Last week, The Cipher Brief sat down with Jaime Suchlicki, the Director of the Institute for Cuban and Cuban-American Studies at the University of Miami, to discuss the impact of the recent changes to U.S.-Cuba relations. His primary advice to U.S. businesses: “caveat emptor," which Professor Suchlicki translated as "beware before you put your money.”
TCB: You have been an outspoken critic of normalizing relations of the U.S. & Cuba. Why?
JS: It is an ill-advised policy that provides major concessions to Cuba and demands very little from the Castro’s. We have recognized a military dictatorship in Latin America, which we haven’t done in 40 years. Second, we removed a dictatorship from the terrorist list, while Cuba remains one of the main allies and supporters of Iran. And third, we have provided Cuba more money and more tourism and received nothing in exchange.
TCB: So, in your view, the deal is lopsided at the very least?
JS: Absolutely. I would have much more preferred that the U.S. waited until the disappearance of the Castro brothers and then offered those concessions to the military in Cuba to try to normalize relations with a group that may be more willing to provide change and concession. Having given all of these concessions ahead of time, we have very little to negotiate with the military later.
TCB: What impact will the normalization have on the Castro regime? What do you think Castro’s calculus is, the end game of the government?
JS: The end game of the Castro regime is survival. They would like to smooth a succession to some of the other leaders in Cuba. Cuba is controlled by the military. The politburo of the Communist party is 15 members, out of which nine are military. Most of the Cuban businesses, 65% of them, are in the hands of the military. These people don’t want a transition. What they want to ensure is that there is a peaceful succession to the heirs, to their friends.
TCB: Will this have any beneficial impact on either the Cuban economy or, frankly, the Cuban people?
JS: It has very little impact or no impact on the Cuban government. It will have some impact on the Cuban people because naturally more tourists will bring more dollars, and they will give a tip to a waiter, to a busboy, so the money will filter down, not in great quantities, but it will filter down somewhat. The other impact, an unintended impact, is that the Cuban-American community, which is primarily white, is sending now more money to their friends and relatives in Cuba. The blacks, which are 65% of the Cuban population, the blacks and the mulatos are not receiving anything. We’ll see in the future of Cuba a significant racial problem.
TCB: How does this change Cuba’s position vis-à-vis countries like Venezuela or Bolivia? How does it affect their relationship?
JS: Cuba is an ally of three major countries: Venezuela, Iran, and Russia. Cuba has not shown any intention of moving away from any of these three countries. Furthermore, Cuba has signed agreements with Russia to allow the Russian Navy to visit Cuban ports and Russian military aircraft to land in Cuba so in the next year or so we are going to see more Russian submarines visiting Cuba, more Russian planes visiting Cuba. Cuba has made a deal with Venezuela to issue passports for the Venezuelan government. Now Cuba can offer, and has done that, Venezuelan passports to Iranian agents. Some were stopped at the border with Canada. Iranians with Venezuelan passports issued by Cuba are now traveling the world. This is a problem of security for the U.S., a problem of concern for our intelligence agencies.
TCB: Until the trade embargo is lifted, there will be limited opportunities for American business, but what advice would you give companies thinking about investing in Cuba right now or near term?
JS: Beware. I would tell them that Cuba is not the most attractive place to put their money. One thing is to trade, if they want to open an office in Havana, have the products in Puerto Rico or the U.S., and bring them to Cuba as the orders come in. Investing in Cuba requires: number one, a legal system that works; number two, that the property in which they’re going to invest is clean and is not being claimed by any American company or any Cuban-American; third, that the infrastructure of Cuba functions, which it doesn’t function; and four, that they are not subjective to an arbitrary government and an arbitrary judicial system that can do whatever they want with their investments once in the island. I would use the word that I use in real estate, caveat emptor. Beware before you put your money.
TCB: For things to really change, the trade embargo would have to be lifted. If that were to happen, who do you see as being the winners and losers? And do you see the Cuban government putting restrictions on U.S. companies trying to do business there?
JS: Cuban investment law requires that foreign companies become in partnership with the Cuban government, which means the Cuban military, so the Cuban government is going to be limiting investment. Very few American companies would like to jump to Cuba in partnership with the military. The biggest beneficiary will be the Cuban government, which will receive a significant amount of money from trade, from tourism, from exchanging currency. Cuba is doing whatever it can to survive without having to provide any concessions.
TCB: Even though you see the opportunities being limited and you offer caution to American businesses seeking to enter the Cuban market, what are the opportunities?
JS: Definitely there are opportunities in the tourism business - building hotels, transportation for tourism, port facilities for tourism. In the nickel industry, there is no opportunity. Cuba has significant reserves of nickel, but those are controlled by Sherritt. The rum industry is controlled by Pernod Ricard and the Cuban military so no opportunity there. The tobacco industry is controlled by the military and the government. There is no opportunity there. There is opportunity in agriculture if you want to grow vegetables and fruits to re-export to the U.S. That would be a great market taking into consideration that there are two major problems. Cuba is covered by a weed that is very difficult to eradicate and requires significant effort and money to eradicate. And second, a lot of water from the rivers in Cuba has become solidified so the desalinization cost is going to be very large. But provided you find the right piece of real estate close to a river or water system that is operating well, sure, you can build a plant and provide fruits and vegetables to the U.S.
TCB: Do you believe that the more the U.S. becomes economically integrated with Cuba, the greater chance the U.S. has to put a dent in the Communist system that is already in place there?
JS: Well the question is, how big of a dent? Sure, if you engage and Cuba allows American businesses and American diplomats to roam through Cuba and talk to the people, provide them with literature, and so on, it is going to have an impact. But knowing how jealous the Cuban government is of its power and what they’ve done for the past 50 years, I doubt they will open up Cuba to American investment and American academics, people that are going to provide information.
