File #3564: "DI-1310_ref.pdf"


"U.S. Policy on Cuba"
Remarks Delivered at the
Sugar Industry of Cuba Institute
December 8, 1995
Dr. Richard A. Nuccio
Special Advisor to the President and Secretary of State on Cuba
It's a genuine pleasure for me to be here with you today.
I'd like to speak today about the prospects for a peaceful, democratic transition
in Cuba. I'd also like to discuss what the Clinton Administration is doing to promote
that transition, as well as what some on Capitol Hill propose to do. While none of us
here can determine how and when a transition takes place in Cuba - that will and
should be done by Cubans on the island - what the United States does or does not do
will make a tremendous difference.
The United States has a stake in seeing a peaceful outcome to the end of three
decades of dictatorship in Cuba. The principal threat that Cuba poses to our national
security is from a social collapse on the island that could provoke massive waves of
illegal immigration, the involvement of US citizens inside Cuba, and/ or the
introduction of US armed forces into the island. Thus, it is appropriate for the US to
promote a transition in Cuba, but in a way that is more likely to produce a peaceful
and democratic outcome.
I personally believe that the Cuban people, when given a choice, will share many
of the same aspirations that we have seen expressed throughout this hemisphere and
in most of the nations formerly under communist rule: the desire for political
democracy and a better standard of living for themselves and their children.
Democracy will be a necessity for them, not a luxury, and they will struggle to achieve
it. But that is the choice that should be available to them.
The Process of Change Underway in Cuba
Let me tell you what we believe is happening in Cuba right now.


A process of profound change is underway on the island, some of it controlled
by the Government, much of it not. Some consider that to be a controversial statement
- claiming that no real change can occur while Fidel Castro is still in power - but I
think the evidence is clear.
During the heyday of $6 billion annual subsidies from the Soviet Union, the
Cuban regime was able to establish a completely government-run, command
economy, and provide free, universal education and health care. The Government
was the only source of everything for the individual, from his job to his home to
medicine for his family. In return for the state's generosity, the individual was
expected to render unconditional obedience. The regime's extensive and
highly-effective repressive apparatus, which persecutes dissidents and human rights
activists, guaranteed that the Cuban people upheld their end of this "bargain."
The end of Soviet subsidies exposed the underlying weakness of Cuba's
economic system. You have heard some of the startling facts about Cuba's economic
free fall since 1989. GNP has declined by half. Sugar exports, Cuba's main source of
hard currency, have declined by more than half. As a consequence, Cuba's imports
have declined almost 80 percent. These cold economic numbers have had a
devastating impact on ordinary Cubans: monthly rations now barely supply enough
food for two weeks; bicycles have replaced cars and buses; oxen and horses have
replaced tractors; state industries operate at a fraction of their capacity, and huge
layoffs are rumored as the government confronts a fiscal nightmare. Cuba's standard
of living has nose-dived.
As a result of the end of Soviet subsidies, plummeting domestic productivity,
and our continuing comprehensive embargo, the Cuban government has been forced
to enact a series of limited economic reforms that are slowly creating the beginnings of
a private sector. The Cuban Government has not made these moves because it has
had a change of heart, but because circumstances have forced its hand. It cannot any
longer afford to employ everyone, nor supply enough food for Cubans to survive. It
has had to tum, slowly and reluctantly, to the market.
For example, around 200,000 Cubans have taken advantage of a government
decree legalizing self-employment in service areas like small restaurants, barbershops,


appliance repair and the like. These enterprises have to struggle to find the inputs
they need to operate, often on the black market, and their proprietors may not hire
employees outside the immediate family. Meanwhile, many independent farmers
and agricultural cooperatives have brought their produce to the farmers' markets
re-initiated last year, where 11 excess 11 goods may be sold at market prices. Farmers
must still meet state quotas in commodities they are instructed to grow and at
artificially low prices established by the government. In another major decision, the
Government legalized circulation of the dollar.
The Cuban Government has also begun implementing a series of fiscal reforms
of the kind that have often formed part of IMF structural adjustment plans. It has cut
subsidies to state enterprises, increased rates for public services, eliminated some
unnecessary jobs from the state sector (and more cuts appear to be on the way),
initiated the creation of new kinds of banking institutions to service Cuba's free
market sectors, established a quasi-official floating exchange rate and.dabbled in
currency market intervention, even implementing a rudimentary tax system.
These fiscal changes suggest a commitment to adopt the financial institutions of
a modern market economy. Ironically, however, a country that has consistently
denounced the 11 neoliberal economic models" of the IMF and criticized the social
impact of structural adjustment, has itself decided to pursue a course of restructuring
whose motto might be "much pain, little gain. 11 Cuba has attacked its budget deficit,
cut benefits and services to citizens, and raised prices all without any cushion or
support from international lending institutions - a daring course indeed, the kind of
policy that only an authoritarian government could pursue.
More disturbingly the Cuban Government has initiated this contraction in the
state sector without allowing a new private sector to take up the slack. By continuing
to bar self-employed entrepreneurs from hiring workers outside their immediate
families, and by limiting the kinds of businesses self-employed entrepreneurs may
establish, the Government is essentially prohibiting an increase in production or job
creation in wholly Cuban private enterprises. Why? The regime has limited its
economic reforms in order to preserve the state's power over the livelihoods of
individuals. It is afraid that Cubans who enjoy economic independence from the
government, through their own businesses or through direct employment with a
foreign firm, for example, will soon demand political liberty as well.


Rather than take the risks involved in freeing up Cuba's domestic economic
sector, the Cuban Government has instead been aggressively courting foreign
investment, and doing its best to build a fire wall between foreign investors and
Cuban workers. While the new foreign investment law unveiled this September
permits 100% foreign ownership of assets for the first time, it failed to allow foreign
firms to hire Cuban workers directly, and instead continues to require contracting
labor through a state firm. It also failed to allow Cubans to invest in their own
economy; once again for the sake of control, only carefully screened Cuban exiles will
be allowed to do that.
I have been discussing the state of the Cuban economy as a whole, but I know
that you have a particular interest in one sector of it-- one of the most important.
Despite the Revolution's promise to diversify and modernize the economy, it remains
as true as ever that "Sin azucar, no hay pais." In fact Cuba last year came shockingly
close to discovering what life was like without sugar, since the 1994 harvest, at about
3.2 million tons, was the lowest in half a century.
You are all aware of the precipitous decline in Cuba's sugar sector since during
the so-called "Special Period." Although the decline has been only marginally worse
than the decline in the Cuban economy overall, its impact was especially devastating
because sugar continued to be the regime's chief source of hard currency and most
important barter commodity. Apart from sugar, Cuba still has relatively little of value
to offer on the international market. The decline has been due to a number of factors,
including a chronic lack of fertilizer and other basic inputs, a shortage of qualified
labor and, perhaps most importantly, inadequate economic incentives to motivate
what labor force exists. The regime has taken steps to try and overcome these
obstacles, including the dissolution of almost all state farms into "agricultural
cooperatives" called UBPCs and, more recently, the dramatic opening of the formerly
sacrosanct sugar sector to foreign financing. This financing has come a very high rates
of interest, reflecting Cuba's bad credit history and the risks of putting money into the
Reports from Cuba indicate that foreign financing has resulted in increased
quantities and quality of cane this year. Although this would appear to auger well for
the economic recovery the government has been touting, more cane is not the end of

the story, as you know. First, the tough terms of Cuba's foreign financing make it
imperative that this year's harvest be much better than last year's -- some estimates
say it must reach 4.5 or 5 million tons -- in order simply to pay back investors and
meet leftover trade obligations from prior years. Such an increase will be a tall order.
Second, more cane means nothing if it is not harvested and processed efficiently.
Evidence suggests that Cuban efforts to increase incentives to workers through the
UBPCs have been grossly insufficient. Even with new dollar rewards for work
discipline, it appears questionable the UBPCs will respond adequately to the regime's
call for a "victory harvest." Another poor performance would leave the regime more
over-extended with its customers and deeper in debt with its creditors than ever.
The Cuban Government has lately been claiming that the economic free-fall has
bottomed out and a recovery has begun. It cites impressive statistics for growth in
sectors where foreigners have invested. Most economic experts, however, do not
believe that Cuba has yet made the kinds of deep, structural changes that will produce
sustainable economic growth. The government will not overcome its economic crisis
if it continues clinging to control. Only much broader economic freedoms and
incentives will generate a real economic recovery. Our fear is that the Cuban
government has picked the worst of the features of the Chinese and Vietnamese
models it claims to want to emulate. China and Vietnam have calculated that their
citizens would accept authoritarian control if they could benefit directly in the jump to
market economics. The Cuban government's preoccupation with political control is
denying the benefits of even its limited market reforms to the majority of the
In the same way that the market has been filling the economic void being left by
the Government, independent individuals and organizations - churches, professional
societies, dissident organizations and others - are reaching out to respond to other
unmet needs of ordinary Cubans. In organizing to help the sick, the old, the needy,
the unemployed or those in spiritual crisis, or just to speak the truth frankly, these
independent actors build the foundations of a new Cuba. The Government fears these
changes and has persecuted some of these groups, but has been unwilling or unable to
stop their growth.

I wish I could tell you that there are indications that the Cuban Government
recognizes the inevitability of democratic change and is preparing for a peaceful


transition. But we have no such sign. All indications are that Fidel Castro is still
firmly in control, and that he has no intention of stepping down or initiating
significant political reforms. He produced applause in New York and satisfaction
among his closest supporters at home when he confirmed that the Cuban Government
is unwilling to undertake political reforms. In the new, post-cold war world, the
Cuban regime is trying desperately to find a way to stabilize its economy through
~imited reform, while minimizing pressures for change in the country's repressive
political system.
But I believe this spirit of triumphalism in Havana is misplaced. The European
Union, in explaining the vote it cast against the US embargo at the United Nations,
condemned what it termed as "repeated violations of human rights in Cuba," and
said that "In the political field, the Cuban regime retains a firm monopoly on political
power." This week I spent a day at the United Nations discussing the upcoming vote
on a human rights resolution introduced by the United States and co-sponsored by
more than 20 other nations, including many that voted for the embargo resolution. I
believe will have a strong vote in the Plenary session, including affirmative votes from
several Latin American countries. Contrary to the impression Havana prefers to
convey, the Cuban government remains the odd man out in the Western Hemisphere.
What is the U.S. Doing to Promote a Transition?
Given the changes underway in Cuba, what can the U.S. do to promote a
peaceful transition to democracy?
First, let me assert what I believe to be true and what is at the heart of the
Clinton Administration's approach to Cuba: the next President of Cuba is already on
the island. I don't know who he or she is, but I do believe that the future of Cuba will
ultimately be determined by those currently living in Cuba, in the same way that the
present in Eastern Europe is being shaped by those whose voices were once
suppressed. The objective of U.S. policy is not to determine who will govern Cuba,
how its budget will be spent, or what kind of health system will be maintained. Our
goal is to promote democratic elections that will offer the Cuban people the
opportunity to make these choices. For too long, choices have been made in the name
of the Cuban people, but without their free participation or consent.


Immodestly, I believe that the most effective role for the United States in
promoting a democratic transition in Cuba is outlined in the Cuban Democracy Act
(CDA), legislation I helped draft as an advisor to Congressman Bob Torricelli and
which was endorsed by President Clinton when he was a candidate in 1992. We
continue to work to fulfill the promise of that legislation, but I believe the policy for
which it laid the groundwork is already bearing some fruit. It has four main aspects:
The first is well-known - our comprehensive economic embargo on Cuba. The
embargo is not popular with everyone. I know of no one in this Administration who
takes pleasure from the economic hardship in Cuba to which our embargo
contributes. On the contrary, we are all eager to establish the kind of respectful
relationship with Cuba we have with our closest allies and to participate in the
rebuilding of Cuba's devastated economy. We are frequently criticized in the United
Nations and by many of our allies for maintaining the embargo. But it remains the
most effective leverage we have in pressing Cuba to reform. The Cuban Government
has undertaken the limited economic reforms it has only because it has been forced to
by its economic collapse. While Cuba's economic crisis stems primarily from its
hopelessly inefficient, centrally planned economic system, the embargo limits the flow
of hard currency to Cuba from the U.S., and so forces the Cuban regime to make
tough choices sooner.
Perhaps unwittingly, the Cuban Government gave public confirmation of the
necessary evil of the embargo in September. Its new foreign investment law falls far
short of what the Cuban Government had promised investors. It does not permit
foreign companies to hire their own workers directly, and, even more importantly, it
does not allow Cubans on the island to invest in their own country. We believe that
the reason Cuba pulled back from more ambitious reform appears to be the breathing
space this year's modest economic upturn has temporarily given them.
The second aspect of our policy is to provide support for the Cuban people.
Since the enactment of the CDA three years ago, the U.S. Government has licensed
over $100 million in private humanitarian aid to Cuba, mostly food and medicine
from groups in the U.S. distributed through churches and non-governmental
organizations on the island. We also licensed telecommunications agreements that
have dramatically improved communications between the U.S. and Cuba, including
telephone, e-mail, and fax connections. This increased flow of information has


strengthened ties between Americans and Cubans and helped to break the Castro
regime's monopoly on information.
While those initial steps to implement the CDA had an impact, we felt we
needed to do more to support the Cuban people. On Oct 6, the President announced
a series of new measures designed to increase significantly the flow of information to,
from and particularly within Cuba, and to allow U.S. private organizations to play a
more active role in strengthening civil society in Cuba. By civil society, I mean all
those institutions - churches, an independent press, democratic political
organizations, universities, human rights groups, professional societies and other
non-governmental institutions - that mediate between the State and the individual.
As part of our efforts we will be permitting for the first time in decades:
• the reciprocal establishment of news bureaus in Cuba and the U.S.

student and faculty exchanges between U.S. and Cuban universities,
including formal study abroad programs for U.S. college students

private (NGO) support for activities of recognized human rights
organizations in Cuba, and other activities of individuals and NGOs which
promote independent activity on the island.

sale and donation of communications equipment such as faxes, copiers,
computers etc. to NGOs.

• the resumption of direct mail service with Cuba, if the Cuban Government
will agree.
We think that these measures will increase the Cuban people's exposure to
outside ideas in a foc1;1sed way that will not provide an unwarranted hard currency
windfall for the Cuban Government They should also promote the strengthening of
independent groups in Cuba which can articulate and channel Cubans' desire for
democratic change. Just this week we took important steps to explain these new
measures to academic, foundation, and.non-governmental actors. In New York, the
Institute for International Education and Exchanges organized a meeting with more

than 20 representatives from major academic institutions and US private foundations.
In Washington, I had the pleasure of addressing a packed house of 100 nongovernmental actors interested in obtaining licenses for a wide range of activities in
Cuba to support and promote civil society.
A third important aspect of our policy is that we are prepared to reduce
sanctions against Cuba in carefully calibrated ways in response to positive change in
Cuba. If the Cuban Government begins implementing political and economic reforms
that lead toward more fundamental changes than we have seen so far - for example,
legally recognizing genuinely independent organizations or permitting Cubans to
own and operate small businesses, we are prepared to modify our policy accordingly.
We want to encourage Cuba to undertake real change, and to respect basic,
internationally-recognized human rights. As long as Cuba refuses to recognize these
universal principles, we will continue our work in the United Nations and other
international fora to focus the attention of the world community on the lack of
fundamental freedoms and the ~ngoing, systematic abuses of human rights in Cuba.
Fourth, we are committed to providing for safe, legal and orderly migration
from Cuba to the U.S., including special in-country processing of refugees, through
our bilateral migration agreement with the Cuban Government. We are equally
committed to deterring the kind of unsafe, illegal migration that we witnessed in the
massive wave of rafters in the Summer of 1994. The immigration agreements
approved by President Clinton in September of last year and May of this year are
working effectively, channeling Cuban migration flows through safe and legal
procedures and protecting those returned to Cuba from reprisals.
The Wrong Way to Promote a Democratic Transition
The Administration is seeking to use the best tools available to promote a
democratic transition in Cuba. We believe our policy is tough but flexible, and takes
into account broader U.S. inter~sts. Meanwhile, however, a number of members of
Congress, led by Senator Jesse Helms and Representative Dan Burton, have taken a
considerably different approach. The Helms/Burton bills, particularly the House
version, would damage prospects for a peaceful democratic transition. It would also
harm a number of other vital U.S. interests, including U.S. efforts to strengthen

democracy in Russia and the ability of U.S. businesses and investors to operate
Although there are some elements. of the legislation that the Administration
could support, including a mandate to accelerate the Administration's planning for
U.S. assistance and other benefits to transition and democratic governments in Cuba,
many other aspects of the bills would cause serious problems.
The House version of the legislation would, for example, create the legal
grounds for a flood of lawsuits by against foreign investors who have invested in
property in Cuba to which U.S. citizens hold claims, even for those who were not U.S.
citizens when their property was taken. The U.S. has condemned the Castro
government's expropriations and intends to strongly encourage a transition
government in Cuba to resolve all expropriation claims as quickly and fairly as
possible. The Helms/Burton lawsuits, however, would undermine important
international legal principles and expose American businesses abroad to similar
lawsuits. Key U.S. allies in Europe and Latin America have also expressed strong
opposition to this measure. The impact at home could be equally painful - the suits
could num her in the tens or even hundreds of thousands, and could clog up already
over-burdened U.S. courts. Associations of certified U.S. corporate and individual
claimants who were American citizens at the time their property was taken 35 years
ago have spoken out against this legislation, rightly claiming that the suits could
damage their own prospects for eventual compensation.
The Helms/Burton lawsuits are also likely to discourage democratic change in
Cuba. Already the Castro regime has used these provisions to play on the fears of
ordinary citizens that their homes and work places would be instantly seized by
Miami Cubans if the regime falls. The Administration believes it should be up to
future Cuban governments to decide how best to resolve the claims of those who were
Cuban citizens when their property was taken, not U.S. courts. To send the Cuban
people the wrong signal about that will ?nly delay Cuba's transition.
Other provisions of the Helms and Burton bills would prevent the
Administration from doing all it could to aid a transition once it has begun. For
example, the bills would bar the U.S. from supporting World Bank and IMF
involvement in Cuba under a transition government, just when such help would be

needed most. The bills would also establish a number of strict requirements for
determining when democratic and transition governments are in power that could
leave the U.S. on the sidelines when events in Cuba start moving rapidly.
The Helms/Burton legislation has been passed by both houses of Congress,
though in significantly different versions. We will try to convince House-Senate
conferees to send the President a good bill he can sign. Secretary of State Christopher
has already indicated that he would recommend that the President veto the more
radical Burton bill.
U.S. Policy Toward Cuba: Where Are We Now?
The U.S. is using the tools that we believe will be most effective in promoting
democracy in Cuba. I am often told that these are not the same tools we are using in
Vietnam and China, where our goals are similar. This is true, but it is also true that
Cuba is very different from either country. The U.S. should tailor its policies toward
each country specifically in ways that will most effectively promote U.S. interests.
This is not the time to unilaterally ease sanctions on Cuba. The Cuban
Government appears to believe that this year's mild upturn in the economy will allow
it put off or avoid fundamental reforms. When asked recently whether additional
changes were planned, Castro replied frankly that "we will do as much as we have
to." Unilateral relaxation of U.S. sanctions would only allow him to do less.
What should determine the future course of our policy? Events on the island and
in the international environment within which our relations with Cuba operate. There
is no single step we can take, no change in policy or new piece of legislation that will
fix the date of the transition in Cuba. What we can do is to keep the pressure on the
Cuban Government for political and economic reform, provide what support we can
to the Cuban people as they struggle to overcome the limitations imposed on them by
the Cuban leadership, and prepare to respond quickly and effectively when change