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Castro In Trouble By: Mark Falcoff
FrontPageMagazine.com | Thursday, August 01, 2002

The bad news from major South American countries has helped keep Cuba on the back pages of American newspapers. Until recently there was good reason for the lack of attention paid to that country. The crisis growing out of the collapse of the Soviet Union more than a decade ago seemed to have passed, thanks to legalization of the dollar and the opening of the island to tourism and (in some areas) to limited foreign investment. While such expedients did not replace the $6-billion-plus annual subsidy from the Soviet Union and its satellites, they did provide the Castro regime with a crucial lifeline. All that remained, apparently, was to await the softening of the U.S. position — the lifting of the trade embargo and the normalization of relations — and all would be smooth sailing.

This optimism was further encouraged at the end of the 1990s by the affair of Elián González — a controversy that pitted a six-year-old boy's father against the boy's Miami relatives, both of whom claimed him after he survived a perilous journey on a raft across the Florida straits in which almost all other passengers, including his mother, had perished. During the ensuing weeks and months in which the case made its way through the U.S. federal courts, the Cuban government was able to cull numerous political benefits. For the first time in many years, the crowds demonstrating in Havana and other Cuban cities apparently required no artificial stimulus whatever to work themselves up into paroxysms of righteous indignation and nationalist fervor against the United States. And for the first time ever, the Castro regime found itself supported on a crucial issue by both the U.S. government and the broad American public. The big loser was the Miami exile community, which after nearly two decades of virtually controlling the Cuban agenda of the United States, suffered a major public relations disaster.

Meanwhile, the number of American businessmen, politicians, and celebrities of various kinds visiting Havana and endorsing the Cuban government's point of view on the trade embargo (and sometimes on other subjects as well) has continued to mount. In the year 2000 alone, more than 3,400 business leaders from the United States visited the island, including delegations from port cities with a long history of trading with the island before the 1959 revolution — New Orleans, Jacksonville, Houston, and Baton Rouge. Furthermore, in the U.S. Congress, representatives from the farm belt in both parties — led by Senator Byron Dorgan (D-N.Dak.) — were leading the charge to resume the sale of agricultural commodities to the island. Since Cuba is broke, these sales would have to be financed with soft credits that, in the event of default, would have to be paid for by the U.S. taxpayer, an expedient that Senator Dorgan and his farm-state colleagues seem perfectly willing to countenance.[1] That explains how American agricultural producers and exporters can argue with a perfectly straight face that the embargo is depriving them of a huge economic opportunity.

Until President George W. Bush's speech in Miami on May 20, in which he insisted that significant movement toward democratization would have to precede normalization of relations, Cuban government officials at all levels were probably justified in reading these events as a sign that the U.S. embargo was about to be lifted. Indeed, the Cuban tourist ministry had even gone so far as to book space at an important travel industry trade fair in Los Angeles in early summer on just that assumption. Although Cuban information about the United States should be unrivaled — Castro's intelligence services are certainly the best in Latin America, and their penetration of American institutions probably goes further and deeper than do those of any other foreign country — they missed several points, including the checkmate delivered by the Cuban community in Florida. Its response to the Elián affair was to turn out in nearly record numbers to vote for George W. Bush in the November 2000 election — the closest presidential race in more than a hundred years, one in which many Miami Cubans may well be justified in believing was resolved by their desire to take revenge on the Clinton administration for the Elián affair. Quite apart from what President Bush and his supporters regard as a matter of high principle, it was payback time.

The Dwindling Appeal of Castro's Nationalism

Paradoxically, it is by no means certain that Fidel Castro wants to see the U.S. trade embargo lifted, much less the establishment of normal relations between Washington and Havana. True, this is the stated position of his government, his diplomats, and his apologists near and far. But a more subtle and sophisticated analysis would suggest that what he really enjoys is conflict with the United States. Indeed, without it, Cuba's international significance shrinks to that of a slightly larger version of the Dominican Republic. Unfortunately for Castro, the more recent efforts to rouse the Cuban population to ire at the "Colossus of the North" have been far less successful than during the glory days of the Elián case. For example, assiduous efforts to replicate the same degree of indignation over the trial and conviction for espionage of five Cuban agents in Florida have fallen flat, as have attempts to produce a massive repudiation of the Varela Project, a dissident initiative made known to Cubans earlier this year by former president Jimmy Carter during his visit to the island. True, more than 98 percent of Cubans have apparently supported Fidel Castro's riposte to the Varela Project — a referendum of sorts that makes socialism "untouchable" now and forever. But no one who knows the country well can believe that this represents a genuine consensus.

Even the other Latin American countries are proving far less susceptible to Castro's nationalist appeals than in the past. At the most recent meeting of the United Nations Commission on Human Rights in Geneva, for example, a resolution condemning the island for its repressive practices (admittedly, while also somewhat gratuitously congratulating it for its "achievements" in health, education, and other social "rights") received the support not only of France, Italy, Spain, Great Britain, and Portugal, but also of Argentina, Chile, Costa Rica, El Salvador, and — for the very first time — Mexico. (The sole Latin American dissenter, closing ranks with some of the most hideous regimes of Asia and the Middle East, was Venezuela, whose president, Hugo Chávez, is engaged in a pathetic and so far outstandingly unsuccessful attempt to replicate Castro's revolution.)

More important still, the events of September 11, 2001, have underscored once again just how dependent Cuba remains on the United States. Travel worldwide took a sharp dip after the terrorist attacks on Washington and New York, and Cuba is no exception; at present tourism to the island — its major source of foreign exchange — is down by 20 percent. And remittances from the overseas Cuban community, variously estimated at between $400 million and $1 billion a year, have likewise declined.

The Economy: From Grim to Grimmer

Over the past decade much nonsense has been written about Cuba's near-miraculous economic recovery since 1989. Unquestionably the country's economic growth rates between 1995 and 1999 were significant, but only because they were compared to the previous five years, during which the gross national product dropped by 40 percent. On the other hand, many commentators have ignored or overlooked important qualitative aspects of the Cuban economy. In the first place, apart from remittances, almost all of the new infusions of hard currency have come from tourism, a necessarily volatile and often unpredictable source. Moreover, the total dollar amounts obtained from this sector are far less significant than the portion that Cuba keeps. By the regime's own calculations, some 22 cents of every tourist dollar remain on the island. (This is so because almost all the inputs, including food, have to be imported.) Thus to replace the $6 billion Cuba used to receive from the Soviets, the island would have to gross more than $24 billion in tourist receipts. This is plainly impossible, since Mexico, with a far larger and more sophisticated infrastructure, and also a more varied and interesting program of attractions, does not quite gross $8 billion.

In the second place, lately almost half of Cuba's hard currency earnings have been devoted to buying oil-with cash on the barrelhead, at world prices. (The oil-for-sugar agreement with the Russians ended in 1999.) True, in the same year President Chávez stepped into the breach to offer Cuba Venezuelan oil under extremely favorable credit arrangements. Even so, at the time of the failed coup of April 11 this year — in which the opposition and elements of the armed forces almost succeeded in deposing Chávez — Cuba was already several months behind in its payments to Venezuela. Moreover, since then no Venezuelan oil has been shipped to Cuba, since the Venezuelan navy refuses to carry it. Consequently, the price of gasoline has doubled in Cuba during the past two months.

Third, investment in capital stocks in Cuba virtually disappeared in 1989 and has not resumed. As a result, machinery is wearing out with no possibility of immediate replacement; spare parts are also in very short supply. For example, many of the electrical pylons knocked down by Hurricane Michelle last year have not been restored to service because of nonexistent inventories of replacements. This situation underscores a basic fact about the Castro regime: even its apparent survival is mortgaged to the cannibalization of existing facilities, and in the long term (or perhaps the not-so-long term), this expedient will not prove sufficient.

Making matters worse, Hurricane Michelle in 2001 wreaked horrible devastation in key parts of the island, particularly in the province of Matanzas, where much of Cuba's sugar is produced. Even without the physical devastation, Cuba's sugar industry is entering a near-terminal phase. A combination of depressed commodity prices, unusually high interest rates from European banks, and mediocre harvests have rendered the industry useless as a source of foreign exchange. Perhaps not surprisingly, a few weeks ago Castro announced the closing down of nearly half the island's mills, putting 100,000 Cubans out of work. How such people will survive is a deeply troubling question. They cannot all go into jobs in the tourist sector, since many of these mills and their adjoining communities lie far outside the area with attractions of interest to foreign visitors.

How Castro Hangs On — and Might Continue to Do So

One of the questions most frequently asked about Cuba is how a regime that has performed so miserably in the economic sphere can enjoy such a placid domestic political environment, particularly when so much of the rest of the Latin American continent seems in turmoil. Evidently, the country's repressive apparatus is without equal in Latin America. Quite apart from the fact that it possesses no independent press, trade unions, or political parties, Cuba has raised intimidation of opponents, real or imagined, to a high art form. The willingness of the United States — under the 1994 migration agreements — to take a minimum of 20,000 dissatisfied Cubans off Castro's hands each year eases his task of governance. The rising tide of support in the United States for lifting the trade embargo — a tide that has not yet crested, but of which ordinary Cubans are kept very fully informed in the state-controlled media outlets — allows many to imagine that a magical solution to the country's problems is just around the corner. And finally, fear of the future — one in which, as Cubans are often told, the Miami exile community will return to reclaim its properties — is enough to give pause to many, particularly the elderly.

On the other hand, unless a good break comes soon — a resumption of Venezuelan oil shipments, a sudden influx of new investments or new waves of tourism, a lifting of the travel ban by the U.S. Congress, or some combination of these — Cuba might well find itself sinking into a morass almost as deep as the one into which it descended in the early 1990s. One way out might be an extension of the extremely modest economic reforms that Castro reluctantly enacted in 1994 and 1995. To revisit that project would be extremely unpleasant for the Cuban dictator, who is viscerally opposed to devolution of economic power to ordinary citizens. He understands full well that as long as people are dependent upon his regime for their basic necessities, most will be pliable subjects. Economic independence threatens to render ordinary Cubans a bit unmanageable. On the other hand, circumstances — and saner counsels around him — forced his hand seven years ago, and they might again now, with political consequences no one can quite foresee.

Another alternative would be to deliberately unleash a new wave of migrants to the United States. Castro has played this card before, most notably in 1980 and again in 1993, both times with considerable success. To be sure, the 1980 crisis did reveal to the entire world a surprisingly deep current of dissatisfaction on the part of ordinary Cubans with their revolution. But many years have passed, and our elite media and much of our policy community is already prepared now with well-rehearsed arguments placing much if not most of the blame on President Bush's alleged subservience to the Miami exile community rather than on Cuba's political and economic system.

On the other hand, perhaps some other event like the Elián González case will come to Castro's rescue. It had better do so quickly, however, before Cuba's quiet crisis gathers enough steam to push Argentina, Brazil, Colombia, and Venezuela off the news pages.


1. Last year Cuba defaulted on $500 million in short-term loans to various Western creditors; France and the Netherlands have actually frozen Cuban credit for nonpayment of arrears.

MARK FALCOFF is a resident scholar at the American Enterprise Institute. The present article is adapted from his new book Cuba the Morning After: Normalization and Its Discontents to be published in September by the AEI Press.

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