Friday, November 17, 2006

Ask a Cuban-American

Dear Cuban-American,

Today I noticed that Mr. Cohiba posted a comment on the recently departed, and much loved economist, Milton Friedman. Which reminded me of another apparent contradiction when it comes to certain "free-market capitalists", especially those that support the US embargo towards Cuba. My questions is:

How is it that many Cuban-Americans support the US embargo towards Cuba, and at the same time confidently support "free market" values, when the majority of "free market" libertarians, such as Milton Friedman and Bill Buckley, and organizations, such as the CATO and Acton Institutes, disapprove of the embargo?

From your number one fan.
--O--

Judging from the tone of the note, I detect an attempt to brand The Cuban-American as a hypocrite. For the record, The Cuban-American agrees with a lot of things that the Cato Institute and Bill Buckley advocate for, but not everything. Perhaps you, my number one fan, agree with EVERYTHING they say, though I doubt it. In fact, I'm betting that this is one of the few things you agree with them on.

Yes there is a contradiction here. Like many issues, it's complicated, with competing arguments and interests battling in one's mind to formulate a coherent opinion. In this case my desire for the liberty of the Cuban people supersedes any ideological/economic philosophies I may adhere to generally.

My number one fan should know by now that I think capitalism and trade are probably the most democratizing forces at our disposal, BUT the problem lies with the way the Cuban economy is set up.

As you well know, there are no private buyers for American goods (or sellers for Cuban goods) in Cuba. Almost without exception, the only entities allowed to do business on the island are government entities. As I mentioned in the comments section on the post about Friedman, the only monopolies that can survive for an extended period of time are government monopolies and that's exactly the case with Cuba. The government monopolizes the entire economy.

So what, you might be asking. Well this type of hegemony by the government limits the empowering aspects of trade, which is precisely why fidel castro has implemented this economic model. It allows him complete control over not just the political aspects of his people's lives but also the economic aspects. This Cuban government monopoly more than lives up to the bad reputation enjoyed by monopolies in the history and economics books.

From the US standpoint there are several reasons to keep the embargo in place. For one thing Cuba confiscated and nationalized $1.4 billion worth of US assets. This may not sound like a lot but it's the largest seizure of American property in history (more than $8.4 billion in today's dollars). Cuba has not made any attempt to settle with the property owners. The reason we finally "opened up" to China was because they agreed to settle for 48 cents on the dollar for the confiscations of 1949. A similar arrangement was agreed-to with Vietnam. Both countries were interested in making needed economic reforms so they could re-enter the world economy as viable trading partners. Cuba has made no such overtures to date. Allowing Cuba to again trade freely with the US without making even a token settlement sets a dangerous precedent.

Secondly, Cuba has proven again and again that it's not good for its debts. More than an inability to pay them, there is a downright systematic refusal to even accept their existence. Just as recently as this week French business interests have been grousing about Cuban non-payment. There is no wonder why this happens; Cuba has no interest in playing by established economic practices and international law. For 47-years the modus operandi has been to run up as much debt as possible with one sucker and then find another. It sounds like you want the US and US business interests to be that next sucker, something the embargo has prevented to date. What do you suppose would happen when Cuba reneges on hundreds of millions of dollars worth of obligations to US creditors? Where do you think the creditors will try to get the money? For the unimaginative out there, the US government is the answer. I'm quite sure that Friedman was against subsidies and in this perverted subsidy castro comes out winning while US taxpayers and Cubans end up losing.

Not only that but the most important Swiss banks (followed by many other international banks) have stopped dealing with Cuba. A UBS spokesperson was quoted as saying, "it costs too much to ensure that Cuba respects and conforms to legal and financial regulations". Is that the kind of unsavory business partner that you want to have? I doubt it's what Buckley and the Cato Institute have in mind.

I want the US to lower the embargo. Believe me, I do. I just want it to happen when the above conditions are remedied. Then both Cubans on the island and American business interests will be best served. Since we can expect no change to Cuba's failed 47-year old economic policies as long as fidel castro is alive, I think we should maintain the embargo until he is out of the way for good. What's another 3-18 months? The embargo hasn't worked as a stick but it can work as a carrot to a successor regime that prioritizes normalization of relations and economic well-being over confrontation and subversion of neighboring countries.

As always when discussing this issue, I'll say that the power to completely lower the embargo really lies with Cuba. Make the necessary political (release the political prisoners, call for free multiparty elections) and economic (recognize private property rights, decriminalize private business ownership) reforms and the embargo will be a thing of the past.

Thanks for your CONTINUED READERSHIP, for giving me material to write about on a slow Friday and for being my NUMBER ONE FAN!

If you have a question for the resident Cubanazo, please email it to me with "Ask a Cuban-American" in the subject line. Cranks need not apply.

"Ask a Cuban-American" is a complete rip-off of Gustavo Arellano's "Ask a Mexican".

"Ask a Cuban-American artwork provided by Tony Mendoza.

1 comment:

Gonzalo Fernandez said...

I have read recent articles indicating that Cuba is one of the worst credit risks in the world.

Cuban debt is around $8 billions in "inactive" balances since 1986, and $5.8 billions in "active" short and medium term balances after 1986.

Venezuela and China are two of the few recent lenders to Cuba. There are no commercial or business reasons for these transactions; only political considerations.

Castro has perfected the "earring" economy. Hanging from the creditors lobes for display, without any business benefits.

All the nations dealing with Cuba were trying to prove the United States wrong. These nations have learned that selling "al fiado" to Cuba it's impossible.

NOTE: Verbo "fiar". "Ser the fiar," to be trustworthy.