasing foreign exchange earnings dramatically– Will Cuba experience the “Resource Curse”

phenomenon ??– Increasingly unlikely

– Maybe, as long as Maduro remains in power– Maybe, if other factors lead to renewed

economic prosperity

Might the Reform Process Decelerate?

IV (c) Policy Prospects with a Lifting of the Embargo

Relaxation of “Siege Mentality”;

Political monopoly more difficult to maintain without a credible foreign threat from the US;

Pragmatic economic reforms will continue and intensify;

In time, political change will come. When? Well after Raul and maybe one successor.

The Embargo: a US policy failure for half a century;

Probably more costly to the United States than to Cuba

Great potential gains for both the US and Cuba from ending the embargo

Disentangling the complexities and normalizing relations with Cuba: immensely difficult.

Good Luck!!

[Perhaps within the next four years ! ?]

V. Conclusion

US-Cuba Relations by 2016?

Thank You Very Much