The Heritage Foundation

Backgrounder #1456 on Latin America

July 6, 2001

July 6, 2001 | Backgrounder on Latin America

How to Help the People of Cuba, Not the Regime

The debate over U.S.-Cuba policy will soon return to center stage when Congress begins considering new approaches to encourage democratic change on the island. Four legislative initiatives are now before Congress. Two of these measures seek to enhance support for the Cuban people by building on provisions in the Cuban Democracy Act (CDA) of 19921 and the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996,2 which authorize humanitarian donations and assistance to pro-democracy and human rights groups. A second pair of measures would promote more engagement with the Cuban state by permitting unrestricted sales of food and medicines, including unrestricted credit and barter transactions; unrestricted travel to Cuba; and scholarships for Cuban graduate students in selected fields.

All these measures seek ultimately to increase the opportunities for Americans to engage the Cuban people. But the focus of the two sets is very different. The first two bills specifically address interaction with and support for Cuban civil society, especially independent, self-employed Cubans and independent Cuban non-governmental organizations (NGOs). The latter set of proposals would allow U.S. citizens greater interaction with Cubans by improving relations with the Cuban state--lifting the current travel restrictions, and by granting the Castro regime access to both U.S. government credits and private financing as well as the ability to engage in limited commercial activities with the United States. While all four measures include some important new tools to assist in the island's eventual transition toward democracy, any resulting legislation should clearly support nascent forces of democracy and market economics among the Cuban people and, to the extent practical, deny material aid to the regime.

The Evolution of U.S.-Cuba Policy

The legislation currently before Congress represents another stage in the development of U.S. policy toward the Cuban Revolution and the regime of Fidel Castro. Throughout Castro's 42-year reign, the United States has sought to promote political change in Cuba, to contain Castro's efforts to export revolution, and to deny material support to his repressive dictatorship primarily through a policy of isolation and economic sanctions.

The current policy structure is the result of both presidential and congressional actions largely taken in response to various actions by the Cuban government. After the regime expropriated U.S. and other foreign property in 1960, President Dwight Eisenhower imposed the original trade embargo (except for food and medicine) and broke diplomatic ties. After the Soviet Union's attempt to install intermediate-range nuclear missiles on the island, the Kennedy Administration prohibited travel and commercial transactions with Cuba. President Gerald Ford initially sought to restore relations, until Castro sent 35,000 combat troops to buttress the Marxist regime in Angola. Later, Cuban training and support for Nicaragua's Sandinista Front and Marxist guerrillas in El Salvador dissuaded further normalization efforts.

Following the collapse of the Soviet Union in 1991, Castro was forced to open the Cuban economy to allow some independent farming, limited self-employment, and tourism. In this, the U.S. Congress sensed an opportunity to weaken Castro's grip on ordinary Cubans. Until the 1992 enactment of the CDA, U.S. policy was largely punitive, seeking to tighten the restrictions on U.S.-Cuban economic interaction. The CDA and the LIBERTAD Act contain enhanced sanctions as well as initiatives to allow for greater interaction between the United States and the Cuban people. Specifically, the CDA prohibits subsidiaries of U.S. companies from doing business with Cuba, and the LIBERTAD Act creates penalties for third-country investors engaged in a commercial enterprise involving the confiscated property of a U.S. citizen. More significantly, the bills together permit donations of food and medicine, the restoration of mail and phone service to and from the island, and aid to family members of political prisoners and funding for human rights groups.

Since the 1996 approval of the LIBERTAD Act, some U.S. lawmakers--encouraged by American businesses looking for sales opportunities in such countries as Cuba, Iran, and North Korea--have developed a competing agenda to renew commercial ties.3 One measure, contained in the Agriculture Appropriations Act4 which passed in October 2000, enabled "cash and carry" food sales to the regime and streamlined the sale of medicines and medical equipment.5 Other proposals that seek to lift U.S. trade sanctions entirely have so far failed. To date, efforts to help the Cuban people and to help American businesses find new markets have yet to converge, and the following measures now before Congress reflect that difference.

Current Proposals Before Congress

Cuban Internal Opposition Assistance Act (H.R. 1271).
In March 2001, Representative Lincoln Diaz-Balart (R-FL) and 96 colleagues introduced the Cuban Internal Opposition Assistance Act to expand U.S. assistance to independent non-governmental organizations and victims of political repression in Cuba. The assistance would include communications and printing equipment as well as aid already authorized under the LIBERTAD Act "to support democracy-building efforts," such as published materials, humanitarian assistance, and support for pro-democracy and human rights groups and independent human rights monitors.

It should be noted that the LIBERTAD Act itself expanded on the Cuban Democracy Act, which permits donations of food, medicine, and medical supplies; medical sales; and assistance to "individuals and organizations to promote nonviolent democratic change in Cuba." H.R. 1271 does not contain specific dollar amounts; it simply authorizes the funding of activities and programs. And it allows for the licensing of monetary remittances by U.S. citizens to assist independent NGOs.

Cuban Solidarity Act (S. 894).
In May, Senators Jesse Helms (R-NC) and Joseph Lieberman (D-CT) co-sponsored a more vigorous measure, the Cuban Solidarity Act, to enhance the provisions of both the CDA and the LIBERTAD Act. S. 894 would authorize spending up to $25 million a year for four years--up from the $5 million now provided--to assist pro-democracy independent NGOs and human rights monitors in Cuba, as well as the victims of Castro's repressive policies. Aid under S. 894 may include educational material, food, medicines and medical supplies, and basic office materials.

Recognizing the importance of Cuba's "self-employed" workers6 --those who have opted to pursue limited market opportunities and end their reliance on state subsidies--the legislation would allow the importation of products made by these individuals. It also would allow remittances of up to $1,000 during a three-month period to any self-employed Cuban or independent Cuban group by any U.S. group or person.7 Further, S. 894 would provide up to $5 million for human rights observers from the Organization of American States (OAS) and scholarships for Cuban students attending higher-education programs in OAS member states.

Bridges to the Cuban People Act of 2001 (S. 1017/H.R. 2138).
In the wake of the Diaz-Balart and Helms proposals, companion bills titled Bridges to the Cuban People Act of 2001 were introduced in the Senate and the House by Senator Christopher Dodd (D-CT) and Representative Jose Serrano (D-NY), respectively. These measures would end restrictions on "trade or financial transactions with Cuba" involving the export of food, agricultural commodities or equipment, and medicine and medical devices, and the import of drugs and medical devices into the United States from Cuba. They also would end bans on travel and related transactions as well as authorize scholarships for Cubans to undertake graduate study in such areas as public health, public policy, law, and economics in the United States. Finally, S. 1017/H.R. 2138 would abolish limits on the amount any person can remit to Cuba.

Weighing the Options

The Diaz-Balart and Helms bills seek to involve the U.S. government to a greater degree in strengthening Cuban civil society. But opponents claim any more U.S. support to Cuba's nascent civic movements would endanger resources already being sent by private donors, possibly provoking Castro to block humanitarian assistance.8 They argue that lifting the 40-year-old U.S. trade embargo and allowing the Castro regime unfettered access to U.S. credits and hard currency is more likely to entice him into less repressive behavior and to grant a democratic opening for Cuba.

Despite the title, "Bridges to the Cuban People," the Dodd/Serrano bills mostly seek to help U.S. businesses sell goods to the Castro regime. They propose lifting all restrictions on sales of food, agricultural equipment, medicines, and medical equipment to the regime and mandate a study of export promotion and credit programs for U.S. agricultural goods and commodities in Cuba. They would allow the regime to sell pharmaceuticals and medical equipment to the United States despite the fact that the production of pharmaceuticals is a state monopoly, that laborers in state factories make only about a nickel an hour, and that quality controls are not subject to reliable scrutiny. Finally, proposals to end travel restrictions would provide additional hard currency to the regime and its tourism monopoly on the island.

Experience over the past decade has shown that efforts to assist the Cuban people will not alone bring them democracy or less repressive treatment until Castro leaves power. Nevertheless, independent organizations such as libraries, human rights monitors, and journalist associations that could form the basis of a Cuban civil society are increasing in number9 and have benefited from U.S. support to date. In a July 2000 report, the accounting firm of PriceWaterhouseCoopers concluded that existing U.S. aid programs to encourage a peaceful transition to democracy in Cuba have demonstrated their potential. Moreover, "the encouragement of democratic change in Cuba provides sustenance and information to important actors on the island, within the international community, and to several U.S. civil society organizations that are helping the people of Cuba today."10

As for the U.S. trade embargo, simply lifting it will not improve conditions either. The rest of the world has been doing business with Castro on and off for 42 years and the dictator has only softened his grip when his government was in financial straits. Yet, Cuba's artisans and other self-employed workers who began to flourish after the loss of Soviet subsidies may be the seed of an entrepreneurial class that could benefit from direct commerce with the United States and should thus be the principal focus of liberalization efforts.

Another factor to be considered is the aging dictator's health: Castro's inability to maintain a coherent discourse in public, fainting, and evidence of other problems suggest a scenario of gradual enfeeblement.11 He is clearly not the horse that ultimately is going to win the race, nor is his 70-year-old, uncharismatic brother, Raúl. Moreover, the lack of a strong follow-on leader suggests that ordinary Cuban citizens may be the real future of the island. With that idea in mind, it would make more sense to invest in them and provide some incentives to help ease the transition to a fledgling market economy.

Improving U.S. Policy

Because both sets of bills have positive elements, it makes sense to combine the best ideas into a single package and strengthen them. In doing so, Members of Congress should be guided by an ethic of keeping pressure on Castro while making it easier for Americans to communicate with, assist, and do business with ordinary Cubans to help them prepare for a democratic transition following his enfeeblement or demise. Congress should:

  • Retain the Diaz-Balart spirit of concern for victims of political repression and the Helms bill's targeted assistance for pro-democracy efforts . Such a combined measure should facilitate interaction with Cuba's fledgling free-marketers, as well as make available aid to the victims of political repression. And it should enable any U.S. group or person to remit money to independent, self-employed Cubans and independent NGOs, i.e., those Cubans who are seeking to work independently of the state.
  • Authorize scholarships for Cuban students . Both the Helms and Dodd/Serrano initiatives would provide scholarships for Cuban students, with the latter set authorizing scholarships only for graduate study "in American schools and institutions of learning located in or outside the United States."12 Scholarships for study in both the United States or other OAS member states, as specified in the Helms bill, should be available for Cubans at the undergraduate, graduate, or even postgraduate levels. Preference should be shown to Cubans who are not employed by the Cuban government or actively participating in the Cuban communist party. Further, a portion of any scholarship funding should be made available to American universities and colleges in the form of a grant to give them the latitude to allow Cuban students to study from among the array of academic disciplines they offer.
  • Maintain "cash and carry" policies for food and medicine sales to the regime, and include farm machinery plus even "soft" goods like clothing . Although unlikely given the position of the current Cuban government, such principled sales open the door to U.S. commerce. However, subsidies and credits of any sort should remain out of reach for the Castro regime. Considering Castro's questionable ability to repay creditors,13 any Cuban debts to U.S. citizens or entities--including debts resulting from non-U.S. government credits--potentially will fall on the U.S. taxpayer for repayment. At the least, any change in current financing restrictions should be conditioned on Cuban market reforms.
  • Prohibit barter deals with Cuban state entities . The Dodd/Serrano measures allow for creative financing mechanisms to facilitate commerce with the regime, e.g., barter arrangements. Trade under current conditions must be conducted with state entities that are, in fact, monopolies. Not only would such arrangements solely benefit the regime, they would also support unfair labor practices and, in certain categories of goods such as citrus and tobacco, would compete unfairly with U.S. businesses.
  • Mandate a study on the impact on U.S. businesses of allowing Cuban state monopolies access to U.S. markets . Rather than only require the U.S. Department of Agriculture to study how export promotion and credit programs could increase the consumption of U.S. agricultural commodities in Cuba's limited economy, Congress should mandate an analysis of any potential harm that could result from opening trade with Cuban state monopolies, including but not limited to pharmaceuticals, medical devices, citrus, textiles, cigars, distilled spirits, and sugar.
  • Authorize microenterprise credits for independent, self-employed Cubans to buy from Americans . A helping hand for independent, self-employed Cubans is critical, even if at first this support is limited and largely symbolic.
  • Condition joint ventures on market access and labor reforms . The principal focus should be on trade between U.S. businesses and independent, self-employed Cubans. However, joint ventures with the state should be allowed as long as U.S. companies are able to hire whomever they wish, compensate their employees as they wish, and make the goods and services they produce available to all Cubans. Such criteria are similar to principles named after Cuban human rights activist Gustavo Arcos and elaborated by the Cuban Pro-Human Rights Committee, an independent local monitor. Such a provision keeps the burden of reform on the regime and shows flexibility on the part of the United States.
  • Make the easing of travel restrictions conditioned on Cuban reform . Any easing of the current travel restrictions should clearly be conditioned on an end to the state monopoly on hotel or tourist facilities and the ability of Cubans to enter and enjoy facilities now restricted to non-Cubans. Tourism has become a central component of the Castro regime's currency-generating endeavors, with the overwhelming amount of proceeds going to the state. The regime even requires Cuban resort workers to turn over a percentage of the tips they earn in hard currency in exchange for pesos at the official exchange rate. Cubans themselves are denied access to such "tourist" facilities. To the extent they can enter the hotels and resorts, it is as clerks, maids, bell captains, and prostitutes, making Cuba a premier destination for "sex tours."14 When tourism no longer exploits the Cuban people or merely enriches the regime, restrictions on travel by U.S. citizens should be lifted entirely.15
  • Working with the President, develop a set of principles for reestablishing U.S.-Cuban commercial relations . Title II of the LIBERTAD Act outlines a set of political and human rights conditions for U.S. assistance to and engagement with a post-Castro Cuba. It required a one-time report by the President to Congress on the restrictions on U.S.-Cuban commercial/economic relations that need to be addressed once a transition is underway on the island. However, the LIBERTAD Act did not articulate principles for the reestablishment of commercial relations between the United States and Cuba. With increasing attention on the Free Trade Area of the Americas (FTAA), now is a good time to develop principles, consistent with the agenda underlying the FTAA, that would allow for the incorporation of Cuba as quickly as possible into the hemispheric free trade area. Some specific principles that should be included are: open markets, the elimination of tariff barriers, real and intellectual property rights, contract rights and remedies, labor rights, environmental protections, transparency mechanisms, and the democracy clause under debate for the FTAA.

Conclusion

The U.S. policy debate on Cuba has evolved into differing approaches on how to promote political and economic change on the island. The Diaz-Balart/Helms bills seek to encourage direct interaction with and support for the Cuban people, circumventing the Castro regime to the extent possible. The Dodd/Serrano measures generally promote a commercial opening with the regime along with targeted aid to Cuban students and the removal of limits on remittances.

President George Bush has signaled an interest in "actively support[ing] those working to bring about democratic change in Cuba." Both the President and Congress are right to focus on Cuba's internal dynamics and the role the United States can play in promoting its evolution to a
participatory system of government, where equality of opportunity replaces equality of misery.

Properly restructured into a unified policy approach, some of the provisions in all four of these Cuba policy bills could allow increased assistance to flow to the victims of Castro's repressive policies, nascent microenterprises, and independent Cuban organizations. Helping the Cuban people in this manner is more likely to promote an eventual democratic transition and uphold Cuban desires for self-determination.

Daniel Fisk is the former Deputy Director of, and Stephen Johnson is a Policy Analyst in, the Kathryn and Shelby Cullom Institute for International Studies at The Heritage Foundation.

 

Endnotes

1. Title XVII of Public Law 102-484 (October 23, 1992).

2. Public Law 104-114 (March 12, 1996).

3. Commerce with the island may be risky. State buying decisions are arbitrary and there is no rule of law to help enforce contracts. The value of foreign commerce is small--estimated between $5 billion and $10 billion. And most purchases, including food, are done on credit. In 1996, Cuba had a foreign currency debt of $10 billion, according to the Banco Nacional de Cuba. See Jorge F. Pérez-López, "The Cuban Economic Crisis of the 1990s and the External Sector," Cuba in Transition , Vol. 8 (August 6-8, 1998), p. 408. More recently, it has been negotiating debt payments on $20 million worth of Chilean canned mackerel and $13 million in arrearages from the purchase of diesel engines from South Africa. See "Companies Ask Cuba to Settle Debt," Santiago Times , March 29, 2001; and "Debt Hampers Cuban Efforts to Attract South African Investment," Xinhua General News Service, April 1, 2001.

4. Public Law 106-387.

5. Hailed by U.S. farm state representatives as a groundbreaking bill, the Cuban government denounced it as "diabolical and sinister." The state newspaper Granma warned "Our country will not purchase a single cent of food and medicine in the United States." See Pascal Fletcher, "U.S. Plan to Ease Trade Embargo Enrages Cubans," The Financial Times , October 20, 2000, p. 5.

6. In September 1993, the regime legalized self-employment following the end of subsidies by the defunct Soviet Union. This tactical move allowed the regime to reduce the number of Cubans on the bloated state payroll. Since that time, the regime has alternately encouraged and repressed this small sector. There were more than 200,000 self-employed workers (or cuentapropistas ) in 1995, but their numbers have fallen to about 150,000 as the regime disallowed certain occupations and heavily taxed others. See Benjamin Smith, "The Self-Employed in Cuba: A Street Level View," Cuba in Transition , Vol. 9 (August 12-14, 1999), p. 50. For a description of how self-employment benefits the lives of those who engage in it, see Philip Peters, "Cuba's New Entrepreneurs: Five Years of Small Scale Capitalism," Alexis de Tocqueville Institution, August 1998.

7. Under current regulations, only those with family in Cuba may remit up to $300 a quarter to relatives on the island.

8. The U.S. government already provides up to $5 million a year in assistance programs designed to support internal independent organizations.

9. See Juan Carlos Espinosa, "Civil Society in Cuba: The Logic of Emergence in Comparative Perspective," Cuba in Transition , Vol. 9 (August 12-14, 1999), pp. 346-367.

10. PriceWaterhouseCoopers, "Evaluation of the USAID Cuba Program," July 21, 2000, at
http://www.usaid.gov/countries/cu/program_report (July 2, 2001).

11. See Daniel Schweimler, "Cubans Ponder Life After Castro," The Financial Times , June 25, 2001.

12. As provided for under Section 102 of the Mutual Educational and Cultural Exchange Act of 1961 (22 U.S.C. 2452).

13. Omar Everleny of the state-funded Center for Studies of the Cuban Economy is reported as saying, "If tomorrow the United States sends all the medicines and food it wants, Cuba simply doesn't have the money to pay. And in the absence of U.S. financing, I can't see foreign bankers putting up credits for Cuba to buy from the United States." Quoted in Andrew Cawthorne, "U.S. Embargo Seen Unlikely to Spur Quick Cuba Trade," Reuters, October 6, 2000. Also, Gary H. Maybarduk observes that foreign governments extending credit typically must reschedule their Cuban debt. Private vendors sometimes make a few shipments without receiving payment, then find that the regime has changed suppliers. See Maybarduk, "The State of the Cuban Economy 1998-1999," Cuba in Transition , Vol. 9 (August 12-14, 1999), p. 11.

14. See Andrei Codrescu, "Picking the Flowers of the Revolution," The New York Times Magazine , February 1, 1998.

15. Cubans who work in the tourist sector earn slightly more than other workers, but typically receive only a small portion of what foreign joint ventures must pay the government to employ them. To obtain such jobs, they must have political connections to obtain special schooling and join the Cuban Workers Confederation (CTC), which is controlled by the state. The CTC provides labor to foreign companies, preventing them from hiring workers of their choice. See Denise Sibley, "State Control and the Tourism Industry," Cuba Today , Vol. 2, No. 1 (Spring 2001), pp. 5-6.

About the Author

Stephen Johnson Senior Policy Analyst
The Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy

Related Issues: Latin America