Embargo FAQs

When Val Prieto and I spoke on radio a couple of weeks ago one of the things we mentioned is the constant need to repeat arguments about the embargo on Cuba. In response to that need I have developed the following FAQ about the trade sanctions. Not all of the material here is 100% original thinking on my part but I agree 100% with all of it.

Q. The embargo hasn’t worked in 47-plus years, why don’t we ditch this failed policy in favor constructive engagement and dialogue.

A. The United States imposed an embargo on trade with Cuba after fidel castro’s regime nationalized American assets in the country without compensation. To this day Cuba has not repaid what it stole from American owners. The embargo also coincided with Cuba’s aligning itself with the former Soviet Union and renouncing its long standing economic ties with the United States. For the first thirty-something years of the policy the embargo was irrelevant because Cuba was being subsidized by the USSR. Only with the collapse of communism in Eastern Europe did fidel castro become preoccupied with other sources of cash. The economic struggles in Cuba in the early 90s actually bubbled over into the first real acts of resistance to the regime. This was known as the "Maleconazo" because it occurred along Cuba's famous waterfront boulevard "El Malecon". In response to the crisis Cuba began to liberalize it's economy for the first time ever. Several steps were taken to create an influx of hard currency. Cuba began investing in its tourist sector for the first time in years. This was done with the aid of foreign companies. But as western countries began to invest in Cuba and the situation leveled off (with a large amount of outgoing migration towards the United States in the form of the rafter crisis) castro has recently begun to roll back some of the reforms he instituted during the special period.

Q. Doesn’t the embargo punish the Cuban people and isn’t it the reason for Cuba’s economic problems.

A. The suffering of the Cuban people is not the result of the U.S. embargo, but of a failed economic policy implemented by castro for more than 47 years. Cuba does not have enough financial resources to purchase great quantities of needed products on the world market because his priorities are military spending and support for international socialist causes. Cuba’s centralized economy does not respond to market forces and thus, like the economies of the historical Soviet bloc is unproductive, inefficient, and riddled with mismanagement and corruption. On top of all of that, Cuba is free to buy and sell to and from almost any other country in the world. Food and medicines are not currently part of the U.S. embargo and Cuba can purchase them from the U.S. on a cash up-front basis. The United States is currently the leading supplier of food and agricultural products to Cuba.

Q. Doesn’t free trade among countries have a democratizing effect?

A. Normally it does. The problem is that in Cuba the state dominates all aspects of trade policy and trade implementation. There are no private buyers or sellers of goods in Cuba only government owned and operated enterprises. This means every dollar earned by these enterprises ends up in the government’s coffers. The castro regime’s power comes from its ability distribute whatever goods and services are available on the island. The more resources he has, the more power he derives. Imagine a tribe of Indians. The chief is the one that can provide whatever food and shelter is available. His position as chief depends on nobody challenging him at that task. So he prevents anyone from even trying. Except these Indians live on an island. Their only choices are to go along with the chief, resist and suffer the consequences, or try to get out.

Q. If we get rid of the embargo won’t the spread of goods and services result in new ideas that will ultimately achieve the goal of liberalizing the totalitarian government.

A. Many countries, particularly in Europe and Latin America, have been trading with Cuba for more than 10 years and this engagement has not resulted in any meaningful political reforms. In fact repression is alive and well in Cuba. Many of the small private businesses that sprung up during the “special period” after the collapse of the USSR have been shut down and the small and medium sized joint ventures with foreigners have been unilaterally shut down by Cuba, often leaving investors holding the bag.

Q. Aren’t American businesses losing money because of the embargo?

A. Cuba currently buys large amounts of food and agricultural products from the U.S. on a cash up-front basis. This system is set up to protect American businesses because Cuba has very little credit on the world market as a result of its failed economic policies. Many opponents of the embargo are really angling for permission to give credit to Cuba. It should be mentioned that Cuba has a huge external debt and that castro has defaulted on almost every financial obligation that he has assumed on behalf of the Cuban people. If American farmers and businesses sell goods to Cuba on a credit basis, who will back those contracts up? Who will bail the castro regime out? It certainly should not be the U.S. government with taxpayer funds. The result of such an agreement would be farm subsidies and corporate welfare where American businesses and fidel castro win and the Cuban people and American taxpayers lose.


Q. Won’t American tourism help Cubans bring about change?

A. Millions of Latin American, European and Canadian tourists have visited the island yet Cuba continues to be a totalitarian state that denies its citizens basic human rights. In Cuba, the tourism industry is set up to reap the maximum amount of hard currency while keeping foreign influence to a minimum. Tourists are allowed to visit certain areas designed for them; everyday Cubans are not allowed to mingle with foreigners.