Tavakoli Structured Finance, Inc.

The Financial Report

By Janet Tavakoli

Should We Help End Cuba’s ‘Special Period’?

What is it like to live in a country where the government has been accused of torture, fickle application of the law to imprison citizens, unfair courts, repression of journalists, and a huge prison system? I’m not talking about the United States—in case you thought I was—I’m talking about Cuba.

That’s the question that ran through my mind as I read Havana Lost, a new thriller by my friend Libby Hellmann, former president of the Midwest chapter of Mystery Writers of America and National President of Sisters in Crime. She deftly weaves a story of the Chicago Mafia and its ties to Cuba spanning several generations.

Libby’s descriptions of rich and poor bring into sharp relief how people struggle through poverty while making a life for themselves in a beautiful and decaying country challenged by revolution, repression, and the longest trade embargo in modern history.

Cuba’s Finest Exports

Dr. Ricardo V. Enriquez, a Cuban-American, was my first obstetrician/gynecologist. He looked at my maiden name, smiled in surprise, and said: “I knew your father. He helped me when I came to the United States!”

My father had given my mother a new car, and then sold her old one to Dr. Enriquez for a song. He knew the young Cuban immigrant wasn’t earning much at the time. My feeling of anonymity was gone, but Dr. Enriquez was a wonderful physician, and he remained my only doctor until I moved to another state.

Dr. Enriquez came to the U.S. in 1955 for his internship and residency. When Fidel Castro rose to power in 1959, he decided to stay in the United States. He was proud to be Cuban and was resolutely against Cuba’s repression of its people. Cuba’s loss was very much our gain. He raised a large family and practiced medicine until his death from a heart attack at the age of 70 in 1999.

One of my university pals was a Cuban-American woman who fled Havana with her sister as a child. The girls spent years in U.S. foster care until an aunt escaped and took them in. It’s saying something that her parents viewed the problematic U.S. foster care system as safer than raising their daughters in Cuba. My friend studied mathematics and became a consultant.

Despite Chicago’s long winters, and social and economic problems, we are free to express ourselves and enjoy opportunities that are beyond one’s reach in Cuba, no matter how much effort you exert. Repression crushes the human spirit. I was reminded of that in Hellmann’s well-researched novel.

Cuba Languishes In the U.S. Penalty Box

The U.S. still has Cuba by the short hairs. During the Cold War, Cuba got into bed with the Soviet Union. We originally imposed a soft embargo by reducing sugar purchases in 1958 during conflict between Fulgencio Batista’s regime and rebels. The Soviet Union bought the sugar, and Cuba stepped up nationalization of U.S. property.

The Kennedy era saw the Bay of Pigs fiasco and the Cuban missile crisis. Kennedy imposed more trade restrictions on Cuba and drove up the cost of any country doing business with Cuba by restricting the use of U.S technology. By 1963 the U.S. had imposed a full-fledged embargo. 

But that still wasn’t enough. The U.S. passed the Cuban Democracy Act in 1992 and the Cuban Liberty and Democracy Solidarity Act in 1996 stating that foreign companies that do business with Cuba can’t do business with the U.S. Our claim is that Cuba owes us $6 billion, and doing business with Cuba is trafficking in stolen property.

When I spoke to Libby about her research, she remarked that after the Soviet Union fell in 1991, the Council for Mutual Economic Assistance (Comecon) led by the Soviet Union also ended. Meanwhile, the U.S. kept in place the financial and economic embargo it imposed in 1960. As a practical matter, U.S. businesses that supply one-fifth of Cuba’s imports get paid in cash. Cuba has no credit with the U.S. The result? Cuba has been languishing through a severe depression that makes our “Great Recession” look like the Gilded Age.

In the early years of the Periodo Especial, a term coined by Castro but worthy of Joseph Goebbels, the average adult Cuban lost 20 pounds. While not as acute as the 1990’s, the special period has dragged on now for 22 years.

Cubans are ruled by Fidel’s brother, General Raul Castro Ruz. You can vote at age 16, yet somehow Cubans haven’t managed to vote him out. The communist-led population of 11 million holds a disproportionate number of dirt poor, albeit literate, people. Hellmann’s travel to Cuba revealed an active barter economy, especially with produce from organic farming.  But no one would say the economy is thriving.

Political dissent is harshly suppressed, and violation of human rights is “flagrant,” according to the European Union. Only China outdoes Cuba when it comes to imprisoning journalists.

Cubans still have to ask permission of their government to travel to and from Cuba. Even digital communication is under government control. Computer ownership is restricted, and internet use, for the most part still dial-up, is spotty. However, Cuba seems to be loosening internet restrictions, or perhaps government operatives are just reading email faster. Libby’s emails to and from Cuba are no longer delayed for days.

Cuba’s Potential Energy Crunch

Cuba is still hard pressed for oil. It’s difficult to operate cars, tractors, or to pay for insecticides and fertilizer. You still see fields plowed by oxen, and many Cubans live in huts and squalor. Tourism helps boost the economy, and there are fewer restrictions on car ownership, property, and small businesses, even if those businesses are heavily taxed. But foreign ownership is not allowed.

Cuba imports oil from Venezuela, but Cuba lost its top ally when Hugo Chavez died in March. His sweetheart deal with Cuba gave her 110,000 barrels of oil per day, two-thirds of Cuba’s imports, in exchange for services from Cuba’s skilled labor, including medical professionals. Not only did Chavez’s passing exacerbate Venezuela’s economic problems, it created more uncertainty in Cuba.

Zarubezhnhneft, a Russian state-owned oil company announced in March that it would give up exploration on Cuba’s north coast for a year. It’s currently Cuba’s only hope for oil exploration.

Perhaps that’s an opportunity for the Unites States. The U.S. geological survey estimates 4.6 billion barrels off Cuba’s north coast. Cuba estimates reserves at 20 billion barrels.

That’s tiny compared to Saudi Arabia’s estimated reserves of 267 billion and Venezuela’s 297 billion barrels, but Cuba’s peak consumption year in 2004 was only about 84 million barrels. Development would be a boon to its economy. Moreover, earning more hard currency through conventional trade of goods and services with the U.S. would give Cuba more flexibility to acquire fuel from outside sources.

Should the U.S. End the Embargo?

The embargo with Cuba is unpopular with Europe and with the UN. The U.S. Chamber of Commerce estimates the embargo costs the U.S. over $1 billion per year in lost trade. Cuba estimates it costs the communist-led island $62 per Cuban per year, representing more than three months’ salary for the average Cuban.

The death of Hugo Chavez may leave Cuba in need of new allies. Perhaps it’s time to negotiate a pact with Cuba: political reforms in Cuba in exchange for trade leniency from the U.S. In the process Cuba might regain her footing, and the U.S. might reap a significant political and economic opportunity.

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