Tuesday, January 26, 2016

U.S. Treasury Cuba Announcement in brief: "U.S. taxpayers get ready to pick up the tab for the Castro regime."

"They’re normally like chupacabras.  The only thing they’re looking for is someone to give them money for free." - Vicente Fox, Former Mexican President, in 2015 on the Castro regime

Today's press release from the Treasury Department appears innocuous titled: "Treasury and Commerce Announce Further Amendments to the Cuba Sanctions Regulations"  as does the "subheading Amendments Further Implement President Obama’s Policy Related to Easing of Sanctions on Cuba."  However the devil is in the details reproduced below from paragraph six:

Removing financing restrictions for most types of authorized exports.
  • Restrictions on payment and financing terms for authorized exports and reexports, except for agricultural commodities and agricultural items, will be removed, and U.S. depository institutions will be authorized to provide financing, including, for example, issuing a letter of credit for such exports and reexports.  Currently, payment and financing terms for all authorized exports are restricted to cash-in-advance or third-country financing.  Effective January 27, 2016, examples of permissible payment and financing terms for authorized non-agricultural exports and reexports will include: payment of cash in advance; sales on an open account; and financing by third-country financial institutions or U.S. financial institutions.  OFAC is required by statute to maintain the existing limitations on payment and financing terms for the export and reexport of agricultural commodities and agricultural items. 
The United States is the only country in the world that since 2000 has had a cash and carry arrangement with the purchase of agricultural and pharmaceutical products.Under this arrangement American companies sold over $5.2 billion to the Castro regime. This arrangement protected U.S. taxpayers from having to subsidize the dictatorship when it defaulted on its financial obligations.

How did the Castro regime raise the money to purchase U.S. goods?

James Prevor, President and Editor in Chief of the publication Produce Business in October of 2002 in the article, Cuba Caution, reported on how Cuba "had exhausted all its credit lines and, at best, was simply rotating the accounts. When the opportunity came to buy from the United States, Cuba simply abandoned all those suppliers who supported the country for 40 years and began buying from us."  The suppliers were not the ones impacted by Cuba's failure to pay its debts, the taxpayers of the suppliers' home countries were the one's left holding the tab.  

For example in December 2015 it was announced that Spain would forgive $1.88 billion that the Castro regime owes it. In December of 2013, Russia and Cuba quietly signed an agreement to write off 90 percent of Cuba's $32 billion debt to the defunct Soviet Union, a deal that ends a 20-year squabble. Canadians have had to pursue Cuban maritime debts seizing Cuban vessels and negotiating payment through Canadian courts. On November 1, 2013 the government of Mexico announced that it was ready to waive 70 percent of a debt worth nearly $500 million that Cuba owes it. The former president of Mexico Vicente Fox protested the move stating: “Let the Cubans get to work and generate their own money…They’re normally like chupacabras.  The only thing they’re looking for is someone to give them money for free.”

Trade with the Castro regime peaked under the Bush administration and has crashed under the Obama administration. The Treasury Department's announcement today means that the United States will join the rest of the world in financing the Castro regime.

While the U.S. Chamber of Commerce touts the virtues of free trade, free markets and free enterprise in its advocacy for lifting economic sanctions on Cuba what it is actually pursuing is trade with the Cuban government that passes the risk of not getting paid on to taxpayers.  Darío Fernández-Morera an associate professor at North Western University in the May 1, 2014 issue of Chronicles in the article The Cost of Normalization reports that the Small Business Exporters Association announced 
"since March 2009, a select group of commercial banks now will be able to offer terms of 180 days to five years on federally-guaranteed loans to the foreign buyers of U.S. exports without having to obtain prior federal approval.  ... Because of the foreign risks involved  in export lending, most commercial banks through-out the world do not make these loans without government guarantees. In the U.S., the guarantees are provided by the Export-Import Bank of the United States (Ex-Im Bank), a federal agency.
This will mean that the Chamber of Commerce and Agriculture lobby will sell to the Cuban dictatorship and have the taxpayers pick up the tab if anything goes wrong.  The record with other countries over the past half century indicates that the Castro regime will default on what it owes. On April 23, 2014 Moody's Investor Service downgraded Cuba's already poor credit rating to Caa2 from Caa1which Nasdaq defines as follows: "Obligations rated Caa2 are judged to be of poor standing and are subject to very high credit risk."  

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