No Bailout for Castro, Inc.
‘Tis the season for bailouts, or so it seems. Executives from the financial and automotive sectors have their hands out. The same executives tell us that we have an obligation to provide our hard-earned tax dollars to prop up their businesses despite years of questionable decisions on their part.
To those of us who follow Cuba closely these arguments are nothing new. The executives of Castro, Inc. and their public relations arm in the U.S. have been asking for a similar bailout for years. They want to see the last vestiges of America’s trade embargo on Cuba removed. Like the CEOs of the big three U.S. automakers, Raul Castro, the Chairman of Castro, Inc. likes to fly around in luxury jets despite the disastrous state of his venture.
Opponents of the bailouts here in America warn of the “moral hazard” created when we insulate people and companies from the negative consequences of bad decisions and bad behavior. After all, how are banks going to learn who not to give loans to if they never have to foot the bill when the loans go into default? The same with the automobile manufacturers, how are they to ever change their cost structure to compete in the real world if they are subsidized?
For going on fifty years Castro, Inc. has mismanaged Cuba into the ground following a Marxist economic model. Russia has had to write off more than $20 billion in Soviet era Cuban debt and today Venezuela’s Hugo Chavez is Cuba’s lender in chief though the regime owes money to almost every country it trades with except the United States despite America being Cuba’s top food and agricultural supplier. That’s because current U.S. policy requires Cuba to pay for its purchases up-front with cash, a policy that surely irks Cuba’s creditors around the world.
Additionally American firms are prohibited from investing or operating in Cuba, a policy they may not like but should be thankful for. One of Cuba’s largest private sector trading partners is the Canadian firm Sherritt International. Castro, Inc. currently owes Sherritt in excess of $400 million. Incidentally, Sherritt operates mining enterprises that were expropriated from American business interests in the early 1960s. Such expropriations without compensation were what led to the implementation of the embargo to begin with.
Though President Elect Obama promised to lift family travel and remittance restrictions for Cuban-Americans he also promised Cuban exiles that he would not lift the embargo since it is an “inducement to change” on the island. But President Obama will be under a lot of pressure to do just that. Already activists are saying that Obama’s proposed modifications to Cuba policy don’t go far enough and that a full-fledged bailout of Cuba is required. They want to see American tourists frolicking on the beaches of a police state and American business interests as minority partners in joint ventures with Castro, Inc. These are the same terms and conditions Cuba currently enjoys with regard to nearly every other country in the world.
Proponents of the bailout claim that contrary to the substantial evidence available from observing these business dealings that American involvement in Cuba’s economy will somehow magically be different from Spanish, Canadian, French or British involvement. The truth is that these countries and others have provided a significant moral hazard to Castro, Inc. for years now. The regime in Havana has manipulated these countries, their leaders, and their corporations while refusing to implement the most basic and obvious reforms and now they’d like to do the same to the United States.
Why would anyone believe that a post-embargo Castro, Inc. tomorrow would be wiser and more benevolent than the cruel and inept Castro, Inc. of today? The Cuban economy is estimated to be 90% state controlled. Supposing that the regime should find itself awash in Yanqui greenbacks, what makes anyone believe that it will allow any more of them to trickle down to the people than currently?
Recently the European Union dropped 5 year-old sanctions against Cuba that were put in place when 75 Cuban dissidents were rounded up and imprisoned in what is known as the “Black Spring” of 2003. Castro, Inc. agitated for removal of the sanctions, because they impeded an economic cooperation agreement, and finally got their wish without conceding a single thing. Today more than 55 of the original 75 prisoners remain behind bars, forgotten during the course of the most recent European bailout.
Proponents of the U.S. bailout believe that if we only lift the embargo that the executives of Castro, Inc. will see the light and in fact they blame the embargo for the sorry state that Cuba finds itself in today. But the embargo did not cause much of Cuba’s arable land to be overrun by an invasive weed called marabú, only incompetence did. The embargo does not cause the regime to imprison political opposition and independent journalists, the fear of free thought does.
The answer for Castro, Inc., just like General Motors, does not lie in a U.S. bailout (ultimately paid for with taxpayer dollars when Castro, Inc. defaults on its obligations); it’s bankruptcy and reorganization, even better in the case of Castro, Inc., dissolution.