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Search for oil won’t cure the Cuban economy

01.10.2010

BY FRANK CALZON,  executive director at the Center for a Free Cuba, a human-rights and pro-democracy organization

Havana needs the embargo ended and dangles the possibility of great profits before American companies. Why the Castros would want to do a favor to American capitalists is a question cooler heads should be asking, but even some who are not Castro sympathizers have fallen for the trick.
The Atlantic’s Jeffery Goldberg, who was just in Havana, has fallen for it. He wrote: “Cuba is beginning to adopt the sort of economic ideas that America has long demanded it adopt, but Americans are not allowed to participate in this free-market experiment because of our government’s hypocritical and stupidly self-defeating embargo policy. We’ll regret this, of course, when Cubans partner with Europeans and Brazilians to buy up all the best hotels.”
In a recent article in The Financial Times, the Council of the Americas’ Christopher Sabatini wrote about reports suggesting “that oil exploration may soon begin off Cuba’s coast, potentially testing the current U.S. trade embargo.” Sabatini is careful in his wording, but the message, repeated elsewhere, is clear: “Let’s get in while the picking is good. This Cuban oil is a sure thing.”
On such questionable certainties fortunes have been lost. Foreign companies that have spent millions in similar pursuits, in partnership with the regime, have yet to recover their investments.
Be that as it may, it is probably true that there is oil very deep off Cuba’s shores; although the discovery and production of such crude, if it’s there, remains a matter of years. Cuba depends on Hugo Chávez’s largess, as it depended on Moscow’s. The Castros have turned the island into a beggar state; before 1959 Cuba purchased the oil it needed in the international market with the funds generated from its Cuban sugar industry and other enterprises.
Cuban sugar was to Cuba what oil is to Texas. The island was known as the sugar bowl of the world. Now, the sugar industry that made possible modern Cuba is no more, its mills abandoned, its workers idled. Cuba buys sugar for its domestic needs from the Dominican Republic.
This is not the first time that the possibility of substantial oil production has been mentioned in the context of the embargo, which denies Havana access to international financial institutions including the World Bank. Havana is broke, and because of a “liquidity crisis” has frozen the bank accounts of foreign investors operating on the island. For more than 20 years Havana has been unable to make payments to many foreign creditors.
Even if oil was to be found, it does not mean the Castro brothers will use those resources to benefit Cubans, as billions of wasted foreign aid, misused loans and squandered subsidies during half a century demonstrate.
What the Castro brothers need in a hurry is dollars. Havana is broke. Raúl Castro just announced the layoff of half a million government workers. The oil dollars are perhaps in the future, but the speculation is designed to “test” the U.S. embargo, to get U.S. companies to lobby to end it, so that the regime could be thrown a life saver in the form of international credits.
Is this the time to gamble that oil will be found and get on line before the end of the Castro dynasty? And are there any assurances that its income will not be used — as Chávez does with his petro-dollars — to subsidize anti-American regimes around the world?
The Cuban ship of state has entered troubled waters. The internal opposition continues to speak out. The regime, desperate as it is for dollars, doesn’t have the courage to allow its citizens to produce, sell and export their own products and put an end to the economic crisis. Fidel and Raúl Castro might hope that the lure of quick oil profits could end the embargo and bring millions into their coffers so that they do not have to adopt real economic reforms. For that to happen, Washington would have to ignore the situation in Cuba, as well as U.S. interests.
In the meantime, there does not seem to be enough time left, or enough oil, for Cuban oil to calm its troubled waters.

Source

www.cubacenter.org

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