There are times in the course of a public discussion when one comes across a presentation that encapsulates ones argument that the only thing you can do is point to it and say "What he said." This is my reaction to Mauricio Claver-Carone's testimony on Capitol Hill on September 14, 2016. I have touched on these issues in the past and how they will negatively affect U.S. taxpayers, but his testimony is the best encapsulation of the most important points surrounding this policy debate. Below is Mauricio's full statement taken from his Capitol Hill Cubans blog.
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| Mauricio Claver-Carone testifying before the House Committee on Agriculture |
Testimony House Agriculture Committee: 'American Agricultural Trade With Cuba'
The following is today's testimony by Mauricio Claver-Carone during a hearing of the House Agriculture Committee on '
American Agricultural Trade With Cuba':
Thank you, Mr. Chairman, Ranking Member and Members of the Committee.
It's truly a privilege to join you here today to discuss important and
consequential issues surrounding U.S. agricultural trade with Cuba. I
commend you for including a dissenting voice on this panel.
My name is Mauricio Claver-Carone and I'm the Executive Director of Cuba
Democracy Advocates, a non-profit, non-partisan organization dedicated
to the promotion of human rights, democracy and the rule of law in Cuba.
My testimony will be divided into two parts. First, I would like to
present key facts regarding agricultural trade with Cuba and highlight
the counter-productive trends we are seeing since President Obama
announced a new policy of unconditional engagement with the Castro
regime on December 17th, 2014. Second, I would like to focus on the
issue of financing agricultural sales to Cuba, which I understand is a
priority for my fellow panelists, with the good faith and disposition to
find common ground.
The Reality of Trade With Cuba
As you are surely aware, pursuant to the Trade Sanctions Reform and
Export Enhancement Act of 2000 (‘TSREEA’), the sale of agricultural
commodities, medicine and medical devices to the
Castro regime
in Cuba was authorized by Congress, with one important caveat – these
sales must be for “cash-in-advance.” Prior to that, the export of food,
medicine and medical devices to the
Cuban people had already been authorized under the Cuban Democracy Act of 1992 (‘CDA’).
This is an important distinction that needs to be made, for in order to
have a productive discussion about agricultural trade with Cuba, one
should understand how the island’s totalitarian regime conducts
business.
In most of the world, trade means dealing with privately-owned or
operated corporations. That's not the case in Cuba. In Cuba, foreign
trade and investment is the exclusive domain of the state, namely the
Castro regime. There are no "exceptions."
Here's a noteworthy fact: In the last five decades, every single
"foreign trade" transaction with Cuba has been with a state entity, or
individual acting on behalf of the state. The state's exclusivity
regarding trade and investment remains enshrined in Article 18 of
Castro's 1976 Constitution.
Since the passage of TSREEA in 2000, over $5 billion in U.S.
agricultural products have been sold to Cuba. It is an unpleasant fact,
however, that all of those sales by more than 250 privately-owned U.S.
companies were made to only one Cuban buyer – the Castro regime.
As the U.S. Department of Agriculture’s (‘USDA’) own report on Cuba notes, “
The
key difference in exporting to Cuba, compared to other countries in the
region, is that all U.S. agricultural exports must be channeled through
one Cuban government agency, ALIMPORT."
ALIMPORT is an acronym for Empresa Cubana Importadora de Alimentos, S.A.
It is a subsidiary of Cuba's Ministry of Foreign Trade and serves as
the sole procurement agency for U.S. agricultural products. Throughout
the years, the Castro regime has ensured the Ministry of Foreign Trade
is run by senior officials from Cuba's intelligence services (known as
Directorio General de Inteligencia, or ‘DGI’). The current Minister of
Foreign Trade is a DGI official, Rodrigo Malmierca Diaz, who is the son
of Isidoro Malmierca Peoli, a historic Castro family confidant and
founder of Cuba's counter-intelligence and state-security services.
Hence another unpleasant fact: All business decisions in Cuba are based
on the political and control-based calculations of the Castro regime --
not on market forces. If the Cuban people enjoyed property rights to
establish their businesses and were allowed to freely partake in foreign
trade and investment – my testimony today would be very different.
ALIMPORT primarily supplies government institutions, and the Cuban
military's hard currency retail stores (known as Tiendas de Recuperacion
de Divisas, ‘TRDs’), hotels and other facilities that cater to tourists
and other foreigners.
So let’s immediately debunk a myth: Financing agricultural transactions
with Cuba is not about assisting small and midsize farmers on the
island, but about financing a monopoly of the Castro regime.
Again, as the USDA itself recognizes: “
U.S. food products will be
sold and delivered to Alimport, which will take control of the imports
at the Cuban point of entry, manage distribution throughout Cuba and
coordinate payments. Consequently, U.S. agricultural firms planning on
doing business with Cuba need to learn to negotiate and transact
business with the Cuban government through Alimport.”
As a result, we already know what any further lifting sanctions towards
Cuba would look like. TSREEA sales from the U.S. and business ventures
with other nations exhibit the model: A mercantilist system whereby
commerce is simply a tool to benefit and strengthen its totalitarian
regime.
President Obama’s Policy Changes Have Proven Counter-Productive
President Obama’s policy of unilaterally easing sanctions has proven to
be counter-productive for agricultural sales to Cuba. But before
focusing on those figures, it’s important to note how President Obama’s
new policy has broadly proven to yield counter-productive results.
For example, since December 17th, 2014:
· Political arrests have intensified. Throughout 2015,
there were more than 8,616 documented political arrests in Cuba. Thus
far, there have already been over 7,935 political arrests during the
first eight months of 2016. This represents the highest rate of
political arrests in decades and nearly
quadruples the tally of political arrests throughout all of 2010 (2,074), early in Obama’s presidency.
· A new Cuban migration crisis has unfolded. The United
States is faced with the largest migration of Cuban nationals since the
rafters of 1994. The number of Cubans fleeing to the United States in
2015 was nearly
twice that of 2014. Some 51,000 Cubans last
year entered the United States and this year’s figures will easily
surpass that. The numbers of Cuban nationals fleeing the island have now
quintupled since President Obama took office, when it was less than
7,000 annually.
· Castro’s military monopolies are displacing "self-employed" workers.
There are fewer licensed "self-employed" workers in Cuba today than in
2014. In contrast, Castro's military monopolies are expanding at record
pace. The Cuban military-owned tourism company, Gaviota S.A., announced
12% growth in 2015 and expects to double its hotel business this year.
Even the limited spaces in which “self-employed” workers previously
operated are being squeezed as the Cuban military expands its control of
the island's travel, retail and financial sectors of the economy.
· Internet "connectivity ranking" has dropped. The
International Telecommunication Union's (ITU) Measuring the Information
Society Report for 2015, the world's most reliable source of data and
analysis on global access to information and communication. ITU has
dropped Cuba's ranking to 129 from 119. The island fares much worse than
some of the world's most infamous suppressors of the Internet
suppressors, including Zimbabwe (127), Syria (117), Iran (91), China
(82) and Venezuela (72).
· Religious freedom violations have increased tenfold.
According to the London-based NGO, Christian Solidarity Worldwide
(‘CSW’), last year 2,000 churches were declared illegal and 100 were
designated for demolition by the Castro regime. Altogether, CSW
documented 2,300 separate violations of religious freedom in 2015
compared to 220 in 2014. In the first half of 2016, there have already
been 1,606 separate violations of religious freedom.
· Democracy’s regional foes have been emboldened.
President Obama’s unconditional recognition and engagement of the sole
remaining dictatorship in the Western Hemisphere has sent a message to
Castro’s allies in the region that there are no consequences for rogue
and undemocratic behavior. Hence the recent militarization (with Cuba’s
support) of Venezuela's regime and the parliamentary coup in Nicaragua.
Agricultural sales have not escaped this downward trend.
Over the years, in this same Committee room, I have heard testimony
professing that an easing of sanctions; re-defining of “cash-in
advance”; improving U.S.-Cuba relations; and an increase in travel to
the island, would benefit U.S. farmers. And, as we all know, since
December 17th, 2014, the Obama Administration has engaged the Castro
regime and extended a litany of unilateral concessions.
As part of these concessions, the Obama Administration has redefined
“cash-in-advance”; eased payment terms for agricultural sales; American
travel to Cuba has increased by over 50%; Cuba’s GDP grew last year by
over 4%; diplomatic relations were established; and endless U.S.
business and trade delegations have visited Havana.
Yet, U.S. agricultural exports to Cuba plummeted by nearly 40% in 2015.
During the first quarter of 2016, the slide continued, as ALIMPORT
purchased only $63 million in U.S. agricultural products. That is an
additional 21% percent drop from the same period in 2015. These are the
lowest numbers since the United States authorized agricultural exports
to the Castro regime in 2000.
Of course, those who understand how the Castro regime operates are not
surprised -- for it has long used agricultural sales as a tool of
political influence.
As a 2007 report of the U.S. International Trade Commission (‘ITC’) confirmed: "
Alimport
reportedly initiated a policy in 2003 that limited or ceased purchases
from U.S. companies that did not actively lobby the U.S. government for
changes to laws and regulations regarding trade with Cuba. Purchases are
also allegedly geared to particular U.S. States or Congressional
districts in an effort to heighten local interests in pressing the
Administration to normalize trade with Cuba."
Today is no different. The Castro regime wants the U.S. Congress to lift
tourism, financing and investment sanctions that would overwhelmingly
benefit its military monopolies, so it is putting on the squeeze.
Financing Agricultural Sales to Cuba
We will surely hear testimony today about Cuba being one of the U.S.’s
largest export markets pre-1959 and how we need to “recapture” it.
Politics aside, I would caution that Cuba’s economy is nowhere near the
same today as it was throughout its pre-1959 history, when it was
free-market oriented, with a dynamic private sector, property rights,
and among the largest middle class and highest per capita income in
Latin America at the time. Today, Cuba is a totalitarian dictatorship,
with a centralized control economy and the lowest per capita income in
Latin America.
We will also surely hear testimony about Cuba purchasing rice from
Brazil and Vietnam, instead of from the United States, as a result of
the prohibition on U.S. financing for agricultural sales. But I would
caution that Brazil and Vietnam’s rice sales to the Castro regime are
heavily state-subsidized and made pursuant to political arrangements.
They are not based on competitive terms and rates. I would further argue
that the recent downfall of the socialist government in Brazil -- and
its shady financing deals with the Castro regime that are currently
under investigation by the Brazilian authorities -- may lead to a bigger
increase in U.S. rice sales to Cuba than anything the U.S. Congress
could do.
Finally, we will surely hear many theories and estimates about how much
more money one commodity sector or another -- or one state or another --
can make from exports to the Cuba, if U.S. sanctions were further eased
or lifted. However, as we’ve learned from the dramatic decline in
agricultural sales figures over the last year -- despite the Obama
Administration easing of sanctions and establishing diplomatic relations
with the Castro regime -- that is hardly guaranteed.
Let me be absolutely clear. Those of us who support sanctions and oppose
the financing of transactions with the Castro regime do not do so with
the intent of harming American farmers. Conversely, I know that American
farmers do not seek to sell their products with the intent of
supporting or subsidizing the Castro regime.
American farmers are the best in the world and we all share their desire
to establish and expand markets. As a matter of fact, I’m sure
Cuban-Americans in Florida consume more rice than any amount ever sold
to Cuba pre- or post-1959. However, the agricultural groups represented
here today remain steadfast in their desire for the financing of
agricultural sales to Cuba and there is even legislation before this
Committee to that end.
But any such proposition must be weighed by serious factual
considerations regarding the troubling structure of Cuba’s business
entities (military-run monopolies), its beneficiaries (the Castro family
and regime cronies), the rights of its victims (both Cubans and
Americans), and whether such practices are in the U.S.’s security
interests.
Thus, the question comes down to: How to authorize private financing for
U.S. agricultural sales to Cuba without subsidizing its derelict regime
and in a manner consistent with U.S. security interests and the rights
of victims?
We are obviously not going to resolve this challenge today. But
hopefully, this discussion can be helpful in understanding each other’s
concerns and in highlighting important safeguards that could address
broader policy implications.
These safeguards fall into three categories:
1. Protect American Taxpayers.
Cuba ranks among the world's worst credit-risks and debtor nations.
Moody's Investors Service gives Cuba's sovereign debt a Caa2 rating,
which translates into "very high credit risk."
Despite highly publicized (and politicized) debt forgiveness concessions
from Russia and the Paris Club, Cuba still owes upward of $75 billion
to a long international list of creditors. As recently as 2010,
Reuters
reported how Cuba “failed to make some debt payments on schedule
beginning in 2008, and then froze up to $1 billion in the accounts of
foreign suppliers by the start of 2009." That should make anyone unwise
enough to leave money sitting in a Cuban bank account reconsider.
And just a few months ago, on July 8th, 2016, General Raul Castro
stated, in his own words: "I should recognize that there have been some
delays in current payments to creditors."
I am confident we all agree that American taxpayers must not be exposed
to any direct bailout of the Castro regime. It is for this reason that
TSREEA includes a prohibition (Sec. 7207(a)) on United States
assistance, which reads:
“
No United States Government assistance, including United States
foreign assistance, United States export assistance, and any United
States credit or guarantees shall be available for exports to Cuba.”
But American taxpayers should also not be exposed to any indirect
bailout of the Castro regime. Thus, TSREEA should further be
supplemented by a prohibition in the Internal Revenue Code that would
prevent any losses stemming from commercial transactions with Cuba’s
regime -- pursuant to Obama’s policy changes -- from being deducted when
calculating business taxes.
2. Protect American Victims of Stolen Property.
According to the
Inter-American Law Review, the Castro regime’s confiscation of U.S. assets was the “
largest uncompensated taking of American property by a foreign government in history.”
Unfortunately, President Obama's policy of expanding business
transactions with the Castro regime is already encouraging American
companies to traffic and exploit properties stolen from other fellow
Americans. Any expansion of such transactions by the U.S. Congress would
further expose American victims.
There are nearly 6,000 unpaid, certified claims, worth nearly $7 billion
arising from the Castro regime’s confiscation of American-owned
business and properties. They include many of the ports and other
infrastructure used for agricultural exports to Cuba.
American farmers understand the importance of property rights. Property
is the very core of farming. As such, it is easy for farmers to
appreciate the injustice of having your property stolen, and then
coopted, exploited and marketed to someone else to the benefit of the
thief. This injustice must be corrected and resolved for the victims.
Part of that solution will involve restitution from those collaborators
who have knowingly benefited from the theft. The injustices occurring
today in Cuba regarding confiscated property must be resolved; U.S. law
promises that it will, and it is not just the Castro regime that is on
the hook.
It is for this reason that Section 103 of the 1996 Cuban Liberty and
Democratic Solidarity Act (‘Libertad Act’) contains a prohibition on the
indirect financing of Cuba, which states:
“No loan, credit, or other financing may be extended knowingly by a
United States national, a permanent resident alien, or a United States
agency to any person for the purpose of financing transactions involving
any confiscated property the claim to which is owned by a United States
national.”
The American victims of stolen property in Cuba must not only remain
protected from any financing involving their property, but they should
be provided recourse.
Unfortunately, President Obama is denying any recourse -- through his
waiver of Title III of the Libertad Act -- to Americans who are now
seeing their property rights trampled upon by other fellow Americans.
That used to be unimaginable. If the Obama Administration is unwilling
to protect the rights of grieved Americans, then a private right of
action should allow for the victims to do so directly through the rule
of law.
As such, the U.S. Congress should pass legislation to end the
President’s waiver authority over Title III of the Libertad Act and
grant Americans the legal standing to pursue justice.
3. Prevent Support for Cuban Military Entities.
Today, the Cuban military owns and operates one of the largest
conglomerates in Latin America, known as the Grupo de Administración
Empresarial, S.A., or GAESA. Its portfolio includes companies that
dominate ports, trade zones, tourist attractions, restaurants, hotels,
real estate, retail stores, currency exchanges, gas stations, airlines,
and other transportation services. Its head, Gen. Luis Alberto Rodriguez
Lopez-Callejas, is Raul's son-in-law.
Far from empowering Cuba’s small sector of "self-employed" residents,
the Castro regime is taking full advantage of President Obama's new
policy to accelerate the military's holdings of every entity poised to
benefit from current U.S.-Cuba relations.
As an
Associated Press report this weekend confirmed: “the
[Cuban] military's long-standing business wing, GAESA, assumed a higher
profile after Gen. Raul Castro became president in 2008, positioning the
armed forces as perhaps the prime beneficiary of a post-detente boom in
tourism. Gaviota, the military's tourism arm, is in the midst of a
hotel building spree that outpaces projects under control of nominally
civilian agencies like the Ministry of Tourism. The military-run Mariel
port west of Havana has seen double-digit growth fueled largely by
demand in the tourism sector. The armed forces this year took over the
bank that does business with foreign companies, assuming control of most
of Cuba's day-to-day international financial transactions, according to
a bank official.”
Let there be no doubt, the Cuban military is already encroaching into
the U.S. agricultural trade sphere, which is currently under the
direction of the nominally-civilian Ministry of Foreign Trade. However,
if Congress were to authorize any financing for agricultural sales to
Cuba, I guarantee that GAESA would absorb ALIMPORT as swiftly -- with no
legal process and lack of transparency -- as it recently did
Habaguanex, S.A. and Banco Financiero Internacional. (Both were the
focus of the
AP story referenced in the prior paragraph).
With great foresight, just a few months after President Obama announced
his new Cuba policy, the Chairman of the House Intelligence Committee,
U.S. Rep. Devin Nunes (Cal.), and the Chairman of the House Armed
Services Committee, U.S. Rep. Mac Thornberry (Tex.), anticipated this
trend and introduced the
Cuban Military Transparency Act (H.R.
2937), which seeks to ensure that any increase in resources to Cuba --
pursuant the Obama Administration's recent policy changes -- truly reach
the Cuban people and are not funneled through the Castro regime's armed
forces.
After all, these are the same Cuban armed forces that recently held a
stolen U.S. Hellfire missile for nearly two years; that have been caught
twice internationally-smuggling heavy weaponry, including the worst
sanctions violations ever to North Korea; that oversee the most
egregious abuses of human rights in the Western Hemisphere; that are
subverting democracy in Venezuela and exporting surveillance systems and
technology to other countries in the region; that welcome Russian
military intelligence ships to dock in their ports; that share
intelligence with the world's most dangerous anti-American regimes; and
of which three senior Cuban military officers remain indicted in the
United States for the murder of four Americans.
As such, I would urge that this important piece of legislation,
introduced by your national security counterparts, remain the priority
of any Cuba policy consideration by the U.S. Congress.
Mr. Chairman, this concludes my testimony. Again, I thank you for the
opportunity to testify today. I look forward to continuing this
important discussion and working in furtherance of our common interests.
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