Thursday, February 21, 2019

Cuentapropistas in court

Cuba’s Supreme Court issued a decision about court cases involving entrepreneurs, trabajadores por cuenta propia, that clarifies how their cases should be handled.

It can be found in the Gaceta Oficial, the January 23 issue, decision number GOC-2019-89-O2. There is also an explanatory article on the court’s website (didn’t know they did these) written by Liliana Hernández Díaz, the chief judge of the court’s division that handles economic matters (Presidenta de la Sala de lo Económico).

The decision is procedural. Apparently there have been many cases involving disputes between cuentapropistas, and between them and clients and creditors. The decision clarifies that these cases should be heard and where they should be assigned.

It also says that in contract disputes, as the judge puts it in her article, that when it comes to contract disputes, cuentapropistas “litigate under equal conditions and respect for rights and procedural guarantees as state enterprises and other legal entities and economic actors.”

So while they remain – for now – individuals with licenses as opposed to legally constituted businesses with personalidad jurídica, they have standing in court when it comes to contract disputes.

Tuesday, February 19, 2019

Pep-rally Venezuela policy

The thrust of President Trump’s Venezuela speech wasn’t a surprise, but it was still jarring to see him talk about freedom abroad as if he had never spoken about his “America First” disinterest in how other countries govern themselves, about being “in love” with Kim Jong Un, about the money Saudi Arabia invests here (when asked about a Saudi murder of a U.S. resident journalist), about Putin’s poll ratings and leadership qualities, about his warm personal relations with a Chinese premier who deals with the Uighur minority through mass jailing and re-education.

But as ever with President Trump, he has a way of telling you what is foremost on his mind, and yesterday it was the electoral benefit of his outrage about Venezuela, Nicaragua, and Cuba. Votes, votes, and votes.

In the only non-partisan reference of the day, he thanked FIU President Mark Rosenberg for hosting his partisan event. Democratic elected officials were excluded, including the Congresswoman in whose district the speech occurred. Supportive elected officials were praised, all Republicans. Senator Scott used his remarks idiotically to bash Democrats for wanting to bring socialism to America. The President hailed Venezuelan Doral, Nicaraguan Sweetwater, and Cuban Miami. The format was that of hundreds of Trump campaign rallies, right down to the recessional, “You Can’t Always Get What You Want.”

The crowd went nuts, so he got the politics right. But does the Administration’s Venezuela effort work as a foreign policy strategy?

If the first test of strategy is to set a clear objective, it passes with flying colors: Maduro must go. The agreement of 50 other governments on Trump’s central contention – that Maduro’s electoral and constitutional shenanigans forfeit his legitimacy – is a plus.

From there, things get murky.

For starters, there is no visible alignment of ends and means. For Maduro to go, the military has to flip. To achieve that, we have exhortations (patriotism) and threats (military leaders are “risking their lives” by sticking with Maduro and stand to “lose everything”).

To force the issue, we have the most novel use of emergency assistance ever devised: tons of aid dangled at the border to inspire Venezuelan citizens and military officers to depose their government.

As the aid piles up, Senator Rubio and Administration officials (especially those appearing in Spanish-language media) declare daily that it will absolutely enter Venezuela next Saturday. They do not say how, but interim Venezuelan President Juan Guaidó now tweets that on that day, Venezuelans will bring it in and distribute it in “every province” of a country the size of Texas and Oklahoma combined. His ends and means are not aligned either, but he has an action plan and we will see on Saturday if it works.

And indeed it might. Aided by Maduro, Venezuela’s opposition is united and enjoys massive support. If the military command flips, it would not be the first Latin American military institution to determine that its national defense duty lies in facilitating a change in political leadership. Foreign intelligence agencies may have inducements.

But so much could go wrong. No significant military element has switched allegiance – and unless that changes, Saturday is set up to be a day of confrontation. There could be a simple standoff at the border, but if there is violence there will be calls for military intervention. Guaidó has all but called for it and the Venezuelan Supreme Court (operating from abroad) has authorized it explicitly. Those who cheered yesterday’s speech would surely welcome a “humanitarian corridor” protected by U.S. troops. President Trump has warned against any harm to Guaidó or his political allies. Legal foundations for military action have been set, and Saturday could provide the political impetus.

With or without foreign troops, success for Guaidó will require the military command, the rank and file, and all police and irregular forces at once to turn away from Maduro. Some may disband; the rest must all work effectively and immediately to preserve order. If you don’t like the odds of such a neat, seamless change, then you don’t want to imagine the implications for U.S. troops operating amid scarcity, latent violence, and a crisis of authority.

If February 23 passes with Maduro still standing and no military action, the Administration will be left with its maximalist objectives supported by the same threats and exhortations that have not worked so far. Venezuelan officers seem not to be convinced by the assurances coming from Guaidó and Trump, perhaps because no one can offer to drop all U.S. drug trafficking charges. Conditions inside Venezuela will worsen, and the increasing bite of U.S. sanctions will start to give Washington a share of responsibility that President Trump and Senator Rubio will neither recognize nor accept. As time passes, governments now allied with the Trump effort will lose their stomach for tactics that add to Venezuelans’ woes, and they will look for negotiated solutions that Washington opposes. Floridians whose votes matter to the President will press for stronger action, and neither they nor the President’s advisors will be troubled by extended economic sanctions.

In sum, a long waiting game would be hell for Maduro and difficult for Trump too, as it becomes clear that endless sanctions are bad strategy and bad politics. The only way to bridge the gap between ends and means will be escalation, but those options are likely to be distasteful to a President who decried “foolish wars” to a national audience weeks ago. In time, Venezuela could generate national media coverage that would make him less happy about great headlines in Miami-Dade. Long-haul strategies are great if you are in a position of strength, time is on your side, and your leader’s commitment is true.

One prays for a good, fast outcome for Venezuela, but it is hard to imagine such an outcome except in prayer. Which leads to a final point on strategy: given the challenges, the President’s partisan approach is a strategic blunder. The White House did more than exclude Democrats from yesterday’s rally – it made clear that it wants no part of them in the Venezuela policy, and it tries to paint them as would-be Maduros to win votes (presumably because of their ideas about providing health care to poor people). Foreign publics will see a campaign ploy, not a genuine foreign policy effort. Allies will be more inclined to peel away. If G.I.’s are deployed, they will know that their country is divided at the outset. And future difficulties or failures will be Trump’s alone. Apparently there is no one in the White House to argue that bipartisan foreign policy is at once a positive value and a source of political strength.

What does this mean for Cuba? The writing is already on the wall with regard to new sanctions, and yesterday’s speech shows that politics will be the guide. New U.S. actions will have no international support, and will have nothing to do with the views of a President who was exploring for Cuba business opportunities not long ago. Wait for the next rally at FIU.

Monday, February 11, 2019


A column of mine on the Administration's approach to Venezuela and Cuba, and Cuba's options.

Monday, January 21, 2019

Why Radio/TV Marti is a joke

How is the U.S. government broadcast to Cuba covering the announcement about Title III of the Helms-Burton law?

In this story, TV Marti reporter Tomas Regalado explains the State Department statement and presents some reaction: from Congressman Mario Diaz-Balart, from Miami radio powerhouse Ninoska Perez, and from a guy who would like to file a lawsuit based on his property claim. Regalado did not indicate that alternative points of view exist, much less say what they are or show anyone espousing them.

On the evening newscast, they brought out reporter Pablo Alfonso to explain the news, and in addition to explaining the issue of lawsuits, he proceeded to describe an aspect of the legislation that doesn’t exist. He said that Title III “prohibits subsidiaries of foreign businesses, who have subsidiaries in the United States, from doing business with Cuba” (see 3:00). That is nonsense, but it’s not hard to guess why he said it. Someone probably told him, accurately, that the desired effect of the law is to induce companies doing business here to stop doing business there. Rather than doing actual reporting, it appears he went with that and garbled it. (Note also at 4:25 that after referring to the Cuban “government” he quickly corrects himself and says “regime.”)

On the Radio/TV Marti website, there’s a story about Congressman Mario Diaz-Balart supporting the implementation of Title III, and another about dissidents in Cuba with the same point of view.

This is not the first time Radio/TV Marti covers a story by providing information and a single point of view, as if it aspires to be a mirror image of Granma. You get the impression that if you were to read the Voice of America’s charter to it management (VOA represents “America, not any single segment of American society,” and presents “a balanced and comprehensive projection of significant American thought and institutions”), they would look at you as if you were speaking Chinese.

Obviously the funding for Radio/TV Marti will go on forever, so I repeat my suggestion: call it Radio Exilio and spare Marti and the rest of us with any association with it.

More on Title III

It appears likely from the State Department’s announcement that Title III of the Helms-Burton law will be allowed to go into effect around March 1. No U.S. President has permitted this: Since enactment in 1996, Clinton, Bush, Obama, and Trump have blocked it every six months.

As a result, those whose properties in Cuba were expropriated and who can identify a foreign business connected to that property, can sue the foreign business in U.S. courts – even if the plaintiff was not a U.S. citizen or resident at the time of the taking.

My opinion on all this is here. Some more info on Title III:

The law is presented as protection for claimants who were never compensated. But the right to sue is limited. Cuban Americans can’t sue for their homes. No one can sue for a property worth $50,000 or less when it was taken. And the right to sue expires if Cuba’s socialist government goes away, or if the President decides to suspend it again.

The law also shields two classes of business from Title III lawsuits.

First are those engaged in “the delivery of international telecommunication signals to Cuba.” In other words, companies delivering voice or data traffic to the Cuban network are protected, while those whose businesses extend into the Cuban domestic network are not.

Then there are those engaged in transactions and uses of property incident to lawful travel to Cuba, to the extent that such transactions and uses of property are necessary to the conduct of such travel.” The House-Senate report accompanying the bill put it more simply: “any activities related to lawful travel to Cuba” are protected. Those who want to sue, for example, based on ownership of a port facility, are surely searching for ways to argue that this language should not apply.

In theory, the damages could be substantial; the law fixes them at three times the property’s current value, plus court costs and attorneys’ fees.

Finally, some U.S. businesses who lost property in Cuba were partially compensated through a tax deduction. In November 1962, the IRS allowed them to deduct Cuba confiscation losses from their business income.

Thursday, January 17, 2019

MLB's good baseball deal

The opposition to MLB’s deal that will allow Cuban pro ballplayers to sign with big league clubs without fleeing Cuba and without the need to establish residency elsewhere, is in part understandable: If you support the embargo, you want to limit any financial flows to Cuba.

But I suspect there’s more to it. In Miami, some are surely rubbed the wrong way at the idea that Cuban players could play here without emigrating, without effectively breaking with the system, without joining el exilio.

It certainly shows that those who want to block the deal are not interested in encouraging some positive changes in Cuba that made it possible: the ability for Cubans to travel and return, and the ability of pro athletes to earn market-based pay abroad and return to Cuba with those earnings. They are not being called desertores anymore.

How do Cuban ballplayers see the deal that Senator Rubio wants to block?

Look at the math from a Cuban player’s point of view. Say he signs a one-year, $2 million deal (half the MLB average).

A “release fee” of $400,000 goes to Cuban baseball – paid by the club, not the player.

If IRS applies U.S. tax (30%), that’s $600,000 to Uncle Sam, and the player pockets $1.4 million.

Cuba decided recently to tax that income at 4%, not the 50% marginal rate applied to, say, a private restaurant or bed-and-breakfast with taxable income above $2000.

Senator Rubio complains about the “new tax” Cuba is imposing (4%), but if it applied the 50% rate on the books since 1996, the player would pay more than ten times more!

After paying the 4%, the player is left with $1.344 million – more than 2,600 times his salary in the Cuban national league.
More on all this in this column in Cuba Standard.